<PAGE>
REGISTRATION NOs. 2-89971
811-3990
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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PRE-EFFECTIVE AMENDMENT NO.
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POST-EFFECTIVE AMENDMENT NO. 16 X
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AND/OR
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940
AMENDMENT NO. 17 X
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NORTHWESTERN MUTUAL SERIES FUND, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
720 EAST WISCONSIN AVENUE
MILWAUKEE, WISCONSIN 53202
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(414) 271-1444
(REGISTRANT'S TELEPHONE NUMBER)
MERRILL C. LUNDBERG, SECRETARY
720 EAST WISCONSIN AVENUE
MILWAUKEE, WISCONSIN 53202
(NAME AND ADDRESS OF AGENT FOR SERVICE)
IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE (CHECK APPROPRIATE BOX)
[ ] IMMEDIATELY UPON FILING PURSUANT TO PARAGRAPH (b)
[ ] ON (DATE) PURSUANT TO PARAGRAPH (b)
[ ] 60 DAYS AFTER FILING PURSUANT TO PARAGRAPH (a)(1)
[ ] ON (DATE) PURSUANT TO PARAGRAPH (a)(1)
[X] 75 DAYS AFTER FILING PURSUANT TO PARAGRAPH (a)(2)
[ ] ON (DATE) PURSUANT TO PARAGRAPH (a)(2) OF RULE 485
[ ] THIS POST-EFFECTIVE AMENDMENT DESIGNATES A NEW EFFECTIVE DATE FOR A
PREVIOUSLY FILED POST-EFFECTIVE AMENDMENT.
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<PAGE>
NORTHWESTERN MUTUAL
SERIES FUND, INC.
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CROSS REFERENCE SHEET
Cross reference sheet showing location in Prospectus of information
required by the Items in Part A of Form N-1A.
<TABLE>
<CAPTION>
ITEM NUMBER HEADING IN PROSPECTUS
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<S> <C>
1 Front Cover Page and Back Cover Page
2 Summary
3 *
4 Investment Objectives, Strategies
and Risks
5 *
6 Management of the Fund, Taxes
and Dividends
7 Offering and Redemption of
Shares, Taxes and Dividends
8 Offering and Redemption of
Shares
9 Financial Highlights
</TABLE>
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* Indicates inapplicable or negative
<PAGE>
NORTHWESTERN MUTUAL
SERIES FUND, INC.
CROSS REFERENCE SHEET
Cross reference sheet showing location in Statement of Additional
Information required by the Items in Part B of Form N-1A.
<TABLE>
<CAPTION>
HEADING IN STATEMENT
ITEM NUMBER OF ADDITIONAL INFORMATION
<S> <C>
10 Cover Page and Table of Contents
11 Fund History
12 Description of the Fund and Its
Investments and Risks
13 Management of the Fund
14 Control Persons and Principal Holders of
Securities
15 Investment Advisory and
Other Services
16 Brokerage Allocation and Other
Practices
17 Capital Stock and Other Securities
18 Purchase, Redemption and
Pricing of Shares
19 Taxation of the Fund
20 *
21 Calculation of Performance Data
22 Report of Independent Accountants,
Financial Statements and
Schedules of Investments
</TABLE>
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* Indicates inapplicable or negative
<PAGE>
NORTHWESTERN
MUTUAL LIFE-Registered Trademark-
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NORTHWESTERN MUTUAL SERIES FUND, INC.
A Series Fund Offering Eleven Portfolios
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
MONEY MARKET PORTFOLIO
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Shares of the Portfolios are offered only for funding variable annuity contracts
and variable life insurance policies offered by The Northwestern Mutual Life
Insurance Company. Variable annuity contracts or variable life insurance
policies are described in the separate prospectus to which this prospectus for
the Fund is attached.
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy of this prospectus. Any representation
to the contrary is a criminal offense.
April 30, 1999
<PAGE>
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT LAWFULLY BE MADE. NO PERSON IS AUTHORIZED TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS AND IN THE STATEMENT OF ADDITIONAL INFORMATION.
CONTENTS
PAGE
----
Summary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Investment Objectives and Strategies. . . . . . . . . . . . . . . . . . . . 2
Main Risks. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Investment Objectives, Strategies and Risks. . . . . . . . . . . . . . . . . 7
Small Cap Growth Stock Portfolio . . . . . . . . . . . . . . . . . . . . . 7
Aggressive Growth Stock Portfolio. . . . . . . . . . . . . . . . . . . . . 7
International Equity Portfolio . . . . . . . . . . . . . . . . . . . . . . 7
Index 400 Stock Portfolio. . . . . . . . . . . . . . . . . . . . . . . . . 8
Growth Stock Portfolio . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Growth and Income Stock Portfolio. . . . . . . . . . . . . . . . . . . . . 9
Index 500 Stock Portfolio. . . . . . . . . . . . . . . . . . . . . . . . .10
Balanced Portfolio . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
High Yield Bond Portfolio. . . . . . . . . . . . . . . . . . . . . . . . .11
Select Bond Portfolio. . . . . . . . . . . . . . . . . . . . . . . . . . .12
Money Market Portfolio . . . . . . . . . . . . . . . . . . . . . . . . . .13
Year 2000 Risks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
Management of the Fund . . . . . . . . . . . . . . . . . . . . . . . . . . .14
Portfolio Managers. . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
Investment Advisory Fees and Other Expenses . . . . . . . . . . . . . . . .15
Taxes and Dividends. . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
Offering and Redemption of Shares. . . . . . . . . . . . . . . . . . . . . .16
Financial Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . .17
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SUMMARY
Northwestern Mutual Series Fund, Inc. ("Fund") is composed of eleven Portfolios
which operate as separate mutual funds. This section gives you an overview of
the investment objectives and strategies for each of the Portfolios. The
summary concludes with a brief identification of the main risks and performance
information for all of the Portfolios. More detailed information follows this
summary.
INVESTMENT OBJECTIVES AND STRATEGIES
SMALL CAP GROWTH STOCK PORTFOLIO The investment objective of the Small Cap
Growth Stock Portfolio is long-term growth of capital. The Portfolio will seek
to achieve this objective primarily by investing in the common stocks of
companies which can reasonably be expected to increase sales and earnings at a
pace which will exceed the growth rate of the U.S. economy over an extended
period.
AGGRESSIVE GROWTH STOCK PORTFOLIO The investment objective of the Aggressive
Growth Stock Portfolio is to achieve long-term appreciation of capital. This
Portfolio also attempts to meet this goal primarily by investing in the common
stocks of companies which can reasonably be expected to increase their sales and
earnings at a pace which will exceed the growth rate of the nation's economy
over an extended period.
INTERNATIONAL EQUITY PORTFOLIO The investment objective of the International
Equity Portfolio is long-term capital growth. It pursues its objective through
a flexible policy of investing in stocks and debt securities of companies and
governments outside the United States.
INDEX 400 STOCK PORTFOLIO The investment objective of the Index 400 Stock
Portfolio is to achieve investment results that approximate the performance of
the Standard & Poor's MidCap 400 Index (AS&P 400 Index@). The Portfolio will
attempt to meet this objective by investing in stocks included in the S&P 400
Index.
GROWTH STOCK PORTFOLIO The investment objective of the Growth Stock Portfolio
is long-term growth of capital; current income is secondary. The Portfolio
seeks to achieve this objective by selecting investments in companies which have
above average earnings growth potential.
GROWTH AND INCOME STOCK PORTFOLIO The investment objectives of the Growth and
Income Stock Portfolio are long-term growth of capital and income. Ordinarily
the Portfolio pursues its investment objectives by investing primarily in
dividend-paying common stock.
INDEX 500 STOCK PORTFOLIO The investment objective of the Index 500 Stock
Portfolio is to achieve investment results that approximate the performance of
the Standard & Poor's 500 Composite Stock Price Index ("S&P 500 Index"). The
Portfolio attempts to meet this objective by investing in stocks included in the
S&P 500 Index.
BALANCED PORTFOLIO The investment objective of the Balanced Portfolio is to
realize as high a level of long-term total rate of return as is consistent with
prudent investment risk. Total rate of return consists of current income,
including dividends, interest and
2
<PAGE>
discount accruals, and capital appreciation. The assets of the Balanced
Portfolio will be invested in the stock, bond and money market sectors as
described for the Index 500 Stock, Select Bond and Money Market Portfolios. The
mix of investments among the three market sectors will be adjusted continuously.
HIGH YIELD BOND PORTFOLIO The investment objective of the High Yield Bond
Portfolio is to achieve high current income and capital appreciation. The
Portfolio invests primarily in fixed income securities that are rated below
investment grade by the major rating agencies. High yield fixed income
securities are commonly known as "junk bonds".
SELECT BOND PORTFOLIO The primary investment objective of the Select Bond
Portfolio is to provide as high a level of long-term total rate of return as is
consistent with prudent investment risk. Total rate of return consists of
current income, including interest and discount accruals, and capital
appreciation. A secondary objective is to seek preservation of shareholders'
capital. The Select Bond Portfolio's assets are invested primarily in bonds and
other debt securities with maturities generally exceeding one year.
MONEY MARKET PORTFOLIO The investment objective of the Money Market Portfolio
is to realize maximum current income consistent with liquidity and stability of
capital. The assets of the Money Market Portfolio are invested in money market
instruments and other debt securities with maturities generally not exceeding
one year.
MAIN RISKS
The eleven Portfolios present varying amounts of risk. The amount of investment
risk for a Portfolio depends on the types of securities in which the Portfolio
invests and the investment strategies it uses. All investments present some
risk. In this prospectus we have listed the Portfolios in the sequence that we
think reflects the relative risk they present. The Small Cap Growth Stock
Portfolio presents the most investment risk. The Money Market Portfolio
presents less investment risk than any of the others.
RISKS FOR STOCKS Stock prices have historically outperformed other asset
classes over the long term, but stock prices tend to go up and down more
dramatically over the shorter term. These price movements may result from
factors affecting individual companies, industries, or the stock market as a
whole.
GROWTH STOCKS are typically priced higher than other stocks, in relation to
earnings and other measures, because investors believe they have more
appreciation potential. This potential may or may not be realized and growth
stock prices tend to fluctuate more dramatically than the overall stock market.
VALUE STOCKS are selected because they seem attractively priced. The main risks
are that the price for a stock may turn out to have been too high, or the market
may not recognize the real value of the stock for a long time.
SMALL CAP STOCKS may involve greater risks because smaller companies often have
a limited track record, narrower markets and more limited managerial and
financial resources than larger, more established companies. The prices of
these stocks tend to be more volatile and the issuers face greater risk of
business failure.
RISKS FOR FIXED INCOME SECURITIES
INTEREST RATE RISK Bond prices rise and fall in response to changes in market
interest rates. When interest rates rise, bond prices fall. This effect is
greater for longer term bonds, and relatively minor for short-term cash
instruments that are about to mature.
CREDIT RISK Bond prices reflect the risk of default. The credit rating
assigned to a fixed income issue generally reflects the credit risk. High yield
fixed income securities present more credit risk than investment grade issues.
RISKS FOR INTERNATIONAL SECURITIES Foreign securities present the investment
risks that are inherent in all investments in securities as well as an array of
special risk considerations, including currency risks. Some of these risks are
described in this prospectus. A longer description is included in the Statement
of Additional Information.
RISKS FOR FINANCIAL FUTURES CONTRACTS All of the Portfolios, except the Money
Market Portfolio, may use financial futures contracts in pursuit of their
investment objectives. These instruments are used as a hedge against changes in
the market value of common stocks or changes in prevailing levels of interest
rates. Successful use of these instruments requires special skills, knowledge
and techniques. Gains or losses from positions in financial futures contracts
may be much greater than the amounts invested.
ASSET ALLOCATION RISK In addition to the risks involved with each kind of
securities there is the risk that an investor will hold the wrong mix of
securities at any point in time. This risk is especially important for the
Balanced Portfolio, but it is a consideration for all of the Portfolios. It is
also likely to be the most
3
<PAGE>
important consideration for you as an individual investor.
RISKS FOR ALL SECURITIES The value of a security on a given date depends
entirely on its market price. Investors necessarily rely on the integrity of
the marketplace. There is no guarantee that the securities markets will
function in an orderly manner. IIliquidity may make it difficult for a
Portfolio to buy or sell a security or to price the security fairly. The Year
2000 issue is a consideration for all investors at this juncture, as discussed
in this prospectus.
MONEY MARKET PORTFOLIO An investment in the Money Market Portfolio is not
insured or guaranteed by the Federal Deposit Insurance Corporation or any other
government agency. Although the Money Market Portfolio seeks to preserve the
value of your investment at $1.00 per share, it is possible to lose money by
investing in the Money Market Portfolio
PERFORMANCE
The following bar charts illustrate the risks of investing in the Portfolios by
showing how the performance of each Portfolio has varied from year to year. No
shares of the Small Cap Growth Stock and Index 400 Stock Portfolios were
outstanding during the periods shown.
<TABLE>
<CAPTION>
AGGRESIVE GROWTH PORTFOLIO
1991 1992 1993 1994 1995 1996 1997 1998
- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
55.99% 5.95% 19.11% 5.40% 39.29% 17.70% 13.87% 7.56%
</TABLE>
<TABLE>
<CAPTION>
GROWTH STOCK PORTFOLIO
1995 1996 1997 1998
- ---- ---- ---- ----
<S> <C> <C> <C>
30.82% 20.91% 29.85% 19.98%
</TABLE>
<TABLE>
<CAPTION>
INTERNATIONAL EQUITY PORTFOLIO
1994 1995 1996 1997 1998
- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C>
- -0.10% 14.58% 21.02% 12.28% 4.82%
</TABLE>
<TABLE>
<CAPTION>
GROWTH & INCOME STOCK PORTFOLIO
1995 1996 1997 1998
- ---- ---- ---- ----
<S> <C> <C> <C>
31.11% 19.97% 30.03% 23.14%
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
INDEX 500 PORTOLIO
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
18.39% -4.32% 29.78% 4.54% 9.90% 1.21% 37.25% 22.75% 33.20% 28.72%
</TABLE>
<TABLE>
<CAPTION>
HIGH YIELD BOND PORTFOLIO
1995 1996 1997 1998
- ---- ---- ---- ----
<S> <C> <C> <C>
16.77% 19.78% 15.85% -1.84%
</TABLE>
<TABLE>
<CAPTION>
MONEY MARKET PORTOLIO
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
8.98% 8.04% 5.69% 3.34% 2.85% 4.06% 5.82% 5.29% 5.47% 5.43%
</TABLE>
<TABLE>
<CAPTION>
BALANCED PORTFOLIO
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
15.66% 1.52% 23.34% 5.61% 9.91% 0.16% 26.39% 13.45% 21.52% 18.88%
</TABLE>
<TABLE>
<CAPTION>
SELECT BOND PORTFOLIO
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
14.16% 8.09% 17.33% 7.74% 10.81% -2.28% 19.09% 3.31% 9.46% 7.07%
</TABLE>
5
<PAGE>
Past performance is no indication of future results.
<TABLE>
<CAPTION>
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Best Worst
PORTFOLIO Quarter Quarter
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<S> <C> <C>
Aggressive Growth Stock Portfolio 24.77% (1st Q/91) -21.47% (3rd Q/98)
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International Equity Portfolio 14.15% (1st Q/98) -18.16% (3rd Q/98)
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Growth Stock Portfolio 22.20% (4th Q/98) -12.56% (3rd Q/98)
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Growth and Income Stock Portfolio 21.76% (4th Q/98) -10.88% (3rd Q/98)
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Index 500 Stock Portfolio 21.45% (4th Q/98) -11.72% (3rd Q/90)
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Balanced Portfolio 12.21% (4th Q/98) -5.93% (3rd Q/90)
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High Yield Bond Portfolio 7.48% (2nd Q/97) -10.69% (3rd Q/98)
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Select Bond Portfolio 8.10% (2nd Q/89) -2.23% (1st Q/94)
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Money Market Portfolio 2.33% (2nd Q/89) 0.69% (2nd Q/93)
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</TABLE>
The following table further illustrates the risks of investing in the Porfolios
by showing how each Portfolio's average annual returns for the periods shown
compare with the returns of certain indexes that measure broad market
performance. No shares of the Small Cap Growth Stock and Index 400 Stock
Portfolios were outstanding during the periods shown.
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<TABLE>
<CAPTION>
Since
1 Year 5 Years 10 Years Inception*
------- ------- -------- ----------
<S> <C> <C> <C> <C>
AGGRESSIVE GROWTH STOCK PORTFOLIO 7.56% 16.18% ---- 19.58%
Wilshire Small Cap Index -0.36% 13.46% ---- 18.84%
Wilshire Next 1750 Index 0.83% 13.19% ---- 18.58%
INTERNATIONAL EQUITY PORTFOLIO 4.82% 10.27% ---- 13.32%
Morgan Stanley Capital International
EAFE (Europe-Australasia-Far Far East) Index 20.33% 9.52% ---- 10.13%
GROWTH STOCK PORTFOLIO 26.69% ---- ---- 23.17%
S&P 500 Index 28.50% ---- ---- 26.41%
GROWTH AND INCOME STOCK PORTFOLIO 23.14% ---- ---- 22.00%
S&P 500 Index 28.50% ---- ---- 26.41%
INDEX 500 STOCK PORTFOLIO 28.72% 23.93% 17.32% ----
S&P 500 Index 28.50% 23.94% 19.16% ----
BALANCED PORTFOLIO 18.88% 15.72% 13.31% ----
Merrill Lynch Domestic Master Index 8.87% 7.33% 9.30% ----
S&P 500 Index 28.50% 23.94% 19.16% ----
Merrill Lynch 91-Day T-Bill 5.23% 5.22% 5.68% ----
HIGH YIELD BOND PORTFOLIO -1.84% ---- ---- 11.17%
Lehman Brothers Index 1.49% ---- ---- 9.46%
SELECT BOND PORTFOLIO 7.07% 7.10% 9.31% ----
Merrill Lynch Domestic Master Index 8.87% 7.33% 9.30% ----
MONEY MARKET PORTFOLIO 5.43% 5.48% 5.21% ----
</TABLE>
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* The Aggressive Growth Stock Portfolio, the International Equity Portfolio,
the Growth Stock Portfolio, Growth and Income Stock Portfolio, and the High
Yield Portfolio commenced operations on May 3, 1994.
MONEY MARKET PORTFOLIO For the seven-day period ended January 31, 1999, the
Money Market Portfolio's yield was 4.83% and was equivalent to a compound
effective yield of 4.94%.
6
<PAGE>
INVESTMENT OBJECTIVES, STRATEGIES AND RISKS
The investment objectives, strategies and risks of each Portfolio are described
below.
The main risks for each kind of security are briefly identified above. See
AMain Risks@, p. 3. Some of the risks are also discussed in the descriptions of
the Portfolios below.
The investment objective of a Portfolio may be changed only with the approval of
the majority of the Portfolio's shares outstanding. The details of the
investment policies of a Portfolio may be changed by the Fund's Board of
Directors without a vote of the shareholders. For example, such details include
investments in new types of debt instruments which may be devised in the future
or which are presently in disuse but may become more prominent in the future and
minor changes in investment policies which may be made in response to changes in
regulatory requirements which are reflected in the Portfolio's present policies.
SMALL CAP GROWTH STOCK PORTFOLIO
The investment objective of the Small Cap Growth Stock Portfolio is to achieve
long-term appreciation of capital. The Portfolio will seek to achieve this
objective primarily by investing in the common stocks of companies which can
reasonably be expected to increase their sales and earnings at a pace which will
exceed the growth rate of the nation's economy over an extended period. These
companies, for the most part, are small capitalization companies whose stock may
experience substantial price volatility. Under normal circumstances the
Portfolio will invest at least 80% of its assets in stocks.
In addition to common stocks, the Small Cap Growth Stock Portfolio may invest in
other equity securities such as preferred stocks and debt securities with
conversion privileges or warrants. A portion of the assets may be invested in
money market instruments, including U.S. Government and agency securities and
short-term commercial paper.
The Small Cap Growth Stock Portfolio may also invest in covered call option
contracts, stock index futures contracts, including indexes on specific
industries, repurchase agreements and warrants. A description of these
instruments is included in the Statement of Additional Information. Because the
Small Cap Growth Stock Portfolio will be investing in stocks which possess
substantial price volatility, an investment in the Small Cap Growth Stock
Portfolio will present more risk than an investment in any of the other
Portfolios.
AGGRESSIVE GROWTH STOCK PORTFOLIO
The investment objective of the Aggressive Growth Stock Portfolio is to achieve
long-term appreciation of capital. The Portfolio will seek to achieve this
objective primarily by investing in the common stocks of companies which can
reasonably be expected to increase their sales and earnings at a pace which will
exceed the growth rate of the nation's economy over an extended period. These
companies, for the most part, are mid-sized and smaller companies whose stock
may experience substantial price volatility. Under normal circumstances the
Portfolio will invest at least 80% of its assets in stocks.
In addition to common stocks, the assets of the Aggressive Growth Stock
Portfolio may be invested in other equity securities such as preferred stocks
and debt securities with conversion privileges or warrants. From time to time
assets may be invested in investment grade debt securities, short-term
commercial paper and United States Treasury obligations, or temporarily held in
cash uninvested for periods when the manager determines that economic conditions
call for such action. The Aggressive Growth Stock Portfolio may also invest in
covered call option contracts, stock index futures contracts, including indexes
on specific industries, repurchase agreements and warrants. A description of
these instruments is included in the Statement of Additional Information.
Because the Aggressive Growth Stock Portfolio will, for the most part, be
investing in stocks which possess substantial price volatility, an investment in
the Aggressive Growth Stock Portfolio will present more risk than an investment
in the Growth Stock Portfolio.
INTERNATIONAL EQUITY PORTFOLIO
The International Equity Portfolio seeks long-term capital growth through a
flexible policy of investing in stocks and debt obligations of companies and
governments outside the United States. In pursuit of its investment objective,
the Portfolio will invest at least 65% of its assets in securities of issuers in
at least three countries outside the United States. Any income realized will be
incidental.
The strategy for the Portfolio will reflect a bottom-up, value-oriented and
long-term investment philosophy. In choosing equity investments, the
Portfolio's manager will focus on the market price of a company's securities in
relation to the company's long-term earnings, asset value and cash flow
potential. A company's historical value measures, including price/earnings
ratio, profit margins and liquidation value, will also be considered.
7
<PAGE>
Although the Portfolio generally invests in common stocks, it may also invest in
preferred stocks and certain debt securities such as convertible bonds which are
rated in any category by Moody's Investors Service, Inc. or Standard & Poor's or
which are unrated by any rating agency. See Appendix in the Statement of
Additional Information for a description of the ratings presented by Moody's
Investors Service, Inc. and Standard & Poor's. The Statement of Additional
Information also includes a longer discussion of the risks presented by
investments in foreign securities.
For temporary defensive purposes, the Portfolio may invest without limit in
commercial paper, certificates of deposit, bank time deposits in the currency of
any nation, bankers acceptances, U.S. Government securities, corporate debt
obligations, and repurchase agreements with respect to these securities.
The International Equity Portfolio may purchase and sell financial futures
contracts, stock index futures contracts, and foreign currency futures contracts
for hedging purposes only and not for speculation. It may engage in such
transactions only if the total contract value of the futures contracts does not
exceed 20% of the Portfolio's total assets. Financial futures contracts are
described in the Statement of Additional Information.
The International Equity Portfolio has an unlimited right to purchase securities
in any foreign country, developed or underdeveloped. Before investing in the
Portfolio, you should consider carefully the risks involved in investing in
securities issued by companies and governments of foreign nations, which are in
addition to the usual risks inherent in domestic investments. There is the
possibility of expropriation, nationalization or confiscatory taxation, taxation
of income earned in foreign nations (including withholding taxes) or other taxes
imposed with respect to investments in foreign nations, foreign exchange
controls (which may include suspension of the ability to transfer currency from
a given country), default in foreign government securities, political or social
instability or diplomatic developments which could affect investments in
securities or issuers in those nations.
These considerations generally are more of a concern in developing countries,
where the possibility of political instability (including revolution) and
dependence on foreign economic assistance may be greater than in developed
countries. Investments in companies domiciled in developing countries therefore
may be subject to potentially higher risks than investments in developed
countries.
In many countries there is less publicly available information about issuers
than is available in reports about companies in the United States. Foreign
companies are not generally subject to uniform accounting and auditing and
financial reporting standards, and auditing practices and requirements may not
be comparable to those applicable to United States companies. It may be more
difficult to obtain or enforce judgments obtained against foreign entities.
Commission rates in foreign countries, which are generally fixed rather than
subject to negotiation as in the United States, are likely to be higher.
Further, the settlement period of securities transactions in foreign markets may
be longer than in domestic markets.
In many foreign countries there is less government supervision and regulation of
business and industry practices, stock exchanges, brokers and listed companies
than in the United States. Foreign securities transactions may be subject to
higher brokerage costs than domestic securities transactions. Foreign
securities often trade with less frequency and volume than domestic securities
and are therefore less liquid and more volatile than securities of comparable
domestic issuers. The International Equity Portfolio may invest in Russia.
This involves special risks that are described in the Statement of Additional
Information.
INDEX 400 STOCK PORTFOLIO
The investment objective of the Index 400 Stock Portfolio is to achieve
investment results that approximate the performance of the S&P Mid Cap 400 Stock
Price Index ("S&P 400 Index"). The Portfolio will attempt to meet this
objective by investing in stocks included in the S&P 400 Index in proportion to
their weighting in the index.
The S&P 400 Index is composed of 400 common stocks. The companies included in
the S&P 400 Index are generally smaller than those that comprise the S&P 500
Index. See the description of the Index 500 Stock Portfolio below. The S&P 400
does not include the very large issues that account for most of the weighting in
the S&P 500 Index. Most of the companies in the S&P 400 Index have a market
value in the range of $750 million to $5 billion. A few are smaller and a few
are larger. "Standard & Poor's7", "S&P7", "S&P 4007" and "Standard & Poor's Mid
Cap 4007" are trademarks of The McGraw-Hill Companies, Inc. and have been
licensed for use by Northwestern Mutual Life. The Fund is not sponsored,
endorsed, sold or promoted by Standard & Poor's and Standard & Poor's makes no
representation regarding the advisability of investing in the Fund.
The Index 400 Stock Portfolio will not be managed in the traditional sense using
economic, financial and
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market analysis. A computer program will be used to determine which stocks are
to be purchased or sold to achieve the Portfolio's objective. The Portfolio
will, to the extent feasible, remain fully invested and will normally hold at
least 375 of the 400 issues that comprise the S&P 400 Index.
The Index 400 Stock Portfolio's ability to match the performance of the S&P 400
Index will be affected to some extent by the size and timing of cash flows into
and out of the Index 400 Stock Portfolio. The Portfolio will be managed with a
view to reducing such effects. A portion of the assets may at times be invested
in investment grade debt securities, short term commercial paper and Government
and agency obligations, as well as option contracts, stock index futures
contracts, and repurchase agreements.
GROWTH STOCK PORTFOLIO
The investment objective of the Growth Stock Portfolio is long-term growth of
capital; current income is secondary. The Portfolio will seek to achieve this
objective by selecting investments in companies which have above average
earnings growth potential.
The Growth Stock Portfolio invests primarily in common stocks of
well-established companies, with emphasis placed on high quality companies with
strong financial characteristics. The investment process is initiated with a
fundamental economic outlook. Further study of economic sectors leads to the
identification of growth-oriented industries, and to detailed studies of
individual companies. In evaluating individual companies, factors such as the
company management team, product outlook, global exposure, industry leadership
position, and financial characteristics are important variables used in the
analysis.
The market capitalization of companies the Portfolio may invest in is not
limited by size, but the Portfolio will generally invest in large- and
medium-sized companies. The aim of the Portfolio is to seek to reduce overall
risk by diversifying its assets in an appropriate manner. This diversification
will span economic sectors, industry groups, and companies, while emphasizing
high quality investments.
The Portfolio may invest in any of the securities in which the Growth and Income
Stock Portfolio or the Aggressive Growth Stock Portfolio may invest, including,
but not limited to, preferred stock, convertible bonds, short-term commercial
paper, and covered call options.
Portfolios emphasizing growth-oriented investments may experience above average
price volatility. An investment in the Growth Stock Portfolio can present more
risk than an investment in the Index 500 Stock Portfolio. The Growth Stock
Portfolio is designed for long-term investors seeking capital appreciation.
GROWTH AND INCOME STOCK PORTFOLIO
The investment objectives of the Growth and Income Stock Portfolio are long-term
growth of capital and income. The Portfolio seeks to achieve these objectives
consistent with reasonable investment risk. Ordinarily, the Portfolio pursues
its investment objectives by investing primarily in dividend-paying common
stock. The Portfolio may also invest in other equity securities, consisting of,
among other things, nondividend-paying common stock, preferred stock, and
securities convertible into common stock, such as convertible preferred stock
and convertible bonds, and warrants. The Portfolio may also invest in American
Depository Receipts (ADRs).
The Portfolio is not subject to any limit on the size of companies in which it
may invest, but intends, under normal circumstances, to be fully invested to the
extent practicable in the large- and medium-sized companies primarily included
in the S&P 500 Index. The Portfolio is designed for investors who want an
actively managed equity portfolio of selected equity securities that seeks to
outperform the total return of the S&P 500 Index. In managing the Portfolio,
the potential for appreciation and dividend growth is given more weight than
current dividends. Nonetheless, the manager of the Portfolio will normally
strive for gross income for the Portfolio at a level not less than 75% of the
dividend income generated on the stocks included in the S&P 500 Index, although
this income level is merely a guideline and there can be no certainty that this
income level will be achieved.
The Portfolio does not seek to achieve its objective with any individual
investment security, but rather it aims to manage all of its assets in such a
way as to achieve its objective. The Portfolio attempts to reduce risk by
investing in many different economic sectors, industries and companies. The
manager of the Portfolio may moderately under- or over-weight selected economic
sectors against the sector weightings of the S&P 500 Index to seek to enhance
the Portfolio's total return or reduce fluctuations in market value relative to
the S&P 500 Index. In selecting securities, the manager may emphasize
securities that it believes to be undervalued. Securities of a company may be
undervalued for a variety of reasons such as an overreaction by investors to
unfavorable news about a company, an industry or the stock markets in general;
or as a result of a market decline, poor economic conditions, tax-loss selling,
or actual or anticipated unfavorable developments affecting a company.
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<PAGE>
During ordinary market conditions, the Portfolio will be as fully invested as
practicable in the equity securities described above. The Portfolio may enter
into firm commitment agreements, purchase securities on a "when-issued" basis,
and invest in various foreign securities if U.S. exchange-listed. The Portfolio
may also invest in money market instruments, including U.S. Government
securities, short term bank obligations that are rated in the highest two rating
categories by Moody's Investors Service, Inc. or Standard & Poor's, or, if
unrated, are determined to be of equal quality by the manager of the Portfolio,
certificates of deposit, time deposits and banker's acceptances issued by U.S.
and foreign banks and savings and loan institutions with assets of at least $500
million as of the end of their most recent fiscal year; and commercial paper and
corporate obligations, including variable rate demand notes, that are issued by
U.S. and foreign issuers and that are rated in the highest two rating categories
by Moody's Investors Service, Inc. or Standard & Poor's, or if unrated, are
determined to be of equal quality by the manager of the Portfolio. A
description of these ratings is included in the Statement of Additional
Information. Under normal circumstances, the Portfolio will invest in such
money market instruments to invest temporary cash balances or to maintain
liquidity to meet redemptions or expenses. The Portfolio may also, however,
invest in these instruments, without limitation, as a temporary defensive
measure taken during, or in anticipation of, adverse market conditions.
Convertible bonds and other fixed income securities (other than money market
instruments) in which the Portfolio may invest will, at the time of investment,
be rated Baa or better by Moody's Investors Service, Inc. or BBB or better by
Standard & Poor's or, if not so rated, will be of comparable quality as
determined by the manager of the Portfolio. A description of these ratings is
included in the Statement of Additional Information. In the event that an
existing holding is downgraded below these ratings, the Portfolio may
nonetheless retain the security.
In pursuing its investment objective, the Portfolio may engage in the purchase
and writing of put and call options on securities and stock indexes and may
purchase or sell stock index futures contracts and options thereon. These
investment techniques may involve a greater degree of risk than those inherent
in more conservative investment approaches. See the Statement of Additional
Information for a description of these techniques and their attendant risks.
INDEX 500 STOCK PORTFOLIO
The investment objective of the Index 500 Stock Portfolio is to achieve
investment results that approximate the performance of the Standard & Poor's 500
Composite Stock Price Index ("S&P 500 Index"). The Portfolio will attempt to
meet this objective by investing in stocks included in the S&P 500 Index in
proportion to their weighting in the index.
The S&P 500 Index is composed of 500 common stocks representing more than 70% of
the total market value of all publicly-traded common stocks. "Standard &
Poor's-Registered Trademark-", "S&P-Registered Trademark-", "S&P 500-Registered
Trademark-", "Standard & Poor's 500", and "500" are trademarks of
The McGraw-Hill Companies, Inc. and have been licensed for use by Northwestern
Mutual Life. The Fund is not sponsored, endorsed, sold or promoted by
Standard & Poor's and Standard & Poor's makes no representation regarding the
advisability of investing in the Fund.
The Index 500 Stock Portfolio will not be managed in the traditional sense using
economic, financial and market analysis. A computer program will be used to
determine which stocks are to be purchased or sold to achieve the Portfolio's
objective. The Portfolio will, to the extent feasible, remain fully invested
and will normally hold at least 450 of the 500 issues that comprise the S&P 500
Index.
The Index 500 Stock Portfolio's ability to match the performance of the S&P 500
Index will be affected to some extent by the size and timing of cash flows into
and out of the Index 500 Stock Portfolio. The Portfolio will be managed with a
view to reducing such effects. A portion of the assets may at times be invested
in investment grade debt securities, short term commercial paper and United
States Treasury obligations, as well as option contracts, stock index futures
contracts, and repurchase agreements.
BALANCED PORTFOLIO
The investment objective of the Balanced Portfolio is to realize as high a level
of long-term total rate of return as is consistent with prudent investment risk.
Total rate of return consists of current income, including dividends, interest
and discount accruals, and capital appreciation.
The assets of the Balanced Portfolio will be invested in the following three
market sectors:
1. Common stock and other equity securities including the securities in which
the Index 500 Stock Portfolio invests.
2. Bonds and other debt securities with maturities generally exceeding one
year including the securities in which the Select Bond Portfolio invests.
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<PAGE>
3. Money market instruments and other debt securities with maturities
generally not exceeding one year including the securities in which the
Money Market Portfolio invests.
The Balanced Portfolio seeks to achieve its investment objectives by
continuously adjusting the mix of investments among the three market sectors.
The manager attempts to capitalize on variation in return potential produced by
the interaction of changing financial markets and economic conditions. Asset
allocation decisions are based on fundamental analysis rather than short-term
market timing considerations. Shifts in asset allocation are expected to be
gradual.
The Portfolio will normally have some portion of its assets invested in each of
the three asset categories. However, up to 100% of the Balanced Portfolio's net
assets may be invested in money market instruments. Not more than 75% of the
Balanced Portfolio's net assets may be invested in either the stock sector or
the bond sector. No minimum percentage has been established for any of the
sectors. The Balanced Portfolio's investment objective is supplemented by
investment objectives and policies for the stock, bond and money market sectors.
These are presently substantially identical to those which have been established
for the Index 500 Stock, Select Bond and Money Market Portfolios.
HIGH YIELD BOND PORTFOLIO
The investment objective of the High Yield Bond Portfolio is to achieve high
current income and capital appreciation.
The High Yield Bond Portfolio seeks to achieve its objective by investing
primarily in a diversified selection of fixed income securities rated Ba1 or
lower by Moody's Investors Service, Inc. or BB+ or lower by Standard & Poor's.
A description of the ratings provided by the major rating agencies is included
in the Statement of Additional Information. The Portfolio may also invest in
nonrated securities.
The securities in which the High Yield Bond Portfolio will invest are considered
speculative and are sometimes known as "junk bonds". These securities tend to
offer higher yields than higher rated securities of comparable maturities
because the historical financial condition of the issuers of these securities is
usually not so strong as that of other issuers. High yield fixed income
securities usually present greater risk of loss of income and principal than
higher rated securities. Investors in these securities should carefully
consider these risks and should understand that high yield fixed income
securities are not appropriate for short-term investment purposes.
The primary investment strategy of the High Yield Bond Portfolio is to invest in
industries or individual companies which have stable or improving fundamental
financial characteristics. The success of this strategy depends on the
manager's analytical and portfolio management skills. These skills are more
important in the selection of high yield/high risk securities than would be the
case with a portfolio of high quality bonds. In selecting securities for the
High Yield Bond Portfolio the manager will consider the ratings assigned by the
major rating agencies, but primary reliance will be placed on the manager's
evaluation of credit and market risk in relationship to the expected rate of
return.
The risk that the issuer of a fixed income security may fail to pay principal
and interest when due is referred to as "credit risk". Price volatility caused
by such factors as interest rate fluctuation, market perceptions of an issuer's
creditworthiness and general liquidity in the financial market is "market risk".
The value of the securities held by the High Yield Bond Portfolio will be
directly affected by the market perception of the creditworthiness of the
securities' issuers and will fluctuate inversely with changes in interest rates.
Lower rated securities are more likely to react to developments affecting market
and credit risk than are more highly rated securities, which react primarily to
movements in the general level of interest rates. For example, because
investors generally perceive that there are greater risks associated with
investing in medium or lower rated securities, the yields and prices of such
securities may tend to fluctuate more than those of higher rated securities.
Moreover, in the lower quality segments of the fixed income securities market,
changes in perception of the creditworthiness of individual issuers tend to
occur more frequently and in a more pronounced manner than do changes in higher
quality segments of the fixed income securities market. The yield and price of
medium to lower rated securities therefore may experience greater volatility
than is the case with higher rated securities. The manager of the Portfolio
seeks to reduce volatility through careful evaluation of credit risk and market
risk and diversification of the Portfolio's investments.
The secondary market for high yield/high risk securities, which is concentrated
in relatively few market makers, may not be as liquid as the secondary market
for more highly rated securities. Under adverse market or economic conditions,
the secondary market for high yield/high risk securities could contract further,
independent of any specific adverse changes in the condition of a particular
issuer. As a result, the High Yield Bond Portfolio could find it more difficult
to sell such securities or may be able to sell the securities only at prices
lower than if such securities were widely traded. Prices realized upon the
sale of such lower rated securities therefore may be less
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<PAGE>
than the prices used in calculating the Portfolio's net asset value. In the
absence of readily available market quotations, high yield/high risk securities
will be valued by the Fund's Directors using a method that, in the good faith
belief of the Directors, accurately reflects fair value. Valuing such
securities in an illiquid market is a difficult task. The Directors' judgment
plays a more significant role in valuing such securities than those securities
for which more objective market data are available.
In addition to notes and bonds, the High Yield Bond Portfolio may invest in
preferred stocks and convertible securities, including warrants or other equity
securities issued as part of a fixed income offering. The Portfolio may also
invest up to 5% of its assets in other equity securities, rights, warrants,
options and other derivatives. The Portfolio may purchase put and call options,
on individual securities as well as indexes, and may write covered call and
secured put options. A description of put and call options is included in the
Statement of Additional Information. The Portfolio may invest available
temporary cash in short-term obligations, including those in which the Money
Market Portfolio may invest. The Portfolio may invest more substantially in
such short-term obligations or in investment grade securities (rated Baa3 or
higher by Moody's Investors Service, Inc. or BBB- or higher by Standard &
Poor's) when market conditions warrant a more defensive investment posture.
The High Yield Bond Portfolio may invest in foreign securities consistent with
its investment objective. Some of the risks associated with investments in
foreign securities are briefly set forth in the description of the International
Equity Portfolio above. Such investments may be in United States currency
denominated debt issues or in debt securities in the currency of other nations.
The Portfolio may, but will not necessarily, attempt to hedge its exposures by
engaging in transactions in foreign currency futures contracts. For a
discussion of the risks involved in these contracts see the Statement of
Additional Information.
SELECT BOND PORTFOLIO
The primary investment objective of the Select Bond Portfolio is to provide as
high a level of long-term total rate of return as is consistent with prudent
investment risk. Total rate of return consists of current income, including
interest and discount accruals, and capital appreciation. A secondary objective
is to seek preservation of shareholders' capital.
The Select Bond Portfolio's assets will be invested in the following types of
securities:
1. publicly offered straight debt securities having a rating within the four
highest grades as determined by Moody's Investors Service, Inc. (Aaa, Aa, A
or Baa) or Standard & Poor's (AAA, AA, A or BBB);
2. obligations of or guaranteed by the United States Government or its
agencies;
3. obligations (payable in U.S. dollars) of or guaranteed by the Government of
Canada or of a Province of Canada or any instrumentality or political
subdivision thereof, provided such obligations have a rating within the
three highest grades as determined by Moody's Investors Service, Inc. or
Standard & Poor's and do not exceed 10% of the Portfolio's total assets;
4. publicly offered straight debt securities issued or guaranteed by a
national or state bank or bank holding company (as defined in the Federal
Bank Holding Company Act, as amended) having a rating within the two
highest grades as determined by Fitch's Investor's Service, Inc. (AAA or
AA), and certificates of deposit of such banks or bank holding companies;
5. commercial paper having a rating within the two highest investment grades,
as determined by Moody's Investors Service, Inc. (P-1 or P-2) or Standard &
Poor's (A-1 or A-2);
6. straight debt securities acquired directly from the issuers in private
placement transactions, which securities, in the judgment of the Fund's
Board of Directors, are of investment quality comparable to publicly
offered straight debt securities rated Baa by Moody's Investors Service,
Inc. or BBB by Standard & Poor's, or better;
7. cash or cash equivalents; and
8. preferred stocks and obligations not described above, including convertible
securities, securities carrying warrants to purchase equity securities and
securities acquired directly from the issuers in private placement
transactions other than those securities described above.
A description of the ratings provided by Moody's Investors Service, Inc.,
Standard & Poor's and Fitch's Investor's Service, Inc. is included in the
Statement of Additional Information.
The Select Bond Portfolio will not invest in common stocks directly, but may
retain up to 10% of its total assets in common stocks acquired upon conversion
of debt securities or upon exercise of warrants acquired with debt securities.
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At least 70% of the Select Bond Portfolio's total assets will normally be
invested in bonds and debentures which have maturities of at least one year.
However, during periods of particular volatility or when an unusual decline in
the value of long-term obligations is anticipated, for temporary defensive
purposes the Select Bond Portfolio may place a larger portion of its assets in
cash and short-term obligations. During such periods the Select Bond Portfolio's
holdings of short-term obligations and equity securities may temporarily exceed
an aggregate total of 30% of the Select Bond Portfolio's total assets.
The Select Bond Portfolio invests in obligations of a number of U.S. Government
agencies. Obligations of some agencies are supported by the full faith and
credit of the U.S. Treasury, others are supported only by the credit of the
agency. No assurance can be given that the U.S. Government would provide
financial support to any agency if it is not obligated to do so by law. The
Select Bond Portfolio will invest in the securities of a particular agency only
when the investment adviser is satisfied that the credit risk with respect to
such agency is minimal.
The Select Bond Portfolio may invest up to 10% of its total assets in high
yield/high risk securities and up to 10% of its total assets in foreign
securities, consistent with its investment objectives. See the description of
the High Yield Bond Portfolio, p. 11 for a discussion of high yield/high risk
securities. Some of the risks associated with investments in foreign securities
are briefly set forth in the description of the International Equity Portfolio,
p. 7.
The Select Bond Portfolio may also invest in interest rate futures contracts and
repurchase agreements. The Statement of Additional Information includes a
description of these instruments.
MONEY MARKET PORTFOLIO
The investment objective of the Money Market Portfolio is to realize maximum
current income to the extent consistent with liquidity and stability of capital.
The assets of the Money Market Portfolio will be invested in money market
instruments and other debt securities with maturities generally not exceeding
one year. Such instruments may include the following:
1. U.S. Treasury Bills and other obligations of or guaranteed by the U.S.
Government or its agencies;
2. obligations of or guaranteed by the Government of Canada or of a Province
of Canada or any instrumentality or political subdivision thereof, provided
such obligations do not exceed 10% of the Money Market Portfolio's total
assets;
3. obligations (including certificates of deposit, time deposits, or bankers'
acceptances) of U.S. or Canadian chartered banks having total assets in
excess of $1,000,000,000, U.S. branches of foreign banks where said foreign
banks have total assets in excess of $10,000,000,000, and U.S. savings and
loan associations having total assets in excess of $1,000,000,000, and
Eurodollar certificates of deposit issued by foreign branches of U.S. banks
where said banks have total assets in excess of $1,000,000,000 (see
"Eurodollar Certificates of Deposit");
4. commercial paper, including variable amount master notes, having a rating
at the time of purchase within the two highest grades as determined by
Moody's Investors Service, Inc. (P-1 or P-2) or Standard & Poor's (A-1 or
A-2), or commercial paper or notes issued by companies with an unsecured
debt issue outstanding having a rating at the time of purchase within the
three highest grades as determined by Moody's Investors Service, Inc. (Aaa,
Aa, or A) or Standard & Poor's (AAA, AA or A); and
5. publicly traded bonds, debentures and notes having a rating within the four
highest grades as determined by Moody's Investors Service, Inc. (Aaa, Aa, A
or Baa) or Standard & Poor's (AAA, AA, A or BBB).
A glossary of the following terms is included in the Statement of Additional
Information: certificates of deposit, Eurodollar certificates of deposit, time
deposits, bankers' acceptances, variable amount master notes and commercial
paper. A description of the ratings provided by Moody's Investors Service, Inc.
and Standard & Poor's is also included in the Statement of Additional
Information.
The Money Market Portfolio will attempt to maximize its return by trading to
take advantage of changing money market conditions and trends. The Money Market
Portfolio will also trade to take advantage of what are believed to be
disparities in yield relationships between different money market instruments.
This procedure may increase or decrease the Portfolio's yield depending upon
management's ability to correctly time and execute such transactions. The Money
Market Portfolio intends to purchase only securities that mature within a year
except for securities which are subject to repurchase agreements. Accordingly,
the level of purchases will be relatively high. However, as transaction costs on
Money Market Portfolio investments are generally not substantial, the
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<PAGE>
high level of purchases will not adversely affect the Portfolio's net asset
value or net income.
U.S. Government and agency obligations held by the Money Market Portfolio
consist primarily of discounted or interest-bearing notes with average
maturities of ninety days or less. The Money Market Portfolio invests most
frequently in obligations of the following agencies of the U.S. Government: Farm
Credit System, Federal Home Loan Banks, Federal Home Loan Mortgage Corporation
and Federal National Mortgage Association. Obligations of some agencies are
supported by the full faith and credit of the U.S. Treasury, others are
supported by the right of the issuer to borrow from the Treasury, others, such
as those of the Federal National Mortgage Association, a private corporation,
are supported by the discretionary authority of the U.S. Government to purchase
the agency's obligations and others are supported only by the credit of the
agency. No assurance can be given that the U.S. Government would provide
financial support to any agency if it is not obligated to do so by law. The
Money Market Portfolio will invest in the securities of a particular agency only
when the investment adviser is satisfied that the credit risk with respect to
such agency is minimal.
The Money Market Portfolio may also invest in repurchase agreements. These are
described in the Statement of Additional Information.
YEAR 2000 RISKS
In providing services to the Fund, Northwestern Mutual Investment Services, LLC,
the Fund's investment adviser (NMIS), and its corporate affiliates rely on both
internal software systems and external software systems purchased from vendors.
Many computer programs employed throughout the world use two digits rather than
four to identify the year. These programs must be adapted in preparation for
the year 2000.
Failure of computer software systems could affect securities trades of the Fund,
payments of interest and dividends and portfolio pricing. If trading systems
fail to function properly there may be settlement problems and liquidity issues.
Corporate and government data processing errors may result in various problems
for the companies in which the Portfolios invest and overall economic
uncertainties. In addition, it has been reported that foreign institutions have
made less progress than major U.S. entities in addressing the year 2000 computer
systems issues. This could adversely affect the investments of the Portfolios
in foreign securities.
NMIS and its affiliates are taking appropriate steps to prepare for the year
2000. However, there can be no assurance that these steps will be sufficient to
avoid any adverse impact on the Fund and the Portfolios.
Nor can there be assurance that the computer issues associated with the turn of
the century will not have adverse effects on the investments of the Portfolios.
- --------------------------------------------------------------------------------
MANAGEMENT OF THE FUND
The Board of Directors of the Fund is responsible for the administration of the
affairs of the Fund. The Fund's investment adviser is NMIS, a wholly-owned
subsidiary of Northwestern Mutual Life. NMIS' address is 720 East Wisconsin
Avenue, Milwaukee, Wisconsin 53202. NMIS has served as investment adviser to
each of the mutual funds sponsored by Northwestern Mutual Life, subject to the
supervision and control of the boards of directors of the funds, since their
incorporation. NMIS provides investment advice and recommendations regarding the
purchase and sale of securities for the Fund's Portfolios.
Northwestern Mutual Life and its wholly-owned subsidiary, Northwestern
Investment Management Company, employ a full staff of investment personnel.
Northwestern Investment Management Company was formed in 1997. The personnel
and related facilities of Northwestern Mutual Life and its subsidiary are
utilized by NMIS in performing its investment advisory functions.
J. P. Morgan Investment Management Inc. ("J. P. Morgan Investment"), 522 Fifth
Avenue, New York, New York 10036, a wholly-owned subsidiary of J. P. Morgan &
Co., is the sub-adviser for the Growth and Income Stock Portfolio. Templeton
Investment Counsel, Inc., 500 East Broward Boulevard, Ft. Lauderdale, Florida
33394, a wholly-owned indirect subsidiary of Franklin Resources, Inc., is the
sub-adviser for the International Equity Portfolio. Each of the sub-advisers
has been retained by Northwestern Mutual Life and the Fund pursuant to an
investment sub-advisory agreement to provide investment advice and, in general,
to conduct the management investment program of the Portfolio, subject to the
general control of the Board of Directors of the Fund.
PORTFOLIO MANAGERS
Mark G. Doll, Vice President and Assistant Treasurer - Public Markets of
Northwestern Investment Management Company, and Senior Vice President of
Northwestern Mutual Life, joined Northwestern Mutual Life in 1972 and holds B.A.
and M.B.A.
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degrees from the University of Wisconsin-Milwaukee. He is a Chartered Financial
Analyst. Mr. Doll is responsible for the publicly traded investments of
Northwestern Mutual Life and for investment management of the Balanced
Portfolio.
Patricia L. Van Kampen, Managing Director of Northwestern Investment Management
Company, joined Northwestern Mutual Life in 1974. She holds a B.A. degree from
St. Norbert College and an M.B.A. from Marquette University, and is a Chartered
Financial Analyst. Ms. Van Kampen is responsible for all common stock
investments of Northwestern Mutual Life, and for investment management of the
Balanced Portfolio.
William R. Walker, Managing Director of Northwestern Investment Management
Company, joined Northwestern Mutual Life in 1984. Prior to this, he worked for
the Chicago Board Options Exchange, the Milwaukee Company, and Armco Insurance.
Mr. Walker is a Chartered Financial Analyst, and holds a B.S. degree from
Marquette University and an M.B.A. from Miami of Ohio. He has primary
responsibility for the management of the Small Cap Growth Stock Portfolio and
the Aggressive Growth Stock Portfolio, as well as the small company portfolio of
Northwestern Mutual Life.
Julie M. Van Cleave, Managing Director of Northwestern Investment Management
Company, joined Northwestern Mutual Life in 1984 and holds B.A. and M.B.A.
degrees from the University of Wisconsin-Madison. Ms. Van Cleave is a Chartered
Financial Analyst and has primary responsibility for the Growth Stock Portfolio
and the large company portfolio of Northwestern Mutual Life.
Timothy S. Collins, Director of Northwestern Investment Management Company,
joined Northwestern Mutual Life in 1986. He received a B.A. degree from St.
Norbert College and an M.B.A. from the University of Wisconsin-Madison. Mr.
Collins manages the High Yield Bond Portfolio and also manages high yield fixed
income securities of Northwestern Mutual Life. Mr. Collins is a Chartered
Financial Analyst.
Varun Mehta, Director of Northwestern Investment Management Company, joined
Northwestern Mutual Life in March, 1997. From 1993 through March 1997, Mr.
Mehta was with the Ameritech Investment Management Department serving as
Portfolio Research Manager - Fixed Income and Portfolio Manager - Fixed Income.
Mr. Mehta has his undergraduate degree from the University of Bombay. He
received a Masters degree in Business Management from the Indian Institute of
Management and an M.B.A. from the University of Chicago Graduate School of
Business. Mr. Mehta is a Chartered Financial Analyst. He has primary
responsibility for the Select Bond Portfolio and the fixed income securities of
the Balanced Portfolio.
Henry D. Cavanna, Managing Director of J.P. Morgan Investment, joined J.P.
Morgan in 1971. Mr. Cavanna is a senior U.S. equity portfolio manager in the
U.S. Equity and Balanced Accounts Group. He received his B.A. degree from
Boston College and L.L.B. degree from the University of Pennsylvania. Mr.
Cavanna is responsible for the Growth and Income Stock Portfolio.
Michael J. Kelly, Vice President of J.P. Morgan Investment, joined J.P. Morgan
in 1985. Mr. Kelly has an undergraduate degree from Gettysburg College and an
M.B.A. from The Wharton School. Mr. Kelly is a Chartered Financial Analyst.
Mr. Kelly shares responsibility for the Growth and Income Stock Portfolio with
Mr. Cavanna.
Gary R. Clemons, Senior Vice President, Portfolio Management/Research of
Templeton Investment Counsel, Inc., manages the International Equity Portfolio.
Prior to joining Templeton Investment Counsel in 1993, Mr. Clemons worked as a
portfolio manager/research analyst for Templeton Quantitative Advisers in New
York, a subsidiary of Templeton International. Mr. Clemons holds an M.B.A. with
emphasis in finance from the University of Wisconsin-Madison and a B.S. degree
from the University of Nevada-Reno.
INVESTMENT ADVISORY FEES AND OTHER EXPENSES
Each Portfolio pays a monthly fee for investment advisory services at an annual
rate based on the aggregate average daily net asset values of the Portfolio.
For the Index 500 Stock Portfolio the rate is .20%. For the Index 400 Stock
Portfolio the rate is .25%. For the Select Bond, Money Market and Balanced
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 $50 NEXT $50
PORTFOLIO MILLION MILLION EXCESS
- --------- --------- -------- ------
<S> <C> <C> <C>
Growth and Income
Stock . . . . . . . . . . . . . . .70% .60% .55%
Growth Stock . . . . . . . . . . . .60% .50% .40%
Small Cap Growth
Stock Portfolio . . . . . . . . . .80% .65% .50%
Aggressive Growth
Stock . . . . . . . . . . . . . . .80% .65% .50%
High Yield Bond. . . . . . . . . . .60% .50% .40%
International Equity . . . . . . . .85% .65% .65%
</TABLE>
15
<PAGE>
Of the amounts received by NMIS from the Fund, the sub-adviser for the Growth
and Income Stock Portfolio will be paid by NMIS at the annual rate of .45% on
the first $100 million of the Portfolio's assets, .40% on the next $100 million,
.35% on the next $200 million and .30% on assets in excess of $400 million. For
the International Equity Portfolio the sub-adviser will be paid by NMIS at the
annual rate of .50% of the Portfolio's assets, reduced to .40% on assets in
excess of $100 million.
The following table shows the annual expenses for each of the Portfolios which
were in operation during 1998, as a percentage of the average net assets of the
Portfolio, based on 1998 operations:
<TABLE>
<CAPTION>
INVESTMENT
ADVISORY OTHER TOTAL
PORTFOLIO FEE EXPENSES EXPENSES
- --------- --------- -------- --------
<S> <C> <C> <C>
Aggressive Growth
Stock. . . . . . . . . . . . . . .52% .00% .52%
International Equity . . . . . . . .67% .09% .76%
Growth Stock . . . . . . . . . . . .45% .01% .46%
Growth and Income
Stock. . . . . . . . . . . . . . .57% .01% .58%
Index 500 Stock. . . . . . . . . . .20% .01% .21%
Balanced . . . . . . . . . . . . . .30% .00% .30%
High Yield Bond. . . . . . . . . . .49% .01% .50%
Select Bond. . . . . . . . . . . . .30% .00% .30%
Money Market . . . . . . . . . . . .30% .00% .30%
</TABLE>
- --------------------------------------------------------------------------------
TAXES AND DIVIDENDS
Each Portfolio is qualified or intends to qualify as a regulated investment
company under Subchapter M of the Internal Revenue Code. It is the Fund's policy
to comply with the provisions of the Code regarding distribution of investment
income and capital gains so as to relieve each Portfolio from all, or
substantially all, Federal taxes. Each Portfolio expects to distribute all or
substantially all net investment income and net capital gains, if any, from the
sale of investments.
Shareholders of each Portfolio are entitled to receive such dividends from net
investment income and distributions of net capital gains as the Directors of the
Fund may declare. Dividends from net investment income and net capital gains
will be declared for the Aggressive Growth Stock, International Equity, Growth
Stock, Growth and Income Stock, Index 500 Stock, Balanced, High Yield Bond and
Select Bond Portfolios annually, and for the Money Market Portfolio on each
business day.
Net investment income of each Portfolio will be determined at the close of
trading on the New York Stock Exchange on each day during which the Exchange is
open for trading. Net investment income of each Portfolio consists of:
1. all dividends, interest income and discount earned by the Portfolio
(including original issue and market discount) and
2. net short-term capital gain less
3. all expenses of the Portfolio.
Shares of the Portfolios are offered only for funding variable annuity contracts
and variable life insurance policies offered by The Northwestern Mutual Life
Insurance Company. For a discussion of the tax considerations that affect the
insurance company and its separate accounts for these products, and the tax
considerations for purchasers of variable annuities and variable life insurance,
see the prospectus to which this prospectus for the Fund is attached
- --------------------------------------------------------------------------------
OFFERING AND REDEMPTION OF SHARES
Shares of capital stock of each Portfolio of the Fund are offered and redeemed
at their net asset value as next determined following receipt of a purchase
order or tender for redemption without the addition of any selling commission or
"sales load" or any redemption charge. The redemption price may be more or less
than the shareholder's cost.
Equity securities listed on a stock exchange are valued at the closing sale
price or, if no sale took place, the closing bid price. Stock index futures
contracts and interest rate futures contracts are valued at the closing
settlement price on the commodities exchange. Debt securities with maturities
generally exceeding one year are valued on the basis of valuations furnished by
Interactive Data Corporation. Money market instruments with maturities
exceeding 60 days but generally not exceeding one year are valued by marking to
market, except for the Money Market Portfolio. Debt securities with remaining
maturities of 60 days or less, and all debt securities of 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. All other
assets are valued at their fair value as determined in good faith by the
Directors. Net asset value is determined as of the close of trading on the New
York Stock Exchange on each day during which the Exchange is open for trading.
In accordance with the requirements of the Investment Company Act of
16
<PAGE>
1940 the Portfolios will also determine the net asset value of their shares on
any other day on which there is sufficient trading to materially affect the
value of their securities.
A more detailed discussion of asset valuation methods is included in the
Statement of Additional Information.
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the Fund's
financial performance for the past five years. Certain information reflects
financial results for a single Fund share. The total returns in the table
represent the rate that an investor would have earned [or lost] on an investment
in the Fund (assuming reinvestment of all dividends and distributions). This
information has been audited by PricewaterhouseCoopers LLP, whose report, along
with the Fund's financial statements, are included in the Fund's Statement of
Additional Information (SAI), which is available upon request
17
<PAGE>
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT THE YEAR)
<TABLE>
<CAPTION>
NET REALIZED
NET AND DISTRIBUTIONS
ASSET NET UNREALIZED TOTAL DIVIDENDS FROM NET
VALUE, INVEST- GAIN FROM FROM NET REALIZED TOTAL
BEGINNING MENT (LOSS) ON INVESTMENT INVESTMENT GAIN ON DISTRIBU-
OF YEAR INCOME INVESTMENTS OPERATIONS INCOME INVESTMENTS TIONS
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Aggressive Growth Stock Portfolio
*1994 . . $1.91 $-- $.09 $.09 $-- $-- $ --
1995 . . 2.00 -- .78 .78 -- (.01) (.01)
1996 . . 2.77 -- .49 .49 -- (.11) (.11)
1997 . . 3.15 -- .39 .39 -- (.20) (.20)
1998 . . 3.34 -- .24 .24 -- (.12) (.12)
- --------------------------------------------------------------------------------------------------------
International Equity Portfolio
*1994 . . $1.22 $.02 $(.02) $-- $(.02) $(.01) $(.03)
1995 . . 1.19 .04 .13 .17 -- (.01) (.01)
1996 . . 1.35 .04 .24 .28 (.03) (.04) (.07)
1997 . . 1.56 .04 .15 .19 (.04) (.02) (.06)
1998 . . 1.69 .05 .04 .09 (.04) (.06) (.10)
- --------------------------------------------------------------------------------------------------------
Growth Stock Portfolio*
*1994 . . $1.00 $.01 $ -- $.01 $(.01) $ -- $(.01)
1995 . . 1.00 .02 .28 .30 (.02) (.02) (.04)
1996 . . 1.26 .02 .25 .27 (.02) (.05) (.07)
1997 . . 1.46 .02 .42 .44 (.02) (.07) (.09)
1998 . . 1.81 .02 .46 .48 (.02) (.02) (.04)
- --------------------------------------------------------------------------------------------------------
Growth and Income Stock Portfolio*
*1994 . . $1.00 $.01 $(.01) $-- $(.01) $(.01) $(.02)
1995 . . 0.98 .02 .29 .31 (.02) (.06) (.08)
1996 . . 1.21 .02 .23 .25 (.02) (.12) (.14)
1997 . . 1.32 .01 .37 .38 (.01) (.36) (.37)
1998 . . 1.33 .01 .29 .30 (.01) -- (.01)
- --------------------------------------------------------------------------------------------------------
Index 500 Stock Portfolio
1994 . . $1.29 $.03 $(.01) $.02 $(.03) $(.01) $(.04)
1995 . . 1.27 .04 .42 .46 (.01) -- (.01)
1996 . . 1.72 .04 .35 .39 (.02) (.03) (.05)
1997 . . 2.06 .04 .62 .66 (.04) (.04) (.08)
1998 . . 2.64 .04 .71 .75 (.04) (.06) (.10)
- --------------------------------------------------------------------------------------------------------
Balanced Portfolio
1994 . . $1.33 $.04 $(.05) $(.01) $-- $(.01) $(.01)
1995 . . 1.31 .07 .27 .34 (.04) (.01) (.05)
1996 . . 1.60 .06 .15 .21 (.06) (.03) (.09)
1997 . . 1.72 .07 .28 .35 (.06) (.02) (.08)
1998 . . 1.99 .07 .29 .36 (.07) (.06) (.13)
- --------------------------------------------------------------------------------------------------------
High Yield Bond Portfolio
*1994 . . $1.00 $.06 $(.03) $.03 $(.06) $ -- $(.06)
1995 . . 0.97 .10 .07 .17 (.10) (.01) (.11)
1996 . . 1.03 .09 .10 .19 (.09) (.03) (.12)
1997 . . 1.10 .11 .06 .17 (.14) (.07) (.21)
1998 . . 1.06 .10 (.12) (.02) (.10) -- (.10)
- --------------------------------------------------------------------------------------------------------
Select Bond Portfolio
1994 . . $1.15 $.06 $(.09) $(.03) $(.06) $ -- $(.06)
1995 . . 1.06 .07 .13 .20 (.03) -- (.03)
1996 . . 1.23 .07 (.04) .03 (.04) -- (.04)
1997 . . 1.22 .08 .04 .12 (.08) -- (.08)
1998 . . 1.26 .08 -- .08 (.08) (.01) (.09)
- --------------------------------------------------------------------------------------------------------
Money Market Portfolio
1994 . . $1.00 $ .05 $-- $ .05 $(.05) $ -- $(.05)
1995 . . 1.00 .06 -- .06 (.06) -- (.06)
1996 . . 1.00 .05 -- .05 (.05) -- (.05)
1997 . . 1.00 .05 -- .05 (.05) -- (.05)
1998 . . 1.00 .05 -- .05 (.05) -- (.05)
RATIO
OF NET
NET NET RATIO OF INVESTMENT
ASSET ASSETS, EXPENSES INCOME
VALUE, END OF TO (LOSS) TO PORTFOLIO
END TOTAL YEAR AVERAGE AVERAGE TURNOVER
OF YEAR RETURNH (THOUSANDS) NET ASSETS NET ASSETS RATE
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Aggressive Growth Stock Portfolio
*1994 . . $2.00 4.47%++ $ 327,096 0.58%+++ 0.29%+++ 21.54%
1995 . . 2.77 39.29 577,014 0.56 0.13 37.84
1996 . . 3.15 17.70 871,926 0.54 (0.03) 47.25
1997 . . 3.34 13.86 1,067,068 0.53 0.06 57.27
1998 . . 3.46 7.56 1,137,466 0.52 0.04 50.43
- ---------------------------------------------------------------------------------------------
International Equity Portfolio
*1994 . . $1.19 0.11%++ $292,533 0.87%+++ 2.28%+++ 10.97%
1995 . . 1.35 14.57 342,127 0.85 2.68 26.71
1996 . . 1.56 21.01 505,189 0.81 3.02 17.07
1997 . . 1.69 12.28 659,850 0.77 2.75 16.74
1998 . . 1.68 4.82 671,106 0.76 3.38 30.41
- ---------------------------------------------------------------------------------------------
Growth Stock Portfolio*
*1994 . . $1.00 1.55%+ $ 41,868 0.71%+++ 2.30%+++ 16.51%
1995 . . 1.26 30.82 85,557 0.61 1.77 46.83
1996 . . 1.46 20.91 170,482 0.57 1.41 37.61
1997 . . 1.81 29.85 243,071 0.49 1.24 33.20
1998 . . 2.25 26.69 421,282 0.46 1.10 21.64
- ---------------------------------------------------------------------------------------------
Growth and Income Stock Portfolio*
*1994 . . $0.98 0.34%+ $ 64,700 0.78%+++ 1.93%+++ 54.18%
1995 . . 1.21 31.12 136,923 0.69 1.68 80.00
1996 . . 1.32 19.97 234,184 0.62 1.44 93.92
1997 . . 1.33 30.03 371,935 0.60 1.04 144.52
1998 . . 1.62 23.14 570,970 0.58 1.00 160.40
- ---------------------------------------------------------------------------------------------
Index 500 Stock Portfolio
1994 . . $1.27 1.21% $316,123 0.24% 3.10% 5.59%
1995 . . 1.72 37.25 495,133 0.21 2.51 3.19
1996 . . 2.06 22.75 740,066 0.21 2.27 3.45
1997 . . 2.64 33.20 1,152,857 0.21 1.86 3.15
1998 . . 3.29 28.72 1,690,680 0.21 1.40 3.03
- ---------------------------------------------------------------------------------------------
Balanced Portfolio
1994 . . $1.31 0.16% $1,727,127 0.30% 4.78% 42.35%
1995 . . 1.60 26.39 2,083,289 0.30 4.40 37.28
1996 . . 1.72 13.45 2,326,234 0.30 3.95 67.66
1997 . . 1.99 21.52 2,788,494 0.30 3.70 29.94
1998 . . 2.22 18.88 3,282,071 0.30 3.48 44.18
- ---------------------------------------------------------------------------------------------
High Yield Bond Portfolio
*1994 . . $0.97 3.02%+ $ 35,537 0.73%+++ 9.40%+++ 119.48%
1995 . . 1.03 16.78 55,974 0.65 9.90 116.57
1996 . . 1.10 19.77 93,878 0.60 9.54 143.91
1997 . . 1.06 15.85 153,038 0.55 9.95 129.49
1998 . . .94 (1.84) 184,782 0.50 10.85 153.71
- ---------------------------------------------------------------------------------------------
Select Bond Portfolio
1994 . . $1.06 (2.28)% $158,508 0.30% 7.02% 108.00%
1995 . . 1.23 19.10 198,142 0.30 6.61 69.06
1996 . . 1.22 3.31 214,333 0.30 6.48 195.98
1997 . . 1.26 9.46 244,835 0.30 7.03 184.93
1998 . . 1.25 7.07 298,034 0.30 6.87 161.79
- ---------------------------------------------------------------------------------------------
Money Market Portfolio
1994 . . $1.00 4.06% $104,217 0.30% 4.64% --
1995 . . 1.00 5.82 132,572 0.30 5.61 --
1996 . . 1.00 5.29 176,298 0.30 5.13 --
1997 . . 1.00 5.47 194,470 0.30 5.33 --
1998 . . 1.00 5.43 291,464 0.30 5.26 --
</TABLE>
- --------------------------------------------------------------------------------
* For the period of May 3, 1994 (commencement of operations) through
December 31, 1994.
+ 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.
+++ Computed on an annualized basis.
18
<PAGE>
More information about Northwestern Mutual Series Fund, Inc. is included in the
Fund's Statement of Additional Information (SAI), incorporated by reference in
this prospectus, which is available free of charge.
More information about the Fund's investments is included in the Fund's annual
and semi-annual reports, which discuss the market conditions and investment
strategies that significantly affected each Portfolio's performance during the
previous fiscal period.
To request a free copy of the Fund's SAI, or current annual or semi-annual
report, call us at 1-800-519-4665. Information about the Fund (including the
SAI) can be reviewed and copied at the Public Reference Room of the Securities
and Exchange Commission (SEC) in Washington, DC. Information on the operation
of the Public Reference Room may be obtained by calling the SEC at
1-800-SEC-0330. Reports and other information about the Fund are available on
the SEC's Internet site at http://www.sec.gov. Copies of this information may
be obtained, upon payment of a duplicating fee, by writing the Public Reference
Section of the SEC, Washington, DC 20549-6009.
NORTHWESTERN MUTUAL LIFE
VARIABLE ANNUITY CONTRACTS
Nontax-Qualified Annuities Individual Retirement Annuities
Roth IRAs Simplified Employee Pension Plan
IRAs Tax-Deferred Annuities
SIMPLE IRAs 457 Deferred Compensation Plan
Annuities
NORTHWESTERN MUTUAL SERIES FUND, INC.
RUSSELL INSURANCE FUNDS
PROSPECTUS
Investment Company Act File Nos. 811-3990 and 811-5371
NORTHWESTERN
MUTUAL LIFE-Registered Trademark-
PO Box 3095
Milwaukee WI 53201-3095
Change Service Requested
<PAGE>
- --------------------------------------------------------------------------------
NORTHWESTERN MUTUAL
SERIES FUND, INC.
Consisting of
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
Money Market Portfolio
This Statement of Additional Information is not a
prospectus but supplements and should be read in conjunction
with the Prospectus for the Fund. This Statement of
Additional Information is incorporated by reference into the
Prospectus, but no information is incorporated by reference
into this Statement of Additional Information. A copy of
the Prospectus may be obtained from The Northwestern Mutual
Life Insurance Company, 720 East Wisconsin Avenue,
Milwaukee, Wisconsin 53202, telephone number (414) 271-1444.
- --------------------------------------------------------------------------------
The date of the Prospectus to which this Statement of
Additional Information relates is April 30, 1999.
The date of this Statement of Additional Information is
April 30, 1999.
B-1
<PAGE>
TABLE OF CONTENTS
CROSS-REFERENCE TO
PAGE PAGE IN
PROSPECTUS
---- ------------------
Investment Policies B-3 5
Investment Restrictions B-3 -
Repurchase Agreements B-4 5
Financial Futures Contracts B-5 3
Covered Call Option Contracts B-11 -
Reverse Repurchase Agreements B-12 -
Warrants B-12 5
Asset-Backed and Variable Rate Securities B-12 -
Short-Term Trading B-13 -
Firm Commitment Agreements and "When-Issued" B-13 -
Securities
Eurodollar Certificates of Deposit B-13
Private Placement Transactions B-14 11
and Illiquid Assets
Risk Factors for Foreign Securities, B-14 3
Foreign Currencies and Foreign Interest Rates
Portfolio Turnover B-17 -
Management of the Fund B-18 13
Ownership of Shares of the Fund B-21 -
Investment Advisory and Other Services B-23 14
Portfolio Transactions and B-26 -
Brokerage Allocation and Other Practices
Organization and Capital Stock B-27 15
Purchase, Redemption and Pricing of B-28 15
Shares
Taxes and Dividends B-31 14
Calculation of Yield Quotations of B-31 5
the Money Market Portfolio
Appendix A B-32 -
Appendix B B-38 -
Report of Independent Accountants B-39 15
Financial Statements and Schedules B-39 15
of Investments
B-2
<PAGE>
INVESTMENT POLICIES
INVESTMENT RESTRICTIONS
The investment restrictions of the Portfolios numbered 1-14 below are
"fundamental policies" and may be changed only with the approval of the majority
of the Portfolio's shares outstanding. These investment restrictions provide
that each Portfolio will not:
1. Acquire more than 25% of any class of equity securities of any one
issuer.
2. With respect to at least 75% of the value of the total assets of the
Portfolio, invest more than 5% of the value of such assets in the
securities of any one issuer (except securities issued or guaranteed
by the U.S. Government or its agencies), or invest in more than 10% of
the outstanding voting securities of any one issuer.
3. Purchase the securities of any other investment company, except in
open-market transactions involving no commission or profit to a dealer
(other than the customary broker's commission) or in connection with
mergers, consolidations or acquisitions of assets, in amounts not
exceeding 10% of the total assets of the Portfolio.
4. Invest more than 15% of the value of the total assets of the Portfolio
in securities which are restricted as to disposition under federal
securities laws and in other illiquid assets. For the Money Market
Portfolio the limit is 10%.
5. Invest more than 25% of the value of the total assets of the Portfolio
in securities of issuers in any one industry except for investments by
the Money Market Portfolio and the Balanced Portfolio in U.S. Treasury
Bills, other obligations of or guaranteed by the U.S. Government or
its agencies, certificates of deposit or bankers' acceptances.
6. Make loans aggregating more than 10% of the total assets of the
Portfolio at any one time, provided that neither the purchase of a
portion of an issue of publicly distributed bonds, debentures, or
other debt securities, nor the purchase of short-term debt
securities, is to be considered as a loan.
7. Invest for the purpose of influencing management or exercising
control, but freedom of action is reserved with respect to exercise of
voting rights in respect of each Portfolio's securities.
8. Purchase any security on margin, but each Portfolio may obtain such
short-term credits as are necessary for the clearance of purchases and
sales of securities.
9. Make short sales of securities.
10. Act as a securities underwriter for other issuers, but each Portfolio
may purchase securities under circumstances where, if the securities
are later publicly offered or sold by the Portfolio, it might be
deemed to be an underwriter for purposes of the Securities Act of
1933.
11. Purchase or sell real estate. However, each Portfolio may invest in
securities issued by companies, including real estate investment
trusts, which invest in real estate or interests therein.
B-3
<PAGE>
12. Invest in commodities or commodity contracts. However, each Portfolio
(except the Select Bond, Money Market and High Yield Bond Portfolios)
may invest in stock index futures contracts, including indexes on
specific industries, and the Select Bond, High Yield Bond,
International Equity and Balanced Portfolios may invest in interest
rate futures contracts in accordance with their investment objectives
and policies. The International Equity and High Yield Bond Portfolios
may invest in foreign currency futures contracts.
13. Issue senior securities or borrow money except for short-term credits
as may be necessary for the clearing of transactions and except for
temporary purposes to the extent of 5% of the total assets of the
Portfolio. Reverse repurchase agreements and financial futures
contracts are not considered to be "senior securities" or "borrowing
money" for the purpose of this restriction.
14. Make loans to persons who intend to use the proceeds for non-business
purposes or to companies which (including predecessors) have been in
business for less than three years. Repurchase agreements are not
considered to be "loans" for the purpose of this restriction.
As a non-fundamental investment policy, which may be changed by the Board
of Directors without shareholder approval, the International Equity Portfolio
will not invest more than 15% of its total assets in securities of foreign
issuers which are not listed on a recognized United States or foreign securities
exchange.
REPURCHASE AGREEMENTS
Each of the Portfolios may invest in repurchase agreements. A repurchase
agreement customarily obligates the seller at the time it sells securities to
the Portfolio to repurchase the securities at a mutually agreed upon time and
price. The total amount received on repurchase would be calculated to exceed
the price paid by the Portfolio, reflecting an agreed upon market rate of
interest for the period from the time of the repurchase agreement to the
settlement date, and would not necessarily be related to the interest rate on
the underlying securities. The differences between the total amount to be
received upon repurchase of the securities and the price which was paid by the
Portfolio upon their acquisition is accrued as interest and is included in the
Portfolio's net income declared as dividends. Each Portfolio intends to limit
repurchase agreements to transactions with financial institutions having total
assets in excess of $1,000,000,000 and with broker-dealers. Securities subject
to repurchase agreements shall be limited to obligations of or guaranteed by the
U.S. Government or its agencies or by the Government of Canada or of a Province
of Canada or any instrumentality or political subdivision thereof, certificates
of deposit of banks or commercial paper which meets the criteria for other
commercial paper in which the Portfolio may invest. A Portfolio will not invest
more than 10% of its total assets in repurchase agreements which have maturities
of more than seven days and will not invest in repurchase agreements with
maturities of over 30 days. Under no circumstances will a Portfolio enter into a
repurchase agreement with The Northwestern Mutual Life Insurance Company
("Northwestern Mutual Life").
Each Portfolio has the right to sell securities subject to repurchase
agreements but would be required to deliver identical securities upon maturity
of the repurchase agreement unless the seller fails to pay the repurchase price.
It is each Portfolio's intention not to sell securities subject to repurchase
agreements prior to the agreement's maturity. To the extent that the proceeds
from any sale upon a default in the obligation to repurchase were less than the
repurchase price, the Portfolio would suffer a loss. The Portfolio might also
incur disposition costs in connection with liquidating its collateral and, if
bankruptcy proceedings are commenced with respect to the seller, realization
upon the collateral by the Portfolio may be delayed or
B-4
<PAGE>
limited and a loss may be incurred if the collateral securing the repurchase
agreement declines in value during the bankruptcy proceedings. To minimize the
possibility of losses due to the default or bankruptcy of the seller, the Fund
has adopted standards of creditworthiness for all broker-dealers with which the
Fund enters into repurchase agreements and will review compliance by such
broker-dealers periodically.
FINANCIAL FUTURES CONTRACTS
Each of the Portfolios (except the Select Bond, High Yield Bond and Money
Market Portfolios) may enter into stock index futures contracts, including
indexes on specific securities, as a hedge against changes in the market values
of common stocks. The Select Bond, High Yield Bond, Balanced and International
Equity Portfolios may enter into interest rate futures contracts as a hedge
against changes in prevailing levels of interest rates. In both cases, the
purpose is to establish more definitely the effective return on securities held
or intended to be acquired by the Portfolios. The Portfolios' hedging may
include sales of futures as an offset against the effect of expected decreases
in stock values or increases in interest rates, and purchases of futures as an
offset against the effect of expected increases in stock values or decreases in
interest rates.
A Portfolio will not enter into a futures contract if, as a result thereof,
(i) the aggregate market value of all open futures positions would exceed
one-third of the Portfolio's total assets or (ii) the sum of the initial margin
deposits of all open futures positions (other than an offsetting transaction)
would be more than 5% of the Portfolio's total assets. More than 5% of the
Portfolio's total assets may be committed to the aggregate of initial and
variation margin payments however. Furthermore, in order to be certain that the
Portfolio has sufficient assets to satisfy its obligations under a futures
contract, the Portfolio deposits cash or cash equivalents equal in value to the
market value of the futures contract in a segregated account for the Portfolio
with the Fund's custodian.
The following describes the stock index and interest rate futures markets
and the manner in which the Portfolios will implement the policy.
USE. The Portfolios, as identified above, may enter into stock index
futures contracts as a hedge against changes in the market values of common
stocks and may enter into interest rate futures contracts as a hedge against
changes in prevailing levels of interest rates. In both cases, the purpose is
to establish more definitely the effective return on securities held or intended
to be acquired by the Portfolios. The Portfolios' hedging may include sales of
futures as an offset against the effect of expected decreases in stock values or
increases in interest rates, and purchases of futures as an offset against the
effect of expected increases in stock values or decreases in interest rates.
The Portfolios will not enter into financial futures contracts for
speculation, and will only enter into futures contracts that are traded on
national futures exchanges and are standardized as to maturity date and
underlying securities. Currently, stock index futures contracts can be
purchased or sold with respect to the Standard and Poor's 500 Stock Index on the
Chicago Mercantile Exchange, the New York Stock Exchange Composite Index on the
New York Futures Exchange and the Value Line Stock Index on the Kansas City
Board of Trade. The principal interest rate futures exchanges in the United
States are the Chicago Board of Trade, the Chicago Mercantile Exchange and the
New York Futures Exchange. Futures exchanges and trading are regulated under
the Commodity Exchange Act by the Commodity Futures Trading Commission.
A Portfolio will not enter into a futures contract if, as a result thereof,
(i) the aggregate market value of all open futures positions would exceed
one-third of the Portfolio's total assets or (ii) the sum of the initial margin
deposits of all open futures positions (other than an offsetting transaction)
would be more than 5% of the Portfolio's total assets.
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More than 5% of the Portfolio's total assets may be committed to the aggregate
of initial and variation margin payments however.
The Portfolios will incur brokerage commissions in connection with
transactions in futures contracts.
DESCRIPTION. A stock index futures contract is an agreement whereby one
party agrees to take and another party agrees to make delivery of an amount of
cash equal to a specified dollar amount times the difference between the stock
index value at the close of the last trading day of the contract and the price
at which the futures contract is originally struck. A stock index assigns
relative values to the common stocks included in the index, and the index
fluctuates with changes in the market values of the common stocks included. No
physical delivery of the underlying stocks in the index is made.
Currently, stock index futures contracts covering the stock market as a
whole and covering certain industries are being traded. It is expected that
futures contracts covering stock indexes of additional industries will
eventually be traded.
An interest rate futures contract is an agreement whereby one party agrees
to sell and another party agrees to purchase a specified amount of a specified
financial instrument (debt security) at a specified price at a specified date,
time and place. Although interest rate futures contracts typically require
actual future delivery of and payment for financial instruments, the contracts
are usually closed out before the delivery date.
A public market exists in interest rate futures contracts covering
primarily the following financial instruments: U.S. Treasury bonds; U.S.
Treasury notes; Government National Mortgage Association (GNMA) modified
pass-through mortgage-backed securities; three-month U.S. Treasury bills; 90-day
commercial paper; bank certificates of deposit; and Eurodollar certificates of
deposit. It is expected that futures contracts trading in additional financial
instruments will be authorized. The standard contract size is $100,000 for
futures contracts in U.S. Treasury bonds, U.S. Treasury notes and GNMA
pass-through securities and $1,000,000 for the other designated contracts.
It is each Portfolio's policy to close out open futures contracts before
delivery. Closing out an open futures contract sale or purchase is effected by
entering into an offsetting futures contract purchase or sale, respectively, for
the same aggregate amount of the stock index or the financial instrument and the
same delivery date. If the offsetting purchase price is less than the original
sale price, the Portfolio realizes a gain, and if it is more, the Portfolio
realizes a loss. Conversely, if the offsetting sale price is more than the
original purchase price, the Portfolio realizes a gain, and if it is less, the
Portfolio realizes a loss. The transaction costs must also be included in these
calculations. There can be no assurance, however, that the Portfolio will be
able to enter into an offsetting transaction with respect to a particular
contract at a particular time. If the Portfolio is not able to enter into an
offsetting transaction, the Portfolio will continue to be required to maintain
the margin deposits on the contract.
As an example of an offsetting transaction, the contractual obligations
arising from the sale of one contract of September Treasury Bills on an exchange
may be fulfilled at any time before delivery of the contract is required (i.e.,
on a specified date in September, the "delivery month") by the purchase of one
contract of September Treasury Bills on the same exchange. In such instance the
difference between the price at which the futures contract was sold and the
price paid for the offsetting purchase, after allowance for transaction costs,
represents the profit or loss to the Portfolio.
Persons who trade in futures contracts may be broadly classified as
"hedgers" and "speculators." Hedgers, such as the Portfolios, whose business
activity involves investment or other commitment in equity and debt securities
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or other obligations, use the financial futures markets primarily to offset
unfavorable changes in value that may occur because of fluctuations in the value
of the securities or obligations held or expected to be acquired by them.
The speculator, like the hedger, generally expects neither to deliver nor
to receive the security underlying the futures contract, but unlike the hedger,
hopes to profit from fluctuations in prevailing stock market values or interest
rates.
Each Portfolio's futures transactions will be entered into for traditional
hedging purposes--that is, futures contracts will be sold to protect against a
decline in the price of securities that the Portfolio owns, or futures contracts
will be purchased to protect the Portfolio against an increase in the price of
securities it intends to purchase. As evidence of this hedging intent, each
Portfolio expects that approximately 75% of such futures contract purchases will
be "completed"; that is, upon sale (offsetting) of these long contracts,
equivalent amounts of related securities will have been or are then being
purchased by the Portfolio in the cash market.
MARGIN. Initial margin is the amount of funds that must be deposited by a
Portfolio with its broker in order to initiate futures trading. An initial
margin deposit is intended to assure the Portfolio's performance of the futures
contract. The margin required for a particular futures contract is set by the
exchange on which the contract is traded and may range upward from less than 5%
of the value of the contract being traded.
Variation margin is the amount of subsequent payments that must be made to
and from the broker to maintain the Portfolio's open position in the futures
contracts. Variation margin payments are made on a daily basis as the price of
the underlying stock index or financial instrument fluctuates. If the value of
the open futures position changes (by increase, in the case of a sale, or by
decrease, in the case of a purchase) so that the loss on the futures contract
reaches a point at which the margin on deposit does not satisfy margin
requirements, the broker will require the Portfolio to make a variation margin
payment in the amount of the insufficiency. However, if the value of a position
increases because of favorable price changes in the futures contract so that the
margin deposit exceeds the required margin, the Portfolio will promptly demand
payment by the broker of variation margin in the amount of the excess. All
variation margin payments received by the Portfolio will be held by the Fund's
custodian in a separate account for the Portfolio.
In computing net asset value daily each Portfolio will mark to market the
current value of its open futures contracts. Each Portfolio expects to earn
interest income on its initial margin deposits.
EXAMPLE OF PURCHASE OF STOCK INDEX FUTURES CONTRACT. A Portfolio might
purchase a stock index futures contract when it anticipates a significant market
or market sector advance and wishes to participate in such advance at a time
when the Portfolio is not fully invested, for example, because the Portfolio has
not selected the individual stocks which it wishes to purchase. The Portfolio
would be endeavoring to eliminate the effect of all or part of an expected
increase in the market price of the stocks that the Portfolio may purchase at a
later date.
For example, assume that the prices of certain stocks that the Portfolio
may later purchase tend to move in concert with the Standard and Poor's 500
Stock Index. The Portfolio wishes to attempt to fix the purchase price of its
anticipated stock investment until the time (three months in this example) when
it may purchase the stock. Assume the stock has a market price of 125 and the
Portfolio believes that, because of an anticipated advance in the stock market,
the price will have risen in three months. The Portfolio might enter into
futures contract purchases of the Standard and Poor's 500 Stock Index for a
price of 125. If the market price of the stock should increase
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from 125 to 130, the futures market price for the Standard and Poor's 500 Stock
Index might also increase, e.g., from 125 to 130. In that case, the five-point
increase in the price that the Portfolio would have to pay for the stock would
be offset by the five-point gain realized by closing out the futures contract
purchase.
If the Portfolio should be mistaken in its forecast of market values, and
the stock index should decline below 125, the market value of the stocks being
hedged would presumably decline. Unless the Portfolio would purchase the stocks
for the decreased price, the Portfolio would realize a loss on the sale of the
futures contract which would not be offset by the price decrease.
EXAMPLE OF SALE OF STOCK INDEX FUTURES CONTRACT. The Portfolio might sell
stock index futures contracts in anticipation of a general market or market
sector decline that may adversely affect the market values of the stocks held by
the Portfolio. The Portfolio would be endeavoring to substantially reduce the
risk of a decline in the value of its stocks without selling the stocks with
resultant transaction costs.
For example, assume that the market price of certain stocks held by the
Portfolio tend to move in concert with the Standard and Poor's 500 Stock Index.
The stock currently has a market value of 125, which the Portfolio believes will
decline because of an anticipated decline in the stock market. The Portfolio
wishes to attempt to fix the current market value of the stock until some time
in the future. The Portfolio might enter into a futures contract sale of the
Standard and Poor's 500 Stock Index at a price of 125. If the market price of
the stock should decline from 125 to 120, the futures market price of the
Standard and Poor's 500 Stock Index might also decline, e.g. from 125 to 120.
In that case the five-point loss in the market value of the stock would be
offset by the five-point gain realized by closing out the futures contract. The
futures market price of the Standard and Poor's 500 Stock Index might decline to
more or less than 120 because of the imperfect correlation with the prices of
the stocks hedged.
If the Portfolio should be mistaken in its forecast of the stock market,
and the futures market price of the Standard and Poor's 500 Stock Index should
increase above 125, the market price of the stock would increase. The benefit
of this increase would be offset by the loss realized on closing out the futures
contract sale.
EXAMPLE OF PURCHASE OF INTEREST RATE FUTURES CONTRACT. The Portfolio might
purchase an interest rate futures contract when it wishes to defer for a time a
fully invested position in longer term securities, for example, in order to
continue holding shorter term securities with higher yields. The Portfolio
would be endeavoring to eliminate the effect of all or part of an expected
increase in market price of the longer term bonds that the Portfolio may wish to
purchase at a later date.
For example, assume that the market price of a type of longer term bonds
that the Portfolio may later purchase, currently yielding 10%, tends to move in
concert with futures market prices of long-term U.S. Treasury bonds. The
Portfolio wishes to attempt to fix the purchase price (and thus the 10% yield)
of its anticipated longer term bond investment until the time (four months away
in this example) when it may purchase the bond. Assume the longer term bond has
a market price of 100, and the Portfolio believes that, because of an
anticipated decline in interest rates, the price will have risen (and
correspondingly the yield will have declined) in four months. The Portfolio
might enter into futures contract purchases of Treasury bonds for a price of 98.
At the same time, the Portfolio would purchase, for example at 100, or continue
to hold, shorter term securities that are either maturing in four months or are
earmarked by the Portfolio for sale in four months. Assume these short-term
securities are yielding 15%. If the market price of the longer term bond should
increase from 100 to 105, the futures market price for Treasury bonds might also
increase, e.g., from 98 to 103. In that case, the five-point increase in the
price that the Portfolio would have to pay for the
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longer term bond would be offset by the five-point gain realized by closing out
the futures contract purchase.
If the Portfolio should be mistaken in its forecast of interest rates, and
the futures market price of the U.S. Treasury obligation should decline below
98, the market price of the security being hedged would presumably decline. If
short-term rates at the same time fall to 10% or below, it is likely that the
Portfolio would follow through with its anticipated purchases of longer term
bonds, as the market price of available longer term bonds would have decreased.
The benefit of this price decrease, and thus the yield increase, would be offset
by the loss realized on closing out the futures contract purchase.
EXAMPLE OF SALE OF INTEREST RATE FUTURES CONTRACT. The Portfolio might
sell an interest rate futures contract in order to maintain the income derived
from its continued holding of a long-term security while endeavoring to avoid
part or all of the loss in market value that would otherwise accompany a decline
in prices of longer term securities because of an increase in prevailing
interest rates.
For example, assume that the market price of a certain longer term security
held by the Portfolio tends to move in concert with the futures market prices of
long-term U.S. Treasury bonds. The security has a current market price of 100,
which the Portfolio believes will decline because of an anticipated rise in
interest rates. The Portfolio wishes to attempt to fix the current market value
of this security until some point in the future. The Portfolio might enter into
a futures contract sale of Treasury bonds at a price of 98. If the market value
of the security should decline from 100 to 95, the futures market price of
Treasury bonds might also decline, e.g., from 98 to 93. In that case, the
five-point loss in the market value of the security would be offset by the
five-point gain realized by closing out the futures contract sale. The futures
market price of Treasury bonds might decline to more or less than 93 because of
the imperfect correlation with the prices of the securities hedged.
If the Portfolio should be mistaken in its forecast of interest rates, and
the futures market price of the U.S. Treasury obligation should increase above
98, the market price of the securities, including the security being hedged,
would increase. The benefit of this increase would be offset by the loss
realized on closing out the futures contract sale.
RISKS. Financial futures prices are volatile and difficult to forecast.
Stock index futures prices reflect the market values of the stocks included in
the index, while interest rate futures contracts are influenced, among other
things, by changes in prevailing interest rates and anticipation of future
interest rate changes. The factors influencing interest rate futures prices are
in turn affected by government fiscal and monetary policies and actions, and
national and international political and economic events, while stock market
values are also influenced by corporate management policies, consumer demand,
competition, sources of raw materials and supplies and government regulation.
At best, the correlation between changes in prices of futures contracts and
the securities being hedged can be only approximate. The degree of imperfection
of correlation depends upon circumstances, such as: variations in speculative
market demand for futures and for equity or debt securities, including technical
influences in futures trading, and differences between the securities being
hedged and the instruments underlying the standard futures contracts available
for trading. A decision of whether, when and how to hedge involves the exercise
of skill and judgment, and even a well-conceived hedge may be unsuccessful to
some degree because of market behavior or unexpected stock market or interest
rate trends.
Because of the low margin deposits required, futures trading involves an
extremely high degree of leverage. As a result, a relatively small price
movement in a futures contract may result in immediate and substantial loss,
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as well as gain, to the investor. For example, if at the time of purchase, 10%
of the value of the futures contract is deposited as initial margin, a 10%
decrease in the value of the futures contract would result in a total loss of
the initial margin deposit before any deduction for the transaction costs, if
the account were then closed out, and 15% decrease would result in a loss equal
to 150% of the initial margin deposit. Thus, a purchase or sale of a futures
contract may result in losses in excess of the amount invested in the futures
contract. However, the Portfolio would presumably have sustained comparable
losses if, instead of the futures contract, it had invested in the underlying
security. Furthermore, in order to be certain that the Portfolio has sufficient
assets to satisfy its obligations when it purchases a futures contract, the
Portfolio deposits cash or cash equivalents equal in value to the market value
of the futures contract in a segregated account for the Portfolio with the
Fund's custodian.
Most United States interest rate futures exchanges and the Chicago
Mercantile Exchange limit the amount of fluctuation permitted in futures
contract prices during a single trading day. The daily limit establishes the
maximum amount that the price of a futures contract may vary either up or down
from the previous day's settlement price at the end of a trading session. Once
the daily limit has been reached in a particular type of contract, no trades may
be made on that day at a price beyond that limit. The daily limit governs only
price movement during a particular trading day and therefore does not limit
potential losses because the limit may prevent the liquidation of unfavorable
positions. Futures contract prices have occasionally moved to the daily limit
for several consecutive trading days with little or no trading, thereby
preventing prompt liquidation of futures positions and subjecting some futures
traders to substantial losses.
FOREIGN CURRENCY FUTURES. The International Equity and High Yield Bond
Portfolios have the authority to deal in forward foreign exchange between
currencies of the different countries in which the Portfolio will invest as a
hedge against possible variations in the foreign exchange rate between these
currencies. This is accomplished through contractual agreements to purchase or
sell a specified currency at a specified future date and price set at the time
of the contract. The Portfolios' dealings in forward foreign exchange will be
limited to hedging involving either specific transactions or portfolio
positions. Transaction hedging is the purchase or sale of forward foreign
currency with respect to specific receivables or payables of the Portfolio
arising from the purchase and sale of portfolio securities, the sale and
redemption of shares of the Portfolio, or the payment of dividends and
distributions by the Portfolio. Position hedging is the sale of forward foreign
currency with respect to portfolio security positions denominated or quoted in
such foreign currency. The International Equity and High Yield Bond Portfolios
will not speculate in forward foreign exchange.
RISKS. Financial futures prices are volatile and difficult to forecast.
Stock index futures prices reflect the market values of the stocks included in
the index, while interest rate futures contracts are influenced, among other
things, by changes in prevailing interest rates and anticipation of future
interest rate changes. The factors influencing interest rate futures prices are
in turn affected by government fiscal and monetary policies and actions, and
national and international political and economic events, while stock market
values are also influenced by corporate management policies, consumer demand,
competition, sources of raw materials and supplies and government regulation.
At best, the correlation between changes in prices of futures contracts and
the securities being hedged can be only approximate. The degree of imperfection
of correlation depends upon circumstances, such as: variations in speculative
market demand for futures and for equity or debt securities, including technical
influences in futures trading, and differences between the securities being
hedged and the instruments underlying the standard futures contracts available
for trading. A decision of whether, when and how to hedge involves the exercise
of skill and judgment, and even a well-conceived hedge
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may be unsuccessful to some degree because of market behavior or unexpected
stock market or interest rate trends.
Because of the low margin deposits required, futures trading involves an
extremely high degree of leverage. As a result, a relatively small price
movement in a futures contract may result in immediate and substantial loss, as
well as gain, to the investor. For example, if at the time of purchase, 10% of
the value of the futures contract is deposited as initial margin, a 10% decrease
in the value of the futures contract would result in a total loss of the initial
margin deposit before any deduction for the transaction costs, if the account
were then closed out, and a 15% decrease would result in a loss equal to 150% of
the initial margin deposit. Thus, a purchase or sale of a futures contract may
result in losses in excess of the amount invested in the futures contract.
However, the Portfolio would presumably have sustained comparable losses if,
instead of the futures contract, it had invested in the underlying security.
Furthermore, in order to be certain that the Portfolio has sufficient assets to
satisfy its obligations when it purchases a futures contract, the Portfolio
deposits cash or cash equivalents equal in value to the market value of the
futures contract in a segregated account with the Fund's custodian.
Most United States interest rate futures exchanges and the Chicago
Mercantile Exchange limit the amount of fluctuation permitted in futures
contract prices during a single trading day. The daily limit establishes the
maximum amount that the price of a futures contract may vary either up or down
from the previous day's settlement price at the end of a trading session. Once
the daily limit has been reached in a particular type of contract, no trades may
be made on that day at a price beyond that limit. The daily limit governs only
price movement during a particular trading day and therefore does not limit
potential losses because the limit may prevent the liquidation of unfavorable
positions. Futures contract prices have occasionally moved to the daily limit
for several consecutive trading days with little or no trading, thereby
preventing prompt liquidation of futures positions and subjecting some futures
traders to substantial losses.
FEDERAL INCOME TAX TREATMENT. For Federal income tax purposes, each
Portfolio is required to recognize as income for each taxable year its net
unrealized gains and losses on futures contracts as of the end of the year as
well as those actually realized during the year. Any gain or loss recognized
with respect to a futures contract is considered to be 60% long-term and 40%
short-term, without regard to the holding period of the contract. In the case
of a futures transaction classified as a "mixed straddle," the recognition of
losses may be deferred to a later taxable year.
In order for each Portfolio to continue to qualify for Federal income tax
treatment as a regulated investment company, at least 90% of its gross income
for a taxable year must be derived from qualifying income, i.e., dividends,
interest, income derived from loans of securities, and gains from the sale of
securities. Any net gain realized from the closing out of futures contracts,
for purposes of the 90% requirement, is considered gain from the sale of
securities and therefore is qualifying income. In addition, gains realized on
the sale or other disposition of securities held for less than three months must
be limited to less than 30% of the Portfolio's annual gross income.
Consequently, in order for the Portfolio to avoid realizing a gain within a
three-month period, the Portfolio may be required to defer the closing out of a
contract beyond the time when it would otherwise be advantageous to do so.
COVERED CALL OPTION CONTRACTS
The Index 500 Stock, Index 400 Stock, Balanced, Growth and Income Stock,
Growth Stock, Small Cap Growth Stock, Aggressive Growth Stock and High Yield
Bond Portfolios may engage in writing covered call option contracts--options on
securities owned by the Portfolios--and may purchase call options only to close
out a position acquired through the writing of such options. Any option written
or purchased by a Portfolio must be listed on a domestic exchange. A
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covered call option gives the purchaser of the option the right to purchase the
underlying security at a fixed exercise price at any time prior to the
expiration of the option, regardless of the market price of the security during
the option period. As consideration for the option the purchaser pays the
Portfolio a premium which the Portfolio retains whether or not the option is
exercised. A covered call option will benefit a Portfolio if, over the option
period, the underlying security declines in value or does not appreciate above
the aggregate value of the exercise price and the premium. However, a Portfolio
risks a loss of profits if the underlying security appreciates above the
aggregate value of the exercise price and the premium.
The Portfolios may also close out a position acquired through writing a
call option by purchasing a call option on the same security with the same
exercise price and expiration date as the call option which it has previously
written on the security. Thus, when a security subject to a call option is sold
from a Portfolio (i.e., to protect the Portfolio from possible depreciation of
the security), the Portfolio will purchase a call option on the security to
close out the existing call option. Depending on the premium of the contract, a
Portfolio will realize a profit or a loss on the transaction. Option
transactions may increase a Portfolio's transaction costs and turnover rate and
will be initiated only where appropriate to achieve a Portfolio's investment
objectives.
REVERSE REPURCHASE AGREEMENTS
The Money Market and Balanced Portfolios may enter into reverse repurchase
agreements with banks and broker-dealers. Such agreements involve the sale of
money market securities held by a Portfolio pursuant to an agreement to
repurchase the securities at an agreed upon price, date and interest payment.
The Portfolio will use the proceeds of reverse repurchase agreements to purchase
other money market securities which either mature, or can be sold under an
agreement to resell, at or prior to the expiration of the reverse repurchase
agreement. A Portfolio will utilize reverse repurchase agreements when the
interest income to be earned from the investment of proceeds from the
transaction is greater than the interest expense of the reverse repurchase
transaction. When effecting reverse repurchase transactions, a Portfolio will
hold securities of a dollar amount equal in value to the securities subject to
the reverse repurchase agreement in a segregated account. Amounts subject to
reverse repurchase agreements are also subject to a 300% asset coverage
requirement. If such amounts in the aggregate exceed this asset coverage
requirement, the Portfolio would be obligated within three days to reduce such
amounts to meet the requirement. Under no circumstances will a Portfolio enter
into a reverse repurchase agreement with Northwestern Mutual Life.
WARRANTS
The Index 500 Stock, Index 400 Stock, Balanced, Growth and Income Stock,
Growth Stock, Small Cap Growth Stock, Aggressive Growth Stock and High Yield
Bond Portfolios may invest in warrants. No Portfolio intends to invest more than
2% of its net assets in warrants that are not listed on a national securities
exchange. In no event will a Portfolio's investment in warrants exceed 5% of
its net assets. (A warrant is a right to buy a certain security at a set price
during a certain time period.)
ASSET-BACKED AND VARIABLE RATE SECURITIES
Consistent with its investment objectives and policies, the Money Market
Portfolio may invest in asset-backed and variable rate securities.
Asset-backed securities represent fractional interests in pools of retail
installment loans or revolving credit receivables. These assets are generally
held by a special purpose trust and payments of principal and interest, or
interest only, are passed through or paid through monthly or quarterly to
certificate holders. Payments may be guaranteed up to certain amounts by
letters of credit issued by a financial institution affiliated or
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unaffiliated with the trustee or originator of the trust. Underlying
receivables are generally subject to prepayment, which may reduce the overall
return to certificate holders. Nevertheless, for asset-backed securities,
principal repayment rates tend not to vary much with interest rates and the
short-term nature of the underlying loans or other receivables tends to dampen
the impact of any change in the prepayment level. Certificate holders may also
experience delays in payment on the certificates if the full amounts due on
underlying sales contracts or other receivables are not realized by the trust
because of unanticipated legal or administrative costs of enforcing the
contracts, or because of depreciation or damage to the collateral securing
certain contracts, or other factors.
Variable rate securities bear rates of interest that are adjusted
periodically or which "float" continuously according to formulae intended to
minimize fluctuations in values of the instruments. For the Money Market
Portfolio, the Fund determines the maturity of variable rate securities in
accordance with Securities and Exchange Commission rules that allow the Fund to
consider certain of such instruments as having maturities less than the maturity
date on the instrument.
SHORT-TERM TRADING
Each Portfolio will generally not engage in short-term trading (purchases
and sales within seven days).
FIRM COMMITMENT AGREEMENTS AND "WHEN-ISSUED" SECURITIES
Each Portfolio may enter into firm commitment agreements for the purchase
of securities at an agreed upon price on a specified future date. A Portfolio
may purchase new issues of securities on a "when-issued" basis, whereby the
payment obligation and interest rate on the instruments are fixed at the time of
the transaction. Such transactions might be entered into, for example, when the
manager of a Portfolio anticipates a decline in the yield of securities of a
given issuer and is able to obtain a more advantageous yield by committing
currently to purchase securities to be issued or delivered later.
A Portfolio will not enter into such a transaction for the purpose of
investment leverage. Liability for the purchase price - and all the rights and
risks of ownership of the securities - accrue to the Portfolio at the time it
becomes obligated to purchase such securities, although delivery and payment
occur at a later date. Accordingly, if the market price of the security should
decline, the effect of the agreement would be to obligate the Portfolio to
purchase the security at a price above the current market price on the date of
delivery and payment. During the time the Portfolio is obligated to purchase
such securities it will maintain in a segregated account U.S. Government
securities, high-grade debt obligations, or cash or cash equivalents of an
aggregate current value sufficient to make payment for the securities.
Eurodollar Certificates of Deposit
The Money Market, Balanced, Growth and Income Stock, Growth Stock and High
Yield Bond Portfolios may purchase Eurodollar certificates of deposit issued by
foreign branches of U.S. banks, but consideration will be given to their
marketability and possible restrictions on the flow of international currency
transactions. Investment in such securities involves considerations which are
not ordinarily associated with investing in domestic instruments, including
currency exchange control regulations, the possibility of expropriation,
seizure, or nationalization of foreign deposits, less liquidity and increased
volatility in foreign securities markets, and the impact of political, social or
diplomatic developments or the adoption of other foreign government restrictions
that might adversely affect the payment of principal and interest. If the Fund
were to invoke legal processes, it might encounter greater difficulties abroad
than in the United States.
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PRIVATE PLACEMENT TRANSACTIONS AND ILLIQUID ASSETS
Each Portfolio may invest up to 15% of its total assets in securities
acquired in private placement transactions and other illiquid assets. For the
Money Market Portfolio the limit is 10%. For the purpose of determining each
Portfolio's net asset value, these assets will be valued at their fair value as
determined in good faith by the Fund's Directors. If a Portfolio should have
occasion to sell an investment in restricted securities at a time when the
market for such investments is unfavorable, a considerable period may elapse
between the time when the decision to sell it is made and the time when the
Portfolio will be able to sell the investment, with a possible adverse effect
upon the amount to be realized from the sale.
Notwithstanding these limitations a Portfolio may purchase securities
which, though not registered under the Securities Act of 1933 (the "1933 Act"),
are eligible for purchase and sale pursuant to Rule 144A under the 1933 Act.
Rule 144A permits unregistered securities to be traded among qualified
institutional investors, including the Portfolios. Rule 144A securities that
are determined to be liquid are not subject to the limitations on illiquid
assets. The Fund's investment adviser, Northwestern Mutual Investment Services,
LLC, determines and monitors the liquidity status of each Rule 144A security in
which a Portfolio invests, subject to supervision and oversight by the Board of
Directors of the Fund. The investment adviser takes into account all of the
factors which may have a material bearing on the ability of the Portfolio to
dispose of the security in seven days or less, at a price reasonably consistent
with the value used to determine the Portfolio's net asset value per share,
including the following factors: (1) the frequency and volume of trades, (2)
the number and sources of price quotes, (3) the number, and identity, of dealers
willing to purchase or sell the issue, and the number and identity of other
potential purchasers, (4) any dealer undertakings to make a market in the
security, (5) the nature of the security, and (6) the nature of the market in
which the issue is traded, including the time typically required to make trades,
the methods of soliciting offers and the mechanics of transfer.
RISK FACTORS FOR FOREIGN SECURITIES, FOREIGN CURRENCIES AND FOREIGN INTEREST
RATES
FOREIGN SECURITIES The International Equity Portfolio has an unlimited
right to purchase securities in any foreign country, developed or developing, if
they are listed on a stock exchange, as well as a limited right to purchase such
securities if they are unlisted. The Growth and Income Portfolio, Select Bond
Portfolio, Balanced Portfolio and High Yield Bond Portfolio may each invest a
portion of their assets in foreign securities. Investors should consider
carefully the substantial risks involved in securities of companies and
governments of foreign nations, which are in addition to the usual risks
inherent in domestic investments.
There may be less publicly available information about foreign companies
comparable to the reports and ratings published about companies in the U.S.
Foreign companies are not generally subject to uniform accounting or financial
reporting standards, and auditing practices and requirements may not be
comparable to those applicable to U.S. companies. The Portfolios, therefore,
may encounter difficulty in obtaining market quotations for purposes of valuing
their assets and calculating their net asset value. Foreign markets have
substantially less volume than the New York Stock Exchange and securities of
some foreign companies are less liquid and more volatile than securities of
comparable U.S. companies. Although the International Equity Portfolio may
invest up to 15% of its total assets in unlisted foreign securities, including
up to 10% of its total assets in securities with a limited trading market, in
the opinion of management such securities with a limited trading market
generally do not present a significant liquidity problem. Commission rates in
foreign countries, which are generally fixed rather than subject to negotiation
as in the U.S., are likely to be higher. In many foreign
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<PAGE>
countries there is less government supervision and regulation of stock
exchanges, brokers and listed companies than in the U.S.
EMERGING MARKETS. Investments in companies domiciled in developing
countries may be subject to potentially higher risks than investments in
developed countries. These risks include (i) less social, political and
economic stability; (ii) the small current size of the markets for such
securities and the currently low or nonexistent volume of trading, which result
in a lack of liquidity and in greater price volatility; (iii) certain national
policies which may restrict each Portfolio's investment opportunities, including
restrictions on investment in issuers or industries deemed sensitive to national
interests; (iv) foreign taxation; (v) the absence of developed legal structures
governing private or foreign investment or allowing for judicial redress for
injury to private property; (vi) the absence, until recently in many developing
countries, of a capital market structure or market-oriented economy; and (vii)
the possibility that recent favorable economic developments in some developing
countries may be slowed or reversed by unanticipated political or social events
in such countries.
In addition, many countries in which the Portfolios may invest have
experienced substantial, and in some periods extremely high, rates of inflation
for many years. Inflation and rapid fluctuations in inflation rates have had
and may continue to have negative effects on the economies and securities
markets of certain countries. Moreover, the economies of some developing
countries may differ favorably or unfavorably from the U.S. economy in such
respects as growth of gross domestic product, rate of inflation, currency
depreciation, capital reinvestment, resource self-sufficiency and balance of
payments position.
Investments in developing countries may involve risks of nationalization,
expropriation and confiscatory taxation. For example, the Communist governments
of a number of Eastern European countries expropriated large amounts of private
property in the past, in many cases without adequate compensation, and there can
be no assurance that such expropriation will not occur in the future. In the
event of expropriation, each Portfolio could lose a substantial portion of any
investments it has made in the affected countries. Further, no accounting
standards exist in certain developing countries. Finally, even though the
currencies of some developing countries, such as certain Eastern European
countries, may be convertible into U.S. dollars, the conversion rates may be
artificial to the actual market values and may be adverse to the shareholders of
a Portfolio.
RUSSIAN SECURITIES. Investing in Russian companies involves a high degree
of risk and special considerations not typically associated with investing in
the U.S. securities markets, and should be considered highly speculative. Such
risks include, together with Russia's continuing political and economic
instability and the slow-paced development of its market economy, the following:
(a) delays in settling portfolio transactions and risk of loss arising out of
Russia's system of share registration and custody; (b) the risk that it may be
impossible or more difficult than in other countries to obtain and/or enforce a
judgment; (c) pervasiveness of corruption, insider-trading, and crime in the
Russian economic system; (d) currency exchange rate volatility and the lack of
available currency hedging instruments; (e) higher rates of inflation (including
the risk of social unrest associated with periods of hyper-inflation); (f)
controls on foreign investment and local practices disfavoring foreign investors
and limitations on repatriation of invested capital, profits and dividends, and
on a Portfolio's ability to exchange local currencies for U.S. dollars; (g) the
risk that the government of Russia or other executive or legislative bodies may
decide not to continue to support the economic reform programs implemented since
the dissolution of the Soviet Union and could follow radically different
political and/or economic policies to the detriment of investors, including
non-market-oriented policies such as the support of certain industries at the
expense of other sectors or investors, a return to the centrally planned economy
that existed prior to the dissolution of the Soviet Union, or the
nationalization of privatized enterprises; (h) the risks of investing in
securities with
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<PAGE>
substantially less liquidity and in issuers having significantly smaller market
capitalizations, when compared to securities and issuers in more developed
markets; (i) the difficulties associated in obtaining accurate market valuations
of many Russian securities, based partly on the limited amount of publicly
available information; (j) the financial condition of Russian companies,
including large amounts of inter-company debt which may create a payments crisis
on a national scale; (k) dependency on exports and the corresponding importance
of international trade; (l) the risk that the Russian tax system will not be
reformed to prevent inconsistent, retroactive and/or exorbitant taxation or, in
the alternative, the risk that a reformed tax system may result in the
inconsistent and unpredictable enforcement of the new tax laws; (m) possible
difficulty in identifying a purchaser of securities held by the Portfolios due
to the underdeveloped nature of the securities markets; (n) the possibility that
pending legislation could restrict the levels of foreign investment in certain
industries, thereby limiting the number of investment opportunities in Russia;
(o) the risk that pending legislation would confer to Russian courts the
exclusive jurisdiction to resolve disputes between foreign investors and the
Russian government, instead of bringing such disputes before an
internationally-accepted third-country arbitrator; and (p) the difficulty in
obtaining information about the financial condition of Russian issuers, in light
of the different disclosure and accounting standards applicable to Russian
companies.
There is little long-term historical data on Russian securities markets
because they are relatively new and a substantial proportion of securities
transactions in Russia are privately negotiated outside of stock exchanges.
Because of the recent formation of the securities markets as well as the
underdeveloped state of the banking and telecommunications systems, settlement,
clearing and registration of securities transactions are subject to significant
risks. Ownership of shares (except where shares are held through depositories
that meet the requirements of the 1940 Act) is defined according to entries in
the company's share register and normally evidenced by extracts from the
register or by formal share certificates. However, there is no central
registration system for shareholders and these services are carried out by the
companies themselves or by registrars located throughout Russia. These
registrars are not necessarily subject to effective state supervision nor are
they licensed with any governmental entity and it is possible for the Portfolios
to lose their registration through fraud, negligence or even mere oversight.
While each Portfolio will endeavor to ensure that its interest continues to be
appropriately recorded either itself or through a custodian or other agent
inspecting the share register and by obtaining extracts of share registers
through regular confirmations, these extracts have no legal enforceability and
it is possible that subsequent illegal amendment or other fraudulent act may
deprive the Portfolios of their ownership rights or improperly dilute their
interests. In addition, while applicable Russian regulations impose liability
on registrars for losses resulting from their errors, it may be difficult for
the Portfolios to enforce any rights they may have against the registrar or
issuer of the securities in the event of loss of share registration.
Furthermore, although a Russian public enterprise with more than 500
shareholders is required by law to contract out the maintenance of its
shareholder register to an independent entity that meets certain criteria, in
practice this regulation has not always been strictly enforced. Because of this
lack of independence, management of a company may be able to exert considerable
influence over who can purchase and sell the company's shares by illegally
instructing the registrar to refuse to record transactions in the share
register. In addition, so-called "financial-industrial groups" have emerged in
recent years that seek to deter outside investors from interfering in the
management of companies they control. These practices may prevent the
Portfolios from investing in the securities of certain Russian companies deemed
suitable by the manager. Further, this also could cause a delay in the sale of
Russian company securities by a Portfolio if a potential purchaser is deemed
unsuitable, which may expose the Portfolio to potential loss on the investment.
CURRENCY Each Portfolio's management endeavors to buy and sell foreign
currencies on as favorable a basis as practicable. Some price spread in
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<PAGE>
currency exchange (to cover service charges) will be incurred, particularly when
a Portfolio changes investments from one country to another or when proceeds of
the sale of shares in U.S. dollars are used for purchase of securities in
foreign countries. Also, some countries may adopt policies which would prevent
the Portfolios from transferring cash out of the country or withhold portions of
interest and dividends at the source. There is the possibility of cessation of
trading on national exchanges, expropriation, nationalization or confiscatory
taxation, withholding and other foreign taxes on income or other amounts,
foreign exchange controls (which may include suspension of the ability to
transfer currency from a given country), default in foreign government
securities, political or social instability, or diplomatic developments which
could affect investments in securities of issuers in foreign nations.
Each Portfolio may be affected either unfavorably or favorably by
fluctuations in the relative rates of exchange between the currencies of
different nations, by exchange control regulations and by indigenous economic
and political developments. Some countries in which the Portfolios may invest
may also have fixed or managed currencies that are not free-floating against the
U.S. dollar. Further, certain currencies may not be internationally traded.
Certain of these currencies have experienced a steady devaluation relative
to the U.S. dollar. Any devaluations in the currencies in which a Portfolio's
securities are denominated may have a detrimental impact on that Portfolio.
Through the flexible policy of the Portfolio, its manager endeavors to avoid
unfavorable consequences and to take advantage of favorable developments in
particular nations where from time to time it places the investments of the
International Equity Portfolio.
The exercise of this flexible policy may include decisions to buy
securities with substantial risk characteristics and other decisions such as
changing the emphasis on investments from one nation to another and from one
type of security to another. Some of these decisions may later prove profitable
and others may not. No assurance can be given that profits, if any, will exceed
losses.
EURO. On January 1, 1999, the European Monetary Union (EMU) introduced a
new single currency, the euro, which is replacing the national currency for
participating member countries. The transition and the elimination of currency
risk among EMU countries may change the economic environment and behavior of
investors, particularly in European markets.
Franklin Resources, Inc. has created an interdepartmental team to handle
all euro-related changes to enable the mutual funds managed by Templeton
Investment Counsel, Inc. to process transactions accurately and completely with
minimal disruption to business activities. While the implementation of the euro
could have a negative effect on the International Equity Portfolio, the
Portfolio's manager and its affiliated services providers are taking steps they
believe are reasonably designed to address the euro issue.
INTEREST RATE To the extent each Portfolio invests in debt securities,
changes in interest rates in any country where the Portfolio is invested will
affect the value of its assets and, consequently, its share price. Rising
interest rates, which often occur during times of inflation or a growing
economy, are likely to cause the face value of a debt security to decrease,
having a negative effect on the value of the Portfolio's shares. Of course,
interest rates have increased and decreased, sometimes very dramatically, in the
past. These changes are likely to occur again in the future at unpredictable
times.
PORTFOLIO TURNOVER
Portfolio turnover may vary from year to year or within a year depending
upon economic, market and business conditions. The annual portfolio turnover
rates of the Portfolios cannot be accurately predicted. It is anticipated
B-17
<PAGE>
that the annual portfolio turnover rate for the Index 500 Stock Portfolio will
not exceed 4%, that the rate for the High Yield Bond Portfolio will generally
not exceed 200% and that the rate for the Select Bond Portfolio will generally
not exceed 185%. For the other Portfolios, it is anticipated that the rate will
generally not exceed 100%. In 1998 the portfolio turnover rate for the Growth
and Income Stock Portfolio was higher than usual because of market conditions
over the course of the year. Short-term debt securities are excluded in the
calculation of portfolio turnover rates. U.S. Government securities are
included in the calculation of portfolio turnover rates.
For years 1997 and 1998, the portfolio turnover rates were:
<TABLE>
<CAPTION>
PORTFOLIO TURNOVER RATE 1998 1997
----------------------- ------ ------
<S> <C> <C>
Aggressive Growth Stock Portfolio 50.43% 57.27%
International Equity Portfolio 30.41% 16.74%
Growth Stock Portfolio 21.64 33.20%
Growth and Income Stock Portfolio 160.40% 144.52%
Index 500 Stock Portfolio 3.03% 3.15%
Balanced Portfolio 44.18% 29.94%
High Yield Bond Portfolio 153.71% 129.49%
Select Bond Portfolio 161.79% 184.93%
</TABLE>
The annual portfolio turnover rate of each Portfolio is the lesser of
purchases or sales of the Portfolio's securities for the year stated as a
percentage of the average value of the Portfolio's assets.
MANAGEMENT OF THE FUND
The Board of Directors of the Fund is responsible for the administration of
the affairs of the Fund. The following is a list of the Directors and Officers
of the Fund together with a brief description of their principal occupations
during the past five years.
James D. Ericson (63), President and Director*
720 East Wisconsin Avenue
Milwaukee, WI 53202
President and Chief Executive Officer of Northwestern Mutual. Trustee
of Northwestern Mutual Life
Stephen N. Graff (64), Director*
805 Lone Tree Road
Elm Grove, WI 53122
Retired Partner, Arthur Andersen LLP (Public Accountants). Trustee of
Northwestern Mutual Life since 1996
Martin F. Stein (62), Director
1800 East Capitol Drive
Milwaukee, WI 53211
Chairman of the Board of EyeCare One Corporation (retail sales of
eyewear)
John K. MacIver (68), Director
100 East Wisconsin Avenue
Milwaukee, WI 53202
Partner, Michael Best & Friedrich, Attorneys at Law
William J. Blake (66), Director
731 North Jackson Street
Milwaukee, WI 53202
Chairman, Blake Investment Corp. (real estate investments and venture
capital)
B-18
<PAGE>
William A. McIntosh (60), Director
525 Sheridan Road
Kenilworth, IL 60043
Retired Division Head, U.S. Fixed Income of Salomon Brothers
(investment securities) since 1995; prior thereto, Division Head, U.S.
Fixed Income
Mark G. Doll (49), Vice President and Treasurer
720 East Wisconsin Avenue
Milwaukee, WI 53202
Vice President and Assistant Treasurer-Public Markets of Northwestern
Investment Management Company since 1998. Senior Vice President of
Northwestern Mutual Life since 1996; Senior Vice President and
Treasurer, 1995; prior thereto, Vice President and Treasurer.
Executive Vice President, Investment Advisory Services of Northwestern
Mutual Investment Services, LLC since 1996; prior thereto, President
Patricia L. Van Kampen (47), Vice President-Investments
720 East Wisconsin Avenue
Milwaukee, WI 53202
Managing Director of Northwestern Investment Management Company since
1998; prior thereto, Vice President-Common Stocks of Northwestern
Mutual Life. Vice President-Common Stocks of Northwestern Mutual
Investment Services, LLC
William R. Walker (42), Vice President-Investments
720 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
Managing Director of Northwestern Investment Management Company since
1998; prior thereto, Director of Common Stocks of Northwestern Mutual
Life. Vice President of Northwestern Mutual Investment Services, LLC
Julie M. Van Cleave (40), Vice President-Investments
720 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
Managing Director of Northwestern Investment Management Company since
1998; prior thereto, Director of Common Stocks of Northwestern Mutual
Life. Vice President-Common Stocks of Northwestern Mutual Investment
Services, LLC
Steven P. Swanson (45), Vice President-Investments
720 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
Managing Director of Northwestern Investment Management Company since
1998; Vice President-Securities of Northwestern Mutual Life from 1994
to 1997; prior thereto, Director-Securities; Vice President of
Northwestern Mutual Investment Services, LLC
Varun Mehta (31), Vice President-Investments
720 East Wisconsin Avenue
Milwaukee, WI 53202
Director of Northwestern Investment Management Company since 1998;
Investment Officer-Public Fixed Income of Northwestern Mutual Life
from March of 1997 to December of 1997. Portfolio Research
Manager-Fixed Income and Portfolio Manager-Fixed Income of the
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<PAGE>
Ameritech Investment Management Department from 1993 to March of 1997.
Jefferson V. DeAngelis (41), Vice President-Investments
720 East Wisconsin Avenue
Milwaukee, WI 53202
Managing Director of Northwestern Investment Management Company since
1998; prior thereto, Vice President-Fixed Income Securities of
Northwestern Mutual Life. Vice President-Fixed Income Securities of
Northwestern Mutual Investment Services, LLC
Timothy S. Collins (39), Vice President-Investments
720 East Wisconsin Avenue
Milwaukee, WI 53202
Director of Northwestern Investment Management Company since 1998;
Director of Investments for Northwestern Mutual Life from October of
1996 to December of 1997; Associate Director - Investments from 1993
to 1996; prior thereto, Investment Officer.
Merrill C. Lundberg (59), Secretary
720 East Wisconsin Avenue
Milwaukee, WI 53202
Assistant General Counsel of Northwestern Mutual Life. Secretary of
Northwestern Mutual Investment Services, LLC
Barbara E. Courtney (41), Controller
720 East Wisconsin Avenue
Milwaukee, WI 53202
Associate Director of Mutual Fund Accounting of Northwestern Mutual
Life since 1996; prior thereto, Assistant Director of Investment
Accounting. Assistant Treasurer of Northwestern Mutual Investment
Services, LLC
* Directors identified with an asterisk are "interested persons" as defined
in Section 2(a)(19) of the Investment Company Act of 1940.
John K. MacIver has served as a Director since February 2, 1984. William J.
Blake has served as a Director since March 9, 1988. James D. Ericson has served
as a Director since April 27, 1994. Stephen N. Graff and Martin F. Stein have
served as Directors since March 29, 1995. William A. McIntosh has served as a
Director since May 8, 1997.
An Audit Committee and Nominating Committee have been established for the
Fund. Each Committee is made up of those Directors who are not "interested
persons" of the Fund within the meaning of the Investment Company Act.
All Board members and officers of the Fund are also board members or
officers of Mason Street Funds, Inc. ("MSF"), a registered investment company.
Each of the Directors and principal officers of the Fund who is also an
affiliated person of Northwestern Mutual Investment Services, LLC ("NMIS") or
Northwestern Mutual Life is named above, together with the capacity in which
such person is affiliated with NMIS or Northwestern Mutual Life.
COMPENSATION OF OFFICERS AND DIRECTORS. The Fund pays no salaries or
compensation to any of its officers or Directors employed by Northwestern Mutual
Life. NMIS, the investment advisor to the Fund, pays each of the other
Directors of the Fund a total of up to $15,000 per year, consisting of a $5,000
retainer paid in January and $2,500 per meeting of the board of the Fund
attended. MSF pays other Directors fees totaling $9,000 per year, consisting of
a $5,000 retainer paid in April and $1,000 per meeting of the
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<PAGE>
Board of Directors of MSF attended. The Fund neither pays nor accrues any
pension or retirement benefits to any of the Directors.
COMPENSATION TABLE
<TABLE>
<CAPTION>
(1) (2) (3) (4) (5)
Name of Person, Aggregate Pension or Estimated Total Compensation
Position Compensation Retirement Benefits Annual From Registrant and
From Accrued as Part of Benefits Upon Fund Complex Paid to
Registrant Fund Expenses Retirement Directors in 1998
<S> <C> <C> <C> <C>
James D. Ericson, None None None None
Director
William Blake, None None None $24,000
Director
Stephen N. Graff, None None None $24,000
Director
John K. MacIver, None None None $24,000
Director
Martin F. Stein, None None None $24,000
Director
William A. McIntosh, None None None $24,000
Director
</TABLE>
OWNERSHIP OF SHARES OF THE FUND
All of the outstanding shares of the Fund are held by Northwestern Mutual
Life for its General Account and for its separate investment accounts used for
variable annuity contracts and variable life income policies. Additional shares
are being offered only to Northwestern Mutual Life and the separate investment
accounts. Northwestern Mutual Life is a Wisconsin corporation.
The following tables show the allocation of shares of the Portfolios of the
Fund among the General Account and the separate investment accounts as of
January 31, 1999.
AGGRESSIVE GROWTH STOCK PORTFOLIO
NML Variable Annuity Account A 24,820,223 shares ( 7.65%)
NML Variable Annuity Account B 232,434,913 shares ( 71.62%)
NML Variable Annuity Account C 32,355,540 shares ( 9.97%)
Northwestern Mutual Variable Life Account 34,932,355 shares ( 10.76%)
General Account 0 shares ( 0.00%)
Total 324,543,031 shares (100.00%)
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<PAGE>
INTERNATIONAL EQUITY PORTFOLIO
NML Variable Annuity Account A 26,158,077 shares ( 6.64%)
NML Variable Annuity Account B 285,607,410 shares ( 72.46%)
NML Variable Annuity Account C 34,822,556 shares ( 8.83%)
Northwestern Mutual Variable Life Account 47,573,423 shares ( 12.07%)
General Account 0 shares ( 0.00%)
Total 394,161,466 shares (100.00%)
GROWTH STOCK PORTFOLIO
NML Variable Annuity Account A 12,118,142 shares ( 6.28%)
NML Variable Annuity Account B 137,821,833 shares ( 71.39%)
NML Variable Annuity Account C 12,555,333 shares ( 6.50%)
Northwestern Mutual Variable Life Account 30,561,836 shares ( 15.83%)
General Account 0 shares ( 0.00%)
Total 193,057,144 shares (100.00%)
GROWTH AND INCOME STOCK PORTFOLIO
NML Variable Annuity Account A 22,662,515 shares ( 6.39%)
NML Variable Annuity Account B 263,779,128 shares ( 74.33%)
NML Variable Annuity Account C 23,871,979 shares ( 6.72%)
Northwestern Mutual Variable Life Account 44,562,414 shares ( 12.56%)
General Account 0 shares ( 0.00%)
Total 354,876,036 shares (100.00%)
INDEX 500 STOCK PORTFOLIO
NML Variable Annuity Account A 43,889,699 shares ( 8.41%)
NML Variable Annuity Account B 362,194,356 shares ( 69.38%)
NML Variable Annuity Account C 56,148,639 shares ( 10.76%)
Northwestern Mutual Variable Life Account 59,805,915 shares ( 11.45%)
General Account 0 shares ( 0.00%)
Total 522,038,610 shares (100.00%)
BALANCED PORTFOLIO
NML Variable Annuity Account A 144,572,110 shares ( 9.79%)
NML Variable Annuity Account B 1,182,819,712 shares ( 80.07%)
NML Variable Annuity Account C 77,854,335 shares ( 5.27%)
Northwestern Mutual Variable Life Account 71,970,801 shares ( 4.87%)
General Account 0 shares ( 0.00%)
Total 1,477,216,958 shares (100.00%)
HIGH YIELD PORTFOLIO
NML Variable Annuity Account A 9,964,992 shares ( 5.09%)
NML Variable Annuity Account B 143,518,743 shares ( 73.34%)
NML Variable Annuity Account C 9,194,815 shares ( 4.70%)
Northwestern Mutual Variable Life Account 15,617,131 shares ( 7.98%)
General Account 17,390,337 shares ( 8.89%)
Total 195,686,018 shares (100.00%)
SELECT BOND PORTFOLIO
NML Variable Annuity Account A 20,732,870 shares ( 8.69%)
NML Variable Annuity Account B 191,793,809 shares ( 80.35%)
NML Variable Annuity Account C 15,931,456 shares ( 6.67%)
Northwestern Mutual Variable Life Account 10,241,492 shares ( 4.29%)
General Account 0 shares ( 0.00%)
Total 238,699,627 shares (100.00%)
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<PAGE>
MONEY MARKET PORTFOLIO
NML Variable Annuity Account A 26,056,018 shares ( 8.97%)
NML Variable Annuity Account B 206,406,321 shares ( 71.04%)
NML Variable Annuity Account C 19,826,176 shares ( 6.82%)
Northwestern Mutual Variable Life Account 38,262,120 shares ( 13.17%)
General Account 0 shares ( 0.00%)
Total 290,550,635 shares (100.00%)
The shares held in connection with certain of the separate investment
accounts are voted by Northwestern Mutual Life in accordance with instructions
received from owners of variable annuity contracts and variable life insurance
policies. The shares held in its General Account are voted by Northwestern
Mutual Life in the same proportions as the shares held in connection with these
separate investment accounts. If applicable laws or regulations change so as to
permit Northwestern Mutual Life to vote the Fund shares in its own discretion,
it may elect to do so.
INVESTMENT ADVISORY AND OTHER SERVICES
The Fund's investment adviser, Northwestern Mutual Investment Services, LLC
("NMIS"), is a wholly-owned subsidiary of Northwestern Mutual Life. The adviser
provides investment advice and recommendations regarding the purchase and sale
of securities for the Portfolios and the selection of brokers pursuant to
Investment Advisory Agreements (the "Agreements"). Each Agreement provides that
the adviser will also provide certain services and pay the expenses of the Fund
for certain other administrative services, office space and facilities and the
services of all directors, officers and employees of the Fund. Each Portfolio
(except the Select Bond, Money Market and Balanced Portfolios) pays its own
expenses for fees for services rendered by the custodian, legal counsel and
auditors; costs of Federal registrations of Fund shares; expenses of meetings
and reports; taxes; and brokerage and other expenses directly related to
portfolio transactions.
For acting as investment adviser and for providing such services and paying
such expenses the adviser is paid a monthly fee at the annual rates set forth in
the prospectus for the respective Portfolios. The Fund also pays all interest
charges, brokerage commissions, taxes and extraordinary expenses incurred in
connection with the operation of the Fund. Expenses paid by the Fund are
charged to the Portfolios to which the expenses relate.
For the fiscal years ended December 31, 1996, December 31, 1997, and
December 31, 1998, NMIS received $17,368,648, $23,423,272 and $28,213,362,
respectively, for its services as investment adviser to the Fund.
Northwestern Mutual Life and its wholly-owned subsidiary, Northwestern
Investment Management Company, employ a full staff of investment personnel to
manage the investment assets of Northwestern Mutual Life. These personnel and
related facilities are utilized by NMIS in performing its obligations under the
Agreements and Northwestern Mutual Life is a party to each Agreement.
"Northwestern Mutual Life" is the name and service mark of The Northwestern
Mutual Life Insurance Company and the right of the Fund to use the name and mark
is subject to the consent of Northwestern Mutual Life. Under the Agreement
providing such consent, the Fund recognizes the prior rights of Northwestern
Mutual Life in the name and mark, agrees that use of the name and mark by the
Fund will inure to the benefit of Northwestern Mutual Life and agrees that its
right to use the name and mark can be terminated by Northwestern Mutual Life and
will automatically be terminated if at any time NMIS ceases to be the investment
adviser to the Fund or if NMIS ceases to be a subsidiary of Northwestern Mutual
Life.
Templeton Investment Counsel, Inc. ("Templeton Counsel"), a Florida
corporation with principal offices at 500 East Broward Boulevard, Ft.
Lauderdale, Florida 33394 has been retained under an investment sub-advisory
agreement to provide investment advice and, in general, to conduct the
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<PAGE>
management investment program of the International Equity Portfolio, subject to
the general control of the Board of Directors of the Fund. Templeton Counsel is
a wholly-owned indirect subsidiary of Franklin Resources, Inc. Certain clients
of Templeton Counsel may have investment objectives and policies similar to
those of the International Equity Portfolio. Templeton Counsel may, from time
to time, make recommendations which result in the purchase or sale of a
particular security by its other clients simultaneously with the International
Equity Portfolio. If transactions on behalf of more than one client during the
same period increase the demand for securities being purchased or the supply of
securities being sold, there may be an adverse effect on price. It is the
policy of Templeton Counsel to allocate advisory recommendations and the placing
of orders in a manner which is deemed equitable by Templeton Counsel to the
accounts involved, including the International Equity Portfolio. When two or
more of the clients of Templeton Counsel (including the International Equity
Portfolio) are purchasing the same security on a given day from the same
broker-dealer, such transactions may be averaged as to price. For its services
pursuant to the sub-advisory agreement, Templeton Counsel is paid, by NMIS,
compensation at the annual rate of .50% of the average net assets of the
International Equity Portfolio, reduced to .40% on assets in excess of $100
million.
J.P. Morgan Investment Management Inc. ("J.P. Morgan Investment"), 522
Fifth Avenue, New York, New York 10036, provides investment advisory services to
the Growth and Income Stock Portfolio, pursuant to an investment sub-advisory
agreement. For the services provided, NMIS pays J.P. Morgan Investment a fee at
the annual rate of .45% on the first $100 million of the Portfolio's assets,
.40% on the next $100 million, .35% on the next $200 million and .30% on assets
in excess of $400 million.
J.P. Morgan Investment is an investment manager for corporate, public, and
union employee benefit funds, foundations, endowments, insurance companies,
government agencies and the accounts of other institutional investors. A wholly
owned subsidiary of J.P. Morgan & Co. Inc., J.P. Morgan Investment was
incorporated in the state of Delaware on February 7, 1984 and commenced
operations on July 2, 1984. It was formed from the Institutional Investment
Group of Morgan Guaranty Trust Company of New York, also a subsidiary of J.P.
Morgan & Co. Inc.
Morgan acquired its first tax-exempt client in 1913 and its first pension
account in 1940. Assets under management have grown to over $112 billion. With
offices in London and Singapore, J.P. Morgan Investment draws from a worldwide
resources base to provide comprehensive service to an international group of
clients. Investment management activities in Japan, Australia, and Germany are
carried out by affiliates, Morgan Trust Bank in Tokyo, J.P. Morgan Investment
Management Australia Limited in Melbourne, and J.P. Morgan Investment GmbH in
Frankfurt.
J.P. Morgan Investment currently provides investment advisory services to
the following investment companies: the J.P. Morgan Treasury Money Market
Portfolio, the J.P. Morgan Bond Portfolio, the J.P. Morgan Equity Portfolio, the
J.P. Morgan Small Company Portfolio, and the J.P. Morgan International
Opportunity Portfolio, which are portfolios of the J.P. Morgan Series Trust II,
an open-end diversified investment company registered under the Investment
Company Act of 1940. Morgan Guaranty provides or arranges for the provision of
certain financial and administrative services and oversees fund accounting for
the Trust. J.P. Morgan Investment also acts as the subadviser to the following
U.S. registered investment companies which are otherwise unaffiliated with J.P.
Morgan Investments: Advantus Series Fund, Inc. - Macro-Cap Value Portfolio,
American Century - Benham International Bond Fund, American General Series
Portfolio Company 2 - American General Small Cap Growth Fund, American General
Series Portfolio Company 3 - American General Small Cap Growth Fund, , American
Skandia Master Trust - ASMT JPM Money Market Portfolio, American Skandia Trust -
AST Money Market Portfolio, COVA Series Trust - International Equity Portfolio,
COVA Series Trust - Large Capital Stock Portfolio, COVA Series Trust - Quality
Bond Portfolio, COVA Series Trust - Select Equity Portfolio, COVA Series Trust -
Small Capital Stock Portfolio,
B-24
<PAGE>
Endeavor Series Trust - Enhanced Index Portfolio, EQ Advisors Trust - JPM Core
Bond Portfolio, Frank Russell Emerging Markets Fund, Frank Russell Equity Q
Fund, Frank Russell Equity T Fund, Frank Russell International Fund, Frank
Russell International Securities Fund, Frank Russell Quantitative Equity Fund,
Jefferson Pilot Variable Fund, Inc. - Balanced Portfolio, JNL Series Trust -
JNL/JPM International & Emerging Markets Series, John Hancock Variable Series
Trust I - Strategic Bond Portfolio, Liberty ALL-STAR Equity Fund, Liberty
ALL-STAR Equity Fund Variable Series, Manufacturers Investment Trust -
International Growth and Income Trust, Mason Street Funds, Inc. - Growth and
Income Stock Fund, Mutual Investment Fund of Connecticut, Nationwide Separate
Account Trust - Nationwide Global Equity Fund, North American Funds -
International Growth and Income Fund, Northwestern Mutual Series Fund, Inc. -
Growth and Income Stock Portfolio, Pacific Select Fund - The Equity Income
Portfolio, Pacific Select Fund - The Multi-Strategy Portfolio, Phoenix Edge
Series Fund - JPM Research Enhanced Index Series, Preferred Fixed Income Fund,
Preferred Money Market Fund, Preferred Short-Term Government Securities Fund,
Principal Variable Contracts Fund, Inc. - Small CapValue Fund, Tridan
Corporation, WRL Series Fund, Inc. - Money Market Portfolio, WRL Series Fund,
Inc. - Real Estate Securities Portfolio.
Northwestern Mutual Life is the licensee under two License Agreements with
Standard & Poor's, dated as of November 30, 1990 and February 19, 1999 for the
S&P 500 Index and the S&P MidCap 400 Index, respectively, relating to the Fund
as well as certain other mutual funds sponsored by Northwestern Mutual Life.
The following disclaimers and limitations are included in accordance with the
requirements of the License Agreements:
The Fund is not sponsored, endorsed, sold or promoted by Standard &
Poor's ("S&P"), a division of The McGraw-Hill Companies, Inc., and none of
the Portfolios of the Fund is so sponsored, endorsed, sold or promoted.
S&P makes no representation or warranty, express or implied, to the owners
of the Fund or any of its Portfolios or any member of the public regarding
the advisability of investing in securities generally or in the Fund or any
of its Portfolios particularly or the ability of the S&P 500 Index or the
S&P MidCap 400 Index to track general stock market performance. S&P's only
relationship to the Licensee is the licensing of certain trademarks and
trade names of S&P and of the S&P 500 Index and the S&P MidCap 400 Index,
both of which are determined, composed and calculated by S&P without regard
to the Licensee or the Fund. S&P has no obligation to take the needs of
the Licensee or the owners of the Fund or any of its Portfolios into
consideration in determining, composing or calculating the S&P 500 Index
and the S&P MidCap 400 Index. S&P is not responsible for and has not
participated in the determination of the timing of, prices at, or
quantities of the Fund or any of its Portfolios to be issued or in the
determination or calculation of the equation by which the Fund or any of
its Portfolios is to be converted into cash. S&P has no obligation or
liability in connection with the administration, marketing or trading of
the Fund.
S&P DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE S&P
500 INDEX OR THE S&P MIDCAP 400 INDEX OR ANY DATA INCLUDED THEREIN AND S&P
SHALL HAVE NO LIABILITY FOR ANY ERRORS, OMISSIONS, OR INTERRUPTIONS
THEREIN. S&P MAKES NO WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE
OBTAINED BY LICENSEE, OWNERS OF THE FUND, OR ANY OTHER PERSON OR ENTITY
FROM THE USE OF THE S&P 500 INDEX OR THE S&P MIDCAP 400 INDEX OR ANY DATA
INCLUDED THEREIN. S&P MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND HEREBY
EXPRESSLY DISCLAIMS ALL WARRANTIES OR MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE OR USE WITH RESPECT TO THE S&P 500 INDEX AND THE S&P
MIDCAP 400 INDEX OR ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE
FOREGOING, IN NO EVENT SHALL S&P HAVE ANY LIABILITY FOR ANY SPECIAL,
PUNITIVE, INDIRECT, OR CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS), EVEN
IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES.
The custodian for the Index 400 Stock, Small Cap Growth Stock, Index 500
Stock, Aggressive Growth Stock and Balanced Portfolio is The Chase Manhattan
B-25
<PAGE>
Bank, N.A., One Chase Manhattan Plaza, New York, New York 10081. The custodian
for the Select Bond, High Yield Bond, Money Market, Growth Stock and Growth and
Income Stock Portfolios is Bankers Trust Company, 16 Wall Street, New York, New
York 10015. The custodian for the International Equity Portfolio is Brown
Brothers Harriman & Co., 40 Water Street, Boston, Massachusetts 02109. The
custodians maintain custody of securities and other assets of the respective
Portfolios and perform certain services in connection with the purchase, sale,
exchange and pledge of securities of the Portfolios. Canadian Imperial Bank of
Commerce, Commerce Court, Ontario, Canada M5L 1A2 provides custodial services
for the Fund in Canada.
PricewaterhouseCoopers LLP, 100 East Wisconsin Avenue, Suite 1500,
Milwaukee, Wisconsin 53202, is the independent public accountant of the Fund and
performs auditing services for the Fund.
PORTFOLIO TRANSACTIONS AND BROKERAGE ALLOCATION AND OTHER PRACTICES
There is generally no stated commission in the case of fixed-income
securities, which are traded in the over-the-counter markets, but the price paid
by the Fund usually includes an undisclosed dealer commission or mark-up. In
underwritten offerings, the price paid by the Fund includes a disclosed, fixed
commission or discount retained by the underwriter or dealer. Transactions on
U.S. stock exchanges and other agency transactions involve the payment by the
Fund of negotiated brokerage commissions. Such commissions vary among different
brokers. Also, a particular broker may charge different commissions according
to such factors as the difficulty and size of the transaction. In the case of
securities traded on some foreign stock exchanges, brokerage commissions may be
fixed and the investment adviser or sub-adviser may be unable to negotiate
commission rates for these transactions.
The investment adviser, or sub-adviser in the case of the Growth and Income
Stock and International Equity Portfolios, places all orders for the purchase
and sale of portfolio securities, options, and futures contracts for each
Portfolio through a substantial number of brokers and dealers or futures
commission merchants. In executing transactions, the investment adviser or
sub-adviser will attempt to obtain the best net results for the Portfolio,
taking into account such factors as price (including the applicable brokerage
commission or dollar spread), size of order, the nature of the market for the
security, the timing of the transaction, the reputation, experience and
financial stability of the broker-dealer involved, the quality of the service,
the difficulty of execution and operational facilities of the firms involved,
and the firm's risk in positioning a block of securities. In transactions on
stock exchanges in the United States, payments of brokerage commissions are
negotiated. In effecting purchases and sales of portfolio securities in
transactions on United States stock exchanges for the account of the Fund, the
investment adviser or sub-adviser may pay higher commission rates than the
lowest available when the investment adviser or sub-adviser believes it is
reasonable to do so in light of the value of the brokerage and research services
provided by the broker effecting the transaction, as described below. In the
case of securities traded on some foreign stock exchanges, brokerage commissions
may be fixed and the investment adviser or sub-adviser may be unable to
negotiate commission rates for these transactions. In the case of securities
traded on the over-the-counter markets, there is generally no stated commission,
but the price includes an undisclosed commission or markup.
Some securities considered for investment by the Fund's Portfolios may also
be appropriate for other clients served by the investment adviser or
sub-adviser. If a purchase or sale of securities consistent with the investment
policies of a Portfolio and one or more of these clients served by the
investment adviser or sub-adviser is considered at or about the same time,
transactions in such securities will be allocated among the Portfolios and
clients in a manner deemed fair and reasonable by the investment adviser or
sub-adviser. Although there is no specified formula for allocating such
B-26
<PAGE>
transactions, the various allocation methods used by the investment adviser or
sub-adviser, and the results of such allocations, are subject to periodic review
by the Fund's investment adviser and directors.
It has for many years been a common practice in the investment advisory
business for advisers of investment companies and other institutional investors
to receive research services from broker-dealers which execute portfolio
transactions for the clients of such advisers. Consistent with this practice,
the investment adviser or sub-adviser may receive research services from many
broker-dealers with which the investment adviser or sub-adviser places portfolio
transactions. These services, which in some cases may also be purchased for
cash, include such matters as general economic and security market reviews,
industry and company reviews, evaluations of securities and recommendations as
to the purchase and sale of securities. Some of these services may be of value
to the investment adviser or sub-adviser in advising its various clients
(including the Portfolios), although not all of these services are necessarily
useful and of value in managing a Portfolio.
As permitted by Section 28(e) of the Securities Exchange Act of 1934, the
investment adviser or sub-adviser may cause a Portfolio to pay a broker-dealer,
which provides "brokerage and research services" (as defined in the Act) to the
investment adviser or sub-adviser, an amount of disclosed commission for
effecting a securities transaction for the Portfolio in excess of the commission
which another broker-dealer would have charged for effecting that transaction.
There are no arrangements whatsoever, written or oral, relating to the
allocation to specific brokers of orders for Portfolio transactions.
Consideration is given to those firms providing statistical and research
services to the investment adviser or sub-adviser, but it is not the policy of
any Portfolio to pay higher brokerage commissions to a firm solely because it
has provided such services. In 1998 all brokerage business was allocated to
firms which provided these services. Statistical and research services
furnished by brokers typically include: analysts' reports on companies and
industries, market forecasts, economic analyses and the like. Such services may
tend to reduce the expenses of the adviser or sub-adviser and this has been
considered in setting the advisory fee paid by each Portfolio. During the years
ended December 31, 1996, 1997, and 1998, the Fund paid brokerage commissions of
$1,859,133, $3,985,791 and $5,133,812, respectively.
The Directors of the Fund have recently authorized the investment adviser
and sub-advisers to place portfolio orders for the Fund with Robert W. Baird &
Co. Incorporated ("Baird"), a broker-dealer which is a corporate affiliate of
Northwestern Mutual Life. This authorization is subject to all applicable legal
requirements, including procedures adopted by the Directors. During 1997, the
Fund paid $21,869 in commissions to Baird. This represents .5% of the aggregate
brokerage commissions paid during 1997 and .6% of aggregate Fund transactions.
During 1998, the Fund paid $48,828 in commissions to Baird. This represents
2.4% of the aggregate brokerage commissions paid during 1998 and .3% of
aggregate Fund transactions. No orders were placed with an affiliate broker
during 1996.
ORGANIZATION AND CAPITAL STOCK
The Fund was incorporated in Maryland on December 22, 1983.
The Fund issues a separate class of capital stock for each Portfolio. Each
share of capital stock issued with respect to a Portfolio has a pro rata
interest in the assets of that Portfolio and has no interest in the assets of
any other Portfolio. Each share of capital stock is entitled to one vote on all
matters submitted to a vote of shareholders. Shares of a Portfolio will be voted
separately, however, on matters affecting only that Portfolio, including
approval of the Investment Advisory Agreement and changes in fundamental
investment policies of a Portfolio. The assets of each Portfolio are charged
with the liabilities of the Portfolio and their proportionate share of the
B-27
<PAGE>
general liabilities of the Fund based on the relative asset size of the
Portfolios at the time the liabilities are incurred. All shares may be redeemed
for cash at any time.
All of the outstanding shares of each Portfolio are owned of record by
Northwestern Mutual Life. Shares of each Portfolio are presently being offered
only to Northwestern Mutual Life and its separate investment accounts used for
variable annuity contracts and variable life insurance policies. The shares
held in connection with certain of the separate investment accounts are voted by
Northwestern Mutual Life in accordance with instructions received from the
owners of the variable annuity contracts and variable life insurance policies.
The shares held by Northwestern Mutual Life as general assets are voted by
Northwestern Mutual Life in the same proportions as the shares held in
connection with these separate investment accounts. If applicable laws,
regulations or interpretations change so as to permit Northwestern Mutual Life
to vote the Fund shares in its own discretion, it may elect to do so.
As stated above, the shares of the Fund are offered to separate investment
accounts to fund both variable life insurance policies and variable annuity
contracts. Because of differences in tax treatment or other considerations it
is possible that the interests of variable life insurance policyowners, owners
of variable annuity contracts or owners of other contracts that may participate
in the Fund in the future might at some time be in conflict. The Board of
Directors of the Fund will monitor for any material conflicts and determine what
action, if any, should be taken. Northwestern Mutual Life has agreed to be
responsible, at its cost, to remedy or eliminate any irreconcilable material
conflict up to and including establishing a new registered management investment
company and segregating the assets underlying the variable annuity contracts and
variable life insurance policies.
The capital stock of the Fund is divided into eleven classes corresponding
to the eleven Portfolios of the Fund. Each class is preferred over the other
classes with respect to the assets of the Portfolio to which the class relates.
Dividends and distributions, including distributions in the event of
liquidation, are payable only out of assets of the Portfolio to which the class
relates. All shares of the Fund are entitled to vote on all matters submitted to
a vote of the shareholders except that shares shall be voted by class on matters
concerning only that class, to approve an investment advisory agreement, to
approve changes in fundamental policies with respect to that class and when
otherwise required by the Investment Company Act of 1940. Shares may be
redeemed only for cash, except that capital stock of any class may be redeemed
in kind with assets of the Portfolio to which the class relates if the Directors
deem such action desirable. Each share is nonassessable and shareholders have
no preemptive or conversion rights.
Each Portfolio is a diversified series of the Fund. The Fund is an
open-end management investment company.
PURCHASE, REDEMPTION AND PRICING OF SHARES
Shares of each Portfolio are offered and redeemed at their net asset value
as next determined following receipt of a purchase order or tender for
redemption without the addition of any selling commission or "sales load" or any
redemption charge. The redemption price may be more or less than the
shareholder's cost.
The net asset value of each share of each Portfolio is the net asset value
of the entire Portfolio divided by the number of shares of the Portfolio
outstanding. The net asset value of an entire Portfolio is determined by
computing the value of all assets of the Portfolio and deducting all
liabilities, including reserves and accrued liabilities of the Portfolio.
Portfolio securities for which market quotations are readily available are
valued at current market value.
B-28
<PAGE>
Equity securities listed on a stock exchange and all call options are
valued at the closing sale price on the stock or options exchange or, if there
has been no such sale, at the closing bid price; stock index futures contracts
and interest rate futures contracts are valued at the closing settlement price
on the commodities exchange; unlisted equity securities are valued at the
closing bid price on the over-the-counter market.
Debt securities with maturities generally exceeding one year are valued on
the basis of valuations furnished by Interactive Data Corporation, a facility
which utilizes electronic data processing techniques to report valuations for
normal institutional size trading units of debt securities, without regard to
exchange or over-the-counter prices, unless the Directors of the Fund determine
that in the case of a particular security some other value is fair.
Money market instruments and debt securities with maturities exceeding
sixty days but generally not exceeding one year are valued by marking to market,
except for the Money Market Portfolio. Marking to market is based on an average
(provided by a communication network) of the most recent bid prices or yields.
The marking to market method takes into account unrealized appreciation or
depreciation due to changes in interest rates or other factors which would
influence the current fair values of such securities.
Securities with remaining maturities of sixty days or less, and all debt
securities of 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. Under the amortized cost method of valuation, the
security will initially be valued at the cost on the date of purchase (or, in
the case of securities purchased with more than 60 days remaining to maturity
the market value on the 61st day prior to maturity); and thereafter the
Portfolio will assume a constant proportionate amortization in value until
maturity of any discount or premium.
The value of a foreign security held by the International Equity Portfolio
is determined in its national currency as of the close of trading on the foreign
exchange on which it is traded, or as of 4:00 p.m., New York time, if that is
earlier, and that value is then converted into its U.S. dollar equivalent at
foreign exchange rates in effect at 11:00 a.m., New York time, on the day the
value of the foreign security is determined. If no sale is reported at that
time, the mean between the current bid and asked price is used. Occasionally,
events which affect the values of such securities and such exchange rates may
occur between the times at which they are determined and the close of the New
York Stock Exchange, and will therefore not be reflected in the computation of
the Portfolio's net asset value. If events materially affecting the value of
such securities occur during such period, then these securities will be valued
at fair value as determined by the management and approved in good faith by the
Directors of the Fund. Trading in securities on European and Far Eastern
securities exchanges and over-the-counter markets is normally completed well
before the close of business in New York on each day on which the New York Stock
Exchange is open. Trading in European or Far Eastern securities generally, or in
a particular country or countries, may not take place on every New York business
day. Furthermore, trading takes place in various foreign markets on days which
are not business days in New York and on which the Fund's net asset value is not
calculated. The International Equity Portfolio calculates net asset value per
share, and therefore effects sales and redemptions of its shares, as of the
close of the New York Stock Exchange once on each day on which that Exchange is
open. Such calculation does not take place contemporaneously with the
determination of the prices of many of the portfolio securities used in such
calculation and if events occur which materially affect the value of these
foreign securitie, they will be valued at fair market value as determined by the
management and approved in good faith by the Directors of the Fund.
All other assets, including any securities for which market quotations are
not readily available, will be valued at their fair value as determined in good
faith by the Directors of the Fund. The net asset value is determined as
B-29
<PAGE>
of the close of trading on the New York Stock Exchange on each day during which
the Exchange is open for trading. In accordance with the requirements of the
Investment Company Act of 1940 the Portfolios will also determine the net asset
value of their shares on any other day on which there is sufficient trading to
materially affect the value of their securities.
The Money Market Portfolio will use its best efforts to maintain a constant
net asset value per share of $1.00 (computed to an accuracy of $.005); however,
the net asset value is subject to fluctuation based upon changes in the value of
the Portfolio's securities. Accordingly, if net losses on the Portfolio's
securities for a given period exceed income after expenses, the net asset value
per share of Money Market Portfolio capital stock will decline. The Board of
Directors of the Fund will take such action as it considers appropriate to
maintain the stability of the net asset value per share. For example, the
Directors may reduce or suspend the payment of dividends if the net asset value
per share should decline below $.995 and the Directors may supplement such
dividends with other distributions if the net asset value per share should rise
above $1.005.
The total offering price per share for each Portfolio is computed as
follows:
SPECIMEN PRICE-MAKE-UP SHEET
(as of December 31, 1998)
<TABLE>
<CAPTION>
AGGRESSIVE INTERNATIONAL GROWTH AND
GROWTH STOCK EQUITY GROWTH STOCK INCOME STOCK
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
-------------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
NET ASSETS $1,137,467,243 $671,105,795 $421,281,701 $570,970,130
NUMBER OF SHARES
OUTSTANDING 328,396,433 400,190,764 187,468,667 351,523,199
NET ASSET VALUE
PER SHARE
(NET ASSETS
DIVIDED BY
NUMBER OF SHARES
(OUTSTANDING) $3.464 $1.677 $2.247 $1.624
OFFERING AND
REDEMPTION
PRICE PER SHARE $3.46 $1.68 $2.25 $1.62
</TABLE>
<TABLE>
<CAPTION>
INDEX 500 BALANCED HIGH YIELD
STOCK PORTFOLIO PORTFOLIO BOND PORTFOLIO
--------------- -------------- --------------
<S> <C> <C> <C>
NET ASSETS $1,690,680,293 $3,282,069,954 $ 184,783,386
NUMBER OF SHARES
OUTSTANDING 514,113,472 1,475,966,374 197,519,383
NET ASSET VALUE
PER SHARE
(NET ASSETS
DIVIDED BY
NUMBER OF SHARES
OUTSTANDING) $3.289 $2.224 $0.936
OFFERING AND
REDEMPTION PRICE
PER SHARE $3.29 $2.22 $0.94
</TABLE>
B-30
<PAGE>
<TABLE>
<CAPTION>
SELECT BOND MONEY MARKET
PORTFOLIO PORTFOLIO
----------- ------------
<S> <C> <C>
NET ASSETS $298,033,454 $291,464,693
NUMBER OF SHARES
OUTSTANDING 238,596,316 291,476,496
NET ASSET VALUE
PER SHARE
(NET ASSETS
DIVIDED BY
NUMBER OF SHARES
OUTSTANDING) $1.249 $1.000
OFFERING AND
REDEMPTION PRICE
PER SHARE $1.25 $1.00
</TABLE>
Payment for the shares redeemed must be made within seven days after the
evidence of ownership of such shares is tendered to the Fund; however, the right
to redeem Fund shares may be suspended, or payment of the redemption value
postponed, during any period in which the New York Stock Exchange is closed or
trading thereon is restricted, or any period during which an emergency exists,
or as otherwise permitted by the Investment Company Act of 1940.
TAXES AND DIVIDENDS
Each Portfolio is qualified or intends to qualify as a regulated investment
company under Subchapter M of the Internal Revenue Code. In order to avoid
taxation of capital gains under Subchapter M of the Code, each Portfolio, except
the Money Market Portfolio, will distribute net capital gains annually. Net
capital gains from the sale of investments will be calculated by subtracting any
unused capital loss carryforward from net realized gain for the year, as
prescribed by the Internal Revenue Code. No distribution of realized capital
gains will be made until any capital loss carryforward has been exhausted or
expired. At the end of its last fiscal year, the High Yield Bond Portfolio had
an unused capital loss carryforward of $2,519,798.
CALCULATION OF YIELD QUOTATIONS OF THE MONEY MARKET PORTFOLIO
The Money Market Portfolio's yield is its current investment income
expressed in annualized terms. The Portfolio's yield is calculated by
determining the net change in the value of a pre-existing account having a
balance of one share at the beginning of a seven-day base period. The net
change in the value of the account is divided by the value of the account at the
beginning of the period to obtain the base period return. The result is then
multiplied by 365 and divided by seven, with the resulting annualized yield
carried to the nearest hundredth of one percent. For purposes of this
calculation the net change in the value of the account reflects the value of
additional Portfolio shares purchased with dividends from the original share and
dividends declared on both the original share and any such additional shares.
The calculation reflects net investment income of the Portfolio for the period,
including accrued interest income plus or minus amortized purchase discount or
premium, less all accrued expenses, but does not include realized or unrealized
gains or losses.
B-31
<PAGE>
APPENDIX A
Description of Ratings as Provided by the Rating Services
CORPORATE BONDS
MOODY'S INVESTORS SERVICE, INC.
Aaa--Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.
Aa--Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they compromise what are generally known
as high grade bonds. They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat larger than in Aaa
securities.
A--Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving security
to principal and interest are considered adequate but elements may be present
which suggest a susceptibility to impairment sometime in the future.
Baa--Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba--Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and, thereby, not well safeguarded
during other good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B--Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the security over any long period of time may be small.
Caa--Bonds which are rated Caa are of poor standing. Such securities may
be in default or there may be present elements of danger with respect to
principal or interest.
Ca--Bonds which are rated Ca represent obligations which are speculative in
a high degree. Such issues are often in default or have other marked
shortcomings.
C--Bonds which are rated C are the lowest rated class of bonds and are
regarded as having extremely poor prospects of ever attaining any real
investment standing.
Absence of Rating: Where no rating has been assigned or where a rating has
been suspended or withdrawn, it may be for reasons unrelated to the quality of
the issue.
Should no rating be assigned, the reason may be one of the following:
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<PAGE>
1. An application for rating was not received or accepted.
2. The issue or issuer belongs to a group of securities that are not
rated as a matter of policy.
3. There is a lack of essential data pertaining to the issue or issuer.
4. The issue was privately placed, in which case the rating is not
published in Moody's publications.
Suspension or withdrawal may occur if new and material circumstances arise,
the effects of which preclude satisfactory analysis; if there is no longer
available reasonable up-to-date data to permit a judgment to be formed; if a
bond is called for redemption; or for other reasons.
Note: Moody's applies numerical modifiers 1, 2 and 3 in each generic
ratings classification from Aa through B in its corporate bond rating system.
The modifier 1 indicates that the security ranks in the higher end of its
generic rating category; the modifier 2 indicates a mid-range ranking; and the
modifier 3 indicates that the issue ranks in the lower end of its generic rating
category.
STANDARD & POOR'S
AAA--Debt rated AAA has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.
AA--Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in small degree.
A--Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB--Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
BB, B, CCC, CC, C--Debt is regarded as having predominantly speculative
characteristics with respect to capacity to pay interest and repay principal in
accordance with the terms of this obligation. "BB" indicates the least degree
of speculation and "C" the highest degree of speculation. While such debt will
likely have some quality and protective characteristics, these are outweighed by
large uncertainties or major risk exposures to adverse conditions.
BB--Debt rated "BB" has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure
to adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The "BB"
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied "BBB-" rating.
B--Debt rated "B" has a greater vulnerability to default but currently has
the capacity to meet interest payments and principal repayments. Adverse
business, financial, or economic conditions will likely impair capacity or
willingness to pay interest and repay principal. The "B" rating category is
also used for debt subordinated to senior debt that is assigned an actual or
implied "BB" or "BB-" rating.
CCC--Debt rated "CCC" has a currently indefinable vulnerability to default,
and is dependent upon favorable business, financial and economic
B-33
<PAGE>
conditions to meet timely payment of interest and repayment of principal. In
the event of adverse business, financial or economic conditions, it is not
likely to have the capacity to pay interest and repay principal. The "CCC"
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied "B" or "B-" rating.
CC--The rating "CC" is currently highly vulnerable to nonpayment.
C--The rating "C" is typically applied to debt subordinated to senior debt
which is assigned an actual or implied "CCC-" debt rating. The "C" rating may
be used to cover a situation where a bankruptcy petition has been filed, but
debt service payments are continued.
CI--The rating "CI" is reserved for income bonds on which no interest is
being paid.
D--Debt rated "D" is in payment default. The "D" rating is used when
interest payments or principal are not made on the date due even if the
applicable grace period has not expired, unless S&P believe that such payments
will be made during such grace period. The "D" rating also will be used upon
the filing of a bankruptcy petition if debt service payments are jeopardized.
Plus (+) or Minus (-)--The ratings from "AA" to "CCC" may be modified by
the addition of a plus or minus sign to show relative standing within the major
rating categories.
NR--Not rated.
PREFERRED STOCKS
MOODY'S INVESTORS SERVICE, INC.
aaa--considered to be a top-quality preferred stock. This rating indicates
good asset protection and the least risk of dividend impairment within the
universe of preferred stocks.
aa--considered a high-grade preferred stock. This rating indicates that
there is a reasonable assurance that earnings and asset protection will remain
relatively well maintained in the foreseeable future.
a--considered to be an upper-medium-grade preferred stock. While risks are
judged to be somewhat greater than in the aaa and aa classifications, earnings
and asset protection are, nevertheless, expected to be maintained at adequate
levels.
baa--considered to be medium-grade, neither highly protected nor poorly
secured. Earnings and asset protection appear adequate at present but may be
questionable over any great length of time.
ba--considered to have speculative elements and its future cannot be
considered well assured. Earnings and asset protection may be very moderate and
not well safeguarded during adverse periods. Uncertainty of position
characterizes preferred stocks in this class.
b--generally lacks the characteristics of a desirable investment.
Assurance of dividend payments and maintenance of other terms of the issue over
any long period of time may be small.
caa--likely to be in arrears on dividend payments. This rating designation
does not purport to indicate the future status of payments.
ca--speculative in a high degree and is likely to be in arrears on
dividends with little likelihood of eventual payments.
B-34
<PAGE>
c--lowest rated class of preferred or preference stock. Issues so rated
can be regarded as having extremely poor prospects of ever attaining any real
investment standing.
Moody's applies numerical modifiers 1, 2 and 3 in each rating
classification: the modifier 1 indicates that the security ranks in the higher
end of its generic rating category; the modifier 2 indicates a mid-range
ranking; and the modifier 3 indicates that the issue ranks in the lower end of
its generic rating category.
STANDARD & POOR'S
"AAA"--This is the highest rating that may be assigned by S&P to a
preferred stock issue and indicates an extremely strong capacity to pay the
preferred stock obligations.
"AA"--A preferred stock issue rated "AA" also qualifies as a high-quality
fixed-income security. The capacity to pay preferred stock obligations is very
strong, although not as overwhelming as for issues rated "AAA".
"A"--An issued rated "A" is backed by a sound capacity to pay the preferred
stock obligations, although it is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions.
"BBB"--An issue rated "BBB" is regarded as backed by an adequate capacity
to pay the preferred stock obligations. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity to make payments for preferred stock
in this category than for issues in the "A" category.
"BB", "B", "CCC"--Preferred stock rated "BB", "B", and "CCC" are regarded,
on balance, as predominantly speculative with respect to the issuer's capacity
to pay preferred stock obligations. "BB" indicates the lowest degree of
speculation and "CCC" the highest degree of speculation. While such issues will
likely have some quality and protective characteristics, these are outweighed by
large uncertainties or major risk exposures to adverse conditions.
"CC"--The rating "CC" is reserved for a preferred stock issue in arrears on
dividends or sinking fund payments but that is currently paying.
"C"--The preferred stock rated "C" is a non-paying issue.
"D"--A preferred stock rated "D" is a non-paying issue with the issuer in
default on debt instruments.
NR indicates that no rating has been requested, that there is insufficient
information on which to base a rating, or that S&P does not rate a particular
type of obligation as a matter of policy.
Plus(+) or Minus(-)--To provide more detailed indications of preferred
stock quality, the ratings from "AA" to "CCC" may be modified by the addition of
a plus or minus sign to show relative standing within the major rating
categories.
COMMERCIAL PAPER
MOODY'S INVESTORS SERVICE
The term "commercial paper" as used by Moody's means promissory obligations
not having an original maturity in excess of one year.
Moody's employs the following three designations, all judged to be
investment grade, to indicate the relative repayment capacity of rated issuers:
B-35
<PAGE>
Issuers rated PRIME-1 (or supporting institutions) have a superior ability
for repayment of senior short-term debt obligations. PRIME-1 repayment ability
will often be evidenced by the following characteristics:
-- Leading market positions in well-established industries.
-- High rates of return on funds employed.
-- Conservative capitalization structures with moderate reliance on debt
and ample asset protection.
-- Broad margins in earnings coverage of fixed financial charges and high
internal cash generation.
-- Well-established access to a range of financial markets and assured
sources of alternate liquidity.
Issuers rated PRIME-2 (or supporting institutions) have a strong ability
for repayment of senior short-term debt obligations. This will normally be
evidenced by many of the characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound, may be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.
Issuers rated PRIME-3 (or supporting institutions) have an acceptable
ability for repayment of senior short-term debt obligations. The effect of
industry characteristics and market composition may be more pronounced.
Variability in earnings and profitability may result in changes in the level of
debt protection measurements and the requirement for relatively high financial
leverage. Adequate alternate liquidity is maintained.
Issuers rated NOT PRIME do not fall within any of the Prime rating
categories.
STANDARD & POOR'S
S&P commercial paper rating is a current assessment of the likelihood of
timely payment of debt having an original maturity of no more than 365 days.
Ratings are graded into several categories ranging from "A-1" for the highest
quality obligations to "D" for the lowest. These categories are as follows:
A-1 Commercial paper rated "A-1" is regarded as having a very strong
degree of safety regarding timely payment. A "+" designation is
applied to those issues which possess extremely strong safety
characteristics.
A-2 Commercial paper rated "A-2" is regarded as having a satisfactory
capacity for timely payment. However, the relative degree of safety
is not as high as for issues designated "A-1"
A-3 Commercial paper rated "A-3" is regarded as having an adequate
capacity for timely payment. They are, however, more vulnerable to
the adverse effects of changes in circumstances than obligations
carrying the higher designations.
B Commercial paper rated "B" is regarded as having only speculative
capacity for timely payment.
C Commercial paper rated "C" is regarded as having a doubtful capacity
for repayment.
D Commercial paper rated "D" is in payment default. The "D" rating is
used when interest payments or principal payments are not made on the
date due even if the applicable grace period has not
B-36
<PAGE>
expired, unless S&P believes that such payments will be made during such grace
period.
B-37
<PAGE>
APPENDIX B
Glossary of Terms
CERTIFICATE OF DEPOSIT
A certificate of deposit is a short term obligation of a commercial bank.
EURODOLLAR CERTIFICATE OF DEPOSIT
A Eurodollar certificate of deposit is a short term obligation of a foreign
subsidiary of a U.S. bank payable in U.S. dollars.
TIME DEPOSIT
A time deposit is a deposit in a commercial bank for a specified period of
time at a fixed interest rate for which a negotiable certificate is not
received.
BANKERS' ACCEPTANCE
A bankers' acceptance is a time draft drawn on a commercial bank by a
borrower, usually in connection with international commercial transactions.
VARIABLE AMOUNT MASTER NOTE
A variable amount master note is a note which fixes a minimum and maximum
amount of credit and provides for lending and repayment within those limits at
the discretion of the lender.
COMMERCIAL PAPER
Commercial paper is a short term promissory note issued by a corporation
primarily to finance short term credit needs.
B-38
<PAGE>
ACCOUNTANTS' REPORT
[LOGO]
REPORT OF INDEPENDENT ACCOUNTANTS
To The Shareholders and Board of Directors of
Northwestern Mutual Series Fund, Inc.
In our opinion, the accompanying statements of assets and liabilities, including
the schedules of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the Aggressive Growth Stock
Portfolio, International Equity Portfolio, Growth Stock Portfolio, Growth and
Income Stock Portfolio, Index 500 Stock Portfolio, Balanced Portfolio, High
Yield Bond Portfolio, Select Bond Portfolio and Money Market Portfolio
(constituting Northwestern Mutual Series Fund, Inc., hereafter referred to as
the "Fund") at December 31, 1998, the results of each of their operations for
the year then ended, the changes in each of their net assets for the two years
in the period ended December 31, 1998, and the financial highlights for the
periods indicated, in conformity with generally accepted accounting principles.
These financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentations. We believe that our audits, which included confirmations of the
securities at December 31, 1998 by correspondence with the custodian and brokers
provide a reasonable basis for the opinion expressed above.
/s/ PricewaterhouseCoopers LLP
Milwaukee, Wisconsin
January 25, 1999
B-39
<PAGE>
AGGRESSIVE GROWTH STOCK PORTFOLIO
NORTHWESTERN MUTUAL SERIES FUND, INC.
Aggressive Growth Stock Portfolio
Financial Statements
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
<TABLE>
<S> <C>
ASSETS
Common Stocks (cost $679,951)................................................. $1,043,782
Money Market Investments (cost $95,978)....................................... 95,978
-----------
1,139,760
Cash.......................................................................... 17
Due from Sale of Securities................................................... 5,022
Due from Futures Variation Margin............................................. 92
Dividends and Interest Receivable............................................. 58
Due from Sale of Fund Shares.................................................. 5
-----------
Total Assets................................................................ 1,144,954
-----------
LIABILITIES
Due on Purchase of Securities................................................. 6,087
Due on Redemption of Fund Shares.............................................. 911
Due to Investment Advisor..................................................... 466
Accrued Expenses.............................................................. 24
-----------
Total Liabilities........................................................... 7,488
-----------
NET ASSETS...................................................................... $1,137,466
-----------
-----------
REPRESENTED BY:
Aggregate Paid in Capital (2,000,000 shares authorized, $.01 par value;
328,396 shares outstanding).................................................. $ 736,043
Undistributed Net Investment Income........................................... 390
Undistributed Accumulated Net Realized Gain on Investments.................... 36,213
Net Unrealized Appreciation of:
Investment Securities....................................................... 363,831
Index Futures Contracts..................................................... 989
-----------
Net Assets for 328,396 Shares Outstanding..................................... $1,137,466
-----------
-----------
Net Asset Value, Offering and Redemption Price per Share...................... $ 3.46
-----------
-----------
</TABLE>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<S> <C>
INVESTMENT INCOME
Income
Interest.................................................................... $ 5,107
Dividends................................................................... 850
---------
Total Income.............................................................. 5,957
---------
Expenses
Management Fees............................................................. 5,550
Custodian Fees.............................................................. 26
Other Expenses.............................................................. 18
---------
Total Expenses............................................................ 5,594
---------
Less Custodian Fees:
Paid by Affiliate.................................................... (16)
Paid Indirectly...................................................... (10)
---------
Total Net Expenses........................................................ 5,568
---------
Net Investment Income......................................................... 389
---------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net Realized Gain on Investments:
Investment Securities....................................................... 33,076
Index Futures Contracts..................................................... 3,149
---------
Net Realized Gain on Investments for the Year............................. 36,225
---------
Net Change in Unrealized Appreciation of:
Investment Securities....................................................... 42,088
Index Futures Contracts..................................................... 1,371
---------
Net Change in Unrealized Appreciation of Investments for the Year......... 43,459
---------
Net Gain on Investments....................................................... 79,684
---------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS...................................................... $ 80,073
---------
---------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements
B-40
<PAGE>
NORTHWESTERN MUTUAL SERIES FUND, INC.
Aggressive Growth Stock Portfolio
Statement of Changes in Net Assets
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE FOR THE
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1998 1997
----------------- -----------------
<S> <C> <C>
INCREASE IN NET ASSETS
Operations
Net Investment Income............... $ 389 $ 600
Net Realized Gain on Investments.... 36,225 44,968
Net Change in Unrealized
Appreciation of Investments for the
Period............................. 43,459 82,701
----------------- -----------------
Net Increase in Net Assets
Resulting from Operations......... 80,073 128,269
----------------- -----------------
Distributions to Shareholders from:
Net Investment Income............... (389) --
Net Realized Gain on Investments.... (39,790) (57,365)
----------------- -----------------
Net Decrease in Net Assets
Resulting from Distributions to
Shareholders...................... (40,179) (57,365)
----------------- -----------------
Fund Share Transactions
Proceeds from Sale of 23,019 and
35,663 Shares...................... 74,489 110,666
Proceeds from Shares Issued on
Reinvestment of Distributions Paid
(11,431 and 20,913 shares,
respectively)...................... 40,180 57,365
Payments for 25,793 and 14,059
Shares Redeemed.................... (84,165) (43,793)
----------------- -----------------
Net Increase in Net Assets
Resulting from Fund Share
Transactions
(8,657 and 42,517 shares,
respectively)..................... 30,504 124,238
----------------- -----------------
Total Increase in Net Assets.......... 70,398 195,142
NET ASSETS
Beginning of Period................... 1,067,068 871,926
----------------- -----------------
End of Period (includes undistributed
net investment income of $390 and
$390, respectively).................. $1,137,466 $1,067,068
----------------- -----------------
----------------- -----------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements
B-41
<PAGE>
NORTHWESTERN MUTUAL SERIES FUND, INC.
Aggressive Growth Stock Portfolio
Financial Highlights
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
FOR THE
PERIOD MAY 3,
FOR THE YEAR ENDED DECEMBER 31, 1994* THROUGH
---------------------------------------------------- DECEMBER 31,
1998 1997 1996 1995 1994
-------------- ----------- --------- --------- ---------------
<S> <C> <C> <C> <C> <C>
SELECTED PER SHARE DATA
Net Asset Value, Beginning of
Period............................... $ 3.34 $ 3.15 $ 2.77 $ 2.00 $ 1.91
Income from Investment Operations:
Net Investment Income............. -- -- -- -- --
Net Realized and Unrealized Gains
on Investments................... 0.24 0.39 0.49 0.78 0.09
-------------- ----------- --------- --------- ---------------
Total from Investment
Operations..................... 0.24 0.39 0.49 0.78 0.09
-------------- ----------- --------- --------- ---------------
Less Distributions:
Distributions from Net Investment
Income........................... (0.00) -- -- -- --
Distributions from Realized Gains
on Investments................... (0.12) (0.20) (0.11) (0.01) --
-------------- ----------- --------- --------- ---------------
Total Distributions............. (0.12) (0.20) (0.11) (0.01) --
-------------- ----------- --------- --------- ---------------
Net Asset Value, End of Period.......... $ 3.46 $ 3.34 $ 3.15 $ 2.77 $ 2.00
-------------- ----------- --------- --------- ---------------
-------------- ----------- --------- --------- ---------------
Total Return+........................... 7.56% 13.86% 17.70% 39.29% 4.47%++
-------------- ----------- --------- --------- ---------------
-------------- ----------- --------- --------- ---------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (in
thousands)............................. $1,137,466 $1,067,068 $871,926 $577,014 $327,096
-------------- ----------- --------- --------- ---------------
-------------- ----------- --------- --------- ---------------
Ratio of Expenses to Average Net
Assets................................. 0.52% 0.53% 0.54% 0.56% 0.58%**
-------------- ----------- --------- --------- ---------------
-------------- ----------- --------- --------- ---------------
Ratio of Net Investment Income/(Loss) to
Average Net Assets..................... 0.04% 0.06% (0.03)% 0.13% 0.29%**
-------------- ----------- --------- --------- ---------------
-------------- ----------- --------- --------- ---------------
Portfolio Turnover Rate................. 50.43% 57.27% 47.25% 37.84% 21.54%
-------------- ----------- --------- --------- ---------------
-------------- ----------- --------- --------- ---------------
</TABLE>
* Commencement of Operations.
** Computed on an annualized basis.
+ Total Return includes deductions for management and other fund expenses;
excludes deductions for sales loads and account fees.
++ Reflects total return for the period; not annualized.
The Accompanying Notes are an Integral Part of the Financial Statements
B-42
<PAGE>
INTERNATIONAL EQUITY PORTFOLIO
NORTHWESTERN MUTUAL SERIES FUND, INC.
International Equity Portfolio
Financial Statements
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
<TABLE>
<S> <C>
ASSETS
Common Stocks (cost $551,444)................................................. $599,086
Money Market Investments (cost $70,428)....................................... 70,428
Bonds (cost $5,072)........................................................... 4,421
---------
673,935
Cash.......................................................................... 886
Dividends and Interest Receivable............................................. 3,769
Due from Sale of Securities................................................... 1,948
Due from Foreign Currency Contracts........................................... 1,639
Due from Purchase of Fund Shares.............................................. 708
---------
Total Assets................................................................ 682,885
---------
LIABILITIES
Due on Purchase of Securities................................................. 7,818
Due on Redemption of Fund Shares.............................................. 1,820
Due on Foreign Currency Contracts............................................. 1,628
Due to Investment Advisor..................................................... 374
Accrued Expenses.............................................................. 139
---------
Total Liabilities........................................................... 11,779
---------
NET ASSETS...................................................................... $671,106
---------
---------
REPRESENTED BY:
Aggregate Paid in Capital (2,000,000 shares authorized, $.01 par value;
400,191 shares outstanding).................................................. $528,316
Undistributed Net Investment Income........................................... 19,912
Undistributed Accumulated Net Realized Gain on Investments.................... 75,853
Net Unrealized Appreciation of:
Investment Securities....................................................... 46,991
Foreign Currency Transactions............................................... 34
---------
Net Assets for 400,191 Shares Outstanding..................................... $671,106
---------
---------
Net Asset Value, Offering and Redemption Price per Share...................... $ 1.68
---------
---------
</TABLE>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<S> <C>
INVESTMENT INCOME
Income
Dividends (less foreign dividend tax of $672)............................... $ 20,714
Interest.................................................................... 2,645
---------
Total Income.............................................................. 23,359
---------
Expenses
Management Fees............................................................. 4,602
Custodian Fees.............................................................. 362
Other Expenses.............................................................. 297
---------
Total Expenses............................................................ 5,261
---------
Net Investment Income......................................................... 18,098
---------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCIES
Net Realized Gain (Loss) on:
Investment Securities....................................................... 78,474
Foreign Currency Transactions............................................... (238)
---------
Net Realized Gain For the Period.......................................... 78,236
Net Change in Unrealized Appreciation (Depreciation) of:
Investment Securities....................................................... (66,986)
Foreign Currency Transactions............................................... 79
---------
Net Change in Unrealized Depreciation for the Period...................... (66,907)
---------
Net Gain on Investments....................................................... 11,329
---------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............................ $ 29,427
---------
---------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements
B-43
<PAGE>
NORTHWESTERN MUTUAL SERIES FUND, INC.
International Equity Portfolio
Statement of Changes in Net Assets
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE
YEAR ENDED FOR THE
DECEMBER YEAR ENDED
31, DECEMBER 31,
1998 1997
----------- ------------
<S> <C> <C>
INCREASE IN NET ASSETS
Operations
Net Investment Income............................ $ 18,098 $ 16,845
Net Realized Gain on Investments................. 78,236 22,636
Net Unrealized Appreciation (Depreciation) of
Investments for the Period...................... (66,907) 25,359
----------- ------------
Net Increase in Net Assets Resulting from
Operations..................................... 29,427 64,840
----------- ------------
Distributions to Shareholders from:
Net Investment Income............................ (16,649) (12,704)
Net Realized Gain on Investments................. (22,793) (7,542)
----------- ------------
Net Decrease in Net Assets Resulting from
Distributions to Shareholders.................. (39,442) (20,246)
----------- ------------
Fund Share Transactions
Proceeds from Sale of 35,076 and 66,307 Shares... 60,890 110,618
Proceeds from Shares Issued on Reinvestment of
Dividends Paid
(21,530 and 12,598 shares, respectively)........ 39,442 20,246
Payments for 47,205 and 12,361 Shares Redeemed... (79,061) (20,797)
----------- ------------
Net Increase in Net Assets Resulting from Fund
Share Transactions
(9,401 and 66,544 shares, respectively)......... 21,271 110,067
----------- ------------
Total Increase in Net Assets....................... 11,256 154,661
NET ASSETS
Beginning of Period................................ 659,850 505,189
----------- ------------
End of Period (includes undistributed net
investment income of $19,912 and $16,682
respectively)..................................... $671,106 $659,850
----------- ------------
----------- ------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements
B-44
<PAGE>
NORTHWESTERN MUTUAL SERIES FUND, INC.
International Equity Portfolio
Financial Highlights
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
FOR THE PERIOD
MAY 3, 1994*
FOR THE YEAR ENDED DECEMBER 31, THROUGH
--------------------------------------------- DECEMBER 31,
1998 1997 1996 1995 1994
--------- --------- --------- --------- ---------------
<S> <C> <C> <C> <C> <C>
SELECTED PER SHARE DATA
Net Asset Value, Beginning of
Period............................... $ 1.69 $ 1.56 $ 1.35 $ 1.19 $ 1.22
Income from Investment Operations:
Net Investment Income............. 0.05 0.04 0.04 0.04 0.02
Net Realized and Unrealized Gains
on Investments................... 0.04 0.15 0.24 0.13 (0.02)
--------- --------- --------- --------- ---------------
Total from Investment
Operations..................... 0.09 0.19 0.28 0.17 0.00
--------- --------- --------- --------- ---------------
Less Distributions:
Distributions from Net Investment
Income........................... (0.04) (0.04) (0.03) -- (0.02)
Distributions from Realized Gains
on Investments................... (0.06) (0.02) (0.04) (0.01) (0.01)
--------- --------- --------- --------- ---------------
Total Distributions............. (0.10) (0.06) (0.07) (0.01) (0.03)
--------- --------- --------- --------- ---------------
Net Asset Value, End of Period.......... $ 1.68 $ 1.69 $ 1.56 $ 1.35 $ 1.19
--------- --------- --------- --------- ---------------
--------- --------- --------- --------- ---------------
Total Return+........................... 4.82% 12.28% 21.01% 14.57% 0.11%++
--------- --------- --------- --------- ---------------
--------- --------- --------- --------- ---------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (in
thousands)............................. $671,106 $659,850 $505,189 $342,127 $292,533
--------- --------- --------- --------- ---------------
--------- --------- --------- --------- ---------------
Ratio of Expenses to Average Net
Assets................................. 0.76% 0.77% 0.81% 0.85% 0.87%**
--------- --------- --------- --------- ---------------
--------- --------- --------- --------- ---------------
Ratio of Net Investment Income to
Average Net Assets..................... 3.38% 2.75% 3.02% 2.68% 2.28%**
--------- --------- --------- --------- ---------------
--------- --------- --------- --------- ---------------
Portfolio Turnover Rate................. 30.41% 16.74% 17.07% 26.71% 10.97%
--------- --------- --------- --------- ---------------
--------- --------- --------- --------- ---------------
</TABLE>
* Commencement of Operations.
** Computed on an annualized basis.
+ Total Return includes deductions for management and other fund expenses;
excludes deductions for sales loads and account fees.
++ Reflects total return for the period; not annualized.
The Accompanying Notes are an Integral Part of the Financial Statements
B-45
<PAGE>
GROWTH STOCK PORTFOLIO
NORTHWESTERN MUTUAL SERIES FUND, INC.
Growth Stock Portfolio
Financial Statements
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
<TABLE>
<S> <C>
ASSETS
Common Stocks (cost $236,355)................................................. $369,494
Money Market Investments (cost $51,670)....................................... 51,670
---------
421,164
Cash.......................................................................... 58
Due from Sale of Securities................................................... 394
Dividends and Interest Receivable............................................. 321
Due from Sale of Fund Shares.................................................. 302
Due from Futures Variation Margin............................................. 73
---------
Total Assets................................................................ 422,312
---------
LIABILITIES
Due on Purchase of Securities................................................. 807
Due to Investment Advisor..................................................... 149
Accrued Expenses.............................................................. 44
Due on Redemption of Fund Shares.............................................. 30
---------
Total Liabilities........................................................... 1,030
---------
NET ASSETS...................................................................... $421,282
---------
---------
REPRESENTED BY:
Aggregate Paid in Capital (2,000,000 shares authorized, $.01 par value;
187,469 shares outstanding).................................................. $273,705
Undistributed Net Investment Income........................................... 916
Undistributed Accumulated Net Realized Gain on Investments.................... 11,968
Net Unrealized Appreciation of:
Investment Securities....................................................... 133,139
Index Futures Contracts..................................................... 1,554
---------
Net Assets for 187,469 Shares Outstanding..................................... $421,282
---------
---------
Net Asset Value, Offering and Redemption Price per Share...................... $ 2.25
---------
---------
</TABLE>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<S> <C>
INVESTMENT INCOME
Income
Dividends (less foreign dividend tax of $39)................................ $ 2,918
Interest.................................................................... 2,135
--------
Total Income.............................................................. 5,053
--------
Expenses
Management Fees............................................................. 1,456
Custodian Fees.............................................................. 15
Other Expenses.............................................................. 36
--------
Total Expenses............................................................ 1,507
--------
Less Custodian Fees:
Paid by Affiliate....................................................... (11)
Paid Indirectly......................................................... (4)
--------
Total Net Expenses........................................................ 1,492
--------
Net Investment Income......................................................... 3,561
--------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net Realized Gain on Investments:
Investment Securities....................................................... 10,339
Index Futures Contracts..................................................... 1,637
--------
Net Realized Gain on Investments for the Period........................... 11,976
--------
Net Change in Unrealized Appreciation of:
Investments Securities...................................................... 60,643
Index Futures Contracts..................................................... 1,554
--------
Net Change in Unrealized Appreciation of Investments for the Period....... 62,197
--------
Net Gain on Investments..................................................... 74,173
--------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS...................................................... $77,734
--------
--------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements
B-46
<PAGE>
NORTHWESTERN MUTUAL SERIES FUND, INC.
Growth Stock Portfolio
Statement of Changes in Net Assets
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE FOR THE
YEAR ENDED YEAR ENDED
DECEMBER DECEMBER 31,
31, 1998 1997
----------- ------------
<S> <C> <C>
INCREASE IN NET ASSETS
Operations
Net Investment Income................................ $ 3,561 $ 2,669
Net Realized Gain on Investments..................... 11,976 11,942
Net Change in Unrealized Appreciation of Investments
for the Period...................................... 62,197 42,501
----------- ------------
Net Increase in Net Assets Resulting from
Operations......................................... 77,734 57,112
----------- ------------
Distributions to Shareholders from:
Net Investment Income................................ (2,645) (2,685)
Net Realized Gain on Investments..................... (4,068) (8,527)
----------- ------------
Net Decrease in Net Assets Resulting from
Distributions to Shareholders...................... (6,713) (11,212)
----------- ------------
Fund Share Transactions
Proceeds from Sale of 56,014 and 42,594 Shares....... 112,510 70,967
Proceeds from Shares Issued on Reinvestment of
Distributions Paid
(3,330 and 6,422 shares, respectively).............. 6,713 11,212
Payments for 6,148 and 31,206 Shares Redeemed........ (12,033) (55,490)
----------- ------------
Net Increase in Net Assets Resulting from Fund Share
Transactions
(53,196 and 17,810 shares, respectively)............ 107,190 26,689
----------- ------------
Total Increase in Net Assets........................... 178,211 72,589
NET ASSETS
Beginning of Period.................................... 243,071 170,482
----------- ------------
End of Period (includes undistributed net
investment income of $916 and $0, respectively)....... $421,282 $243,071
----------- ------------
----------- ------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements
B-47
<PAGE>
NORTHWESTERN MUTUAL SERIES FUND, INC.
Growth Stock Portfolio
Financial Highlights
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
FOR THE PERIOD
MAY 3, 1994*
FOR THE YEAR ENDED DECEMBER 31, THROUGH
---------------------------------------------- DECEMBER 31,
1998 1997 1996 1995 1994
----------- --------- --------- -------- --------------
<S> <C> <C> <C> <C> <C>
SELECTED PER SHARE DATA
Net Asset Value, Beginning of Period............ $ 1.81 $ 1.46 $ 1.26 $ 1.00 $ 1.00
Income from Investment Operations:
Net Investment Income....................... 0.02 0.02 0.02 0.02 0.01
Net Realized and Unrealized Gains on
Investments................................ 0.46 0.42 0.25 0.28 --
----------- --------- --------- -------- --------------
Total from Investment Operations.......... 0.48 0.44 0.27 0.30 0.01
----------- --------- --------- -------- --------------
Less Distributions:
Distributions from Net Investment Income.... (0.02) (0.02) (0.02) (0.02) (0.01)
Distributions from Realized Gains on
Investments................................ (0.02) (0.07) (0.05) (0.02) --
----------- --------- --------- -------- --------------
Total Distributions....................... (0.04) (0.09) (0.07) (0.04) (0.01)
----------- --------- --------- -------- --------------
Net Asset Value, End of Period.................... $ 2.25 $ 1.81 $ 1.46 $ 1.26 $ 1.00
----------- --------- --------- -------- --------------
----------- --------- --------- -------- --------------
Total Return+..................................... 26.69% 29.85% 20.91% 30.82% 1.55%++
----------- --------- --------- -------- --------------
----------- --------- --------- -------- --------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (in thousands).......... $421,282 $243,071 $170,482 $85,557 $41,868
----------- --------- --------- -------- --------------
----------- --------- --------- -------- --------------
Ratio of Expenses to Average Net Assets........... 0.46% 0.49% 0.57% 0.61% 0.71%**
----------- --------- --------- -------- --------------
----------- --------- --------- -------- --------------
Ratio of Net Investment Income to Average Net
Assets........................................... 1.10% 1.24% 1.41% 1.77% 2.30%**
----------- --------- --------- -------- --------------
----------- --------- --------- -------- --------------
Portfolio Turnover Rate........................... 21.64% 33.20% 37.61% 46.83% 16.51%
----------- --------- --------- -------- --------------
----------- --------- --------- -------- --------------
</TABLE>
* Commencement of Operations.
** Computed on an annualized basis.
+ Total Return includes deductions for management and other fund expenses;
excludes deductions for sales loads and account fees.
++ Reflects total return for the period; not annualized.
The Accompanying Notes are an Integral Part of the Financial Statements
B-48
<PAGE>
GROWTH AND INCOME STOCK PORTFOLIO
NORTHWESTERN MUTUAL SERIES FUND, INC.
Growth and Income Stock Portfolio
Financial Statements
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
<TABLE>
<S> <C>
ASSETS
Common Stocks (cost $508,003)................................................. $561,369
Money Market Investments (cost $9,078)........................................ 9,078
---------
570,447
Cash.......................................................................... 89
Dividends and Interest Receivable............................................. 687
Due from Sale of Fund Shares.................................................. 175
---------
Total Assets................................................................ 571,398
---------
LIABILITIES
Due to Investment Advisor..................................................... 265
Due on Redemption of Fund Shares.............................................. 119
Accrued Expenses.............................................................. 44
---------
Total Liabilities........................................................... 428
---------
NET ASSETS...................................................................... $570,970
---------
---------
REPRESENTED BY:
Aggregate Paid in Capital (2,000,000 shares authorized, $.01 par value;
351,523 shares outstanding).................................................. $450,101
Undistributed Net Investment Income........................................... 163
Undistributed Accumulated Net Realized Gain on Investments.................... 67,340
Net Unrealized Appreciation of Investments.................................... 53,366
---------
Net Assets for 351,523 Shares Outstanding..................................... $570,970
---------
---------
Net Asset Value, Offering and Redemption Price per Share...................... $ 1.62
---------
---------
</TABLE>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<S> <C>
INVESTMENT INCOME
Income
Dividends (less foreign dividend tax of $11)................................ $ 6,368
Interest.................................................................... 457
---------
Total Income.............................................................. 6,825
---------
Expenses
Management Fees............................................................. 2,685
Custodian Fees.............................................................. 30
Other Expenses.............................................................. 44
---------
Total Expenses............................................................ 2,759
---------
Less Custodian Fees:
Paid by Affiliate.................................................... (27)
Paid Indirectly...................................................... (3)
---------
Total Net Expenses........................................................ 2,729
---------
Net Investment Income......................................................... 4,096
---------
REALIZED AND UNREALIZED
GAIN ON INVESTMENTS
Net Realized Gain on Investments.............................................. 67,556
Net Change in Unrealized Appreciation of Investments for the Period........... 26,191
---------
Net Gain on Investments....................................................... 93,747
---------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS...................................................... $ 97,843
---------
---------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements
B-49
<PAGE>
NORTHWESTERN MUTUAL SERIES FUND, INC.
Growth and Income Stock Portfolio
Statement of Changes in Net Assets
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE FOR THE
YEAR ENDED YEAR ENDED
DECEMBER DECEMBER 31,
31, 1998 1997
----------- ------------
<S> <C> <C>
INCREASE IN NET ASSETS
Operations
Net Investment Income................................ $ 4,096 $ 3,174
Net Realized Gain on Investments..................... 67,556 72,633
Net Change in Unrealized Appreciation of Investments
for the Period...................................... 26,191 2,850
----------- ------------
Net Increase in Net Assets Resulting from
Operations......................................... 97,843 78,657
----------- ------------
Distributions to Shareholders from:
Net Investment Income................................ (3,933) (3,200)
Net Realized Gain on Investments..................... (731) (78,180)
----------- ------------
Net Decrease in Net Assets Resulting from
Distributions to Shareholders...................... (4,664) (81,380)
----------- ------------
Fund Share Transactions
Proceeds from Sale of 82,937 and 75,470 Shares....... 120,879 116,134
Proceeds from Shares Issued on Reinvestment of
Distributions Paid
(3,111 and 61,873 shares, respectively)............. 4,664 81,380
Payments for 14,061 and 35,535 Shares Redeemed....... (19,687) (57,040)
----------- ------------
Net Increase in Net Assets Resulting from Fund
Share Transactions
(71,987 and 101,808 shares, respectively)......... 105,856 140,474
----------- ------------
Total Increase in Net Assets........................... 199,035 137,751
NET ASSETS
Beginning of Period.................................... 371,935 234,184
----------- ------------
End of Period (includes undistributed net investment
income of $163 and $0, respectively).................. $570,970 $371,935
----------- ------------
----------- ------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements
B-50
<PAGE>
NORTHWESTERN MUTUAL SERIES FUND, INC.
Growth and Income Stock Portfolio
Financial Highlights
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
FOR THE PERIOD
MAY 3, 1994*
FOR THE YEAR ENDED DECEMBER 31, THROUGH
----------------------------------------------- DECEMBER 31,
1998 1997 1996 1995 1994
----------- --------- --------- --------- ---------------
<S> <C> <C> <C> <C> <C>
SELECTED PER SHARE DATA
Net Asset Value, Beginning of Period............ $ 1.33 $ 1.32 $ 1.21 $ 0.98 $ 1.00
Income from Investment Operations:
Net Investment Income....................... 0.01 0.01 0.02 0.02 0.01
Net Realized and Unrealized Gains on
Investments................................ 0.29 0.37 0.23 0.29 (0.01)
----------- --------- --------- --------- ---------------
Total from Investment Operations.......... 0.30 0.38 0.25 0.31 (0.00)
----------- --------- --------- --------- ---------------
Less Distributions:
Distributions from Net Investment Income.... (0.01) (0.01) (0.02) (0.02) (0.01)
Distributions from Realized Gains on
Investments................................ 0.00 (0.36) (0.12) (0.06) (0.01)
----------- --------- --------- --------- ---------------
Total Distributions....................... (0.01) (0.37) (0.14) (0.08) (0.02)
----------- --------- --------- --------- ---------------
Net Asset Value, End of Period.................... $ 1.62 $ 1.33 $ 1.32 $ 1.21 $ 0.98
----------- --------- --------- --------- ---------------
----------- --------- --------- --------- ---------------
Total Return+..................................... 23.14% 30.03% 19.97% 31.12% 0.34%++
----------- --------- --------- --------- ---------------
----------- --------- --------- --------- ---------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (in thousands).......... $570,970 $371,935 $234,184 $136,923 $ 64,700
----------- --------- --------- --------- ---------------
----------- --------- --------- --------- ---------------
Ratio of Expenses to Average Net Assets........... 0.58% 0.60% 0.62% 0.69% 0.78%**
----------- --------- --------- --------- ---------------
----------- --------- --------- --------- ---------------
Ratio of Net Investment Income to Average Net
Assets........................................... 1.00% 1.04% 1.44% 1.68% 1.93%**
----------- --------- --------- --------- ---------------
----------- --------- --------- --------- ---------------
Portfolio Turnover Rate........................... 160.40% 144.52% 93.92% 80.00% 54.18%
----------- --------- --------- --------- ---------------
----------- --------- --------- --------- ---------------
</TABLE>
* Commencement of Operations.
** Computed on an annualized basis.
+ Total Return includes deductions for management and other fund expenses;
excludes deductions for sales loads
and account fees.
++ Reflects total return for the period; not annualized.
The Accompanying Notes are an Integral Part of the Financial Statements
B-51
<PAGE>
INDEX 500 STOCK PORTFOLIO
NORTHWESTERN MUTUAL SERIES FUND, INC.
Index 500 Stock Portfolio
Financial Statements
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
<TABLE>
<S> <C>
ASSETS
Common Stocks (cost $926,948)................................................. $1,675,726
Money Market Investments (cost $12,507)....................................... 12,507
-----------
1,688,233
Cash.......................................................................... 14
Dividends and Interest Receivable............................................. 1,763
Due From Sale of Fund Shares.................................................. 1,154
Due From Futures Margin Variation............................................. 34
-----------
Total Assets................................................................ 1,691,198
-----------
LIABILITIES
Due to Investment Advisor..................................................... 276
Due on Redemption of Fund Shares.............................................. 162
Accrued Expenses.............................................................. 80
-----------
Total Liabilities........................................................... 518
-----------
NET ASSETS...................................................................... $1,690,680
-----------
-----------
REPRESENTED BY:
Aggregate Paid in Capital (2,000,000 shares authorized, $.01 par value;
514,113 shares outstanding).................................................. $ 896,075
Undistributed Net Investment Income........................................... 19,630
Undistributed Accumulated Net Realized Gain on Investments.................... 25,873
Net Unrealized Appreciation of:
Investment Securities....................................................... 748,778
Index Futures Contracts..................................................... 324
-----------
Net Assets for 514,113 Shares Outstanding..................................... $1,690,680
-----------
-----------
Net Asset Value, Offering and Redemption Price per Share...................... $ 3.29
-----------
-----------
</TABLE>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<S> <C>
INVESTMENT INCOME
Income
Dividends (less foreign dividend tax of $119)............................... $ 20,213
Interest.................................................................... 2,332
---------
Total Income.............................................................. 22,545
---------
Expenses
Management Fees............................................................. 2,807
Custodian Fees.............................................................. 49
Other Expenses.............................................................. 108
---------
Total Expenses............................................................ 2,964
---------
Less Custodian Fees:
Paid by Affiliate.................................................... (45)
Paid Indirectly...................................................... (4)
---------
Total Net Expenses........................................................ 2,915
---------
Net Investment Income......................................................... 19,630
---------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net Realized Gain on Investments:
Investment Securities....................................................... 19,544
Index Futures Contracts..................................................... 7,550
---------
Net Realized Gain on Investments for the Period........................... 27,094
---------
Net Change in Unrealized Appreciation (Depreciation) of:
Investment Securities....................................................... 309,036
Index Futures Contracts..................................................... (345)
---------
Net Change in Unrealized Appreciation of Investments for the Period....... 308,691
---------
Net Gain on Investments..................................................... 335,785
---------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............................ $355,415
---------
---------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements
B-52
<PAGE>
NORTHWESTERN MUTUAL SERIES FUND, INC.
Index 500 Stock Portfolio
Statement of Changes in Net Assets
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE
YEAR ENDED FOR THE
DECEMBER YEAR ENDED
31, DECEMBER 31,
1998 1997
----------- ------------
<S> <C> <C>
INCREASE IN NET ASSETS
Operations
Net Investment Income............................ $ 19,630 $ 17,811
Net Realized Gain on Investments................. 27,094 27,640
Net Change in Unrealized Appreciation of
Investments for the Period...................... 308,691 219,972
----------- ------------
Net Increase in Net Assets Resulting from
Operations..................................... 355,415 265,423
----------- ------------
Disributions to Shareholders from:
Net Investment Income............................ (17,811) (13,866)
Net Realized Gain on Investments................. (28,519) (16,994)
----------- ------------
Net Decrease in Net Assets Resulting from
Distributions to Shareholders.................. (46,330) (30,860)
----------- ------------
Fund Share Transactions
Proceeds from Sale of 79,805 and 75,307 Shares... 233,133 178,554
Proceeds from Shares Issued on Reinvestment of
Distributions Paid (16,132 and 13,655 shares,
respectively)................................... 46,330 30,860
Payments for 17,928 and 12,917 Shares Redeemed... (50,725) (31,186)
----------- ------------
Net Increase in Net Assets Resulting from Fund
Share Transactions (78,009 and 76,045 shares,
respectively)................................... 228,738 178,228
----------- ------------
Total Increase in Net Assets....................... 537,823 412,791
NET ASSETS
Beginning of Period................................ 1,152,857 740,066
----------- ------------
End of Period (includes undistributed net
investment income of $19,630 and $17,811
respectively)..................................... $1,690,680 $1,152,857
----------- ------------
----------- ------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements
B-53
<PAGE>
NORTHWESTERN MUTUAL SERIES FUND, INC.
Index 500 Stock Portfolio
Financial Highlights
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
FOR THE YEARS
ENDED DECEMBER 31,
-------------------------------------------------------------
1998 1997 1996 1995 1994
----------- ----------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
SELECTED PER SHARE DATA
Net Asset Value, Beginning of Period....... $ 2.64 $ 2.06 $ 1.72 $ 1.27 $ 1.29
Income from Investment Operations:
Net Investment Income.................. 0.04 0.04 0.04 0.04 0.03
Net Realized and Unrealized Gain (Loss)
on Investments........................ 0.71 0.62 0.35 0.42 (0.01)
----------- ----------- --------- --------- ---------
Total from Investment Operations..... 0.75 0.66 0.39 0.46 0.02
----------- ----------- --------- --------- ---------
Less Distributions:
Distributions from Net Investment
Income................................ (0.04) (0.04) (0.02) (0.01) (0.03)
Distributions from Realized Gains on
Investments........................... (0.06) (0.04) (0.03) -- (0.01)
----------- ----------- --------- --------- ---------
Total Distributions.................. (0.10) (0.08) (0.05) (0.01) (0.04)
----------- ----------- --------- --------- ---------
Net Asset Value, End of Period............... $ 3.29 $ 2.64 $ 2.06 $ 1.72 $ 1.27
----------- ----------- --------- --------- ---------
----------- ----------- --------- --------- ---------
Total Return+................................ 28.72% 33.20% 22.75% 37.25% 1.21%
----------- ----------- --------- --------- ---------
----------- ----------- --------- --------- ---------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (in thousands)..... $1,690,680 $1,152,857 $740,066 $495,133 $316,123
----------- ----------- --------- --------- ---------
----------- ----------- --------- --------- ---------
Ratio of Expenses to Average Net Assets...... 0.21% 0.21% 0.21% 0.21% 0.24%
----------- ----------- --------- --------- ---------
----------- ----------- --------- --------- ---------
Ratio of Net Investment Income to Average Net
Assets...................................... 1.40% 1.86% 2.27% 2.51% 3.10%
----------- ----------- --------- --------- ---------
----------- ----------- --------- --------- ---------
Portfolio Turnover Rate...................... 3.03% 3.15% 3.45% 3.19% 5.59%
----------- ----------- --------- --------- ---------
----------- ----------- --------- --------- ---------
</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
B-54
<PAGE>
BALANCED PORTFOLIO
NORTHWESTERN MUTUAL SERIES FUND, INC.
Balanced Portfolio
Financial Statements
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
<TABLE>
<S> <C>
ASSETS
Common Stock (cost $674,270).................................................. $1,640,982
Bonds (cost $1,091,953)....................................................... 1,112,608
Money Market Investments (cost $514,345)...................................... 514,355
-----------
3,267,945
Cash.......................................................................... 905
Dividends and Interest Receivable............................................. 15,825
Due from Futures Variation Margin............................................. 688
-----------
Total Assets................................................................ 3,285,363
-----------
LIABILITIES
Due on Redemption of Fund Shares.............................................. 2,473
Due to Investment Advisor..................................................... 819
-----------
Total Liabilities........................................................... 3,292
-----------
NET ASSETS...................................................................... $3,282,071
-----------
-----------
REPRESENTED BY:
Aggregate Paid in Capital
(3,000,000 shares authorized, $.01 par value; 1,475,966 shares
outstanding)................................................................. $1,945,788
Undistributed Net Investment Income........................................... 103,557
Undistributed Accumulated Net Realized Gain on Investments.................... 232,015
Net Unrealized Appreciation of:
Investment Securities....................................................... 987,377
Index Futures Contracts..................................................... 13,320
Foreign Currency Transactions............................................... 14
-----------
Net Assets for 1,475,966 Shares Outstanding................................... $3,282,071
-----------
-----------
Net Asset Value, Offering and Redemption Price per Share...................... $ 2.22
-----------
-----------
</TABLE>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<S> <C>
INVESTMENT INCOME
Income
Interest (less foreign withholding tax of $29).............................. $ 90,182
Dividends (less foreign dividend tax of $128)............................... 23,405
---------
Total Income.............................................................. 113,587
---------
Expenses
Management Fees............................................................. 9,039
---------
Net Investment Income......................................................... 104,548
---------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net Realized Gain (Loss) on Investments:
Investment Securities....................................................... 199,569
Index Futures Contracts..................................................... 33,083
Foreign Currency Transactions............................................... (882)
---------
Net Realized Gain on Investments for the Period........................... 231,770
---------
Net Change In Unrealized Appreciation of:
Investment Securities....................................................... 173,063
Futures Contracts........................................................... 13,799
Foreign Currency Transactions............................................... 138
---------
Net Change in Unrealized Appreciation of Investments for the Period....... 187,000
---------
Net Gain on Investments....................................................... 418,770
---------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............................ $523,318
---------
---------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements
B-55
<PAGE>
NORTHWESTERN MUTUAL SERIES FUND, INC.
Balanced Portfolio
Statement of Changes in Net Assets
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE
YEAR ENDED FOR THE
DECEMBER YEAR ENDED
31, DECEMBER 31,
1998 1997
----------- ------------
<S> <C> <C>
INCREASE IN NET ASSETS
Operations
Net Investment Income............... $ 104,548 $ 94,986
Net Realized Gain on Investments.... 231,770 83,356
Net Change in Unrealized
Appreciation of Investments for the
Period............................. 187,000 318,351
----------- ------------
Net Increase in Net Assets
Resulting from Operations......... 523,318 496,693
----------- ------------
Distributions to Shareholders from:
Net Investment Income............... (95,131) (86,698)
Net Realized Gain on Investments.... (85,841) (29,228)
----------- ------------
Net Decrease in Net Assets
Resulting from Distributions to
Shareholders...................... (180,972) (115,926)
----------- ------------
Fund Share Transactions
Proceeds from Sale of 54,658 and
42,694 Shares...................... 113,335 79,608
Proceeds from Shares Issued on
Reinvestment of Distributions Paid
(89,901 and 65,384 shares,
respectively)...................... 180,971 115,926
Payments for 69,339 and 61,284
Shares Redeemed.................... (143,075) (114,041)
----------- ------------
Net Increase in Net Assets Resulting
from Fund Share Transactions
(75,220 and 46,794 shares,
respectively)...................... 151,231 81,493
----------- ------------
Total Increase in Net Assets.......... 493,577 462,260
NET ASSETS
Beginning of Period................... 2,788,494 2,326,234
----------- ------------
End of Period (includes undistributed
net investment income of
$103,557 and $94,962 respectively)... $3,282,071 $2,788,494
----------- ------------
----------- ------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements
B-56
<PAGE>
NORTHWESTERN MUTUAL SERIES FUND, INC.
Balanced Portfolio
Financial Highlights
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
FOR THE YEARS
ENDED DECEMBER 31,
-------------------------------------------------------------------
1998 1997 1996 1995 1994
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
SELECTED PER SHARE DATA
Net Asset Value, Beginning of
Period............................... $ 1.99 $ 1.72 $ 1.60 $ 1.31 $ 1.33
Income from Investment Operations:
Net Investment Income............. 0.07 0.07 0.06 0.07 0.04
Net Realized and Unrealized Gain
(Loss) on Investments............ 0.29 0.28 0.15 0.27 (0.05)
----------- ----------- ----------- ----------- -----------
Total from Investment
Operations..................... 0.36 0.35 0.21 0.34 (0.01)
----------- ----------- ----------- ----------- -----------
Less Distributions:
Distributions from Net Investment
Income........................... (0.07) (0.06) (0.06) (0.04) (0.00)
Distributions from Realized Gains
on Investments................... (0.06) (0.02) (0.03) (0.01) (0.01)
----------- ----------- ----------- ----------- -----------
Total Distributions............. (0.13) (0.08) (0.09) (0.05) (0.01)
----------- ----------- ----------- ----------- -----------
Net Asset Value, End of Period.......... $ 2.22 $ 1.99 $ 1.72 $ 1.60 $ 1.31
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Total Return+........................... 18.88% 21.52% 13.45% 26.39% 0.16%
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (in
thousands)............................. $3,282,071 $2,788,494 $2,326,234 $2,083,289 $1,727,127
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Ratio of Expenses to Average Net
Assets................................. 0.30% 0.30% 0.30% 0.30% 0.30%
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Ratio of Net Investment Income to
Average Net Assets..................... 3.48% 3.70% 3.95% 4.40% 4.78%
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Portfolio Turnover Rate................. 44.18% 29.94% 67.66% 37.28% 42.35%
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
</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
B-57
<PAGE>
HIGH YIELD BOND PORTFOLIO
NORTHWESTERN MUTUAL SERIES FUND, INC.
High Yield Bond Portfolio
Financial Statements
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
<TABLE>
<S> <C>
ASSETS
Bonds (cost $164,578)......................................................... $145,907
Preferred Stock (cost $28,969)................................................ 29,526
Money Market Investments (cost $3,896)........................................ 3,896
Common Stock (cost $2,202).................................................... 941
---------
180,270
Cash.......................................................................... 110
Dividends and Interest Receivable............................................. 3,787
Due from Sale of Securities................................................... 1,718
---------
Total Assets................................................................ 185,885
---------
LIABILITIES
Due on Purchase of Securities................................................. 589
Due on Redemption of Fund Shares.............................................. 409
Due to Investment Advisor..................................................... 76
Accrued Expenses.............................................................. 29
---------
Total Liabilities........................................................... 1,103
---------
NET ASSETS...................................................................... $184,782
---------
---------
REPRESENTED BY:
Aggregate Paid in Capital (2,000,000 shares authorized, $.01 par value;
197,519 shares outstanding).................................................. $207,516
Undistributed Net Investment Income........................................... 55
Undistributed Accumulated Net Realized Loss on Investments.................... (3,414)
Net Unrealized Depreciation of Investments.................................... (19,375)
---------
Net Assets for 197,519 Shares Outstanding..................................... $184,782
---------
---------
Net Asset Value, Offering and Redemption Price per Share...................... $ 0.94
---------
---------
</TABLE>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<S> <C>
INVESTMENT INCOME
Income
Interest.................................................................... $16,708
Dividends................................................................... 3,197
--------
Total Income.............................................................. 19,905
--------
Expenses
Management Fees............................................................. 854
Custodian Fees.............................................................. 18
Other Expenses.............................................................. 22
--------
Total Expenses............................................................ 894
--------
Less Custodian Fees:
Paid by Affiliate....................................................... (13)
Paid Indirectly......................................................... (5)
--------
Total Net Expenses.......................................................... 876
--------
Net Investment Income......................................................... 19,029
--------
REALIZED AND UNREALIZED LOSS ON INVESTMENTS
Net Realized Loss on Investments.............................................. (3,333)
Net Change in Unrealized Depreciation of Investments for the Period........... (20,988)
--------
Net Loss on Investments....................................................... (24,321)
--------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS............................ $(5,292)
--------
--------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements
B-58
<PAGE>
NORTHWESTERN MUTUAL SERIES FUND, INC.
High Yield Bond Portfolio
Statement of Changes in Net Assets
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE
YEAR
ENDED FOR THE YEAR
DECEMBER ENDED
31, DECEMBER 31,
1998 1997
----------- ------------
<S> <C> <C>
INCREASE IN NET ASSETS
Operations
Net Investment Income................................ $ 19,029 $ 12,561
Net Realized Gain (Loss) on Investments.............. (3,333) 7,437
Net Change in Unrealized Depreciation of Investments
for the Period...................................... (20,988) (1,416)
----------- ------------
Net Increase (Decrease) in Net Assets Resulting
from Operations.................................... (5,292) 18,582
----------- ------------
Distributions to Shareholders from:
Net Investment Income................................ (18,974) (16,554)
Net Realized Gain on Investments..................... -- (8,429)
----------- ------------
Net Decrease in Net Assets Resulting from
Distributions to Shareholders...................... (18,974) (24,983)
----------- ------------
Fund Share Transactions
Proceeds from Sale of 60,216 and 48,820 Shares....... 65,439 56,788
Proceeds from Shares Issued on Reinvestment of
Distributions Paid (20,380 and 23,165 shares,
respectively)....................................... 18,974 24,983
Payments for 26,994 and 13,489 Shares Redeemed....... (28,403) (16,210)
----------- ------------
Net Increase in Net Assets Resulting from Fund
Share Transactions (53,602 and 58,496 shares,
respectively)...................................... 56,010 65,561
----------- ------------
Total Increase in Net Assets........................... 31,744 59,160
NET ASSETS
Beginning of Period.................................... 153,038 93,878
----------- ------------
End of Period (includes undistributed net investment
income of $55 and ($143), respectively)............... $184,782 $153,038
----------- ------------
----------- ------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements
B-59
<PAGE>
NORTHWESTERN MUTUAL SERIES FUND, INC.
High Yield Bond Portfolio
Financial Highlights
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
FOR THE
PERIOD MAY
FOR THE YEAR ENDED 3, 1994*
DECEMBER 31, THROUGH
------------------------------------------------ DECEMBER 31,
1998 1997 1996 1995 1994
-------------- --------- -------- -------- ------------
<S> <C> <C> <C> <C> <C>
SELECTED PER SHARE DATA
Net Asset Value, Beginning of
Period............................... $ 1.06 $ 1.10 $ 1.03 $ 0.97 $ 1.00
Income from Investment Operations:
Net Investment Income............. 0.10 0.11 0.09 0.10 0.06
Net Realized and Unrealized Gains
(Losses) on Investments.......... (0.12) 0.06 0.10 0.07 (0.03)
-------------- --------- -------- -------- ------------
Total from Investment
Operations..................... (0.02) 0.17 0.19 0.17 0.03
-------------- --------- -------- -------- ------------
Less Distributions:
Distributions from Net Investment
Income........................... (0.10) (0.14) (0.09) (0.10) (0.06)
Distributions from Realized Gains
on Investments................... -- (0.07) (0.03) (0.01) --
-------------- --------- -------- -------- ------------
Total Distributions............. (0.10) (0.21) (0.12) (0.11) (0.06)
-------------- --------- -------- -------- ------------
Net Asset Value, End of Period.......... $ 0.94 $ 1.06 $ 1.10 $ 1.03 $ 0.97
-------------- --------- -------- -------- ------------
-------------- --------- -------- -------- ------------
Total Return+........................... (1.84%) 15.85% 19.77% 16.78% 3.02%++
-------------- --------- -------- -------- ------------
-------------- --------- -------- -------- ------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (in
thousands)............................. $184,782 $153,038 $93,878 $55,974 $35,537
-------------- --------- -------- -------- ------------
-------------- --------- -------- -------- ------------
Ratio of Expenses to Average Net
Assets................................. 0.50% 0.55% 0.60% 0.65% 0.73%**
-------------- --------- -------- -------- ------------
-------------- --------- -------- -------- ------------
Ratio of Net Investment Income to
Average Net Assets..................... 10.85% 9.95% 9.54% 9.90% 9.40%**
-------------- --------- -------- -------- ------------
-------------- --------- -------- -------- ------------
Portfolio Turnover Rate................. 153.71% 129.49% 143.91% 116.57% 119.48%
-------------- --------- -------- -------- ------------
-------------- --------- -------- -------- ------------
</TABLE>
* Commencement of Operations.
** Computed on an annualized basis.
+ Total Return includes deductions for management and other fund expenses;
excludes deductions for sales loads and account fees.
++ Reflects total return for the period; not annualized.
The Accompanying Notes are an Integral Part of the Financial Statements
B-60
<PAGE>
SELECT BOND PORTFOLIO
NORTHWESTERN MUTUAL SERIES FUND, INC.
Select Bond Portfolio
Financial Statements
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
<TABLE>
<S> <C>
ASSETS
Bonds (cost $281,712)......................................................... $283,202
Money Market Investments (cost $11,269)....................................... 11,269
---------
294,471
Cash.......................................................................... 189
Interest Receivable........................................................... 3,044
Due from Sale of Fund Shares.................................................. 268
Due from Futures Variation Margin............................................. 155
---------
Total Assets................................................................ 298,127
---------
LIABILITIES
Due to Investment Advisor..................................................... 75
Due on Redemption of Fund Shares.............................................. 18
---------
Total Liabilities........................................................... 93
---------
NET ASSETS...................................................................... $298,034
---------
---------
REPRESENTED BY:
Aggregate Paid in Capital (1,000,000 shares authorized, $.01 par value;
238,596 shares outstanding).................................................. $276,525
Undistributed Net Investment Income........................................... 17,466
Undistributed Accumulated Net Realized Gain on Investments.................... 2,549
NET UNREALIZED APPRECIATION (DEPRECIATION) OF:
Investments Securities........................................................ 1,490
Foreign Currency Transactions................................................. 7
Futures Contracts............................................................. (3)
---------
Net Assets for 238,596 Shares Outstanding..................................... $298,034
---------
---------
Net Asset Value, Offering and Redemption Price per Share...................... $ 1.25
---------
---------
</TABLE>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<S> <C>
INVESTMENT INCOME
Income
Interest (less foreign withholding tax of $21).............................. $18,946
--------
Expenses
Management Fees............................................................. 803
--------
Net Investment Income......................................................... 18,143
--------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net Realized Gain (Loss) on Investments:
Investment Securities....................................................... 4,478
Foreign Currency Transactions............................................... (742)
Futures Contracts........................................................... (1,190)
--------
Net Realized Gain on Investments for the Period............................... 2,546
--------
NET CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) OF:
Investment Securities......................................................... (2,556)
Foreign Currency Transactions................................................. 101
Futures Contracts............................................................. 428
--------
Net Change in Unrealized Depreciation for the Period........................ (2,027)
--------
Net Gain on Investments....................................................... 519
--------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS...................................................... $18,662
--------
--------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements
B-61
<PAGE>
NORTHWESTERN MUTUAL SERIES FUND, INC.
Select Bond Portfolio
Statement of Changes in Net Assets
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE FOR THE
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1998 1997
------------ ------------
<S> <C> <C>
INCREASE IN NET ASSETS
Operations
Net Investment Income............... $ 18,143 $ 15,676
Net Realized Gain on Investments.... 2,546 2,865
Net Change in Unrealized
Appreciation (Depreciation) of
Investments for the Period......... (2,027) 1,736
------------ ------------
Net Increase in Net Assets
Resulting from Operations......... 18,662 20,277
------------ ------------
Distributions to Shareholders from:
Net Investment Income............... (15,746) (13,300)
Net Realized Gain on Investments.... (2,700) --
------------ ------------
Net Decrease in Net Assets
Resulting from Distributions to
Shareholders...................... (18,446) (13,300)
------------ ------------
Fund Share Transactions
Proceeds from Sale of 45,867 and
26,095 Shares...................... 56,278 32,098
Proceeds from Shares Issued on
Reinvestment of Distributions Paid
(15,606 and 11,396 shares,
respectively)...................... 18,446 13,300
Payments for 17,649 and 17,885
Shares Redeemed.................... (21,741) (21,873)
------------ ------------
Net Increase in Net Assets Resulting
from Fund Share Transactions
(43,824 and 19,606 shares,
respectively)........................ 52,983 23,525
------------ ------------
Total Increase in Net Assets.......... 53,199 30,502
NET ASSETS
Beginning of Period................... 244,835 214,333
------------ ------------
End of Period (includes undistributed
net investment income of
$17,466 and $15,722 respectively).... $298,034 $244,835
------------ ------------
------------ ------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements
B-62
<PAGE>
NORTHWESTERN MUTUAL SERIES FUND, INC.
Select Bond Portfolio
Financial Highlights
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
---------------------------------------------------------
1998 1997 1996 1995 1994
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
SELECTED PER SHARE DATA
Net Asset Value, Beginning of
Period............................... $ 1.26 $ 1.22 $ 1.23 $ 1.06 $ 1.15
Income from Investment Operations:
Net Investment Income............. 0.08 0.08 0.07 0.07 0.06
Net Realized and Unrealized Gain
(Loss) on Investments............ 0.00 0.04 (0.04) 0.13 (0.09)
--------- --------- --------- --------- ---------
Total from Investment
Operations..................... 0.08 0.12 0.03 0.20 (0.03)
--------- --------- --------- --------- ---------
Less Distributions:
Dividends from Net Investment
Income........................... (0.08) (0.08) (0.04) (0.03) (0.06)
Distributions from Realized Gains
on Investments................... (0.01) -- -- -- --
--------- --------- --------- --------- ---------
Total Distributions............. (0.09) (0.08) (0.04) (0.03) (0.06)
--------- --------- --------- --------- ---------
Net Asset Value, End of Period.......... $ 1.25 $ 1.26 $ 1.22 $ 1.23 $ 1.06
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Total Return+........................... 7.07% 9.46% 3.31% 19.10% (2.28%)
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (in
thousands)............................. $298,034 $244,835 $214,333 $198,142 $158,508
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Ratio of Expenses to Average Net
Assets................................. 0.30% 0.30% 0.30% 0.30% 0.30%
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Ratio of Net Investment Income to
Average Net Assets..................... 6.87% 7.03% 6.48% 6.61% 7.02%
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Portfolio Turnover Rate................. 161.79% 184.93% 195.98% 69.06% 108.00%
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</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
B-63
<PAGE>
MONEY MARKET PORTFOLIO
NORTHWESTERN MUTUAL SERIES FUND, INC.
Money Market Portfolio
Financial Statements
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
<TABLE>
<S> <C>
ASSETS
Money Market Investments (cost $290,729)...................................... $290,729
Cash.......................................................................... 3
Due from Sale of Fund Shares.................................................. 774
Interest Receivable........................................................... 31
---------
Total Assets................................................................ 291,537
---------
LIABILITIES
Due to Investment Advisor..................................................... 73
---------
Total Liabilities........................................................... 73
---------
NET ASSETS...................................................................... $291,464
---------
---------
REPRESENTED BY:
Aggregate Paid in Capital (1,000,000 shares authorized, $.01 par value;
291,476 shares outstanding).................................................. $291,464
---------
Net Assets for 291,476 Shares Outstanding..................................... $291,464
---------
---------
Net Asset Value, Offering and Redemption Price per Share...................... $ 1.00
---------
---------
</TABLE>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<S> <C>
INVESTMENT INCOME
Income
Interest.................................................................... $ 12,764
---------
Expenses
Management Fees............................................................. 687
---------
Net Investment Income......................................................... 12,077
---------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS...................................................... $ 12,077
---------
---------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements
B-64
<PAGE>
NORTHWESTERN MUTUAL SERIES FUND, INC.
Money Market Portfolio
Statement of Changes in Net Assets
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE FOR THE
YEAR ENDED YEAR ENDED
DECEMBER DECEMBER 31,
31, 1998 1997
----------- ------------
<S> <C> <C>
INCREASE IN NET ASSETS
Operations
Net Investment Income................................ $ 12,077 $ 9,878
----------- ------------
Net Increase in Net Assets Resulting from
Operations......................................... 12,077 9,878
----------- ------------
Distributions to Shareholders from:
Net Investment Income................................ (12,077) (9,885)
----------- ------------
Net Decrease in Net Assets Resulting from
Distributions to Shareholders...................... (12,077) (9,885)
----------- ------------
Fund Share Transactions
Proceeds from Sale of 222,296 and 130,864 Shares..... 222,308 130,863
Proceeds from Shares Issued on Reinvestment of
Distributions Paid (12,077 and 9,878 shares,
respectively)....................................... 12,077 9,878
Payments for 137,391 and 122,562 Shares Redeemed..... (137,391) (122,562)
----------- ------------
Net Increase in Net Assets Resulting from Fund
Share Transactions (96,982 and 18,180) shares,
respectively)...................................... 96,994 18,179
----------- ------------
Total Increase in Net Assets........................... 96,994 18,172
NET ASSETS
Beginning of Period.................................... 194,470 176,298
----------- ------------
End of Period (includes no undistributed net investment
income)............................................... $291,464 $194,470
----------- ------------
----------- ------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements
B-65
<PAGE>
NORTHWESTERN MUTUAL SERIES FUND, INC.
Money Market Portfolio
Financial Highlights
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
-----------------------------------------------------------------
1998 1997 1996 1995 1994
----------- --------- --------- --------- ---------------
<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 0.06 0.05
Less Distributions from Net Investment
Income....................................... (0.05) (0.05) (0.05) (0.06) (0.05)
----------- --------- --------- --------- ---------------
Net Asset Value, End of Period.................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
----------- --------- --------- --------- ---------------
----------- --------- --------- --------- ---------------
Total Return+................................... 5.43% 5.47% 5.29% 5.82% 4.06%
----------- --------- --------- --------- ---------------
----------- --------- --------- --------- ---------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (in thousands).......... $291,464 $194,470 $176,298 $132,572 $104,217
----------- --------- --------- --------- ---------------
----------- --------- --------- --------- ---------------
Ratio of Expenses to Average Net Assets........... 0.30% 0.30% 0.30% 0.30% 0.30%
----------- --------- --------- --------- ---------------
----------- --------- --------- --------- ---------------
Ratio of Net Investment Income to Average Net
Assets........................................... 5.26% 5.33% 5.13% 5.61% 4.64%
----------- --------- --------- --------- ---------------
----------- --------- --------- --------- ---------------
</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
B-66
<PAGE>
NOTES TO FINANCIAL STATEMENTS
NORTHWESTERN MUTUAL SERIES FUND, INC.
Notes to Financial Statements
DECEMBER 31, 1998
NOTE 1 -- Northwestern Mutual Series Fund, Inc. (the "Series Fund"), is
registered as a diversified open-end investment company under the Investment
Company Act of 1940. The Series Fund consists of the Aggressive Growth Stock
Portfolio, International Equity Portfolio, Growth Stock Portfolio, Growth and
Income Stock Portfolio, Index 500 Stock Portfolio, Balanced Portfolio, High
Yield Bond Portfolio, Select Bond Portfolio and the Money Market Portfolio (the
"Portfolios"). Shares are presently offered only to The Northwestern Mutual Life
Insurance Company ("Northwestern Mutual") and its segregated asset accounts.
NOTE 2 -- The preparation of the financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
Principal accounting policies are summarized below.
NOTE 3 -- Bonds are valued on the basis of prices furnished by a service which
determines prices for normal institutional size trading units of bonds, without
regard to exchange or over-the-counter prices. When quotations are not readily
available, bonds are valued at fair market value determined by procedures
approved by the Board of Directors. Stocks listed on a national or foreign stock
exchange are valued at the final sale price, or final bid price in absence of a
sale. Stocks not listed on a national or foreign stock exchange are valued at
the closing bid price on the over-the-counter market. Money market investments,
other than in the Money Market Portfolio, with maturities exceeding sixty days
but generally not exceeding one year are valued by marking to market on the
basis of an average of the most recent bid prices or yields. Money market
investments with maturities of sixty days or less and all securities in the
Money Market Portfolio are valued on an amortized cost basis or, if the current
market value differs substantially from the amortized cost, by marking to
market.
NOTE 4 -- Securities and other assets and liabilities denominated in foreign
currencies are translated into U.S. dollar amounts on the date of valuation.
Purchases and sales of securities and income items denominated in foreign
currencies are translated in U.S. dollar amounts on the respective dates of such
transactions. When the International Equity Portfolio, Balanced Portfolio and
Select Bond Portfolio purchases or sells a foreign security they may enter into
a foreign exchange currency contract to minimize market risk from the trade date
to the settlement date of such transaction. Such foreign exchange currency
contracts are marked to market daily.
The Portfolios may enter into forward foreign currency contracts to hedge
against exchange rate risk arising from investments in securities denominated in
foreign currencies. Contracts are valued at the contractual forward rate and are
marked to market daily, with the change in market value recorded as an
unrealized gain or loss. When the contracts are closed, a realized gain or loss
is incurred. Risks may arise from changes in market value of the underlying
instruments and from the possible inability of counter parties to meet the terms
of their contracts.
The International Equity Portfolio, Balanced Portfolio and Select Bond Portfolio
do not separately report the results of operations due to changes in foreign
exchange rates on investments from the fluctuations arising from changes in
market prices of securities held. Such fluctuations are included with the net
realized and unrealized gain or loss from investments.
Net realized foreign exchange gains or losses arise from sales of foreign
currencies, currency gains or losses realized between the trade date and the
settlement date on security transactions, the differences between the amounts of
dividends and foreign withholding taxes recorded on the Portfolio's books, and
the U.S. dollar equivalent of the amounts actually received or paid.
NOTE 5 -- The Aggressive Growth Stock, Growth Stock, Index 500 Stock, Balanced
and Select Bond Portfolios invest in futures contracts as an alternative to
investing in individual securities. The Aggressive Growth Stock, Growth Stock,
Index 500 Stock, Balanced and Select Bond Portfolios could be exposed to market
risk due to changes in the value of the underlying securities or due to an
illiquid secondary market. Futures contracts are marked to market daily based
upon quoted settlement prices. The Portfolios receive from or pay to brokers an
amount of cash equal to the daily fluctuation in the value of the contracts.
Such receipts or payments, known as the "variation margin," are recorded by the
Portfolios as unrealized gains or losses. When the contract is closed, the
Portfolios record a realized gain or loss equal to the difference between the
value of the contract at the time it was opened and the value at the time it was
closed.
B-67
<PAGE>
NORTHWESTERN MUTUAL SERIES FUND, INC.
Notes to Financial Statements
DECEMBER 31, 1998
NOTE 6 -- Interest income and discounts earned are recorded daily on the accrual
basis and dividend income is recorded on the ex-dividend date or as soon as
information from foreign issuers is available. Where applicable, dividends are
recorded net of foreign dividend tax. Discounts and premiums on securities
purchased are amortized over the life of the respective securities when required
for federal income tax purposes using the effective interest method. Securities
transactions are accounted for the trade date. The basis for determining cost on
sale of securities is identified cost. For the period ended December 31, 1998,
transactions in securities other than money market investments were:
<TABLE>
<CAPTION>
U.S. GOVT
U.S. GOVT TOTAL SECURITY SECURITY
TOTAL SECURITY SECURITY SALES/ SALES/
PORTFOLIOS PURCHASES PURCHASES MATURITIES MATURITIES
- ---------------------------------------------------------- --------------- -------------- --------------- --------------
<S> <C> <C> <C> <C>
Aggressive Growth Stock................................... $ 494,286,839 $ -- $ 498,668,396 $ --
International Equity...................................... 194,391,889 -- 242,088,311 --
Growth Stock.............................................. 127,830,431 -- 62,233,240 --
Growth and Income Stock................................... 839,516,702 -- 735,710,238 --
Index 500 Stock........................................... 289,575,538 -- 41,383,764 --
Balanced.................................................. 1,160,320,109 528,782,629 1,201,082,980 377,671,643
High Yield Bond........................................... 309,136,258 -- 257,337,234 --
Select Bond............................................... 481,394,554 157,848,606 423,532,859 151,008,239
</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%, 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 $50 NEXT $50
PORTFOLIOS MILLION MILLION EXCESS
- --------------------------------- ----------- ----------- -----------
<S> <C> <C> <C>
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.
Certain Portfolios pay a portion of their custodian fees indirectly through
expense offset arrangements. Custodian fees are reduced for Portfolios that
maintain compensating balances in non-interest bearing accounts. The Portfolios
could have invested the assets used to pay for the custodian fees, had the
assets not been used in the expense offset arrangements. As of December 31,
1998, the amounts paid through expense offset arrangements are $9,752 in the
Aggressive Growth Stock Portfolio, $3,630 in the Growth Stock Portfolio, $3,143
in the Growth and Income Stock Portfolio, $4,031 in the Index 500 Portfolio and
$5,010 in the High Yield Bond Portfolio.
J. P. Morgan Investment Management, Inc. ("J. P. Morgan") and Templeton
Investment Counsel, Inc. ("Templeton Counsel") have been retained under an
investment sub-advisory agreement to provide investment advice and, in general,
to conduct the management investment program of the Growth and Income Stock
Portfolio and the International Equity Portfolio, respectively. NMIS pays J. P.
Morgan .45% on the first $100 million of the combined net assets for all funds
managed for Northwestern Mutual by J. P. Morgan, .40% on the next $100 million,
.35% on the next $200 million and .30% in excess of $400 million. NMIS pays
Templeton Counsel .50% on the first $100 million of the combined net assets for
all funds managed for Northwestern Mutual by Templeton Counsel and .40% in
excess of $100 million.
NOTE 8 -- The Series Fund has elected to be taxed as a regulated investment
company meeting certain requirements under the Internal Revenue Code. Since it
expects to distribute all net investment income and net realized capital gains,
the Series Fund anticipates incurring no federal income taxes.
Taxable distributions from net investment income and realized capital gains in
the Portfolios differ from book amounts earned during the period due to
differences in the timing of capital recognition and due to the reclassification
of certain gains or losses from capital to income. The differences between cost
amounts for book purposes and tax purposes are due to treatment of deferred
losses.
It is the policy of the Series Fund to reclassify the net effect of permanent
differences between book and taxable income to capital accounts on the
statements of assets and liabilities.
For Federal income tax purposes, the High Yield Bond Portfolio has a net
realized capital loss of $2,519,798 which will
B-68
<PAGE>
NORTHWESTERN MUTUAL SERIES FUND, INC.
Notes to Financial Statements
DECEMBER 31, 1998
be carried forward to offset future net realized capital gains. The amount
expires in 2006.
For Federal income tax purposes, net unrealized appreciation (depreciation) on
open futures contracts is required to be treated as realized gains (losses).
NOTE 9 -- Dividends from net investment income and net realized capital gains
are declared each year for the Aggressive Growth Stock, International Equity,
Growth Stock, Growth and Income Stock, Index 500 Stock, Balanced, High Yield
Bond and Select Bond Portfolios and each business day for the Money Market
Portfolio.
NOTE 10 -- Effective April 1, 1996, Northwestern Mutual voluntarily reimburses
the International Equity Portfolio for the benefit Northwestern Mutual receives
from foreign dividend taxes charged against the Portfolio. The amount reimbursed
represents approximately 65% of the foreign dividend tax withheld from the
Portfolio. Reimbursements are recorded when foreign dividend taxes are accrued.
This voluntary reimbursement for the years ended December 31, 1998 and 1997 was
$1,235,277 and $1,313,579, respectively.
B-69
<PAGE>
AGGRESSIVE GROWTH STOCK PORTFOLIO
NORTHWESTERN MUTUAL SERIES FUND, INC.
Schedule of Investments
DECEMBER 31, 1998
<TABLE>
<CAPTION>
MARKET
SHARES/ VALUE
COMMON STOCK (91.8%) PAR (000'S)
- ---------------------------------------------------------------------------------
<S> <C> <C>
BASIC MATERIALS (1.0%)
*Cambrex Corporation 454,200 $ 10,901
-----------
BUSINESS SERVICES (10.7%)
*Administaff, Inc. 309,900 7,748
Boron Lepore & Associates 222,800 7,687
Cintas Corporation 394,900 27,816
*Interim Services, Inc. 497,700 11,634
*The Metzler Group, Inc. 473,650 23,061
*Robert Half International, Inc. 400,150 17,882
*Steiner Leisure, Ltd. 480,150 15,365
Stewart Enterprises, Inc. 513,300 11,421
-----------
TOTAL 122,614
-----------
CAPITAL GOODS (7.0%)
*Ivex Packaging Corporation 336,100 7,814
*Jabil Circuit, Inc. 318,800 23,790
Kaydon Corporation 396,300 15,877
*Kellstrom Industries, Inc. 253,900 7,300
*Tetra Tech, Inc. 677,443 18,333
*Triumph Group, Inc. 189,600 6,067
-----------
TOTAL 79,181
-----------
COMMUNICATION SERVICES (1.5%)
Crown Castle International Co. 341,300 8,021
*Pacific Gateway Exchange, Inc. 192,600 9,257
-----------
TOTAL 17,278
-----------
CONSUMER CYCLICAL (15.0%)
*99 Cents Only Stores 309,375 15,198
*Catalina Marketing Corporation 305,200 20,868
*Dollar Tree Stores, Inc. 452,300 19,760
Galileo International, Inc. 271,500 11,810
General Cable Corporation 311,300 6,382
*Getty Images, Inc. 575,500 9,891
*Jones Apparel Group, Inc. 269,800 5,952
*K&G Men's Center, Inc. 420,150 3,729
*Kohl's Corporation 238,200 14,634
Linens n Things, Inc. 90,000 3,566
*Michaels Stores, Inc. 97,200 1,759
*O'Reilly Automotive, Inc. 574,300 27,136
Sonic Automotive, Inc. 418,400 14,409
*Tower Automotive, Inc. 536,200 13,371
*VWR Scientific Products Corporation 108,000 1,877
-----------
TOTAL 170,342
-----------
CONSUMER STAPLES (6.9%)
*American Italian Pasta Co. - CL A 399,100 10,526
American Tower Systems 272,200 8,047
Cardinal Health, Inc. 322,777 24,491
*Chancellor Media Corp. 187,700 8,986
*Clear Channel Communications, Inc. 145,200 7,913
Golden State Vintners 205,600 2,236
<CAPTION>
MARKET
SHARES/ VALUE
COMMON STOCK (91.8%) PAR (000'S)
- ---------------------------------------------------------------------------------
<S> <C> <C>
CONSUMER STAPLES (CONTINUED)
Infinity Broadcasting 152,800 $ 4,183
*Lamar Advertising, Co. 336,200 12,523
-----------
TOTAL 78,905
-----------
ENERGY (1.7%)
*Barrett Resources Corporation 177,800 4,267
*Global Industries, Ltd. 637,000 3,902
Transocean Offshore Inc. 225,100 6,035
*Weatherford International, Inc. 260,700 5,051
-----------
TOTAL 19,255
-----------
FINANCE (6.0%)
*Affiliated Managers Group 257,000 7,678
CMAC Investment Corp. 137,500 6,316
*ESG Re Limited 268,700 5,441
*Headlands Mortgage Company 545,400 11,419
Investors Financial Services Corp. 205,400 12,247
Knight/Trimark Group 607,500 14,542
*Trammell Crow Company 391,500 10,962
-----------
TOTAL 68,605
-----------
HEALTHCARE (11.9%)
Bausch & Lomb, Inc. 131,800 7,908
*Lincare Holdings, Inc. 416,100 16,878
*NCS Healthcare, Inc. 125,900 2,990
*Patterson Dental Company 355,925 15,483
*Pediatrix Medical Group, Inc. 261,100 15,650
Province Healthcare 359,000 12,879
*PSS World Medical, Inc. 656,400 15,097
*Quintiles Transnational Corp. 364,400 19,450
*Sybron International Corporation 596,000 16,204
*Wesley Jessen VisionCare, Inc. 446,800 12,399
-----------
TOTAL 134,938
-----------
TECHNOLOGY (27.8%)
*CBT Group Public Limited Company 37,500 558
*Computer Horizons Corp. 347,050 9,240
Comverse Technology 242,800 17,239
*Concord EFS, Inc. 536,850 22,749
*CSG Systems International, Inc. 233,400 18,439
*DST Systems, Inc. 306,000 17,461
*Gasonics International Corporation 491,000 4,296
*Gemstar International Group Limited 298,800 17,106
*Integrated Process Equipment Corp. 321,600 3,457
J. D. Edwards & Co. 366,400 10,397
Microchip Technology 348,200 12,883
Molex Incorporated 388,946 12,398
Novellus Systems, Inc. 80,000 3,960
Paychex, Inc. 500,132 25,726
*PMC-Sierra, Inc. 262,700 16,583
</TABLE>
B-70
<PAGE>
NORTHWESTERN MUTUAL SERIES FUND, INC.
Schedule of Investments
DECEMBER 31, 1998
<TABLE>
<CAPTION>
MARKET
SHARES/ VALUE
COMMON STOCK (91.8%) PAR (000'S)
- ---------------------------------------------------------------------------------
TECHNOLOGY (CONTINUED)
<S> <C> <C>
*QLogic Corporation 155,500 $ 20,351
Samina Corp. 308,200 19,262
*Saville Systems PLC- ADR 307,600 5,843
*Semtech Corporation 307,900 11,046
*Sterling Software, Inc. 607,100 16,430
Synopsys Inc. 123,600 6,705
*Tellabs, Inc. 111,900 7,672
Ticketmaster Online 10,000 570
*Transaction Systems Architects, Inc. 283,300 14,165
*Uniphase Corporation 268,900 18,655
*World Access, Inc. 117,700 2,516
-----------
TOTAL 315,707
-----------
TRANSPORTATION (2.3%)
*Heartland Express, Inc. 167,000 2,923
*Knight Transportation, Inc. 489,000 13,050
*Swift Transportation Co., Inc. 359,700 10,083
-----------
TOTAL 26,056
-----------
TOTAL COMMON STOCK 1,043,782
-----------
<CAPTION>
MONEY MARKET INVESTMENTS (8.4%)
- ---------------------------------------------------------------------------------
<S> <C> <C>
FEDERAL GOVERNMENT AND AGENCIES (0.2%)
+Federal Home Loan Mortgage Association, 4.92%,
2/26/99 2,000,000 $ 1,985
-----------
FINANCE (1.7%)
+Triple A One Funding, 5.55%, 1/19/99 20,000,000 $ 19,945
-----------
PERSONAL CREDIT INSTITUTIONS (6.5%)
American Express Credit Corporation, 5.00%, 1/8/99 14,200,000 14,186
American Express Credit Corporation, 5.85%, 1/8/99 20,000,000 19,977
<CAPTION>
MARKET
SHARES/ VALUE
MONEY MARKET INVESTMENTS (8.4%) PAR (000'S)
- ---------------------------------------------------------------------------------
<S> <C> <C>
PERSONAL CREDIT INSTITUTIONS (CONTINUED)
General Electric Capital Corporation, 5.51%, 1/26/99 20,000,000 $ 19,923
General Electric Capital Corporation, 5.65%, 1/13/99 20,000,000 19,962
-----------
TOTAL 74,048
-----------
TOTAL MONEY MARKET INVESTMENTS 95,978
-----------
TOTAL INVESTMENTS (100.2%) (COST $775,929,704)^ 1,139,760
OTHER ASSETS, LESS LIABILITIES (-0.2%) (2,294)
-----------
TOTAL NET ASSETS (100.0%) $1,137,466
-----------
</TABLE>
* Non-Income Producing
^At December 31, 1998, the aggregate cost of securities for federal income tax
purposes was $776,905,792 and the net unrealized appreciation of investments
based on that cost was $362,854,375 which is comprised of $390,885,948
aggregate gross unrealized appreciation and $28,031,573 aggregate gross
unrealized depreciation.
+Partially held by the custodian in a segregated account as collateral for open
futures postions. Information regarding open futures contracts as of December
31, 1998 is summarized below:
<TABLE>
<CAPTION>
UNREALIZED
NUMBER OF EXPIRATION APPRECIATION
ISSUERS CONTRACTS DATE (000'S)
- ----------------------------------------------------------------
<S> <C> <C> <C>
S&P 500 Stock Index 84 3/99 $989
(Total Notional Value at
12/31/98, $25,167,288)
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements
B-71
<PAGE>
INTERNATIONAL EQUITY PORTFOLIO
NORTHWESTERN MUTUAL SERIES FUND, INC.
Schedule of Investments
DECEMBER 31, 1998
<TABLE>
<CAPTION>
MARKET
SHARES/ VALUE
COMMON STOCK (89.2%) COUNTRY PAR (000'S)
- ----------------------------------------------------------------
<S> <C> <C> <C>
CAPITAL EQUIPMENT (6.8%)
Alcatel Alsthom DG Fr. 40,000 $ 4,898
+Alcatel Alsthom , ADR Fr. 18,400 446
BTR PLC U.K. 202,312 397
BTR, PLC "A" U.K. 4,610,531 9,473
*Fairview Holdings PLC U.K. 450,223 667
Granges AB Swe. 188,100 2,715
Hong Kong Aircraft &
Engineering H.K. 2,680,700 3,668
Rolls- Royce PLC U.K. 745,000 3,099
Koninklijke Philips
Electronics N.V. Neth. 208,400 13,992
Sirti SPA Italy 643,000 3,888
VA Technologies AG
Bearer Aus. 30,000 2,601
-----------
TOTAL 45,844
-----------
CONSUMER GOODS (11.5%)
Albert Fisher Group PLC U.K. 5,967,096 595
#Autoliv, Inc. IDR Swe. 65,000 2,334
Autoliv, Inc. Swe. 279,100 10,379
Cafe de Coral Holdings,
Ltd. H.K. 7,672,000 2,401
Fiat SPA Ord. Italy 1,527,900 5,319
Hillsdown Holdings U.K. 900,446 1,124
Medeva PLC U.K. 4,250,000 7,566
Nycomed Amersham PLC U.K. 1,323,110 9,204
Ono Pharmaceutical Co.,
Ltd. Jpn. 233,000 7,292
Tate & Lyle, PLC U.K. 762,600 4,111
*Terranova Foods PLC U.K. 450,223 824
+Teva Pharmaceutical
Industries Ltd., ADR Israel 178,200 7,251
Sony Corporation Jpn. 87,500 6,384
Vitro SA NPV Mex. 768,400 1,127
Volvo Aktiebolaget, B
Free Swe. 433,000 9,936
Yizheng Chemical Fibre
Company China 12,469,200 1,143
-----------
TOTAL 76,990
-----------
ENERGY (14.0%)
BG PLC U.K. 701,752 4,518
*Centrica PLC U.K. 1,913,200 3,931
Electricidad de Caracas Venz. 12,792 6
Endesa S.A. Sp. 252,000 6,687
EVN Energie Versorgung Aus. 38,400 5,440
+Gener S.A., ADR Chile 262,800 4,205
Hong Kong Electric H.K. 1,790,000 5,430
Iberdrola S.A. Sp. 587,500 11,008
<CAPTION>
MARKET
SHARES/ VALUE
COMMON STOCK (89.2%) COUNTRY PAR (000'S)
- ----------------------------------------------------------------
<S> <C> <C> <C>
ENERGY (CONTINUED)
Korea Electric Power
Corp. Kor. 33,000 $ 818
National Power U.K. 1,246,864 10,766
Petroleo Brasileiro SA -
Petrobras Braz. 32,500,000 3,685
Ranger Oil Limited Can. 1,055,400 4,683
Repsol S.A. Sp. 122,000 6,518
Saga Petroleum Norw. 260,000 2,372
Societe Nationale Elf
Aquitaine Fr. 66,801 7,725
Thames Water U.K. 230,104 4,441
+YPF S.A., ADR Arg. 418,500 11,692
-----------
TOTAL 93,925
-----------
FINANCE (25.8%)
Aegon NV Neth. 140,384 17,250
Australia & New Zealand
Bank Group Austrl. 1,506,097 9,866
AXA-UAP SA Fr. 104,063 15,089
Banco Bradesco SA Braz. 623,750,000 3,459
*Banco Bradesco SA,
Rights Braz. 25,853,902 15
Banco de Andulucia Sp. 120,000 5,454
Banco Itau S.A. Braz. 2,079,000 1,015
Bangkok Bank Public
Company Ltd Thai. 3,193,000 6,591
+Banque Nationale de
Paris, ADR (144A) Fr. 146,500 12,069
Barclays PLC U.K. 245,016 5,283
BPI SGPS SA Port. 189,363 6,426
Compagnie Financiere de
Paribas Fr. 71,300 6,199
Canadian Imperial Bank
of Commerce Can. 113,200 2,801
Deutsche Bank AG Ger. 98,600 5,804
EXEL Limited Ber. 131,100 9,833
HSBC Holdings H.K. 316,979 7,897
ING Groep NV Neth. 209,000 12,751
Merita Limited "A" Fin. 2,436,000 15,491
PartnerRe Ltd. Ber. 226,600 10,367
**Peregrine Investments
Holdings, Ltd. H.K. 262,000 --
Reinsurance Australia
Corporation Limited Austrl. 2,908,000 4,461
Unibanco Uniao de Bancos Braz. 14,033,500 488
Zurich Versicherungs-
Gesellschaft Swtz. 19,900 14,735
-----------
TOTAL 173,344
-----------
MATERIALS (10.6%)
Agrium, Inc. Can. 473,300 4,112
Akzo Nobel NV Neth. 117,700 5,362
</TABLE>
B-72
<PAGE>
NORTHWESTERN MUTUAL SERIES FUND, INC.
Schedule of Investments
DECEMBER 31, 1998
<TABLE>
<CAPTION>
MARKET
SHARES/ VALUE
COMMON STOCK (89.2%) COUNTRY PAR (000'S)
- ----------------------------------------------------------------
MATERIALS (CONTINUED)
<S> <C> <C> <C>
Bayer AG Ger. 157,000 $ 6,556
British Steel PLC U.K. 5,270,900 8,002
Carte Holt Harvey Ltd. N.Z. 3,929,357 3,529
Elkem A S Oslo ord "A" Norw. 192,000 2,293
European Vinyls Corp.
EVC International Neth. 68,985 548
Grupo Mexico, B Shares Mex. 1,320,000 2,936
Hepworth PLC U.K. 607,200 1,596
Metsa Serla Oyj Fin. 277,500 2,220
+Minorco SA, ADR Lux. 318,150 4,832
+Pechiney "A", ADR Fr. 48,183 776
Pechiney SA "A" Fr. 19,000 621
Pioneer International
Ltd. Austrl. 3,197,946 6,767
Rhone Poulenc SA, Series
A Fr. 149,108 7,677
Stora Enso OYJ- R Fin. 754,400 6,764
Stora Kapparbergs,
Series B Swe. 350,000 3,886
Union Minerie, NPV Bel. 65,171 2,481
-----------
TOTAL 70,958
-----------
MULTI-INDUSTRY (3.4%)
Amer Group Ltd., "A" Fin. 175,000 1,821
Elementis PLC U.K. 1,494,000 2,038
Hutchinson Whampoa H.K. 798,000 5,639
Jardine Matheson
Holdings Sing. 1,212,301 3,128
Jardine Strategic
Holdings Sing. 1,019,055 1,478
Swire Pacific Class "A" H.K. 1,459,500 6,537
Swire Pacific Limited
"B" H.K. 3,534,200 2,349
-----------
TOTAL 22,990
-----------
SERVICES (17.1%)
Air New Zealand Ltd. "B" N.Z. 1,150,000 1,810
British Telecom U.K. 608,000 9,145
*Cable & Wire Optus Ltd. Austrl. 2,674,560 5,627
+Compania Anonima
Nacional, ADR Venz. 293,000 5,219
+Compania de
Telecommunicaciones,
ADR Chile 155,125 3,209
David Jones Ltd. Austrl. 742,100 819
*Embratel Participacoes
S.A. Braz. 13,669,682 1,259
Hitachi Zosen
Corporation Jpn. 192,000 266
Hong Kong
Telecommunications Ltd. H.K. 6,100,000 10,668
Hyder PLC U.K. 371,666 4,669
<CAPTION>
MARKET
SHARES/ VALUE
COMMON STOCK (89.2%) COUNTRY PAR (000'S)
- ----------------------------------------------------------------
<S> <C> <C> <C>
SERVICES (CONTINUED)
Hyder PLC Cum. Red. Pfd. U.K. 401,400 $ 795
Laidlaw Inc. Can. 82,600 831
Mayne Nickless Ltd. Austrl. 1,671,600 6,203
Moebel Walther AG PFD Ger. 103,297 3,535
+Phillipine Long
Distance Telephone, ADR Phil. 127,000 3,294
+PT Indosat, ADR Indo. 146,600 1,787
+Quantas Airways (144A)
ADR Austrl. 165,000 3,370
SGS Societe Generale de
Surveillance Holding SA Swtz. 885 867
Singapore Airlines Ltd. Sing. 105,000 770
+SK Telecom Co., LTD.,
ADR Fr. 245,037 2,496
*Sobeys Canada Inc Can. 85,258 944
Somerfield PLC U.K. 860,766 5,757
South China Morning Post
Ltd. H.K. 2,554,000 1,310
*Swisscom AG Swtz. 21,040 8,807
*Tele Celular Sul
Participacoes S.A. Braz. 9,429 144
Tele Centro Oeste
Celular Participacoes
S.A. Braz. 27,300 80
Tele Centro Sul
Participacoes S.A. Braz. 16,380 685
*Tele Leste Celular
Participacoes SA Braz. 17,647,838 53
Tele Nordeste Celular
Participacoes S.A. Braz. 4,095 76
Tele Norte Celular
Participacoes S.A. Braz. 1,638 37
Tele Norte Leste
Participacoes S.A. Braz. 81,900 1,019
*Tele Sudeste Celular
Participacoes S.A. Braz. 17,662,580 389
Telecom Italia SPA Italy 1,200,000 7,568
*Telecomunicacois
Brasileiras SA Braz. 17,728,100 10
+Telefonica de Argentina
SA, ADR Argentina 146,300 4,087
+Telefonica del Peru SA
B shares, ADR Peru 115,300 1,463
+Telefonos de Mexico SA Mex. 117,802 5,735
Telemig Celular
Participacoes S.A. Braz. 4,095 87
</TABLE>
B-73
<PAGE>
NORTHWESTERN MUTUAL SERIES FUND, INC.
Schedule of Investments
DECEMBER 31, 1998
<TABLE>
<CAPTION>
MARKET
SHARES/ VALUE
COMMON STOCK (89.2%) COUNTRY PAR (000'S)
- ----------------------------------------------------------------
SERVICES (CONTINUED)
<S> <C> <C> <C>
*Telesp Celular
Participacoes S.A. Braz. 17,678,960 $ 649
*Telesp Participacoes
S.A. Braz. 17,728,100 2,038
The Peninsular and
Oriental Steam
Navigation Company U.K. 548,000 6,495
Vendex NV Neth. 39,621 963
-----------
TOTAL 115,035
-----------
TOTAL COMMON STOCK 599,086
-----------
</TABLE>
<TABLE>
<CAPTION>
BONDS (0.7%)
- -------------------------------------------------------------------
<S> <C> <C> <C>
SBC Communications DECS,
3.071%, 3/15/01 U.S. 99,350 $ 4,421
-----------
TOTAL BONDS 4,421
-----------
</TABLE>
<TABLE>
<CAPTION>
MONEY MARKET INVESTMENTS
(10.5%)
- -------------------------------------------------------------------
<S> <C> <C> <C>
FINANCE (4.1%)
CXC Incorporated, 5.375%,
1/26/99 U.S. 12,600,000 $ 12,553
Triple A One Funding, 5.55%,
1/19/99 U.S. 15,000,000 14,958
-----------
TOTAL 27,511
-----------
PERSONAL CREDIT INSTITUTIONS (1.5%)
General Electric Capital
Corp., 5.65%, 1/13/99 U.S. 10,000,000 9,981
-----------
SHORT TERM BUSINESS CREDIT (4.9%)
American Express Credit,
5.00%, 1/8/99 U.S. 18,000,000 17,981
<CAPTION>
MARKET
MONEY MARKET INVESTMENTS SHARES/ VALUE
(10.5%) COUNTRY PAR (000'S)
- -------------------------------------------------------------------
<S> <C> <C> <C>
SHORT TERM BUSINESS CREDIT (CONTINUED)
CIT Group Inc., 5.75%, 1/20/99 U.S. 15,000,000 $ 14,955
-----------
TOTAL 32,936
-----------
TOTAL MONEY MARKET
INVESTMENTS 70,428
-----------
TOTAL INVESTMENTS (100.4%)
(COST $626,944,284)^ 673,935
OTHER ASSETS, LESS
LIABILITIES (-0.4%) (2,829 )
-----------
TOTAL NET ASSETS (100.0%) $ 671,106
-----------
</TABLE>
* Non-Income Producing
+ ADR-American Depository Receipt
# IDR-International Depository Receipt
144A after the name of a security represents a security exempt from
registration under Rule 144A of the Securities Act of 1933. These
securities may be resold as transactions exempt from registration,
normally to qualified institutional buyers.
DECS-Debt Exchangeable for Common Stock
**Defaulted Security
Investment Percentages by Country:
5.51% Australia
8.58 France
6.82 Hong Kong
7.55 Netherlands
15.51 United Kingdom
11.12 U.S.
44.91 Other
100.00 Total
^At December 31, 1998, the aggregate cost of securities for federal income tax
purposes was $626,983,601 and the net unrealized appreciation of investments
based on that cost was $46,947,724 which is comprised of $141,631,589
aggregate gross unrealized appreciation and $94,683,865 gross unrealized
depreciation.
The Accompanying Notes are an Integral Part of the Financial Statements
B-74
<PAGE>
GROWTH STOCK PORTFOLIO
NORTHWESTERN MUTUAL SERIES FUND, INC.
Schedule of Investments
DECEMBER 31,1998
<TABLE>
<CAPTION>
MARKET
SHARES/ VALUE
COMMON STOCK (87.8%) PAR (000'S)
- ---------------------------------------------------------------------------------
<S> <C> <C>
BASIC MATERIALS (1.6%)
Ecolab, Inc. 181,900 $ 6,583
---------
CAPITAL GOODS (8.2%)
AlliedSignal, Inc. 52,400 2,322
Avery Dennison Corporation 83,900 3,781
Emerson Electric Co. 49,300 3,084
General Electric Company 114,500 11,686
Lockheed Martin Corporation 19,800 1,678
*Republic Services, Inc. 94,000 1,733
Tyco International Ltd. 100,600 7,589
Waste Management, Inc. 62,400 2,909
---------
TOTAL 34,782
---------
COMMUNICATION SERVICES (5.4%)
AT&T Corp. 103,508 7,789
GTE Corporation 56,900 3,837
MCI WorldCom, Inc. 153,500 11,014
---------
TOTAL 22,640
---------
CONSUMER CYCLICAL (16.6%)
*Barnes & Noble, Inc. 71,000 3,018
Borg-Warner Automotive, Inc. 48,900 2,729
Centex Corporation 45,000 2,028
Dayton Hudson Corporation 67,000 3,635
Ford Motor Company 79,000 4,636
Harley-Davidson, Inc. 171,500 8,125
Home Depot, Inc. 119,500 7,312
*Kohl's Corporation 140,600 8,638
Lennar Corporation 45,600 1,151
Mattel, Inc. 30,000 684
McGraw-Hill Companies Inc. 44,600 4,544
The New York Times Company 129,200 4,482
Servicemaster Co. 245,250 5,411
Tribune Company 76,000 5,016
Wal-Mart Stores, Inc. 105,900 8,624
---------
TOTAL 70,033
---------
CONSUMER STAPLES (15.6%)
Anheuser-Busch Companies, Inc. 55,500 3,642
Benckiser N.V. 69,000 4,407
Campbell Soup Company 52,800 2,904
Dial Corp. 158,100 4,565
Hershey Foods Corporation 77,300 4,807
McDonald's Corporation 80,200 6,145
Newell Co. 98,600 4,067
PepsiCo, Inc. 174,100 7,127
Philip Morris Companies, Inc. 89,200 4,772
Procter & Gamble Company 62,400 5,698
The Quaker Oats Company 52,600 3,130
Unilever NV 51,100 4,238
Walgreen Co. 131,200 7,683
Walt Disney Company 79,600 2,388
---------
TOTAL 65,573
---------
<CAPTION>
MARKET
SHARES/ VALUE
COMMON STOCK (87.8%) PAR (000'S)
- ---------------------------------------------------------------------------------
<S> <C> <C>
ENERGY (5.0%)
British Petroleum Company PLC 49,000 $ 4,392
Chevron Corporation 28,300 2,347
*Conoco, Inc. 121,000 2,526
Diamond Offshore Drilling, Inc. 50,000 1,184
Exxon Corporation 26,800 1,960
Mobil Corporation 38,600 3,363
*R&B Falcon Corporation 60,900 464
Schlumberger Limited 44,600 2,057
Tosco Corporation 61,000 1,578
Transocean Offshore Inc. 39,600 1,062
---------
TOTAL 20,933
---------
FINANCE (8.1%)
Associates First Capital Corporation 80,208 3,399
BankAmerica Corporation 52,501 3,157
Chase Manhattan Corporation 76,880 5,233
Citigroup, Inc. 36,000 1,782
Fifth Third Bancorp 73,300 5,227
First Union Corporation 83,100 5,054
Morgan Stanley Dean Witter & Co. 68,700 4,878
The Bank New York Company, Inc. 133,300 5,365
---------
TOTAL 34,095
---------
HEALTHCARE (9.6%)
Bristol-Myers Squibb Company 54,000 7,226
Eli Lilly and Company 46,900 4,168
Guidant Corporation 25,800 2,844
Johnson & Johnson 49,100 4,118
Medtronic, Inc. 80,600 5,985
Merck & Co., Inc. 35,700 5,272
Pfizer, Inc. 65,400 8,204
Warner-Lambert Company 38,600 2,902
---------
TOTAL 40,719
---------
TECHNOLOGY (14.0%)
*Cisco Systems, Inc. 88,500 8,214
Compaq Computer Corporation 101,200 4,244
*DST Systems, Inc. 41,200 2,351
*Fiserv, Inc. 157,650 8,109
Hewlett-Packard Company 47,400 3,238
Intel Corporation 57,300 6,794
International Business Machines Corporation 49,400 9,127
Lucent Technologies, Inc. 41,342 4,548
*Microsoft Corporation 78,700 10,915
W.W. Grainger, Inc. 30,000 1,249
---------
TOTAL 58,789
---------
TRANSPORTATION (3.3%)
AMR Corporation 34,800 2,066
Canadian National Railway Company 61,500 3,190
*FDX Corporation 28,500 2,537
*Midwest Express Holdings, Inc. 103,500 2,724
</TABLE>
B-75
<PAGE>
NORTHWESTERN MUTUAL SERIES FUND, INC.
Schedule of Investments
DECEMBER 31,1998
<TABLE>
<CAPTION>
MARKET
SHARES/ VALUE
COMMON STOCK (87.8%) PAR (000'S)
- ---------------------------------------------------------------------------------
TRANSPORTATION (CONTINUED)
<S> <C> <C>
Southwest Airlines Co. 143,850 $ 3,228
---------
TOTAL 13,745
---------
UTILITIES (0.4%)
Enron Corporation 28,100 1,602
---------
TOTAL COMMON STOCK 369,494
---------
</TABLE>
<TABLE>
<CAPTION>
MARKET
VALUE
MONEY MARKET INVESTMENTS (12.2%) PAR (000'S)
- ---------------------------------------------------------------------------------
<S> <C> <C>
FEDERAL GOVERNMENT AND AGENCIES (0.3%)
+Federal Home Loan Mortgage Corp., 4.919%, 02/26/99 200,000 $ 198
+Federal National Mortgage Association, 4.94%, 02/25/99 1,000,000 992
+Federal National Mortgage Association, 4.98%, 03/15/99 100,000 99
---------
TOTAL 1,289
---------
FINANCE (4.8%)
CIT Group, Inc., 5.749%, 01/20/99 6,000,000 5,982
+CXC Incorporated, 5.375%, 01/20/99 10,000,000 9,963
+Triple A One Funding Group, 5.549%, 01/19/99 4,400,000 4,388
---------
TOTAL 20,333
---------
PERSONAL CREDIT INSTITUTIONS (2.6%)
General Electric Capital Corp., 5.65%, 01/13/99 5,000,000 4,991
+General Electric Capital Corp., 5.51%, 01/26/99 6,100,000 6,077
---------
TOTAL 11,068
---------
<CAPTION>
MARKET
VALUE
MONEY MARKET INVESTMENTS (12.2%) PAR (000'S)
- ---------------------------------------------------------------------------------
<S> <C> <C>
SHORT TERM BUSINESS CREDIT (4.5%)
American Express Credit, 5.00%, 01/08/99 14,000,000 $ 13,986
+American Express Credit, 5.85%, 01/08/99 5,000,000 4,994
---------
TOTAL 18,980
---------
TOTAL MONEY MARKET INVESTMENTS 51,670
---------
TOTAL INVESTMENTS (100.0%) (COST $288,025,070)^ 421,164
OTHER ASSETS, LESS LIABILITIES (0.0%) 118
---------
TOTAL NET ASSETS (100.0%) $421,282
---------
</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, 1998 is summarized below:
<TABLE>
<CAPTION>
UNREALIZED
NUMBER OF EXPIRATION APPRECIATION
ISSUERS CONTRACTS DATE (000'S)
- ----------------------------------------------------------------
<S> <C> <C> <C>
S&P 500 Stock Index 86 3/99 $1,554
(Total Notional Value at
12/31/98, $25,223,900)
</TABLE>
^At December 31, 1998, the aggregate cost of securities for federal tax purposes
was $288,036,724 and the net unrealized appreciation of investments based on
that cost was $133,127,817 which is comprised of $138,565,266 aggregate gross
unrealized appreciation and $5,437,449 aggregate gross unrealized depreciation.
The Accompanying Notes are an Integral Part of the Financial Statements
B-76
<PAGE>
GROWTH & INCOME STOCK PORTFOLIO
NORTHWESTERN MUTUAL SERIES FUND, INC.
Schedule of Investments
DECEMBER 31, 1998
<TABLE>
<CAPTION>
MARKET
SHARES/ VALUE
COMMON STOCK (98.3%) PAR (000'S)
- --------------------------------------------------------------
<S> <C> <C>
BASIC MATERIALS (6.5%)
Albemarle Corporation 21,200 $ 504
Allegheny Teledyne, Inc. 129,100 2,639
Monsanto Company 387,300 18,397
Rohm and Haas Company 250,100 7,534
*Smurfit-Stone Container Corporation 502,334 7,943
-----------
TOTAL 37,017
-----------
CAPITAL GOODS (8.7%)
AlliedSignal, Inc. 153,300 6,793
*Coltec Industries, Inc. 433,000 8,444
Cooper Industries, Inc. 121,000 5,770
General Electric Company 37,600 3,838
*Republic Services, Inc. 102,200 1,884
Tyco International Ltd. 117,669 8,879
Waste Management, Inc. 306,417 14,287
-----------
TOTAL 49,895
-----------
COMMUNICATION SERVICES (7.1%)
GTE Corporation 141,900 9,569
MCI WorldCom, Inc. 262,506 18,835
SBC Communications, Inc. 222,200 11,915
-----------
TOTAL 40,319
-----------
CONSUMER CYCLICAL (10.3%)
*AutoZone, Inc. 75,300 2,480
*Cendant Corporation 252,800 4,819
Circuit City Stores, Inc. 56,500 2,821
Dayton Hudson Corporation 112,900 6,125
The Gap, Inc. 56,500 3,178
International Game Technology 244,800 5,952
Mattel, Inc. 244,700 5,582
*Mirage Resorts, Incorporated 281,800 4,209
The News Corporation Limited 209,800 5,547
Service Corporation International 204,400 7,780
The TJX Companies, Inc. 161,400 4,681
Wal-Mart Stores, Inc. 69,900 5,692
-----------
TOTAL 58,866
-----------
CONSUMER STAPLES (13.6%)
Anheuser-Busch Companies, Inc. 69,900 4,587
Campbell Soup Company 78,000 4,290
Comcast Corporation 59,200 3,474
*Fred Meyer, Inc. 126,400 7,616
Kimberly-Clark Corporation 107,600 5,864
PepsiCo, Inc. 204,200 8,359
Philip Morris Companies, Inc. 309,300 16,548
Procter & Gamble Company 161,400 14,738
Ralston Purina Group 88,700 2,872
The Seagram Company Ltd. 88,700 3,371
*Tele Communications, Inc. 110,300 6,101
-----------
TOTAL 77,820
-----------
<CAPTION>
MARKET
SHARES/ VALUE
COMMON STOCK (98.3%) PAR (000'S)
- --------------------------------------------------------------
<S> <C> <C>
ENERGY (7.1%)
*Input/Output, Inc. 683,100 $ 4,995
Mobil Corporation 169,400 14,759
Shell Transport & Trading Company 357,700 13,302
Tosco Corporation 277,000 7,167
-----------
TOTAL 40,223
-----------
FINANCE (14.6%)
Astoria Financial Corporation 83,235 3,808
BankAmerica Corporation 298,843 17,968
Bankers Trust Corporation 64,500 5,511
Citigroup Inc. 173,450 8,586
Fannie Mae 26,600 1,968
KeyCorp 164,000 5,248
Marsh & McLennan Companies, Inc. 82,050 4,796
MBIA, Inc. 94,100 6,169
Newcourt Credit Group Inc. 113,600 3,969
Starwood Hotels & Resorts 329,396 7,473
UNUM Corporation 147,900 8,634
Washington Mutual, Inc. 243,200 9,287
-----------
TOTAL 83,417
-----------
HEALTHCARE (9.0%)
*Alza Corporation 43,000 2,247
American Home Products Corporation 295,800 16,657
Bristol-Myers Squibb Company 113,200 15,148
*Forest Laboratories, Inc. 61,900 3,292
*Genzyme Corporation (General
Division) 131,800 6,557
*Genzyme Molecular Oncology 14,219 46
*HEALTHSOUTH Corporation 231,500 3,574
*Humana, Inc. 34,300 611
Warner-Lambert Company 43,000 3,233
-----------
TOTAL 51,365
-----------
TECHNOLOGY (16.6%)
AutoDesk, Inc. 88,700 3,786
*Cisco Systems, Inc. 145,225 13,479
Compaq Computer Corporation 158,000 6,626
*EMC Corporation 91,400 7,769
Intel Corporation 96,800 11,477
International Business Machines
Corporation 86,100 15,907
Lucent Technologies Inc. 67,200 7,392
*Microsoft Corporation 96,800 13,425
*Oracle Corporation 53,800 2,320
*Sun Microsystems, Inc. 94,100 8,057
Texas Instruments, Incorporated 53,800 4,603
-----------
TOTAL 94,841
-----------
TRANSPORTATION (2.3%)
Union Pacific Corporation 295,800 13,329
-----------
</TABLE>
B-77
<PAGE>
NORTHWESTERN MUTUAL SERIES FUND, INC.
Schedule of Investments
DECEMBER 31, 1998
<TABLE>
<CAPTION>
MARKET
SHARES/ VALUE
COMMON STOCK (98.3%) PAR (000'S)
- --------------------------------------------------------------
UTILITIES (2.5%)
<S> <C> <C>
K N Energy, Inc. 21,500 $ 782
Northern States Power Company 53,900 1,496
PP & L Resources, Inc. 285,100 7,947
Wisconsin Energy Corporation 128,900 4,052
-----------
TOTAL 14,277
-----------
TOTAL COMMON STOCK 561,369
-----------
</TABLE>
<TABLE>
<CAPTION>
MARKET
VALUE
MONEY MARKET INVESTMENTS (1.6%) PAR (000'S)
- --------------------------------------------------------------------------------
<S> <C> <C>
FINANCE LESSORS (.1%)
Triple A One Funding, 5.55%, 1/19/99 500,000 $ 499
---------
PERSONAL CREDIT INSTITUTIONS (.9%)
General Electric Capital Corporation, 5.65%, 1/13/99 1,000,000 998
General Electric Capital Corporation, 5.51%, 1/26/99 2,000,000 1,992
Variable Funding Capital Corp., 5.95%, 1/11/99 2,000,000 1,997
---------
TOTAL 4,987
---------
<CAPTION>
MARKET
VALUE
MONEY MARKET INVESTMENTS (1.6%) PAR (000'S)
- --------------------------------------------------------------------------------
<S> <C> <C>
SHORT TERM BUSINESS CREDIT (.6%)
American Express Credit, 5.00%, 1/8/99 600,000 $ 599
American Express Credit, 5.85%, 1/8/99 1,000,000 999
CIT Group, 5.75%, 1/20/99 2,000,000 1,994
---------
TOTAL 3,592
---------
TOTAL MONEY MARKET INVESTMENTS 9,078
---------
TOTAL INVESTMENTS (99.9%) (COST $517,081,519)^ 570,447
OTHER ASSETS, LESS LIABILITIES (0.1%) 523
---------
TOTAL NET ASSETS (100.0%) $570,970
---------
</TABLE>
* Non-Income Producing
^At December 31,1998, the aggregate cost of securities for federal income tax
purposes was $519,130,218 and the net unrealized appreciation of investments
based on that cost was $51,316,579 which is comprised of $83,932,797 aggregate
gross unrealized appreciation and $32,616,218 aggregate gross unrealized
depreciation.
The Accompanying Notes are an Integral Part of the Financial Statements
B-78
<PAGE>
INDEX 500 STOCK PORTFOLIO
NORTHWESTERN MUTUAL SERIES FUND, INC.
Schedule of Investments
DECEMBER 31, 1998
<TABLE>
<CAPTION>
MARKET VALUE
COMMON STOCK (99.1%) SHARES (000'S)
- -------------------------------------------------------------
<S> <C> <C>
BASIC MATERIALS (3.1%)
Air Products & Chemicals, Inc. 39,100 $ 1,564
Alcan Aluminum Limited 38,400 1,039
Allegheny Teledyne, Inc. 33,235 679
Aluminum Co. of America 31,500 2,349
Archer Daniels Midland Company 101,080 1,737
ASARCO, Inc. 6,600 99
Barrick Gold Corporation 63,000 1,229
Battle Mountain Gold Company 38,100 157
Bemis Company, Inc. 9,000 341
*Bethlehem Steel Corporation 21,500 180
B. F. Goodrich Company 12,500 448
Boise Cascade Corporation 9,500 295
Champion International 16,100 652
Cyprus Amax Minerals Co. 15,550 156
Dow Chemical Company 37,800 3,437
E.I. du Pont de Nemours & Co. 191,000 10,135
Eastman Chemical Company 13,425 601
Ecolab, Inc. 21,900 793
Engelhard Corp. 24,400 476
*FMC Corporation 5,800 325
Freeport-McMoRan Copper & Gold,
Inc. 30,400 317
Georgia Pacific Group 15,700 919
Great Lakes Chemical 10,000 400
Hercules Inc. 16,000 438
Homestake Mining Company 40,300 370
Inco Limited 28,000 296
International Flavors & Fragrances,
Inc. 18,100 800
International Paper Company 51,900 2,326
Louisiana Pacific Corporation 18,500 339
Mead Corp. 17,500 513
Monsanto Company 101,400 4,817
Morton International, Inc. 22,000 539
Nalco Chemical Company 11,100 344
Newmont Mining Corporation 28,180 509
Nucor Corp. 14,900 644
Phelps Dodge Corporation 9,900 504
Pioneer Hi-Bred International 40,800 1,102
Placer Dome, Inc. 42,200 485
Potlatch Corporation 4,900 181
PPG Industries, Inc. 29,900 1,742
Praxair 26,700 941
Reynolds Metals Company 12,200 643
Rohm and Haas Company 30,100 907
Sigma-Aldrich Corp. 17,000 499
Temple-Inland Inc. 9,400 558
Union Camp Corporation 11,700 790
Union Carbide Corporation 22,800 969
USX-U.S. Steel Group, Inc. 14,900 343
W.R. Grace & Co. 12,600 198
Westvaco Corporation 17,150 460
<CAPTION>
MARKET VALUE
COMMON STOCK (99.1%) SHARES (000'S)
- -------------------------------------------------------------
<S> <C> <C>
BASIC MATERIALS (CONTINUED)
Weyerhaeuser Company 33,600 $ 1,707
Willamette Industries Inc. 1,880 630
Worthington Industries 16,050 201
------------
TOTAL 53,123
------------
CAPITAL GOODS (7.9%)
Aeroquip-Vickers Inc. 4,700 141
AlliedSignal, Inc. 94,700 4,196
AMP, Inc. 36,926 1,922
Avery Dennison Corporation 19,800 892
Ball Corporation 5,100 233
Boeing Company 170,576 5,565
Briggs & Stratton Corporation 4,000 200
Browning-Ferris Industries, Inc. 29,300 833
Case Corporation 12,600 275
Caterpillar, Inc. 61,600 2,834
Cooper Industries, Inc. 17,500 835
Corning, Inc. 39,100 1,760
Crane Co. 11,575 349
Crown Cork & Seal Company, Inc. 21,000 647
Cummins Engine Company, Inc. 6,400 227
Danaher Corporation 22,600 1,227
Deere & Company 41,300 1,368
Dover Corporation 37,700 1,381
Eaton Corporation 12,100 855
Emerson Electric Co. 74,300 4,648
Fluor Corporation 13,300 566
Foster Wheeler Corporation 6,800 90
General Dynamics Corporation 21,400 1,255
General Electric Company 549,200 56,053
Harnischfeger Industries, Inc. 7,900 80
Honeywell, Inc. 21,300 1,604
Illinois Tool Works, Inc. 42,200 2,448
Ingersoll-Rand Company 27,900 1,310
Johnson Controls, Inc. 14,300 844
Lockheed Martin Corporation 33,054 2,801
McDermott International, Inc. 10,000 247
Milacron Inc. 6,500 125
Millipore Corp. 7,300 208
Minnesota Mining & Manufacturing
Co. 68,200 4,851
Moore Corporation Ltd. 14,910 164
NACCO Industries, Inc. 1,400 129
National Service Industries, Inc. 6,900 262
*Navistar International Corporation 11,300 322
Northrop Grumman Corporation 11,600 848
*Owens-Illinois, Inc. 26,200 802
PACCAR Incorporated 13,170 542
Pall Corporation 20,900 529
Parker-Hannifin Corporation 18,675 612
Pitney Bowes, Inc. 46,300 3,059
</TABLE>
B-79
<PAGE>
NORTHWESTERN MUTUAL SERIES FUND, INC.
Schedule of Investments
DECEMBER 31, 1998
<TABLE>
<CAPTION>
MARKET VALUE
COMMON STOCK (99.1%) SHARES (000'S)
- -------------------------------------------------------------
CAPITAL GOODS (CONTINUED)
<S> <C> <C>
Raychem Corp. 13,400 $ 433
Rockwell International Corp. 32,300 1,569
*Sealed Air Corporation 14,071 719
Tenneco Inc. 28,600 974
Textron Inc. 27,700 2,103
*Thermo Electron Corporation 28,000 474
Thomas & Betts Corporation 9,600 416
Timken Company 10,500 198
Tyco International Ltd. 108,759 8,205
United Technologies Corp. 38,500 4,187
Waste Management Inc. 96,485 4,499
------------
TOTAL 133,916
------------
COMMUNICATION SERVICES (8.4%)
*Airtouch Communications Inc. 96,900 6,989
ALLTEL Corporation 46,300 2,769
Ameritech Corporation 186,100 11,794
AT&T Corporation 304,900 22,944
Bell Atlantic Corporation 262,184 14,895
BellSouth Corporation 332,000 16,559
Frontier Corporation 28,900 983
GTE Corporation 162,700 10,972
*MCI WorldCom, Inc. 299,782 21,509
*Nextel Communications, Inc. 48,200 1,139
SBC Communications Inc. 330,398 17,718
Sprint Corporation 72,600 6,107
*Sprint PCS 70,850 1,638
U S WEST, Inc. 84,708 5,474
------------
TOTAL 141,490
------------
CONSUMER CYCLICAL (8.7%)
American Greetings Corp. 11,900 489
Armstrong World Industries Inc. 6,800 410
*Autozone, Inc. 25,800 850
Black & Decker Corporation 14,800 830
Brunswick Corporation 16,700 413
*Cendant Corporation 144,854 2,761
Centex Corporation 10,100 455
Circuit City Stores, Inc. 16,900 844
*Consolidated Stores Corporation 18,500 373
Cooper Tire & Rubber Company 13,100 268
*Costco Companies, Inc. 36,507 2,635
Dana Corporation 27,800 1,136
Dayton Hudson Corporation 74,100 4,020
Dillard 's , Inc. 18,700 531
Dollar General Corp. 31,175 737
Dow Jones & Company, Inc. 15,800 760
Dun & Bradstreet Corporation 28,800 909
*Federated Department Stores, Inc. 35,600 1,551
Fleetwood Enterprises, Inc. 5,800 202
Ford Motor Company 204,500 12,002
*Fruit of the Loom, Inc. 12,200 169
Gannet Company Inc. 48,000 3,177
<CAPTION>
MARKET VALUE
COMMON STOCK (99.1%) SHARES (000'S)
- -------------------------------------------------------------
<S> <C> <C>
CONSUMER CYCLICAL (CONTINUED)
Gap, Inc. 99,450 $ 5,594
General Motors Corp. 110,400 7,901
Genuine Parts Company 30,200 1,010
Goodyear Tire & Rubber Company 26,500 1,337
H & R Block, Inc. 17,000 765
Harcourt General 12,000 638
*Harrahs Entertainment 17,100 268
Hasbro Inc. 22,250 804
Hilton Hotels Corporation 44,000 842
Home Depot, Inc. 248,096 15,180
Interpublic Group of Cos., Inc. 23,000 1,834
ITT Industries Inc. 20,000 795
J.C. Penney Company, Inc. 42,700 2,002
Jostens, Inc. 6,100 160
*Kmart Corporation 83,100 1,272
Kaufman & Broad Home Corp. 6,700 193
Knight-Ridder, Inc. 13,300 680
*Kohl's Corporation 26,700 1,640
Laidlaw Transportation Limited 55,700 560
The Limited, Inc. 38,500 1,121
Liz Claiborne, Inc. 11,100 350
Lowe's Companies, Inc. 59,400 3,041
Marriott International 42,200 1,224
Masco Corporation 57,400 1,650
Mattel, Inc. 49,388 1,127
May Department Stores Company 39,000 2,355
Maytag Corporation 15,400 959
McGraw-Hill Companies Inc. 16,800 1,712
Meredith Corporation 8,900 337
*Mirage Resorts, Inc. 30,300 453
The New York Times Company 32,000 1,110
Nike, Inc. 48,600 1,971
Nordstrom, Inc. 25,100 871
Omnicom Group Inc. 28,600 1,659
Owens Corning 9,100 322
Pep Boys - Manny, Moe & Jack 10,600 166
Pulte Corporation 7,200 200
*Reebok International Ltd. 9,400 140
Russell Corp. 6,000 122
Sears Roebuck & Co. 66,200 2,814
Service Corporation International 43,400 1,652
Sherwin-Williams Company 29,200 858
Snap-On Inc. 9,950 346
Springs Industries, Inc. 3,100 128
The Stanley Works 15,000 416
*Staples, Inc. 52,600 2,298
The TJX Companies, Inc. 53,500 1,552
Tandy Corporation 16,900 696
Times Mirror Company 14,600 818
*Toys R Us 44,100 744
Tribune Company 20,600 1,359
TRW, Inc. 20,600 1,157
</TABLE>
B-80
<PAGE>
NORTHWESTERN MUTUAL SERIES FUND, INC.
Schedule of Investments
DECEMBER 31, 1998
<TABLE>
<CAPTION>
MARKET VALUE
COMMON STOCK (99.1%) SHARES (000'S)
- -------------------------------------------------------------
CONSUMER CYCLICAL (CONTINUED)
<S> <C> <C>
VF Corporation 20,500 $ 961
Venator Group, Inc. 22,400 144
Wal-Mart Stores, Inc. 377,400 30,734
Whirlpool Corporation 12,800 709
------------
TOTAL 147,273
------------
CONSUMER STAPLES (14.8%)
Adolph Coors Co. 6,100 344
Alberto-Culver Company 9,300 248
Albertson's, Inc. 41,500 2,643
American Stores Co. 46,300 1,710
Anheuser-Busch Companies, Inc. 81,400 5,342
Avon Products, Inc. 44,500 1,969
BESTFOODS 48,500 2,583
*Brown-Forman Corporation 11,600 878
Campbell Soup Company 75,800 4,169
Cardinal Health Inc. 33,750 2,561
CBS Corporation 120,800 3,956
*Clear Channel Communications, Inc. 41,900 2,284
Clorox Company 17,500 2,044
The Coca-Cola Company 416,200 27,833
Coca Cola Enterprises Inc. 68,300 2,442
Colgate-Palmolive Co. 49,900 4,634
Comcast Corp. 62,350 3,659
Conagra, Inc. 82,400 2,596
CVS Corporation 65,700 3,613
Darden Restaurant, Inc. 23,500 423
Deluxe Corp. 13,600 497
Fort James Corporation 37,200 1,488
Fortune Brands, Inc. 29,200 923
*Fred Meyer, Inc. 26,000 1,567
General Mills, Inc. 26,100 2,029
Gillette Company 189,500 9,155
Great Atlantic & Pacific Tea Co.,
Inc. 6,500 193
H.J. Heinz Company 61,150 3,463
Hershey Foods Corp. 24,200 1,505
Kellogg Company 68,700 2,344
Kimberly-Clark Corporation 92,444 5,038
*King World Productions, Inc. 12,400 365
Kroger Company 43,300 2,620
Longs Drug Stores Corp. 6,500 244
McDonald's Corporation 115,600 8,858
*MediaOne Group, Inc. 102,900 4,836
Newell Co. 27,400 1,130
PepsiCo Inc. 248,600 10,177
Philip Morris Companies, Inc. 410,500 21,962
Procter & Gamble Company 226,300 20,664
The Quaker Oats Company 23,000 1,369
RJR Nabisco Holdings Corp. 54,800 1,627
R.R. Donnelley & Sons Company 23,500 1,030
<CAPTION>
MARKET VALUE
COMMON STOCK (99.1%) SHARES (000'S)
- -------------------------------------------------------------
<S> <C> <C>
CONSUMER STAPLES (CONTINUED)
Ralston Purina Group 52,700 $ 1,706
Rite Aid Corporation 43,600 2,161
Rubbermaid, Inc. 25,300 795
*Safeway Inc. 82,100 5,003
Sara Lee Corporation 157,600 4,442
The Seagram Company Ltd. 66,500 2,527
Supervalue, Inc. 20,400 571
Sysco Corporation 57,000 1,564
*Tele Communications, Inc. 88,376 4,888
Time Warner Inc. 202,300 12,555
*Tricon Global Restaurants, Inc. 25,790 1,293
Tupperware 9,600 158
Unilever, N.V. 108,100 8,966
UST Incorporated 31,400 1,095
Viacom, Inc. 60,456 4,474
Walgreen Company 84,000 4,919
Walt Disney Company 345,807 10,374
Wendy's International, Inc. 21,500 469
Winn-Dixie Stores, Inc. 25,100 1,126
Wm. Wrigley Jr. Company 19,600 1,755
------------
TOTAL 249,856
------------
ENERGY (6.2%)
Amerada Hess Corporation 15,400 766
Amoco Company 161,100 9,726
Anadarko Petroleum Corporation 20,300 627
Apache Corporation 16,600 420
Ashland, Inc. 12,900 624
Atlantic Richfield Company 54,200 3,537
Baker Hughes, Inc. 53,630 949
Burlington Resource, Inc. 29,920 1,072
Chevron Corp. 110,500 9,165
Exxon Corporation 411,600 30,098
Halliburton Company 74,100 2,195
Helmerich & Payne, Inc. 8,500 165
Kerr-McGee Corporation 8,100 310
Mobil Corporation 131,900 11,492
Occidental Petroleum Corporation 59,600 1,006
*ORYX Energy Company 17,900 241
PennzEnergy Company 8,100 132
*Pennzoil-Quaker State Company 8,100 120
Phillips Petroleum Company 43,600 1,858
*Rowan Companies, Inc. 14,200 142
Royal Dutch Petroleum Co., ADR 361,900 17,326
Schlumberger Limited 91,900 4,239
Sunoco, Inc. 15,800 570
Texaco Inc. 90,400 4,780
Union Pacific Resource Group 42,392 384
Unocal Corp. 40,700 1,188
USX -Marathon Group 51,900 1,563
------------
TOTAL 104,695
------------
</TABLE>
B-81
<PAGE>
NORTHWESTERN MUTUAL SERIES FUND, INC.
Schedule of Investments
DECEMBER 31, 1998
<TABLE>
<CAPTION>
MARKET VALUE
COMMON STOCK (99.1%) SHARES (000'S)
- -------------------------------------------------------------
FINANCE (15.5%)
<S> <C> <C>
Allstate Corporation 139,828 $ 5,401
American Express Company 77,000 7,873
American General Corporation 42,725 3,332
American International Group, Inc. 177,237 17,126
Aon Corporation 28,500 1,578
Associates First Capital
Corporation 116,910 4,954
Banc One Corporation 197,686 10,094
Bank of New York Company, Inc. 126,100 5,076
BankAmerica Corporation 293,276 17,633
BankBoston Corporation 49,700 1,935
Bankers Trust New York Corporation 16,200 1,384
BB&T Corporation 48,300 1,947
The Bear Stearns Companies, Inc. 19,200 718
Berkshire Hathaway Inc. 44 3,136
Capital One Financial Corporation 11,200 1,288
Charles Schwab Corporation 67,550 3,795
Chase Manhattan Corporation 144,612 9,843
The Chubb Corporation 28,000 1,817
CIGNA Corporation 35,800 2,768
Cincinnati Financial Corporation 28,200 1,033
Citigroup 385,841 19,099
Comerica, Inc. 26,250 1,790
Conseco Inc. 52,737 1,612
Countrywide Credit Industries, Inc. 18,700 939
Federal Home Loan Mortgage Corp. 114,500 7,378
Federal National Mortgage
Association 175,000 12,950
Fifth Third Bankcorp 45,175 3,222
First Union Corporation 163,552 9,946
Fleet Financial Group Inc. 95,860 4,284
Franklin Resources Inc. 42,700 1,366
Golden West Financial Corporation 9,700 889
Hartford Financial Services Group
Inc. 39,400 2,162
Household International Inc. 83,079 3,292
Huntington Bancshares, Inc. 35,740 1,074
J.P. Morgan & Company, Inc. 29,800 3,131
Jefferson-Pilot Corp. 17,950 1,346
KeyCorp 74,200 2,374
Lehman Brothers Holdings, Inc. 20,000 881
Lincoln National Corporation 17,000 1,391
Loews Corp. 19,400 1,906
Marsh & McLennan Companies, Inc. 43,150 2,522
MBIA, Inc. 16,800 1,101
MBNA Corp. 126,875 3,164
Mellon Bank Corporation 44,000 3,025
Mercantile Bancorp 25,700 1,185
Merrill Lynch & Co. 58,800 3,925
<CAPTION>
MARKET VALUE
COMMON STOCK (99.1%) SHARES (000'S)
- -------------------------------------------------------------
<S> <C> <C>
FINANCE (CONTINUED)
MGIC Investment Corp. 19,100 $ 760
Morgan Stanley, Dean Witter,
Discover & Co. 98,905 7,022
National City Corp. 55,700 4,038
Northern Trust Corp. 18,800 1,641
PNC Bank Corp. 50,900 2,755
Progressive Corporation 12,300 2,083
Providian Financial Corporation 24,100 1,808
Provident Companies, Inc. 22,800 946
Regions Financial Corporation 36,100 1,455
Republic New York Corporation 18,200 829
SAFECO, Inc. 23,800 1,022
SLM Holding Corporation 28,300 1,358
St. Paul Companies, Inc. 39,886 1,386
State Street Corporation 27,300 1,899
Summit Bancorp. 29,300 1,280
SunAmerica, Inc. 34,900 2,831
Suntrust Banks Inc. 35,300 2,700
Synovus Financial Corp. 44,450 1,083
Torchmark Corporation 23,700 837
Transamerica Corporation 10,600 1,224
UNUM Corporation 23,300 1,360
U.S. Bancorp 125,431 4,453
Union Planters Corporation 21,500 974
Wachovia Corporation 34,900 3,052
Waddell & Reed Financial, Inc. 5,681 132
Washington Mutual, Inc. 100,036 3,820
Wells Fargo & Company 272,930 10,900
------------
TOTAL 262,333
------------
HEALTHCARE (12.0%)
Abbott Laboratories Inc. 259,900 12,735
Aetna, Inc. 24,363 1,916
Allergan Inc. 11,000 712
*Alza Corporation 14,600 763
American Home Products Corporation 222,100 12,507
*Amgen, Inc. 42,900 4,486
Bausch & Lomb, Inc. 9,400 564
Baxter International, Inc. 48,200 3,100
Becton, Dickinson & Company 41,700 1,780
Biomet, Inc. 18,900 761
*Boston Scientific Corp. 66,100 1,772
Bristol-Myers Squibb Company 167,900 22,467
C.R. Bard, Inc. 9,500 470
Columbia/HCA Healthcare Corporation 108,900 2,695
Eli Lilly & Company 185,900 16,522
Guidant Corporation 25,500 2,811
*HCR Manor Care Inc. 18,300 538
*HEALTHSOUTH Corporation 71,300 1,101
Humana, Inc. 28,200 502
</TABLE>
B-82
<PAGE>
NORTHWESTERN MUTUAL SERIES FUND, INC.
Schedule of Investments
DECEMBER 31, 1998
<TABLE>
<CAPTION>
MARKET VALUE
COMMON STOCK (99.1%) SHARES (000'S)
- -------------------------------------------------------------
HEALTHCARE (CONTINUED)
<S> <C> <C>
Johnson & Johnson 227,000 $ 19,040
Mallinckrodt, Inc. 12,300 379
Medtronic, Inc. 79,200 5,881
Merck & Co., Inc. 201,000 29,685
Pfizer, Inc. 220,500 27,659
Pharmacia & Upjohn Inc. 85,705 4,853
Schering-Plough Corporation 247,800 13,691
*St. Jude Medical, Inc. 14,200 393
*Tenet Healthcare Corp. 52,000 1,365
*United Healthcare Corp. 33,000 1,421
Warner-Lambert Company 138,600 10,421
------------
TOTAL 202,990
------------
TECHNOLOGY (18.5%)
*3Com Corporation 60,600 2,716
Adobe Systems, Inc. 11,300 528
*Advanced Micro Devices, Inc. 24,300 703
*Andrew Corporation 14,537 240
*Apple Computer, Inc. 22,700 929
*Applied Materials, Inc. 61,800 2,638
*Ascend Communications, Inc. 36,400 2,393
Autodesk, Inc. 7,900 337
Automatic Data Processing, Inc. 50,800 4,074
*BMC Software, Inc. 34,800 1,551
*Cabletron Systems, Inc. 27,800 233
*Ceridian Corp. 12,200 852
*Cisco Systems Inc. 262,425 24,356
Compaq Computer Corporation 282,009 11,827
Computer Associates International,
Inc. 94,712 4,037
*Computer Sciences Corp. 26,700 1,720
*Data General Corporation 8,200 135
*Dell Computer Corp. 213,700 15,640
EG&G, Inc. 7,800 217
*EMC Corporation 84,300 7,166
Eastman Kodak Company 54,500 3,924
Electronic Data Systems Corporation 83,100 4,176
Equifax, Inc. 25,000 855
First Data Corporation 75,400 2,389
*Gateway 2000, Inc. 26,300 1,346
*General Instrument Corporation 28,300 960
Harris Corporation 13,500 494
HBO & Company 78,500 2,252
Hewlett-Packard Company 175,500 11,989
IMS Health Incorporated 28,000 2,112
Ikon Office Solutions 22,900 196
Intel Corporation 283,600 33,624
International Business Machines
Corporation 157,500 29,098
*KLA- Tencor Corporation 14,700 638
*LSI Logic Corp. 23,800 384
<CAPTION>
MARKET VALUE
COMMON STOCK (99.1%) SHARES (000'S)
- -------------------------------------------------------------
<S> <C> <C>
TECHNOLOGY (CONTINUED)
Lucent Technologies Inc. 221,980 $ 24,418
*Micron Technology 36,000 1,820
*Microsoft Corporation 415,900 57,680
Motorola, Inc. 101,000 6,167
*National Semiconductor Corporation 27,700 374
Northern Telecom Limited 110,100 5,519
*Novell, Inc. 59,700 1,082
*Oracle Corporation 164,300 7,085
*Parametric Technology Company 45,900 752
Paychex, Inc. 27,500 1,415
*Peoplesoft, Inc. 38,900 737
Perkin-Elmer Corporation 8,300 810
Polaroid Corporation 7,300 136
Raytheon Company- Class B 57,200 3,046
Scientific-Atlanta, Inc. 12,700 290
*Seagate Technology Inc. 41,000 1,240
Shared Medical Systems Corp. 4,500 224
*Silicon Graphics 31,900 411
*Sun Microsystems Inc. 63,900 5,471
Tektronix, Inc. 7,950 239
*Tellabs Inc. 32,700 2,242
Texas Instruments, Inc. 65,900 5,639
*Unisys Corporation 42,900 1,477
W.W. Grainger, Inc. 16,500 687
Xerox Corporation 55,500 6,549
------------
TOTAL 312,239
------------
TRANSPORTATION (.9%)
*AMR Corporation 30,800 1,829
Burlington Northern Santa Fe 79,821 2,694
CSX Corporation 36,900 1,531
Delta Air Lines Inc. 24,100 1,253
*Federal Express Corp. 24,860 2,213
Norfolk Southern Corporation 64,000 2,028
Ryder System, Inc. 12,400 322
Southwest Airlines Co. 56,700 1,272
Union Pacific Corporation 41,700 1,879
*USAir Group, Inc. 14,800 770
------------
TOTAL 15,791
------------
UTILITIES (3.1%)
The AES Corporation 29,700 1,407
Ameren Corporation 23,200 990
American Electric Power Co. Inc. 32,200 1,515
Baltimore Gas & Electric Co. 25,100 775
Carolina Power & Light Company 25,500 1,200
Central & South West Corporation 35,900 985
Cinergy Corporation 26,717 918
Coastal Corp. 35,900 1,254
Columbia Energy Group 14,050 811
Consolidated Edison Co. of New York 39,500 2,089
</TABLE>
B-83
<PAGE>
NORTHWESTERN MUTUAL SERIES FUND, INC.
Schedule of Investments
DECEMBER 31, 1998
<TABLE>
<CAPTION>
MARKET VALUE
COMMON STOCK (99.1%) SHARES (000'S)
- -------------------------------------------------------------
UTILITIES (CONTINUED)
<S> <C> <C>
Consolidated Natural Gas Company 16,200 $ 875
Dominion Resources Inc. 33,200 1,552
DTE Energy Company 24,500 1,050
Duke Energy Corp. 60,965 3,906
Eastern Enterprises 3,800 166
Edison International 59,700 1,664
Enron Corp 55,600 3,173
Entergy Corporation 41,600 1,295
FirstEnergy Corporation 40,000 1,303
FPL Group, Inc. 30,600 1,886
GPU, Inc. 21,600 954
Houston Industries Incorporated 49,962 1,605
New Century Energies, Inc. 18,800 917
*Niagara Mohawk Power Corporation 31,600 510
Nicor, Inc. 8,100 342
Northern States Power Company 25,600 710
ONEOK, Inc. 5,300 191
P P & L Resources, Inc. 25,534 712
PacifiCorp 50,200 1,057
PECO Energy Company 37,600 1,565
Peoples Energy Corporation 5,900 235
PG&E Corp. 64,500 2,032
Public Service Enterprise Group,
Inc. 39,200 1,568
*Sempra Energy 40,602 1,030
Sonat Inc. 18,600 503
Southern Company 117,800 3,424
Texas Utilities Company 47,215 2,204
UNICOM Corp. 36,600 1,411
Williams Companies, Inc. 71,700 2,236
------------
TOTAL 52,020
------------
TOTAL COMMON STOCK 1,675,726
------------
</TABLE>
<TABLE>
<CAPTION>
MARKET VALUE
MONEY MARKET INVESTMENTS (0.7%) PAR (000'S)
- -------------------------------------------------------------
<S> <C> <C>
FEDERAL GOVERNMENT AND AGENCIES (0.1%)
+FHLM, 4.92%, 2/26/99 1,000,000 $ 992
+FHLM, 5.11%, 1/08/99 500,000 500
+FNMA, 4.98%, 3/15/99 100,000 99
------------
TOTAL 1,591
------------
FINANCE (0.5%)
+Asset Securitization, 5.6%,
1/28/99 2,000,000 1,992
+CXC Incorporated, 5.375%, 1/26/99 4,750,000 4,732
+Triple A One Funding, 5.55%,
1/19/99 2,000,000 1,994
------------
TOTAL 8,718
------------
SHORT TERM BUSINESS CREDIT (0.1%)
American Express Credit, 5.0%,
1/8/99 2,200,000 2,198
------------
TOTAL MONEY MARKET INVESTMENTS 12,507
------------
TOTAL INVESTMENTS (99.8%) (COST
$939,455,194)^ 1,688,233
OTHER ASSETS, LESS LIABILITIES
(0.2%) 2,447
------------
TOTAL NET ASSETS (100.0%) $ 1,690,680
------------
</TABLE>
ADR-American Depository Receipt.
* Non-Income Producing.
+Partially held by the custodian in a segregated account as collateral for open
futures positions. Information regarding open futures contracts as of December
31, 1998 is summarized below:
<TABLE>
<CAPTION>
UNREALIZED
NUMBER OF EXPIRATION APPRECIATION
ISSUER CONTRACTS DATE (000'S)
- ----------------------------------------------------------------
<S> <C> <C> <C>
S&P 500 Stock Index 40 3/99 $324
(Total Notional Value at
12/31/98, $12,130,969)
</TABLE>
^At December 31, 1998, the aggregate cost of securities for federal income tax
purposes was $939,535,329 and the net unrealized appreciation of investments
based on that cost was $748,698,082 which is comprised of $769,501,002
aggregate gross unrealized appreciation and $20,802,920 aggregate gross
unrealized depreciation.
The Accompanying Notes are an Integral Part of the Financial Statements
B-84
<PAGE>
BALANCED PORTFOLIO
NORTHWESTERN MUTUAL SERIES FUND, INC.
Schedule of Investments
DECEMBER 31, 1998
<TABLE>
<CAPTION>
SHARES/ MARKET VALUE
BONDS (33.9%) PAR (000'S)
- -------------------------------------------------------------
<S> <C> <C>
CORPORATE BONDS (7.4%)
AEROSPACE AND DEFENSE (0.1%)
Lockheed Corporation, 6.75%,
3/15/03 3,000,000 $ 3,117
------------
BANK HOLDING COMPANIES (0.4%)
Banco Montevideo, 8.4%,
04/30/08 (144A) 6,250,000 5,367
BT Institutional Capital Trust,
7.75%, 12/01/26 (144A) 1,000,000 1,031
Security Capital Industrial
Trust, 7.3%, 5/15/01 8,000,000 8,260
------------
TOTAL 14,658
------------
BANKING & FINANCE (0.7%)
Associates Corp. of North
America, 7.95%, 2/15/10 5,550,000 6,345
Lehman Brothers Holdings, Inc.,
8.8%, 3/01/15 5,000,000 5,740
Morgan Stanley Capital, 7.387%,
5/15/06 6,925,000 7,486
Nations Bank Lease, 7.442%,
11/18/05 2,000,000 2,122
------------
TOTAL 21,693
------------
CABLE & MEDIA (0.2%)
Seagram Joseph E & S, 7.60%,
12/15/28 5,000,000 5,033
------------
CHEMICALS AND ALLIED PRODUCTS (0.3%)
Dow Capital B.V., 8.5%, 6/8/10 8,200,000 9,790
------------
COMMUNICATIONS (0.2%)
Telecommunications, Inc.,
7.375%, 2/15/00 8,000,000 8,182
------------
DURABLE GOODS (0.2%)
Tata Engineering & Locomotive,
7.875%, 07/15/07 (144A) 6,500,000 5,404
------------
ELECTRIC SERVICES (1.8%)
Columbia Gas System Inc.,
7.32%, 11/28/10 7,571,000 8,061
Comed Financing II, 8.5%,
1/15/27 3,000,000 3,334
Dayton Power & Light Company,
8.15%, 1/15/26 5,750,000 6,296
Niagra Mohawk Power, 7.0%,
10/01/00 3,000,000 3,041
Niagra Mohawk Power, 7.25%,
10/01/02 1,500,000 1,537
Ohio Edison Company, 7.375%,
9/15/02 3,665,000 3,880
PECO Energy Company, 7.75%,
3/1/23 8,850,000 9,298
<CAPTION>
SHARES/ MARKET VALUE
BONDS (33.9%) PAR (000'S)
- -------------------------------------------------------------
<S> <C> <C>
ELECTRIC SERVICES (CONTINUED)
Public Service Electric & Gas
Co., 6.875%, 1/1/03 9,000,000 $ 9,458
Southern California Edison Co.,
7.25%, 3/1/26 10,000,000 10,233
Texas Utilities Electric Co.,
7.875%, 3/1/23 4,000,000 4,281
------------
TOTAL 59,419
------------
ENERGY (0.3%)
Barrett Resources Corporation,
7.55%, 2/01/07 5,000,000 4,812
Pemex Finance Ltd., 9.15%,
11/15/18 5,000,000 4,963
------------
TOTAL 9,775
------------
FOREIGN BANKS - BRANCHES & AGENCIES (0.2%)
Fuji Bank, Ltd., 9.87%,
12/31/49 (144A) 7,700,000 5,621
------------
FOOD AND BEVERAGE (0.3%)
Coca Cola Enterprises, Inc.,
8%, 1/4/05 10,000,000 11,278
------------
GENERAL MERCHANDISE STORES (0.3%)
May Department Stores Company,
6.7%, 9/15/28 6,150,000 6,371
May Department Stores Company,
7.45%, 10/15/16 4,000,000 4,480
------------
TOTAL 10,851
------------
INSURANCE (0.1%)
Prudential Insurance Co.,
6.375%, 7/23/06 2,500,000 2,574
------------
LIFE SCIENCES /AGRICULTURE (0.2%)
Monsanto Co., 6.60%, 12/01/28 6,900,000 6,887
------------
MOTION PICTURE (0.5%)
News America Holdings Inc.,
8.45%, 8/1/34 10,000,000 11,595
Time Warner Entertainment Inc.,
8.375%, 3/15/23 3,000,000 3,669
Time Warner Entertainment Inc.,
8.375%, 7/15/33 1,500,000 1,854
------------
TOTAL 17,118
------------
MOTOR VEHICLES (0.4%)
General Motors Acceptance
Corp., 6.625%, 10/1/02 5,000,000 5,169
General Motors Corporation,
8.8%, 3/1/21 6,500,000 7,925
------------
TOTAL 13,094
------------
RAILROAD (0.3%)
Burlington Northern, 7.25%,
8/01/97 5,650,000 6,004
</TABLE>
B-85
<PAGE>
NORTHWESTERN MUTUAL SERIES FUND, INC.
Schedule of Investments
DECEMBER 31, 1998
<TABLE>
<CAPTION>
SHARES/ MARKET VALUE
BONDS (33.9%) PAR (000'S)
- -------------------------------------------------------------
RAILROAD (CONTINUED)
<S> <C> <C>
Union Pacific Corp., 7.25%,
11/01/08 2,250,000 $ 2,412
------------
TOTAL 8,416
------------
RETAILERS (0.3)
LB Mortgage Trust, 8.396%,
6/02/10 9,013,920 10,644
------------
TECHNOLOGY (0.1%)
International Business
Machines, 6.22%, 8/01/27 3,000,000 3,136
------------
TELEPHONE COMMUNICATIONS (0.1%)
Cox Communications, Inc.,
6.80%, 8/01/28 1,000,000 1,047
GTE Corporation, 6.94%, 4/15/28 3,000,000 3,247
------------
TOTAL 4,294
------------
TEXTILES (0.1%)
++Polysindo International
Finance, 11.375%, 6/15/06 6,500,000 2,080
------------
TOBACCO (0.2%)
Philip Morris Companies, 9.25%,
2/15/00 1,000,000 1,041
RJR Nabisco Inc., 8.625%,
12/1/02 4,000,000 4,072
------------
TOTAL 5,113
------------
UTILITY (0.1%)
Atlantic City Electric Company,
6.625%, 8/1/13 4,000,000 4,179
------------
TOTAL CORPORATE BONDS 242,356
------------
GOVERNMENT (DOMESTIC AND FOREIGN) AND AGENCY BONDS (19.3%)
FOREIGN GOVERNMENT BONDS (0.9%)
**Hellenic Republic, 7.50%,
5/20/13 3,000,000,000 11,295
**Hellenic Republic, 8.80%,
6/19/07 1,000,000,000 3,978
Province of Quebec, 6.5%,
1/17/06 7,500,000 7,836
Republic of Korea, 8.875%,
4/15/08 5,650,000 5,801
------------
TOTAL 28,910
------------
FEDERAL GOVERNMENT AND AGENCIES (18.4%)
Federal Farm Credit, 6.51%,
01/07/08 8,000,000 8,000
Federal Home Loan Mortgage
Corporation, 6.5%, 10/01/02 16,995,112 17,269
Federal Home Loan Mortgage
Corporation, 7.0%, 4/06/02 7,250,000 7,420
<CAPTION>
SHARES/ MARKET VALUE
BONDS (33.9%) PAR (000'S)
- -------------------------------------------------------------
<S> <C> <C>
FEDERAL GOVERNMENT AND AGENCIES (CONTINUED)
Federal Home Loan Mortgage
Corporation, 7.5%, 9/29/01 18,184,121 $ 18,669
Federal National Mortgage
Assoc., 5.970%, 10/1/08 1,795,194 1,830
Federal National Mortgage
Assoc., 6.07%, 10/1/08 7,136,835 7,355
Federal National Mortgage
Assoc., 6.240%, 02/01/06 4,905,514 5,060
Federal National Mortgage
Assoc., 6.265%, 10/01/08 5,739,806 5,967
Federal National Mortgage
Assoc., 6.315%, 03/01/06 5,178,356 5,363
Federal National Mortgage
Assoc., 6.34%, 02/01/08 4,235,545 4,414
Federal National Mortgage
Assoc., 6.43%, 06/01/08 7,444,333 7,809
Federal National Mortgage
Assoc., 6.500%, 09/25/05 5,689,005 5,687
Federal National Mortgage
Assoc., 6.750% 11/01/07 3,093,754 3,306
Federal National Mortgage
Assoc., 6.750%, 04/25/18 5,596,921 5,816
Federal National Mortgage
Assoc., 6.750%, 12/25/23 6,500,000 6,705
Federal National Mortgage
Assoc., 6.834%, 07/01/03 3,213,826 3,327
Federal National Mortgage
Assoc., 6.895%, 05/01/06 6,053,149 6,459
Federal National Mortgage
Assoc., 6.900%, 04/01/06 2,440,103 2,603
Federal National Mortgage
Assoc., 6.960%, 10/01/07 4,454,611 4,813
Federal National Mortgage
Assoc., 7.000%, 06/01/03 4,193,589 4,288
Federal National Mortgage
Assoc., 7.000%, 06/25/10 8,070,000 8,038
Federal National Mortgage
Assoc., 7.000%, 04/01/26 18,905,967 19,299
Federal National Mortgage
Assoc., 7.025%, 08/01/05 1,941,557 2,074
Federal National Mortgage
Assoc., 7.045%, 08/01/05 7,622,512 8,139
Federal National Mortgage
Assoc., 7.120%, 11/01/03 982,485 1,038
Federal National Mortgage
Assoc., 7.250%, 05/01/04 1,568,082 1,677
Federal National Mortgage
Assoc., 8.400%, 02/25/09 10,910,000 12,165
Federal National Mortgage
Assoc., 11.000%, 12/01/12 257,640 283
Federal National Mortgage
Assoc., 11.000%, 09/01/17 1,821,316 2,012
</TABLE>
B-86
<PAGE>
NORTHWESTERN MUTUAL SERIES FUND, INC.
Schedule of Investments
DECEMBER 31, 1998
<TABLE>
<CAPTION>
SHARES/ MARKET VALUE
BONDS (33.9%) PAR (000'S)
- -------------------------------------------------------------
FEDERAL GOVERNMENT AND AGENCIES (CONTINUED)
<S> <C> <C>
Federal National Mortgage
Assoc., 11.000%, 12/01/17 331,515 $ 366
Federal National Mortgage
Assoc., 11.000%, 02/01/18 692,895 767
Federal National Mortgage
Assoc., 11.500%, 04/01/18 1,292,786 1,452
Federal National Mortgage
Assoc., 12.000%, 09/01/12 1,925,478 2,170
Federal National Mortgage
Assoc., 12.000%, 12/01/12 368,368 418
Federal National Mortgage
Assoc., 12.000%, 09/01/17 511,219 583
Federal National Mortgage
Assoc., 12.000%, 10/01/17 886,677 1,009
Federal National Mortgage
Assoc., 12.000%, 12/01/17 617,462 703
Federal National Mortgage
Assoc., 12.000%, 02/01/18 656,910 749
Federal National Mortgage
Assoc., 12.500%, 04/01/18 594,592 680
Federal National Mortgage
Assoc., 13.000%, 11/01/12 372,594 432
Federal National Mortgage
Assoc., 13.000%, 11/01/17 656,543 761
Federal National Mortgage
Assoc., 13.000%, 12/01/17 276,407 319
Federal National Mortgage
Assoc., 13.000%, 02/01/18 959,656 1,113
Federal National Mortgage
Assoc., 14.000%, 12/01/17 265,482 316
Government National Mortgage
Assoc., 7.00%, 05/15/23 11,437,145 11,708
Government National Mortgage
Assoc., 7.00%, 06/15/23 740,529 758
Government National Mortgage
Assoc., 7.00%, 07/15/23 1,172,190 1,200
Government National Mortgage
Assoc., 7.00%, 08/15/23 19,805 20
Government National Mortgage
Assoc., 7.00%, 09/15/23 589,936 604
Government National Mortgage
Assoc., 7.00%, 10/15/23 452,921 464
Government National Mortgage
Assoc., 7.00%, 11/15/23 1,629,974 1,668
<CAPTION>
SHARES/ MARKET VALUE
BONDS (33.9%) PAR (000'S)
- -------------------------------------------------------------
<S> <C> <C>
FEDERAL GOVERNMENT AND AGENCIES (CONTINUED)
Government National Mortgage
Assoc., 7.00%, 12/15/27 323,665 $ 331
Government National Mortgage
Assoc., 7.00%, 1/15/28 458,923 469
Government National Mortgage
Assoc., 7.00%, 2/15/28 134,915 138
Government National Mortgage
Assoc., 7.00%, 3/15/28 314,639 322
Government National Mortgage
Assoc., 7.00%, 4/15/28 1,077,935 1,103
Government National Mortgage
Assoc., 7.00%, 5/15/28 1,269,358 1,299
Government National Mortgage
Assoc., 7.00%, 6/15/28 4,387,264 4,489
Government National Mortgage
Assoc., 7.00%, 7/15/28 5,115,423 5,234
Government National Mortgage
Assoc., 7.50%, 1/15/23 828,163 854
Government National Mortgage
Assoc., 7.50%, 6/15/23 464,375 479
Government National Mortgage
Assoc., 7.50%, 6/15/24 10,787 11
Government National Mortgage
Assoc., 7.50%, 7/15/24 431,075 444
Government National Mortgage
Assoc., 7.50%, 8/15/25 17,342 18
Government National Mortgage
Assoc., 7.50%, 9/15/25 325,992 336
Government National Mortgage
Assoc., 7.50%, 11/15/25 16,148 17
Government National Mortgage
Assoc., 7.50%, 12/15/25 574,872 592
Government National Mortgage
Assoc., 7.50%, 1/15/26 18,326 19
</TABLE>
B-87
<PAGE>
NORTHWESTERN MUTUAL SERIES FUND, INC.
Schedule of Investments
DECEMBER 31, 1998
<TABLE>
<CAPTION>
SHARES/ MARKET VALUE
BONDS (33.9%) PAR (000'S)
- -------------------------------------------------------------
FEDERAL GOVERNMENT AND AGENCIES (CONTINUED)
<S> <C> <C>
Government National Mortgage
Assoc., 7.50%, 3/15/26 698,207 $ 719
Government National Mortgage
Assoc., 7.50%, 6/15/26 1,361,455 1,403
Government National Mortgage
Assoc., 7.50%, 9/15/26 18,315 19
Government National Mortgage
Assoc., 7.50%, 10/15/26 113,371 117
Government National Mortgage
Assoc., 7.50%, 12/15/26 908,194 936
Government National Mortgage
Assoc., 7.50%, 1/15/27 59,524 61
Government National Mortgage
Assoc., 7.50%, 2/15/27 583,673 602
Government National Mortgage
Assoc., 7.50%, 3/15/27 49,163 51
Government National Mortgage
Assoc., 7.50%, 4/15/27 1,850,440 1,908
Government National Mortgage
Assoc., 7.50%, 5/15/27 729,156 752
Government National Mortgage
Assoc., 7.50%, 7/15/27 763,952 788
Government National Mortgage
Assoc., 7.50%, 12/15/27 264,108 272
Government National Mortgage
Assoc., 7.50%, 7/15/28 861,165 888
Government National Mortgage
Assoc., 8.00%, 9/15/24 537,069 558
Government National Mortgage
Assoc., 8.00%, 3/15/26 307,611 319
Government National Mortgage
Assoc., 8.00%, 5/15/26 638,699 663
Government National Mortgage
Assoc., 8.00%, 6/15/26 548,036 569
<CAPTION>
SHARES/ MARKET VALUE
BONDS (33.9%) PAR (000'S)
- -------------------------------------------------------------
<S> <C> <C>
FEDERAL GOVERNMENT AND AGENCIES (CONTINUED)
Government National Mortgage
Assoc., 8.00%, 7/15/26 1,450,312 $ 1,505
Government National Mortgage
Assoc., 8.00%, 8/15/26 437,431 454
Government National Mortgage
Assoc., 8.00%, 9/15/26 616,170 640
Government National Mortgage
Assoc., 8.00%, 10/15/26 1,016,409 1,054
Government National Mortgage
Assoc., 8.00%, 12/15/26 491,569 510
Government National Mortgage
Assoc., 8.00%, 4/15/27 1,584,497 1,646
Government National Mortgage
Assoc., 8.00%, 6/15/27 573,766 596
Government National Mortgage
Assoc., 8.00%, 7/15/27 210,499 219
Government National Mortgage
Assoc., 8.00%, 7/20/28 4,226,589 4,370
Government National Mortgage
Assoc., 8.50%, 05/15/22 5,163 6
Government National Mortgage
Assoc., 8.50%, 09/15/22 8,869 9
Government National Mortgage
Assoc., 8.50%, 10/15/22 46,432 50
Government National Mortgage
Assoc., 8.50%, 12/15/22 34,015 36
Government National Mortgage
Assoc., 8.50%, 06/15/24 11,957 13
Government National Mortgage
Assoc., 8.50%, 07/15/24 55,154 59
Government National Mortgage
Assoc., 8.50%, 08/15/24 63,636 68
Government National Mortgage
Assoc., 8.50%, 12/15/24 11,871 13
</TABLE>
B-88
<PAGE>
NORTHWESTERN MUTUAL SERIES FUND, INC.
Schedule of Investments
DECEMBER 31, 1998
<TABLE>
<CAPTION>
SHARES/ MARKET VALUE
BONDS (33.9%) PAR (000'S)
- -------------------------------------------------------------
FEDERAL GOVERNMENT AND AGENCIES (CONTINUED)
<S> <C> <C>
Government National Mortgage
Assoc., 8.50%, 01/15/25 92,498 $ 98
Government National Mortgage
Assoc., 8.50%, 02/15/25 85,321 91
Government National Mortgage
Assoc., 8.50%, 11/15/25 12,506 13
Government National Mortgage
Assoc., 8.50%, 01/15/26 51,599 55
Government National Mortgage
Assoc., 8.50%, 02/15/26 15,602 17
Government National Mortgage
Assoc., 8.50%, 03/15/26 32,899 35
Government National Mortgage
Assoc., 8.50%, 04/15/26 102,232 109
Government National Mortgage
Assoc., 8.50%, 05/15/26 23,193 25
Government National Mortgage
Assoc., 11.00%, 01/15/18 8,777,227 9,909
Rural Housing Trust - Class D,
6.33%, 4/1/26 5,730,281 5,789
U.S. Treasury, 3.625%, 07/15/02 2,537,375 2,520
U.S. Treasury, 3.625%, 04/15/28 6,500,000 6,333
U.S. Treasury, 4.000%, 10/31/00 11,650,000 11,526
U.S. Treasury, 4.750%, 11/15/08 3,000,000 3,023
U.S. Treasury, 5.375%, 01/31/00 3,000,000 3,023
U.S. Treasury, 5.375%, 06/30/03 4,800,000 4,937
U.S. Treasury, 5.500%, 08/15/28 4,820,000 5,052
U.S. Treasury, 5.500%, 02/29/00 150,000,000 151,405
U.S. Treasury, 5.500%, 01/31/03 3,500,000 3,602
U.S. Treasury, 5.500%, 03/31/03 15,500,000 15,965
U.S. Treasury, 5.500%, 02/15/08 175,000 186
U.S. Treasury, 5.625%, 04/30/00 10,500,000 10,628
U.S. Treasury, 5.625%, 12/31/99 5,000,000 5,048
U.S. Treasury, 5.625%, 12/31/02 2,300,000 2,375
U.S. Treasury, 6.000%, 07/31/02 4,000,000 4,169
U.S. Treasury, 6.125%, 08/15/07 9,000,000 9,835
U.S. Treasury, 5.625%, 5/15/08 34,000,000 36,274
U.S. Treasury, 6.375%, 05/15/99 45,600,000 45,871
U.S. Treasury, 7.250%, 08/15/04 6,000,000 6,748
Vendee Mortgage Trust, 6.5%,
6/07/08 4,500,000 4,554
<CAPTION>
SHARES/ MARKET VALUE
BONDS (33.9%) PAR (000'S)
- -------------------------------------------------------------
<S> <C> <C>
FEDERAL GOVERNMENT AND AGENCIES (CONTINUED)
Vendee Mortgage Trust, 0.495%,
6/15/23 82,612,291 $ 1,419
------------
TOTAL 603,807
------------
TOTAL GOVERNMENT BONDS 632,717
------------
MORTGAGE/ASSET BACKED SECURITIES (7.0%)
AUTO-RELATED (0.6%)
Daimler-Benz Vehicle Trust -
Class A, 5.85%, 7/20/03 1,044,452 1,049
Eaglemark Trust - Class A,
6.75%, 11/15/02 2,826,860 2,869
Fleetwood Credit Corporation
Grantor Trust - Class A, 6.4%,
05/15/13 2,379,414 2,421
Team Fleet Financing
Corporation - Class A, 6.65%,
12/15/02 (144A) 11,800,000 11,918
Team Fleet Financing
Corporation - Class A, 7.35%,
5/15/03 (144A) 3,000,000 3,086
------------
TOTAL 21,343
------------
BANKING AND FINANCE (0.0%)
Bankers Trust Co., 6.255%,
1/13/99 227,505 228
------------
CREDIT CARD (0.8%)
Charming Shoppes Master Trust -
Class A, 7%, 4/15/03 5,000,000 5,026
Iroquois Trust - Class A,
6.68%, 11/10/03 (144A) 15,000,000 15,107
Iroquois Trust - Class A,
6.752%, 06/25/07 (144A) 4,750,000 4,795
------------
TOTAL 24,928
------------
COMMERCIAL MORTGAGES (4.0%)
Asset Securitization
Corporation - Class CS1,
1.257%, 11/13/26 IO 24,196,896 868
Asset Securitization
Corporation - Class PS1,
1.367%, 02/14/41 IO 22,468,376 2,315
BankBoston Marine Asset Backed
Trust - Class A6, 6.64%,
08/15/10 7,000,000 7,217
Chase Commercial Mortgage
Securities Corp. - Class A2,
6.6%, 11/19/07 8,500,000 8,849
Chase Commercial Mortgage
Securities Corp. - Class B,
6.6%, 11/19/07 2,500,000 2,557
Citibank Credit Card Master
Trust I - Class A, 0%,
08/15/06 17,000,000 12,355
</TABLE>
B-89
<PAGE>
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Schedule of Investments
DECEMBER 31, 1998
<TABLE>
<CAPTION>
SHARES/ MARKET VALUE
BONDS (33.9%) PAR (000'S)
- -------------------------------------------------------------
COMMERCIAL MORTGAGES (CONTINUED)
<S> <C> <C>
Commercial Mortgage Acceptance
Corporation - Class B, 6.646%,
12/15/07 2,500,000 $ 2,553
Credit Suisse First Boston
Mortgage Securities Corp. -
Class A2, 7.26%, 6/20/07
(144A) 3,169,613 3,333
Credit Suisse First Boston
Mortgage Securities Corp. -
Class B, 7.28%, 6/20/07 (144A) 3,250,000 3,430
Credit Suisse First Boston
Mortgage Securities Corp. -
Class B, 9.5465%, 4/25/25
(144A) 3,000,000 3,418
Credit Suisse First Boston
Mortgage Securities Corp. -
Class D, 7.46%, 05/20/29
(144A) 6,000,000 6,089
Credit Suisse First Boston
Mortgage Securities Corp. -
Class D, 9.5465%, 4/25/25
(144A) 2,047,000 2,254
Criimi Mae Commercial Mortgage
Trust, 7.0%, 11/02/06 6,500,000 6,194
DLJ Mortgage Acceptance
Corporation - Class CF1,
0.718%, 02/18/31 IO 255,065,779 10,205
DLJ Mortgage Acceptance
Corporation - Class S, 0.357%,
10/15/17 (144A) IO 18,782,120 428
DLJ Mortgage Acceptance, 8.10%,
6/18/04 2,417,933 2,626
DLJ Mortgage Acceptance, 8.10%,
6/18/04 1,650,000 1,796
First Union-Lehman Brothers
Commerical Mortgage Trust -
Class C, 7.44%, 04/18/07 2,500,000 2,653
GMAC Commerical Mortgage
Securities, Inc. - Class C,
7.81%, 10/15/11 (144A) 7,000,000 7,057
Kmart CMBS Financing, Inc. -
Class C, 6.2466%, 03/01/07
(144A) 3,500,000 3,494
Kmart CMBS Financing, Inc. -
Class D, 6.6466%, 03/01/07
(144A) 4,500,000 4,486
Merrill Lynch Mortgage
Investors, Inc. - Class C,
7.12%, 06/18/29 6,000,000 6,253
<CAPTION>
SHARES/ MARKET VALUE
BONDS (33.9%) PAR (000'S)
- -------------------------------------------------------------
<S> <C> <C>
COMMERCIAL MORTGAGES (CONTINUED)
Merrill Lynch Mortgage
Investors, Inc. - Class C,
8.9726%, 11/25/20 5,845,000 $ 5,858
Merrill Lynch Mortgage
Investors, Inc. - Class E,
8.3346% , 06/25/22 (144A) 2,000,000 1,947
Midland Realty Acceptance Corp.
- Class AEC, 1.389%, 1/25/29
(144A) IO 27,860,189 1,838
Nomura Asset Securities Corp. -
Class A2, 6.9918%, 03/17/28 15,000,000 15,307
Nomura Asset Securities Corp. -
Class A4, 7.5718%, 03/17/28 2,200,000 2,121
Red Mountain Funding LLC -
Class E, 7.365%, 01/15/19
(144A) 1,500,000 1,358
Red Mountain Funding LLC -
Class F, 7.471%, 01/15/19
(144A) 1,800,000 1,460
------------
TOTAL 130,319
------------
FRANCHISE LOAN RECEIVABLES (0.4%)
EMAC Owner Trust - Class A2,
6.38%, 04/15/07 (144A) 6,000,000 5,983
EMAC Owner Trust, 1.378%,
01/15/25 IO (144A) 39,494,414 2,863
Global Franchise Trust, 6.349%,
04/10/04 4,798,408 4,876
------------
TOTAL 13,722
------------
HOME EQUITY LOAN (0.1%)
Amresco Residential Securities
- Class A2, 6.245%, 4/25/22 2,500,000 2,508
------------
MANUFACTURED HOUSING (0.1%)
Vanderbilt Mortgage and
Finance, Inc. - Class 1A4,
7.19%, 02/07/14 2,500,000 2,599
------------
OTHER ASSET BACKED (0.5%)
FMAC Loan Receivables Trust -
Class A, 6.20%, 09/15/20
(144A) 5,439,364 5,451
Harley Davidson Eaglemark,
5.87%, 04/15/04 1,900,000 1,924
Heilig-Meyers Master Trust -
Class A, 6.125%, 01/20/07
(144A) 6,500,000 6,496
Nations Credit Grantor Trust -
Class A1, 6.35%, 04/15/14 2,090,918 2,118
</TABLE>
B-90
<PAGE>
NORTHWESTERN MUTUAL SERIES FUND, INC.
Schedule of Investments
DECEMBER 31, 1998
<TABLE>
<CAPTION>
SHARES/ MARKET VALUE
BONDS (33.9%) PAR (000'S)
- -------------------------------------------------------------
OTHER ASSET BACKED (CONTINUED)
<S> <C> <C>
Newcourt Equipment - Class B,
6.764%, 09/20/04 (144A) 1,378,694 $ 1,377
Newcourt Equipment - Class C,
7.734%, 09/20/04 (144A) 1,102,955 1,100
------------
TOTAL 18,466
------------
RESIDENTIAL MORTGAGES (0.3%)
BCF L L C Mortgage Pass Thru
Certificate - Class B3, 7.75%,
3/25/37 (144A) 4,874,004 4,804
Blackrock Capital Finance LP,
Class B3, 7.25%, 11/25/28
(144A) 5,871,575 5,306
------------
TOTAL 10,110
------------
UTILITY (0.2%)
Comed Transitional, 5.74%,
12/16/08 5,500,000 5,532
------------
TOTAL MORTGAGE/ASSET BACKED
SECURITIES 229,755
------------
MUNICIPAL BONDS (0.2%)
New Jersey Economic Development
Authority, 0.00%, 2/15/25 17,000,000 3,199
New Jersey Economic Development
Authority, 0.00%, 2/15/26 11,000,000 1,940
New Jersey Economic Development
Authority, 7.425%, 2/15/29 2,250,000 2,641
------------
TOTAL MUNICIPAL BONDS 7,780
------------
TOTAL BONDS 1,112,608
------------
<CAPTION>
COMMON STOCK (50.0%)
- -------------------------------------------------------------
<S> <C> <C>
BASIC MATERIALS (1.6%)
Air Products & Chemicals, Inc. 38,300 1,532
Alcan Aluminum Limited 37,600 1,018
Allegheny Teledyne, Inc. 32,562 665
Aluminum Co. of America 30,900 2,304
Archer Daniels Midland Company 99,056 1,703
ASARCO, Inc. 6,600 99
Barrick Gold Corporation 61,700 1,203
Battle Mountain Gold Company 38,000 157
Bemis Company, Inc. 8,800 334
*Bethlehem Steel Corporation 21,400 179
B.F. Goodrich Company 12,200 438
Boise Cascade Corporation 9,300 288
Champion International 15,800 640
Cyprus Amax Minerals Co. 15,500 155
Dow Chemical Company 37,000 3,365
<CAPTION>
SHARES/ MARKET VALUE
COMMON STOCK (50.0%) PAR (000'S)
- -------------------------------------------------------------
<S> <C> <C>
BASIC MATERIALS (CONTINUED)
E.I. du Pont de Nemours &
Company 187,100 $ 9,928
Eastman Chemical Company 13,075 585
Ecolab, Inc. 21,400 774
Engelhard Corp. 23,900 466
*FMC Corporation 5,700 319
Freeport-McMoRan Copper & Gold,
Inc. 29,700 310
Georgia Pacific Group 15,400 902
Great Lakes Chemical 9,800 392
Hercules, Inc. 15,600 427
Homestake Mining Company 39,500 363
Inco Limited 27,400 289
International Flavors &
Fragrances, Inc. 17,700 782
International Paper Company 50,800 2,276
Louisiana Pacific Corporation 18,100 331
Mead Corp. 17,200 504
Monsanto Company 99,300 4,717
Morton International, Inc. 21,500 527
Nalco Chemical Company 10,900 338
Newmont Mining Corporation 27,630 499
Nucor Corp. 14,600 631
Phelps Dodge Corporation 9,700 493
Pioneer Hi-Bred International 39,900 1,077
Placer Dome, Inc. 41,300 475
Potlatch Corporation 4,800 177
PPG Industries, Inc. 29,300 1,707
Praxair 26,100 920
Reynolds Metals Company 11,900 627
Rohm and Haas Company 29,500 889
Sigma-Aldrich Corp. 16,600 488
Temple-Inland Inc. 9,200 546
Union Camp Corporation 11,500 776
Union Carbide Corporation 22,400 952
USX-U.S. Steel Group, Inc. 14,600 336
W.R. Grace & Co. 12,500 196
Westvaco Corporation 16,750 449
Weyerhaeuser Company 32,900 1,672
Willamette Industries, Inc. 18,400 616
Worthington Industries 16,000 200
------------
TOTAL 52,036
------------
CAPITAL GOODS (4.0%)
Aeroquip-Vickers, Inc. 4,700 141
AlliedSignal, Inc. 92,800 4,112
AMP, Inc. 36,169 1,883
Avery Dennison Corporation 19,300 870
Ball Corporation 5,000 229
Boeing Company 167,018 5,449
Briggs & Stratton Corporation 4,000 200
Browning-Ferris Industries,
Inc. 28,700 816
</TABLE>
B-91
<PAGE>
NORTHWESTERN MUTUAL SERIES FUND, INC.
Schedule of Investments
DECEMBER 31, 1998
<TABLE>
<CAPTION>
SHARES/ MARKET VALUE
COMMON STOCK (50.0%) PAR (000'S)
- -------------------------------------------------------------
CAPITAL GOODS (CONTINUED)
<S> <C> <C>
Case Corporation 12,300 $ 268
Caterpillar, Inc. 60,300 2,774
Cooper Industries, Inc. 17,100 815
Corning, Inc. 38,300 1,724
Crane Co. 11,325 342
Crown Cork & Seal Company, Inc. 20,600 635
Cummins Engine Company, Inc. 6,400 227
Danaher Corporation 22,100 1,200
Deere & Company 40,500 1,342
Dover Corporation 36,900 1,351
Eaton Corporation 11,800 834
Emerson Electric Co. 72,800 4,555
Fluor Corporation 13,000 553
Foster Wheeler Corporation 6,700 88
General Dynamics Corporation 20,900 1,225
General Electric Company 537,800 54,889
Harnischfeger Industries, Inc. 7,900 80
Honeywell, Inc. 20,900 1,574
Illinois Tool Works, Inc. 41,300 2,395
Ingersoll-Rand Company 27,350 1,284
Johnson Controls, Inc. 14,000 826
Lockheed Martin Corporation 32,361 2,743
McDermott International, Inc. 9,800 242
Milacron Inc 6,500 125
Millipore Corp. 7,200 205
Minnesota Mining &
Manufacturing Co. 66,800 4,751
Moore Corporation Ltd. 14,573 160
NACCO Industries, Inc. 1,300 120
National Service Industries,
Inc. 6,900 262
*Navistar International Corp. 11,070 315
Northrop Grumman Corporation 11,400 834
*Owens-Illinois, Inc. 25,700 787
PACCAR, Inc. 12,890 530
Pall Corporation 20,466 518
Parker-Hannifin Corporation 18,300 599
Pitney Bowes, Inc. 45,400 2,999
Raychem Corp. 13,100 423
Rockwell International Corp. 31,600 1,535
*Sealed Air Corporation 13,786 704
Tenneco, Inc. 28,000 954
Textron, Inc. 27,100 2,058
*Thermo Electron Corporation 27,400 464
Thomas & Betts Corporation 9,400 407
Timken Company 10,300 194
Tyco International Ltd. 106,459 8,031
United Technologies Corp. 37,700 4,100
<CAPTION>
SHARES/ MARKET VALUE
COMMON STOCK (50.0%) PAR (000'S)
- -------------------------------------------------------------
<S> <C> <C>
CAPITAL GOODS (CONTINUED)
Waste Management, Inc. 94,497 $ 4,406
------------
TOTAL 131,147
------------
CONSUMER SERVICES (4.2%)
*Airtouch Communications, Inc. 94,900 6,845
ALLTEL Corporation 45,300 2,710
Ameritech Corporation 182,200 11,547
AT&T Corporation 298,600 22,470
Bell Atlantic Corporation 256,780 14,588
BellSouth Corporation 325,200 16,219
Frontier Corporation 28,300 962
GTE Corporation 159,300 10,743
*MCI WorldCom, Inc. 293,589 21,065
*Nextel Communications, Inc. 47,200 1,115
SBC Communications, Inc. 323,574 17,352
Sprint Corporation 71,100 5,981
*Sprint PCS 69,350 1,604
US WEST, Inc. 82,905 5,358
------------
TOTAL 138,559
------------
CONSUMER CYCLICAL (4.4%)
American Greetings Corp. 11,700 480
Armstrong World Industries,
Inc. 6,600 398
*AutoZone, Inc. 25,200 830
Black & Decker Corporation 14,500 813
Brunswick Corporation 16,400 406
*Cendant Corporation 141,854 2,704
Centex Corporation 9,900 446
Circuit City Stores, Inc. 16,500 824
*Consolidated Stores
Corporation 18,100 365
Cooper Tire & Rubber Company 12,800 262
*Costco Companies, Inc. 35,751 2,581
Dana Corporation 27,265 1,114
Dayton Hudson Corporation 72,600 3,939
Dillard's, Inc. 18,300 519
Dollar General Corp. 30,575 722
Dow Jones & Company, Inc. 15,500 746
Dun & Bradstreet Corporation 28,200 890
*Federated Department Stores,
Inc. 34,900 1,520
Fleetwood Enterprises, Inc. 5,700 198
Ford Motor Company 200,300 11,755
*Fruit of the Loom, Inc. 11,900 164
Gannett Company, Inc. 47,000 3,110
Gap, Inc. 97,450 5,482
General Motors Corp. 108,100 7,736
Genuine Parts Company 29,575 989
Goodyear Tire & Rubber Company 26,000 1,311
</TABLE>
B-92
<PAGE>
NORTHWESTERN MUTUAL SERIES FUND, INC.
Schedule of Investments
DECEMBER 31, 1998
<TABLE>
<CAPTION>
SHARES/ MARKET VALUE
COMMON STOCK (50.0%) PAR (000'S)
- -------------------------------------------------------------
CONSUMER CYCLICAL (CONTINUED)
<S> <C> <C>
H & R Block, Inc. 16,600 $ 747
Harcourt General 11,700 622
*Harrahs Entertainment 16,700 262
Hasbro, Inc. 21,750 786
Hilton Hotels Corporation 43,100 824
Home Depot, Inc. 242,898 14,862
Interpublic Group of Cos., Inc. 22,500 1,794
ITT Industries, Inc. 19,600 779
J.C. Penney Company, Inc. 41,800 1,959
Jostens, Inc. 6,100 160
*Kmart Corporation 81,400 1,246
Kaufman & Broad Home Corp. 6,600 190
Knight-Ridder, Inc. 13,000 665
*Kohl's Corporation 26,100 1,604
Laidlaw Transportation Limited 54,500 548
The Limited Inc. 37,700 1,098
Liz Claiborne, Inc. 10,900 344
Lowe's Companies, Inc. 58,100 2,974
Marriott International 41,300 1,198
Masco Corporation 56,200 1,616
Mattel, Inc. 48,360 1,103
May Department Stores Company 38,200 2,306
Maytag Corporation 15,100 940
McGraw-Hill Companies, Inc. 16,400 1,671
Meredith Corporation 8,700 330
*Mirage Resorts, Inc. 29,700 444
The New York Times Company 31,300 1,086
Nike, Inc. 47,600 1,931
Nordstrom, Inc. 24,600 853
Omnicom Group Inc. 28,100 1,630
Owens Corning 8,900 315
Pep Boys-Manny, Moe & Jack 10,500 165
Pulte Corporation 7,100 197
*Reebok International Ltd. 9,300 138
Russell Corp. 6,000 122
Sears Roebuck & Co. 64,900 2,758
Service Corporation
International 42,500 1,618
Sherwin-Williams Company 28,600 840
Snap-On, Inc. 9,750 339
Springs Industries, Inc. 3,100 128
The Stanley Works 14,700 408
*Staples, Inc. 51,500 2,250
The TJX Companies, Inc. 52,400 1,520
Tandy Corporation 16,600 684
Times Mirror Company 14,300 801
*Toys R Us 43,200 729
Tribune Company 20,200 1,333
TRW, Inc. 20,200 1,135
VF Corporation 20,100 942
<CAPTION>
SHARES/ MARKET VALUE
COMMON STOCK (50.0%) PAR (000'S)
- -------------------------------------------------------------
<S> <C> <C>
CONSUMER CYCLICAL (CONTINUED)
Venator Group, Inc. 22,400 $ 144
Wal-Mart Stores, Inc. 369,500 30,091
Whirlpool Corporation 12,600 698
------------
TOTAL 144,231
------------
CONSUMER STAPLES (7.4%)
Adolph Coors Co. 6,000 339
Alberto-Culver Company 9,100 243
Albertson's, Inc. 40,600 2,586
American Stores Co. 45,400 1,677
Anheuser-Busch Companies, Inc. 79,700 5,230
Avon Products, Inc. 43,500 1,925
BESTFOODS 47,500 2,529
*Brown-Forman Corporation 11,400 863
Campbell Soup Company 74,200 4,081
Cardinal Health, Inc. 33,100 2,511
CBS Corporation 118,300 3,874
*Clear Channel Communications,
Inc. 41,000 2,235
Clorox Company 17,200 2,009
The Coca Cola Company 407,500 27,252
Coca Cola Enterprises Inc . 66,900 2,392
Colgate-Palmolive Co. 48,900 4,542
Comcast Corp. 61,050 3,583
Conagra, Inc. 80,700 2,542
CVS Corporation 64,400 3,542
Darden Restaurant, Inc. 23,000 414
Deluxe Corp. 13,400 490
Fort James Corporation 36,500 1,460
Fortune Brands, Inc. 28,600 904
General Mills, Inc. 25,600 1,990
Gillette Company 185,600 8,967
Great Atlantic & Pacific Tea
Co., Inc. 6,300 187
H.J. Heinz Company 59,850 3,389
Hershey Foods Corporation 23,700 1,474
Kellogg Company 67,300 2,297
Kimberly-Clark Corporation 90,432 4,929
*King World Productions, Inc. 12,100 356
*Kroger Co. 42,400 2,565
Longs Drug Stores Corp. 6,400 240
Fred Meyer, Inc. 25,500 1,536
McDonald's Corporation 113,200 8,674
*MediaOne Group, Inc. 100,700 4,733
Newell Co. 26,900 1,110
PepsiCo, Inc. 243,400 9,964
Philip Morris Companies, Inc. 402,000 21,507
Procter & Gamble Company 221,700 20,244
The Quaker Oats Company 22,500 1,339
R.R. Donnelley & Sons Company 23,000 1,008
</TABLE>
B-93
<PAGE>
NORTHWESTERN MUTUAL SERIES FUND, INC.
Schedule of Investments
DECEMBER 31, 1998
<TABLE>
<CAPTION>
SHARES/ MARKET VALUE
COMMON STOCK (50.0%) PAR (000'S)
- -------------------------------------------------------------
CONSUMER STAPLES (CONTINUED)
<S> <C> <C>
Ralston Purina Group 51,600 $ 1,670
Rite Aid Corporation 42,700 2,115
RJR Nabisco Holdings Corp. 53,700 1,593
Rubbermaid, Inc. 24,800 780
*Safeway, Inc. 80,400 4,898
Sara Lee Corporation 154,400 4,351
The Seagram Company Ltd. 65,200 2,478
Supervalue, Inc. 20,000 560
Sysco Corporation 55,800 1,530
*Tele Communications, Inc. 86,514 4,784
Time Warner, Inc. 198,100 12,295
*Tricon Global Restaurants,
Inc. 25,190 1,263
Tupperware 9,500 156
Unilever, N.V. 105,800 8,775
UST, Incorporated 30,700 1,071
Viacom, Inc. 59,156 4,378
Walt Disney Company 338,608 10,158
Walgreen Company 82,200 4,814
Wendy's International, Inc. 21,000 458
Winn-Dixie Stores, Inc. 24,600 1,104
Wm. Wrigley Jr. Company 19,200 1,720
------------
TOTAL 244,683
------------
ENERGY (3.1%)
Amerada Hess Corporation 15,000 746
Amoco Company 157,700 9,521
Anadarko Petroleum Corporation 19,800 611
Apache Corporation 16,300 413
Ashland, Inc. 12,600 610
Atlantic Richfield Company 53,100 3,465
Baker Hughes, Inc. 52,540 929
Burlington Resource, Inc. 29,375 1,052
Chevron Corp. 108,200 8,974
Exxon Corporation 403,000 29,469
Halliburton Company 72,500 2,148
Helmerich & Payne, Inc. 8,300 161
Kerr-McGee Corporation 7,900 302
Mobil Corporation 129,200 11,257
Occidental Petroleum
Corporation 58,400 986
*ORYX Energy Company 17,600 237
PennzEnergy Company 7,900 129
*Pennzoil-Quaker State Company 7,900 117
Phillips Petroleum Company 42,700 1,820
*Rowan Companies, Inc. 14,100 141
Royal Dutch Petroleum Co., ADR 354,400 16,967
Schlumberger Limited 90,000 4,151
Sunoco, Inc. 15,500 559
Texaco, Inc. 88,600 4,685
<CAPTION>
SHARES/ MARKET VALUE
COMMON STOCK (50.0%) PAR (000'S)
- -------------------------------------------------------------
<S> <C> <C>
ENERGY (CONTINUED)
Union Pacific Resource Group 41,458 $ 376
Unocal Corp. 39,900 1,165
USX-Marathon Group 50,800 1,530
------------
TOTAL 102,521
------------
FINANCE (7.8%)
Allstate Corporation 136,894 5,288
American Express Company 75,400 7,710
American General Corporation 41,803 3,260
American International Group,
Inc. 173,562 16,770
Aon Corporation 27,950 1,548
Associates First Capital
Corporation 114,438 4,849
Banc One Corporation 193,545 9,883
Bank of New York Company, Inc. 123,500 4,971
BankAmerica Corporation 287,195 17,268
BankBoston Corporation 48,600 1,892
Bankers Trust New York
Corporation 15,900 1,358
BB&T Corporation 47,300 1,907
The Bear Stearns Companies,
Inc. 18,800 703
Berkshire Hathaway Inc 44 3,063
Capital One Financial
Corporation 10,900 1,254
Charles Schwab Corporation 66,225 3,721
Chase Manhattan Corporation 141,548 9,634
The Chubb Corporation 27,400 1,778
CIGNA Corporation 35,100 2,714
Cincinnati Financial
Corporation 27,600 1,011
Citigroup 377,888 18,705
Comerica, Inc. 25,700 1,752
Conseco, Inc. 51,670 1,579
Countrywide Credit Industries,
Inc. 18,400 923
Federal Home Loan Mortgage
Corp. 112,200 7,230
Federal National Mortgage
Corporation 171,400 12,684
Fifth Third Bancorp 44,275 3,157
First Union Corporation 160,186 9,741
Fleet Financial Group, Inc. 93,838 4,193
Franklin Resources, Inc. 41,800 1,338
Golden West Financial
Corporation 9,500 871
Hartford Financial Services
Group Inc. 38,600 2,118
Household International, Inc. 81,359 3,224
Huntington Bancshares, Inc. 34,980 1,052
</TABLE>
B-94
<PAGE>
NORTHWESTERN MUTUAL SERIES FUND, INC.
Schedule of Investments
DECEMBER 31, 1998
<TABLE>
<CAPTION>
SHARES/ MARKET VALUE
COMMON STOCK (50.0%) PAR (000'S)
- -------------------------------------------------------------
FINANCE (CONTINUED)
<S> <C> <C>
J.P. Morgan & Company, Inc. 29,200 $ 3,068
Jefferson-Pilot Corp. 17,575 1,318
KeyCorp 72,700 2,326
Lehman Brothers Holdings, Inc. 19,600 864
Lincoln National Corporation 16,600 1,358
Loews Corp. 19,000 1,867
Marsh & McLennan Companies,
Inc. 42,300 2,472
MBIA, Inc. 16,400 1,075
MBNA Corp. 124,232 3,098
Mellon Bank Corporation 43,100 2,963
Mercantile Bancorp 25,100 1,158
Merrill Lynch & Co. 57,600 3,845
MGIC Investment Corp. 18,700 744
Morgan Stanley, Dean Witter
Discover & Co. 96,780 6,871
National City Corp. 54,500 3,951
Northern Trust Corp. 18,400 1,607
PNC Bank Corp. 49,800 2,695
Progressive Corporation 12,000 2,033
Provident Companies, Inc. 22,300 925
Providian Financial Corporation 23,550 1,766
Regions Financial Corp 35,400 1,427
Republic New York Corporation 17,800 811
SAFECO, Inc. 23,300 1,000
SLM Holding Corporation 27,700 1,330
St. Paul Companies, Inc. 39,006 1,355
State Street Corporation 26,700 1,857
Summit Bancorp 28,700 1,254
SunAmerica, Inc. 34,200 2,774
Suntrust Banks, Inc. 34,500 2,639
Synovus Financial Corp. 43,550 1,062
Torchmark Corporation 23,200 819
Transamerica Corporation 10,300 1,190
UNUM Corporation 22,900 1,337
U.S. Bancorp 122,787 4,359
Union Planters Corporation 21,000 952
Wachovia Corporation 34,200 2,990
Waddell & Reed Financial, Inc. 5,706 133
Washington Mutual, Inc. 98,014 3,743
Wells Fargo & Company 267,260 10,674
------------
TOTAL 256,859
------------
HEALTHCARE (6.1%)
Abbott Laboratories, Inc. 254,500 12,471
Aetna, Inc. 23,893 1,879
Allergan, Inc. 10,800 699
*Alza Corporation 14,300 747
American Home Products
Corporation 217,500 12,248
*Amgen, Inc. 42,000 4,392
Bausch & Lomb, Inc. 9,200 552
<CAPTION>
SHARES/ MARKET VALUE
COMMON STOCK (50.0%) PAR (000'S)
- -------------------------------------------------------------
<S> <C> <C>
HEALTHCARE (CONTINUED)
Baxter International, Inc. 47,200 $ 3,036
Becton, Dickinson & Company 40,900 1,746
Biomet, Inc. 18,500 745
*Boston Scientific Corp. 64,700 1,735
Bristol-Myers Squibb Company 164,400 21,999
C.R. Bard, Inc 9,300 460
Columbia/HCA Healthcare
Corporation 106,650 2,640
Eli Lilly & Company 182,000 16,175
Guidant Corporation 24,900 2,745
*HCR Manor Care Inc. 17,900 526
*HEALTHSOUTH Corporation 69,900 1,079
Humana, Inc. 27,600 492
Johnson & Johnson 222,300 18,645
Mallinckrodt, Inc. 12,100 373
Medtronic, Inc. 77,600 5,762
Merck & Co., Inc. 196,800 29,065
Pfizer, Inc 216,000 27,095
Pharmacia & Upjohn, Inc. 83,930 4,753
Schering-Plough Corporation 242,600 13,404
*St. Jude Medical, Inc. 13,950 386
*Tenet Healthcare Corp. 50,900 1,336
*United Healthcare Corp. 32,300 1,391
Warner-Lambert Company 135,700 10,203
------------
TOTAL 198,779
------------
TECHNOLOGY (9.3%)
*3Com Corporation 59,300 2,657
Adobe Systems, Inc. 11,100 519
*Advanced Micro Devices, Inc. 23,800 689
*Andrew Corporation 14,262 235
*Apple Computer, Inc. 22,300 913
*Applied Materials, Inc. 60,500 2,583
*Ascend Communications, Inc. 35,700 2,347
Autodesk, Inc. 7,800 333
Automatic Data Processing, Inc. 49,800 3,993
*BMC Software Inc 34,100 1,520
*Cabletron Systems, Inc. 27,200 228
*Ceridian Corp. 12,000 838
*Cisco Systems, Inc. 257,000 23,853
Compaq Computer Corporation 276,167 11,582
Computer Associates
International, Inc. 92,812 3,956
*Computer Sciences Corp. 26,100 1,682
*Data General Corporation 8,200 135
*Dell Computer Corp. 209,200 15,311
EG&G, Inc. 7,600 211
*EMC Corporation 82,600 7,021
Eastman Kodak Company 53,400 3,845
Electronic Data Systems
Corporation 81,400 4,090
Equifax, Inc. 24,500 838
First Data Corporation 73,800 2,339
</TABLE>
B-95
<PAGE>
NORTHWESTERN MUTUAL SERIES FUND, INC.
Schedule of Investments
DECEMBER 31, 1998
<TABLE>
<CAPTION>
SHARES/ MARKET VALUE
COMMON STOCK (50.0%) PAR (000'S)
- -------------------------------------------------------------
TECHNOLOGY (CONTINUED)
<S> <C> <C>
*Gateway 2000, Inc. 25,700 $ 1,316
*General Instrument Corporation 27,700 940
Harris Corporation 13,200 483
HBO & Company 76,900 2,206
Hewlett-Packard Company 171,800 11,736
IMS Health Incorporated 27,500 2,075
Ikon Office Solutions 22,400 192
Intel Corporation 277,700 32,925
International Business Machines
Corporation 154,200 28,488
*KLA-Tencor Corporation 14,400 625
*LSI Logic Corp. 23,300 376
Lucent Technologies, Inc. 217,386 23,912
*Micron Technology 35,200 1,780
*Microsoft Corporation 407,300 56,487
Motorola, Inc. 98,900 6,039
*National Semiconductor
Corporation 27,100 366
Northern Telecom Limited 107,760 5,401
*Novell, Inc. 58,400 1,059
*Oracle Corporation 160,850 6,937
*Parametric Technology Company 45,000 737
Paychex, Inc 27,000 1,389
*Peoplesoft, Inc 38,100 722
Perkin-Elmer Corporation 8,100 790
Polaroid Corporation 7,300 136
Raytheon Company - Class B 56,000 2,982
Scientific-Atlanta, Inc. 12,400 283
*Seagate Technology Inc. 40,200 1,216
Shared Medical Systems Corp. 4,400 219
*Silicon Graphics 31,200 402
*Sun Microsystems, Inc. 62,600 5,360
Tektronix, Inc. 7,800 234
*Tellabs, Inc. 32,000 2,194
Texas Instruments, Inc. 64,500 5,519
*Unisys Corporation 42,000 1,446
W.W Grainger, Inc. 16,100 670
Xerox Corporation 54,300 6,407
------------
TOTAL 305,767
------------
TRANSPORTATION (0.5%)
*AMR Corporation 30,100 1,787
Burlington Northern Santa Fe 78,199 2,639
CSX Corporation 36,100 1,498
Delta Air Lines, Inc. 23,600 1,227
*Federal Express Corp 24,420 2,173
Norfolk Southern Corporation 62,600 1,984
Ryder System, Inc. 12,100 315
Southwest Airlines Co. 55,450 1,244
Union Pacific Corporation 40,900 1,843
*USAir Group, Inc 14,400 749
------------
TOTAL 15,459
------------
<CAPTION>
SHARES/ MARKET VALUE
COMMON STOCK (50.0%) PAR (000'S)
- -------------------------------------------------------------
<S> <C> <C>
UTILITIES (1.6%)
The AES Corporation 29,100 $ 1,379
Ameren Corporation 22,700 969
American Electric Power Co.,
Inc. 31,600 1,487
Baltimore Gas & Electric Co. 24,600 760
Carolina Power & Light Company 25,000 1,177
Central & South West
Corporation 35,100 963
Cinergy Corporation 26,205 901
Coastal Corp. 35,100 1,226
Columbia Energy Group 13,800 797
Consolidated Edison Co. of New
York 38,700 2,046
Consolidated Natural Gas
Company 15,800 853
Dominion Resources, Inc. 32,500 1,519
DTE Energy Company 24,000 1,029
Duke Energy Corp. 59,671 3,823
Eastern Enterprises 3,700 162
Edison International 58,500 1,631
Enron Corp. 54,500 3,110
Entergy Corporation 40,800 1,270
FirstEnergy Corporation 39,200 1,276
FPL Group, Inc. 30,000 1,849
GPU, Inc. 21,100 932
Houston Industries,
Incorporated 48,926 1,572
New Century Energies, Inc. 18,400 897
*Niagara Mohawk Power
Corporation 31,000 500
Nicor, Inc. 7,900 334
Northern States Power Company 25,000 694
ONEOK, Inc. 5,200 188
P P & L Resources, Inc. 25,033 698
PacifiCorp 49,100 1,034
PECO Energy Company 36,800 1,532
Peoples Energy Corporation 5,800 231
PG&E Corp. 63,100 1,988
Public Service Enterprise
Group, Inc. 38,300 1,532
*Sempra Energy 39,759 1,009
Sonat, Inc. 18,200 493
Southern Company 115,300 3,351
Texas Utilities Company 46,195 2,157
UNICOM Corp. 35,900 1,384
Williams Companies, Inc. 70,200 2,188
------------
TOTAL 50,941
------------
TOTAL COMMON STOCK 1,640,982
------------
</TABLE>
B-96
<PAGE>
NORTHWESTERN MUTUAL SERIES FUND, INC.
Schedule of Investments
DECEMBER 31, 1998
<TABLE>
<CAPTION>
SHARES/ MARKET VALUE
SHORT TERM INVESTMENTS (15.7%) PAR (000'S)
- -------------------------------------------------------------
MONEY MARKET INVESTMENTS (13.5%)
<S> <C> <C>
AUTOMOBILE REPAIR, SERVICES, & PARKING (0.7%)
+PHH Corp., 5.48%, 1/22/99 25,000,000 $ 24,920
------------
CHEMICALS & ALLIED PRODUCTS (0.7%)
+American Home Products, 5.15%,
2/10/99 25,000,000 24,857
------------
DEPARTMENT STORES (0.8%)
+J.C. Penney, Co., Inc., 5.22%,
2/24/99 25,690,000 25,489
------------
FEDERAL GOVERNMENT AND AGENCIES (0.5%)
+Federal Home Loan Mortgage
Corporation, 4.92%, 2/26/99 15,000,000 14,885
------------
FINANCE (4.6%)
+BAT Capital Corp., 5.55%,
1/08/99 25,000,000 24,973
Household Finance Co., 5.55%,
1/29/99 25,000,000 24,892
+Chrysler Financial Corp.,
5.24%, 2/10/99 25,000,000 24,854
CIESCO LP 5.25%, 1/27/99 25,000,000 24,905
+CXC Incorporated, 5.18%,
1/25/99 25,000,000 24,914
CIT Group Holdings, 5.35%,
1/28/99 25,000,000 24,900
------------
TOTAL 149,438
------------
PERSONAL CREDIT INSTITUTIONS (4.6%)
+General Electric Capital,
5.23%, 2/16/99 25,000,000 24,833
+General Motors Acceptance,
5.07%, 1/29/99 25,000,000 24,901
Commercial Credit Co., 5.35%,
1/20/99 25,000,000 24,929
+Transamerica Finance, 5.18%,
1/20/99 25,000,000 24,932
IBM Credit Corp., 6.90%, 1/4/99 25,000,000 24,986
+Variable Funding Capital
Corp., 5.17%, 1/06/99 25,000,000 24,982
------------
TOTAL 149,563
------------
SHORT TERM BUSINESS CREDIT (1.6%)
American Express Credit, 5.00%,
1/08/99 26,800,000 26,774
+Sears Roebuck Acceptance
Corp., 5.27%, 2/11/99 25,000,000 24,850
------------
TOTAL 51,624
------------
TOTAL MONEY MARKET
INVESTMENTS 440,776
------------
<CAPTION>
SHARES/ MARKET VALUE
SHORT TERM INVESTMENTS (15.7%) PAR (000'S)
- -------------------------------------------------------------
<S> <C> <C>
ASSET-BACKED SECURITIES (2.2%)
AUTO RELATED (0.8%)
+New Center Asset Trust, 5.39%,
1/8/99 25,000,000 $ 24,974
------------
COMMERCIAL MORTGAGES (0.7% )
+Asset Securitization, 5.18%,
3/10/99 25,000,000 24,765
------------
FINANCE LESSORS (0.7%)
+Triple A One Funding, 5.22%,
2/16/99 24,000,000 23,840
------------
TOTAL ASSET-BACKED
SECURITIES 73,579
------------
TOTAL SHORT TERM
INVESTMENTS 514,355
------------
TOTAL BALANCED PORTFOLIO
(99.6%) (COST
$2,280,568,518)^ 3,267,945
OTHER ASSETS, LESS
LIABILITIES (0.4%) 14,126
------------
TOTAL NET ASSETS (100.0%) $ 3,282,071
------------
</TABLE>
IO-Interest Only Security
144A after the name of a security represents a security exempt from registration
under Rule 144A of the Securities Act of 1933. These securities may be
resold as transactions exempt from registration, normally to qualified
institutional buyers.
* Non-Income Producing.
++ Defaulted security
** Denominated in Greek Drachma
+ Partially held by the custodian in a segregated account as collateral for
open futures postions. Information regarding open futures contracts as of
December 31, 1998 is summarized below:
<TABLE>
<CAPTION>
UNREALIZED
NUMBER OF EXPIRATION APPRECIATION
ISSUER CONTRACTS DATE (000'S)
- ----------------------------------------------------------------
<S> <C> <C> <C>
S&P 500 Stock Index 741 3/99 $13,320
(Total Notional Value at
12/31/98, $217,408,980)
</TABLE>
^At December 31, 1998, the aggregate cost of securities for federal income tax
purposes was $2,287,836,541 and the net unrealized appreciation of investments
based on that cost was $980,108,923 which is comprised of $1,012,402,159
aggregate gross unrealized appreciation and $32,293,236 gross unrealized
depreciation.
The Accompanying Notes are an Integral Part of the Financial Statements
B-97
<PAGE>
HIGH YIELD BOND PORTFOLIO
NORTHWESTERN MUTUAL SERIES FUND, INC.
Schedule of Investments
DECEMBER 31, 1998
<TABLE>
<CAPTION>
MARKET
SHARES/ VALUE
BONDS (79.0%) PAR (000'S)
- ---------------------------------------------------------------------------------
<S> <C> <C>
BASIC MATERIALS (1.4%)
PAPER (0.7%)
Pindo Deli Fin Mauritius, 10.75%, 10/01/07 2,500,000 $ 1,359
---------
STEEL (0.7%)
Renco Steel Holdings, Inc., 10.875%, 2/01/05 (144A) 1,500,000 1,290
---------
TOTAL BASIC MATERIALS 2,649
---------
BROADCASTING/MEDIA (3.8%)
BROADCASTING (3.1%)
+Big City Radio, Inc., 11.25%, 3/15/05 (144A) 5,750,000 3,795
+Fox Family Worldwide, Inc., 10.25%, 11/01/07 3,100,000 1,953
---------
TOTAL 5,748
---------
PRINTING AND PUBLISHING (0.7%)
+Diva System Corp., 12.625%, 3/01/08 (144A) 3,375,000 1,257
---------
TOTAL BROADCASTING/MEDIA 7,005
---------
CABLE TELEVISION (4.9%)
+International Cabletel, Inc., 11.50%, 02/01/06 3,000,000 2,460
+NTL, Inc.,9.75%, 4/01/08, 4,250,000 2,635
NTL Incorporated, 11.50%, 10/01/08 (144A) 1,000,000 1,093
Supercanal Holdings S A, 11.50%, 05/15/05 (144A) 2,500,000 1,500
+Telewest PLC, 11.25%, 11/1/08 1,150,000 1,288
---------
TOTAL CABLE TELEVISION 8,976
---------
CONSUMER RELATED (5.3%)
CONSUMER STAPLES (0.6%)
+SF Holdings Group, Inc., 12.75%, 3/15/08 3,250,000 1,137
---------
FOODS/FOOD SERVICES (4.1%)
Favorite Brands Int'l, Inc., 10.75%, 05/15/06 (144A) 2,250,000 1,845
Global Health Sciences, Inc., 11.0%, 05/01/08 (144A) 2,500,000 1,650
Iowa Select Farms L.P., 10.75%, 12/01/05 (144A) 4,200,000 3,402
Planet Hollywood, 12.00%, 4/01/05 (144A) 2,100,000 735
---------
TOTAL 7,632
---------
HOUSEHOLD PRODUCTS (0.2%)
+Diamond Brands, 12.875%, 04/15/09 (144A) 1,250,000 437
---------
SOAPS & TOILETRIES (0.4%)
Styling Technologies, 10.875%, 07/01/08 (144A) 800,000 760
---------
TOTAL CONSUMER RELATED 9,966
---------
<CAPTION>
MARKET
SHARES/ VALUE
BONDS (79.0%) PAR (000'S)
- ---------------------------------------------------------------------------------
<S> <C> <C>
ENERGY RELATED (9.2%)
ELECTRIC AND OTHER SERVICES (0.5%)
CE Casecnan Water & Energy, 11.95%, 11/15/2010 1,000,000 $ 850
---------
OIL AND GAS INDEPENDENT (6.3%)
Belden & Blake Corp., 9.875%, 6/15/07 3,950,000 3,200
Chesapeake Energy, 9.625%, 05/01/05 (144A) 3,750,000 2,812
Gothic Production Corp., 11.125%, 05/01/05 (144A) 5,250,000 4,095
Grey Wolf, Inc., 8.875%, 07/01/07 2,100,000 1,523
---------
TOTAL 11,630
---------
OIL FIELD SERVICES (2.4%)
Pride International, Inc., 9.375%, 05/01/07 2,525,000 2,348
R&B Falcon Corp., 9.5%, 12/15/08 (144A) 2,000,000 2,000
---------
TOTAL 4,348
---------
TOTAL ENERGY RELATED 16,828
---------
FINANCE (4.7%)
FINANCE COMPANIES (3.4%)
Arcadia Financial, Ltd., 11.50%, 3/15/07 3,675,000 2,793
BF Saul Real Estate, 9.75%, 4/01/08 2,250,000 2,093
Metris Companies, Inc., 10.00%, 11/01/04 1,400,000 1,386
---------
TOTAL 6,272
---------
INSURANCE (1.3%)
Superior Nat'l Capital Trust I, 10.75%, 12/01/17 2,400,000 2,376
---------
TOTAL FINANCE 8,648
---------
HEALTHCARE (4.4%)
Magellan Health Services, 9.00%, 02/15/08 2,800,000 2,464
Vencor, Inc., 9.875%, 05/01/05 (144A) 6,550,000 5,633
---------
TOTAL HEALTHCARE 8,097
---------
LEISURE (10.3%)
GAMING (5.7%)
Circus Circus Enterprise, 9.25%, 12/01/05 1,500,000 1,515
Trump Atlantic, 11.25%, 5/1/06 2,500,000 2,200
Trump Hotels & Casino Resorts, 15.50%, 6/15/03 2,000,000 2,120
Venetian Casino/LV Sands, 12.25%, 11/15/04 5,000,000 4,725
---------
TOTAL 10,560
---------
HOTELS AND OTHER LODGING PLACES (2.2%)
HMH Properties, Inc., 8.45%, 12/01/08 1,200,000 1,200
John Q. Hammons Hotels, 8.875%, 02/15/04 500,000 470
</TABLE>
B-98
<PAGE>
NORTHWESTERN MUTUAL SERIES FUND, INC.
Schedule of Investments
DECEMBER 31, 1998
<TABLE>
<CAPTION>
MARKET
SHARES/ VALUE
BONDS (79.0%) PAR (000'S)
- ---------------------------------------------------------------------------------
HOTELS AND OTHER LODGING PLACES (CONTINUED)
<S> <C> <C>
Starwood Hotels & Resorts, 6.75%, 11/15/05 450,000 $ 415
Starwood Hotels & Resorts, 7.875%, 11/15/15 2,250,000 1,992
---------
TOTAL 4,077
---------
LEISURE RELATED (0.8%)
+Hedstrom Holdings Inc., 12.00%, 6/1/09 3,325,000 1,530
---------
MOVIE THEATERS (1.6%)
Hollywood Theaters, Inc., 10.625%, 08/01/07 2,600,000 1,918
Silver Cinemas, 10.50%, 04/15/05 (144A) 1,400,000 952
---------
TOTAL 2,870
---------
TOTAL LEISURE 19,037
---------
OTHER INDUSTRIES (6.8%)
AUTO RELATED (2.6%)
Exide Corporation, 10.00%, 04/15/05 (144A) 3,250,000 3,209
Exide Corporation, 2.90%, 12/15/05 (144A) 3,000,000 1,758
---------
TOTAL 4,967
---------
HOUSEHOLD FURNISHINGS, APPLIANCES (2.9%)
Corning Consumer Products Co., 9.625%, 05/01/08 (144A) 3,900,000 2,730
Renters Choice, Inc., 11.00%, 08/15/08 (144A) 2,500,000 2,538
---------
TOTAL 5,268
---------
INDUSTRIAL MACHINERY AND EQUIPMENT (0.8%)
United Rentals, Inc., 9.25%, 01/15/09 (144A) 1,500,000 1,504
---------
OFFICE EQUIPMENT (0.5%)
US Office Products Co., 9.75%, 06/15/08 1,300,000 848
---------
TOTAL OTHER INDUSTRIES 12,587
---------
SERVICES (5.0%)
PROFESSIONAL SERVICES (1.5%)
Decisionone Holdings, 9.75%, 8/1/07 1,800,000 828
+Decisionone Holdings, 11.50%, 8/1/08 3,875,000 891
Federal Data Corp., 10.125%, 8/01/05 1,000,000 990
---------
TOTAL 2,709
---------
BUSINESS SERVICES (3.5%)
Loewen Group International, Inc., 7.5%, 04/15/01 2,000,000 1,765
Loewen Group International, Inc., 7.75%, 10/15/01 3,000,000 2,625
<CAPTION>
MARKET
SHARES/ VALUE
BONDS (79.0%) PAR (000'S)
- ---------------------------------------------------------------------------------
<S> <C> <C>
BUSINESS SERVICES (CONTINUED)
Loewen Group International, Inc., 8.25%, 10/15/03 500,000 $ 430
Loewen Group International, Inc., 7.6%, 06/01/08 2,100,000 1,690
---------
TOTAL 6,510
---------
TOTAL SERVICES 9,219
---------
TELECOMMUNICATIONS (16.1%)
Arch Communications, 12.75%, 07/01/07 (144A) 6,000,000 6,000
+Bestel S A de CV, 12.75%, 05/15/05 1,950,000 1,072
+Firstworld Communications, 13.00%, 04/15/08 2,500,000 750
+GST Network Funding, Inc., 10.50%, 05/01/08 (144A) 3,000,000 1,290
+Hyperion Telecommunications, 13.00%, 4/15/03 400,000 286
Hyperion Telecommunications, 12.25%, 9/01/04 4,000,000 4,060
+KMC Telecommunication Hldgs, 12.50%, 2/15/08 6,250,000 3,000
Metromedia Fiber Network, 10.00%, 11/15/08 (144A) 1,500,000 1,541
++Mobilemedia Communications Inc., 10.50%, 12/01/03 2,000,000 220
Northeast Optic Network, 12.75%, 08/15/08 3,300,000 3,234
Splitrock Services, Inc., 11.75%, 07/15/08 3,000,000 2,595
+21st Century Telecom, 12.25%, 2/15/08 (144A) 1,750,000 735
Verio, Inc.......................11.25%, 12/01/08 (144A) 2,000,000 2,010
Viatel, Inc., 11.25%, 04/15/08 1,500,000 1,534
+Viatel, Inc., 12.50%, 04/15/08 2,500,000 1,475
---------
TOTAL TELECOMMUNICATIONS 29,802
---------
TRANSPORTATION (6.6%)
TRUCKING AND SHIPPING (6.6%)
Greyhound Lines, Inc., 11.50%, 4/15/07 2,500,000 2,838
Navigator Gas Trans PLC, 10.50%, 06/30/07 (144A) 1,550,000 1,364
Navigator Gas Trans PLC, 12.00%, 06/30/07 900,000 810
Stena AB, 8.75%, 06/15/07 2,500,000 2,381
Stena Line AB, 10.625%, 06/01/08 5,400,000 4,860
---------
TOTAL TRANSPORTATION 12,253
---------
UTILITIES (0.5%)
Companhia De Saneamento Basico, 10%, 7/28/05 (144A) 1,235,000 840
---------
TOTAL BONDS 145,907
---------
</TABLE>
B-99
<PAGE>
NORTHWESTERN MUTUAL SERIES FUND, INC.
Schedule of Investments
DECEMBER 31, 1998
<TABLE>
<CAPTION>
MARKET
SHARES/ VALUE
PREFERRED STOCK (16.0%) PAR (000'S)
- ---------------------------------------------------------------------------------
BROADCASTING MEDIA (7.6%)
<S> <C> <C>
BROADCASTING (5.1%)
Cumulus Media, Inc. 43,656 $ 4,693
Sinclair Capital 43,500 4,742
---------
TOTAL 9,435
---------
PRINTING AND PUBLISHING (2.5%)
Primedia, Inc. 45,000 4,631
---------
TOTAL BROADCASTING MEDIA 14,066
---------
CABLE TELEVISION (3.7%)
**CSC Holdings, Inc. (PIK) 59,276 6,817
---------
ENERGY RELATED (0.6%)
GAS UTILITY (0.6%)
Petroleum Heat & Power Inc. 48,750 1,023
---------
FINANCE (0.8%)
BANKS (0.8%)
California Fed Pfd Capital 60,000 1,519
---------
LEISURE RELATED (0.3%)
**Samsonite Corp. (PIK) 6,663 513
---------
MEDICAL PRODUCTS (0.4%)
Fresenius Medical Care AG 750,000 743
---------
TELECOMMUNICATIONS (2.6%)
+Crown Castle International Corp. 20,000 2,012
+Global Crossing Holdings, Ltd. 2,500 245
**21st Century Telecom (PIK) 9,110 592
**Hyperion Telecommunications (PIK) 22,260 1,770
**Viatel, Inc. (PIK) 2,052 226
---------
TOTAL TELECOMMUNICATIONS 4,845
---------
TOTAL PREFERRED STOCK 29,526
---------
<CAPTION>
COMMON STOCK AND WARRANTS (0.5%)
- ---------------------------------------------------------------------------------
<S> <C> <C>
APPAREL AND TEXTILE (0.1%)
*Ithaca Industries Inc. 136,000 $ 247
---------
BROADCASING/MEDIA (0.1%)
*Diva System Corp. (144A) 10,125 162
---------
CONSUMER STAPLES (0.0%)
*SF Holdings Group, Inc. (144A) 6,500 13
---------
ENERGY RELATED (0.0%)
GAS UTILITY (0.0%)
Petroleum Heat & Power, Inc. 4,111 3
---------
FINANCE (0.0%)
FINANCE COMPANIES (0.00%)
*Arcadia Financial, Ltd. 4,000 20
---------
<CAPTION>
MARKET
SHARES/ VALUE
COMMON STOCK AND WARRANTS (0.5%) PAR (000'S)
- ---------------------------------------------------------------------------------
<S> <C> <C>
LEISURE (0.2%)
LEISURE RELATED (0.2%)
*Hedstrom Holdings, Inc. (144A) 201,674 $ 202
Meditrust Corp. 11,117 168
*Samsonite Corp. 6,250 19
---------
TOTAL 389
---------
TELECOMMUNICATIONS (0.1%)
*Bestel S A de CV 1,950 4
*Firstworld Communications 2,500 25
*KMC Telecom Holdings, Inc. 6,250 20
*Splitrock Services, Inc. 3,000 33
*21st Century Telecom 8,500 25
---------
TOTAL 107
---------
TOTAL COMMON STOCK
AND WARRANTS 941
---------
<CAPTION>
MONEY MARKET INVESTMENTS (2.1%)
- ---------------------------------------------------------------------------------
<S> <C> <C>
PERSONAL CREDIT INSTITUTIONS (2.1%)
American Express Credit, 4.999%, 01/08/99 3,900,000 $ 3,896
---------
TOTAL MONEY MARKET INVESTMENTS 3,896
---------
TOTAL INVESTMENTS (97.6%)
(COST $199,646,191)^ 180,270
OTHER ASSETS, LESS LIABILITIES (2.4%) 4,512
---------
TOTAL NET ASSETS (100.0%) $184,782
---------
</TABLE>
* Non-Income Producing
+ Deferred interest security that presently receives no coupon payments. At
a predetermined date the stated coupon rate becomes effective.
++ Defaulted Security
**PIK-Payment in Kind
144A after the name of a security represents a security exempt from
registration under Rule 144A of the Securities Act of 1933. These
securites may be resold as transactions exempt from registration,
normally to qualified institutional buyers.
^ At December 31, 1998, the aggregate cost of securites for federal income
tax purposes was $199,971,590 and the net unrealized depreciation of
investments based on that cost was $19,701,115 which is comprised of
$5,103,845 aggregate gross unrealized appreciation and $24,804,960
aggregated gross unrealized depreciation.
The Accompanying Notes are an Integral Part of the Financial Statements
B-100
<PAGE>
SELECT BOND PORTFOLIO
NORTHWESTERN MUTUAL SERIES FUND, INC.
Schedule of Investments
DECEMBER 31, 1998
<TABLE>
<CAPTION>
MARKET
VALUE
BONDS (95.0%) PAR (000'S)
- --------------------------------------------------------------
<S> <C> <C>
CORPORATE BONDS (15.8%)
BANK HOLDING COMPANIES (1.0%)
BT Institutional Capital Trust,
7.75%, 12/1/26 (144A) 3,000,000 $ 3,094
-----------
BANKING AND FINANCE (1.7%)
Lehman Brothers Holdings, Inc.,
8.8%, 3/1/15 4,500,000 5,166
-----------
CABLE AND MEDIA (1.5%)
Seagram Joseph E & S, 7.60%,
12/15/28 4,400,000 4,429
-----------
CHEMICALS AND ALLIED PRODUCTS (0.8%)
Dow Capital B.V., 8.5%, 6/8/10 1,800,000 2,149
-----------
ELECTRIC SERVICES (2.6%)
Comed Financing II, 8.5%, 1/15/27 1,750,000 1,945
Ohio Edison Company, 7.375%,
9/15/02 1,000,000 1,059
PECO Energy Company, 7.75%,
3/1/23 1,150,000 1,208
Public Service Electric & Gas
Co., 6.875%, 1/1/03 2,250,000 2,364
Texas Utilities Electric Co.,
7.875%, 3/1/23 1,000,000 1,070
-----------
TOTAL 7,646
-----------
ENERGY (1.3%)
Pemex Finance Ltd., 9.15%,
11/15/18 4,000,000 3,970
-----------
FINANCE (1.7%)
Associates Corp. of North
America, 7.95%, 2/15/10 1,500,000 1,715
Tokai Preferred Capital Co. LLC,
9.98%, 12/29/49 4,000,000 3,400
-----------
TOTAL 5,115
-----------
FOREIGN BANKS - BRANCHES & AGENCIES (0.3%)
Fuji Bank, Ltd., 9.87%, 12/31/49
(144A) 1,300 949
-----------
GENERAL MERCHANDISE STORES (0.4%)
May Dept Stores Company, 7.45%,
10/15/16 1,000,000 1,119
-----------
LIFE SCIENCES AND AGRICULTURE (0.9%)
Monsanto Co., 6.60%, 12/01/28 2,750,000 2,745
-----------
MOTION PICTURE (0.4%)
News America Holdings Inc.,
8.25%, 8/10/18 1,000,000 1,135
-----------
RAILROAD (2.2%)
Burlington Northern, 7.25%,
8/1/97 4,000,000 4,250
<CAPTION>
MARKET
VALUE
BONDS (95.0%) PAR (000'S)
- --------------------------------------------------------------
<S> <C> <C>
RAILROAD (CONTINUED)
Union Pacific Corp., 7.25%,
11/01/08 2,250,000 $ 2,412
-----------
TOTAL 6,662
-----------
TEXTILES (0.5%)
#Polysindo International Finance,
11.375%, 6/15/06 4,200,000 1,344
-----------
TOBACCO (0.5%)
Philip Morris Companies, 9.25%,
2/15/00 500,000 520
RJR Nabisco Inc., 8.625%, 12/1/02 1,000,000 1,018
-----------
TOTAL 1,538
-----------
TOTAL CORPORATE BONDS 47,061
-----------
GOVERNMENT BONDS (DOMESTIC AND FOREIGN)
AND AGENCY BONDS (35.2%)
FOREIGN GOVERNMENT BONDS (2.2%)
*Hellenic Republic, 7.5%, 5/20/13 850,000,000 3,200
*Hellenic Republic, 8.8%, 6/19/07 850,000,000 3,381
-----------
TOTAL 6,581
-----------
FEDERAL GOVERNMENT AND AGENCIES (33.0%)
Federal Farm Credit, 6.51%,
1/7/08 2,000,000 2,000
Federal Home Loan Mortgage
Corporation, 7.5%, 9/29/01 10,644,364 10,928
Federal National Mortgage Assoc.,
5.97%, 10/1/08 3,989,321 4,066
Federal National Mortgage Assoc.,
6.07%, 10/1/08 2,994,476 3,086
Federal National Mortgage Assoc.,
6.22%, 2/01/06 1,917,146 1,976
Federal National Mortgage Assoc.,
6.24%, 1/1/06 5,405,115 5,573
Federal National Mortgage Assoc.,
6.265%, 10/1/08 2,994,681 3,113
Federal National Mortgage Assoc.,
6.32%, 2/1/06 3,885,724 4,024
Federal National Mortgage Assoc.,
6.360%, 4/1/08 3,784,254 3,952
Federal National Mortgage Assoc.,
6.390%, 4/1/08 1,460,225 1,527
Federal National Mortgage Assoc.,
6.500%, 09/25/05 2,438,626 2,438
Federal National Mortgage Assoc.,
6.750%, 04/25/18 2,398,681 2,492
Federal National Mortgage Assoc.,
6.750%, 12/25/23 3,500,000 3,610
Federal National Mortgage Assoc.,
6.960%, 10/01/07 3,266,715 3,529
Federal National Mortgage Assoc.,
7.0%, 6/1/03 583,690 597
</TABLE>
B-101
<PAGE>
NORTHWESTERN MUTUAL SERIES FUND, INC.
Schedule of Investments
DECEMBER 31, 1998
<TABLE>
<CAPTION>
MARKET
VALUE
BONDS (95.0%) PAR (000'S)
- --------------------------------------------------------------
FEDERAL GOVERNMENT AND AGENCIES (CONTINUED)
<S> <C> <C>
Federal National Mortgage Assoc.,
7.360%, 4/1/11 3,370,703 $ 3,767
Federal National Mortgage Assoc.,
8.400%, 02/25/09 2,500,000 2,788
Federal National Mortgage Assoc.,
10%, 10/1/17 116,204 126
Federal National Mortgage Assoc.,
11.000%, 12/01/12 205,013 226
Federal National Mortgage Assoc.,
11.000%, 09/01/17 1,455,341 1,609
Federal National Mortgage Assoc.,
11.000%, 12/01/17 475,993 527
Federal National Mortgage Assoc.,
11.000%, 02/01/18 553,326 613
Federal National Mortgage Assoc.,
11.500%, 04/01/18 646,573 726
Federal National Mortgage Assoc.,
12.000%, 12/01/12 1,542,325 1,738
Federal National Mortgage Assoc.,
12.000%, 12/01/12 294,911 335
Federal National Mortgage Assoc.,
12.000%, 09/01/17 493,970 562
Federal National Mortgage Assoc.,
12.000%, 10/01/17 707,215 805
Federal National Mortgage Assoc.,
12.000%, 12/01/17 408,891 466
Federal National Mortgage Assoc.,
12.000%, 02/01/18 525,209 598
Federal National Mortgage Assoc.,
12.25%, 1/1/18 436,396 495
Federal National Mortgage Assoc.,
12.500%, 04/01/18 296,562 339
Federal National Mortgage Assoc.,
13.000%, 11/01/12 220,779 255
Federal National Mortgage Assoc.,
13.000%, 11/01/17 525,420 609
Federal National Mortgage Assoc.,
13.000%, 12/01/17 298,396 346
Federal National Mortgage Assoc.,
13.000%, 02/01/18 767,712 890
Federal National Mortgage Assoc.,
14.000%, 12/01/17 212,378 253
Government National Mortgage
Assoc., 7.0%, 05/15/23 341,794 350
Government National Mortgage
Assoc., 7.5%, 04/15/22 320,005 330
Government National Mortgage
Assoc., 7.5%, 06/15/28 467,035 482
Government National Mortgage
Assoc., 7.5%, 10/15/23 773,158 797
Government National Mortgage
Assoc., 7.5%, 10/15/25 78,692 81
<CAPTION>
MARKET
VALUE
BONDS (95.0%) PAR (000'S)
- --------------------------------------------------------------
<S> <C> <C>
FEDERAL GOVERNMENT AND AGENCIES (CONTINUED)
Government National Mortgage
Assoc., 7.5%, 11/15/25 17,136 $ 18
Government National Mortgage
Assoc., 7.5%, 05/15/26 16,501 17
Government National Mortgage
Assoc., 7.5%, 02/15/27 640,485 660
Government National Mortgage
Assoc., 7.5%, 03/15/27 55,090 57
Government National Mortgage
Assoc., 7.5%, 04/15/27 134,562 139
Government National Mortgage
Assoc., 7.5%, 08/15/27 17,524 18
Government National Mortgage
Assoc., 7.5%, 06/15/28 481,639 497
Government National Mortgage
Assoc., 8.0%, 01/15/26 531,624 552
Government National Mortgage
Assoc., 8.0%, 02/15/26 584,032 606
Government National Mortgage
Assoc., 8.0%, 08/15/26 321,346 334
Government National Mortgage
Assoc., 8.0%, 08/15/26 442,102 459
Government National Mortgage
Assoc., 8.0%, 09/15/26 551,925 573
Government National Mortgage
Assoc., 8.0%, 12/15/26 206,248 214
Government National Mortgage
Assoc., 8.0%, 01/15/27 590,313 613
Government National Mortgage
Assoc., 8.0%, 03/15/27 574,718 597
Government National Mortgage
Assoc., 8.0%, 04/15/27 449,946 467
Government National Mortgage
Assoc., 8.0%, 04/15/27 605,863 629
Government National Mortgage
Assoc., 8.0%, 06/15/27 550,082 571
Government National Mortgage
Assoc., 8.0%, 07/15/27 543,556 565
Government National Mortgage
Assoc., 8.0%, 08/15/27 404,685 420
Government National Mortgage
Assoc., 8.0%, 09/15/27 413,078 429
Government National Mortgage
Assoc., 8.5%, 09/15/21 11,037 12
Government National Mortgage
Assoc., 8.5%, 09/15/24 4,678 5
Government National Mortgage
Assoc., 8.5%, 03/15/23 149,150 159
Government National Mortgage
Assoc., 8.5%, 06/15/23 104,470 112
Government National Mortgage
Assoc., 8.5%, 07/15/24 64,283 68
</TABLE>
B-102
<PAGE>
NORTHWESTERN MUTUAL SERIES FUND, INC.
Schedule of Investments
DECEMBER 31, 1998
<TABLE>
<CAPTION>
MARKET
VALUE
BONDS (95.0%) PAR (000'S)
- --------------------------------------------------------------
FEDERAL GOVERNMENT AND AGENCIES (CONTINUED)
<S> <C> <C>
Government National Mortgage
Assoc., 8.5%, 09/15/24 5,886 $ 6
Government National Mortgage
Assoc., 8.5%, 11/15/24 147,407 157
Government National Mortgage
Assoc., 8.5%, 11/15/24 131,350 140
Government National Mortgage
Assoc., 8.5%, 11/15/24 272,589 290
Government National Mortgage
Assoc., 8.5%, 02/15/25 55,568 59
Government National Mortgage
Assoc., 8.5%, 02/15/25 7,632 8
Government National Mortgage
Assoc., 11.0%, 01/15/18 5,618,110 6,342
U.S. Treasury, 5.5%, 8/15/28 638,000 669
U.S. Treasury, 6.125%, 11/15/27 3,730,000 4,178
U.S. Treasury, 4.75%, 11/15/08 2,000,000 2,016
U.S. Treasury, 4.0%, 10/31/00 1,350,000 1,336
Vendee Mortgage Trust, .4951%,
6/15/23 (IO) 81,189,546 1,395
-----------
TOTAL 98,411
-----------
TOTAL GOVERNMENT BONDS AND
AGENCY BONDS 104,992
-----------
MORTGAGE BACKED AND ASSET BACKED SECURITIES (44.0%)
AUTO-RELATED (2.2%)
Daimler-Benz Vehicle Trust -
Class A, 5.85%, 7/20/03 435,189 437
Eaglemark Trust - Class A, 6.75%,
11/15/02 565,372 574
Fleetwood Credit Corporation
Grantor Trust - Class A, 6.4%,
5/15/13 1,019,749 1,038
Team Fleet Financing Corporation
- Class A, 6.65%, 12/15/02
(144A) 3,200,000 3,232
Team Fleet Financing Corporation
- Class A, 7.35%, 5/15/03 (144A) 1,125,000 1,157
-----------
TOTAL 6,438
-----------
BANK AND FINANCE (2.2%)
Bankers Trust Co., 6.255%,
1/13/99 91,002 91
Morgan Stanley Capital Trust,
7.387%, 5/15/06 3,000,000 3,243
Nations Bank Lease Pass Thru
Trust 97-A, 7.442%, 11/18/05 3,000,000 3,183
-----------
TOTAL 6,517
-----------
COMMERCIAL MORTGAGES (26.9%)
Asset Securitization Corporation,
Class CS1, 1.257%, 11/13/26 IO 19,158,273 687
<CAPTION>
MARKET
VALUE
BONDS (95.0%) PAR (000'S)
- --------------------------------------------------------------
<S> <C> <C>
COMMERCIAL MORTGAGES (CONTINUED)
Asset Securitization Corporation,
Class CS2, 1.097%, 11/13/26 IO 52,000,000 $ 3,083
Asset Securitization Corporation,
Class PS1, 1.367%, 2/14/41 IO 12,098,357 1,247
Chase Commercial Mortgage
Securities Corp., Class B, 6.6%,
11/19/07 2,000,000 2,046
Chase Commercial Mortgage
Securities Corp., Class A2,
6.6%, 11/19/07 5,000,000 5,205
Chase Commercial Mortgage
Securities Corp., Class B,
7.37%, 6/19/29 1,000,000 1,073
Commercial Mortgage Acceptance
Corporation, Class B, 6.646%,
12/15/07 2,000,000 2,043
Credit Suisse First Boston
Mortgage Securities Corp., Class
D, 7.46%, 05/20/29 (144A) 3,500,000 3,552
Credit Suisse First Boston
Mortgage Securities Corp., Class
B, 9.546%, 4/25/25 (144A) 682,000 751
Credit Suisse First Boston
Mortgage Securities Corp., Class
C1, 7.26%, 6/20/07 (144A) 1,465,292 1,541
Credit Suisse First Boston
Mortgage Securities Corp., Class
C1, 7.28%, 6/20/07 (144A) 1,500,000 1,583
Credit Suisse First Boston
Mortgage Securities Corp., Class
D, 9.546%, 4/25/25 (144A) 2,000,000 2,279
Criimi Mae Commercial Mortgage
Trust, 7.0%, 11/02/06 3,000,000 2,859
DLJ Mortgage Acceptance
Corporation, Class S, .3571%,
10/15/17 (144A) IO 104,798,235 2,391
DLJ Mortgage Acceptance
Corporation, Class S, .718%,
2/18/31 IO 120,486,326 4,821
DLJ Mortgage Acceptance
Corporation, 8.100%, 6/18/04 1,824,855 1,982
DLJ Mortgage Acceptance
Corporation, 8.100%, 6/18/04 1,000,000 1,089
First Union-Lehman Brothers
Commercial Mortgage Trust, Class
C, 7.44%, 4/18/07 2,500,000 2,653
GMAC Commercial Mortgage
Securities, Inc., Class C,
7.81%, 10/15/11 (144A) 5,000,000 5,040
Kmart CMBS Financing, Inc., Class
D, 6.6466%, 03/01/07 (144A) 2,000,000 1,994
</TABLE>
B-103
<PAGE>
NORTHWESTERN MUTUAL SERIES FUND, INC.
Schedule of Investments
DECEMBER 31, 1998
<TABLE>
<CAPTION>
MARKET
VALUE
BONDS (95.0%) PAR (000'S)
- --------------------------------------------------------------
COMMERCIAL MORTGAGES (CONTINUED)
<S> <C> <C>
Kmart CMBS Financing, Inc., Class
C, 6.2466%, 03/01/07 (144A) 1,500,000 $ 1,497
LB Mortgage Trust, 8.396%, 6/2/10 5,088,504 6,009
Malan Mortgage Securities Trust,
Class A3, 7.8%, 8/15/05 (144A) 3,000,000 3,118
Merrill Lynch Mortgage Investors,
Inc., Class C, 7.12%, 6/18/29 2,500,000 2,605
Merrill Lynch Mortgage Investors,
Inc., Class E, 7.12%, 6/18/29 4,500,000 4,240
Merrill Lynch Mortgage Investors,
Inc., Class E, 8.3346%, 6/25/22
(144A) 2,000,000 1,947
Merrill Lynch Mortgage Investors,
Inc., Class C, 8.9726%, 11/25/20 1,950,000 1,954
Midland Realty Acceptance Corp.,
Class AEC, 1.389%, 1/25/29
(144A) IO 13,930,095 919
Nomura Asset Securities Corp. -
Class A2, 6.9918%, 3/17/28 2,800,000 2,857
Nomura Asset Securities Corp. -
Class A4, 7.5718%, 3/17/28 2,200,000 2,121
Red Mountain Funding LLC, Class
E, 7.365%, 1/15/19 (144A) 1,500,000 1,358
Red Mountain Funding LLC, Class
F, 7.471%, 1/15/19 (144A) 1,800,000 1,460
The Equitable Life Insurance
Society of the U S, Class C1,
7.52%, 5/15/06 2,000,000 2,148
-----------
TOTAL 80,152
-----------
CREDIT CARD ASSET BACKED (0.7%)
Iroquois Trust, Class A, 6.752%,
6/25/07 (144A) 2,000,000 2,019
-----------
FRANCHISE LOAN RECEIVABLES (2.6%)
EMAC Owner Trust, 1.378%, 1/15/25
(144A) IO 30,965,287 2,245
EMAC Owner Trust - Class A2,
6.38%, 04/15/07 (144A) 3,100,000 3,091
Global Franchise Trust, 6.349%,
4/10/04 2,495,173 2,536
-----------
TOTAL 7,872
-----------
HOME EQUITY LOAN (0.7%)
Amresco Residential Securities -
Class A2, 6.245%, 04/25/22 2,200,000 2,207
-----------
<CAPTION>
MARKET
VALUE
BONDS (95.0%) PAR (000'S)
- --------------------------------------------------------------
<S> <C> <C>
MANUFACTURED HOUSING (1.3%)
Mid-State Trust VI, Class A3,
7.54%, 7/1/35 1,126,317 $ 1,159
Vanderbilt Mortgage and Finance,
Inc., Class 1A4, 7.19%, 2/7/14 2,500,000 2,599
-----------
TOTAL 3,758
-----------
OTHER ASSET BACKED (3.6%)
FMAC Loan Receivables Trust -
Class A, 6.2%, 9/15/20 (144A) 1,541,153 1,545
Harley-Davidson Eaglemark, 5.87%,
4/15/04 1,500,000 1,519
Heilig-Meyers Master Trust -
Class A, 6.125%, 1/20/07 (144A) 3,000,000 2,998
Nations Credit Grantor Trust -
Class A1, 6.35%, 4/15/14 2,090,919 2,118
Newcourt Equipment - Class B,
6.764%, 9/20/04 (144A) 1,102,955 1,102
Rural Housing Trust, 6.33%,
4/17/01 1,546,266 1,562
-----------
TOTAL 10,844
-----------
RESIDENTIAL MORTGAGES (2.6%)
BCF L L C Mortgage Pass Thru
Certificate, Class B3, 7.75%,
3/25/37 (144A) 3,899,204 3,843
Blackrock Capital Finance, Class
B3, 7.25%, 11/25/28 (144A) 4,403,682 3,979
-----------
TOTAL 7,822
-----------
UTILITY (1.2%)
Comed Transitional, 5.74%,
12/16/2008 3,500,000 3,520
-----------
TOTAL MORTGAGE BACKED AND
ASSET BACKED SECURITIES 131,149
-----------
TOTAL BONDS 283,202
-----------
<CAPTION>
MONEY MARKET INVESTMENTS (3.8%)
- --------------------------------------------------------------
<S> <C> <C>
FEDERAL GOVERMENT AND AGENCIES (0.5%)
++Federal Home Loan Mortgage
Company, 4.92%, 2/26/99 1,500,000 $ 1,489
-----------
FINANCE SERVICES (2.3%)
++American Express Credit, 5.0%,
1/8/99 6,800,000 6,793
-----------
</TABLE>
B-104
<PAGE>
NORTHWESTERN MUTUAL SERIES FUND, INC.
Schedule of Investments
DECEMBER 31, 1998
<TABLE>
<CAPTION>
MARKET
VALUE
MONEY MARKET INVESTMENTS (3.8%) PAR (000'S)
- --------------------------------------------------------------
COMMERCIAL MORTGAGE (1.0%)
<S> <C> <C>
++Asset Securitization, 5.6%,
1/28/99 3,000,000 $ 2,987
-----------
TOTAL MONEY MARKET
INVESTMENTS 11,269
-----------
TOTAL INVESTMENTS (98.8%)
(COST $292,980,971)^ 294,471
OTHER ASSETS, LESS
LIABILITIES (1.2%) 3,563
-----------
TOTAL NET ASSETS (100.0%) $ 298,034
-----------
</TABLE>
IO-Interest Only Security
144A after the name of a security represents a security exempt from registration
under Rule 144A of the Securities Act of 1933. These securities may be
resold as transactions exempt from registration, normally to qualified
institutional buyers.
# Defaulted Security
++ Partially held by the custodian in a segregated account as collateral for
open futures postions. Information regarding open futures contracts as of
December 31, 1998 is summarized below:
<TABLE>
<CAPTION>
UNREALIZED
NUMBER OF DEPRECIATION DEPRECIATION
ISSUERS CONTRACTS DATE (000'S)
- -----------------------------------------------------------------
<S> <C> <C> <C>
U.S. Treasury Bond 47 3/99 $3
Future
(Total Notional Value
at 12/31/98,
$6,002,781)
</TABLE>
* Foreign securities denominated in Greek Drachma.
^ At December 31, 1998, the aggregate cost of securities for federal income tax
purposes was $296,076,635 and the net unrealized depreciation of investments
based on that cost was $1,605,662 which is comprised of $6,694,897 aggregated
gross unrealized appreciation and $8,300,559 aggregated gross unrealied
depreciation.
The Accompanying Notes are an Integral Part of the Financial Statements.
B-105
<PAGE>
MONEY MARKET PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Objective: Portfolio Strategy: Net Assets:
Maximum current income Achieve stability of capital by investing in $291,464,000
consistent with liquidity and short- term debt securities.
stability of capital
</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.
Like all portfolios that include debt instruments, the Money Market Portfolio
was affected by the extreme volatility of financial markets during the last half
of 1998. During the third quarter, maturities in this Portfolio were extended to
as much as 50 days; this action helped performance as rates fell in September
and October. At year end, the policy is balanced, with relatively short
maturities.
AN INVESTMENT IN THE MONEY MARKET PORTFOLIO IS NEITHER INSURED NOR GUARANTEED
BY THE U.S. GOVERNMENT AND THERE CAN BE NO ASSURANCE THAT THE PORTFOLIO WILL
BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE.
B-106
<PAGE>
MONEY MARKET PORTFOLIO
NORTHWESTERN MUTUAL SERIES FUND, INC.
Schedule of Investments
DECEMBER 31, 1998
<TABLE>
<CAPTION>
MARKET
VALUE
MONEY MARKET INVESTMENTS (69.2%) PAR (000'S)
- ---------------------------------------------------------------
<S> <C> <C>
CHEMICALS & ALLIED PRODUCTS (4.8%)
American Home Product Co., 5.15%,
02/10/99 14,000,000 $ 13,920
-----------
DEPARTMENT STORES (4.8%)
J.C. Penny Company, Inc., 5.04%,
02/05/99 1,940,000 1,930
J.C. Penny Company, Inc., 5.22%,
02/24/99 4,310,000 4,276
J.C. Penny Company, Inc., 5.07%,
03/05/99 7,750,000 7,681
-----------
TOTAL 13,887
-----------
ELECTRONIC COMPUTERS (4.9%)
International Business Machines,
5.04%, 01/22/99 14,200,000 14,158
-----------
FINANCE (12.5%)
Chrysler Financial Corporation,
5.24%, 02/10/99 13,638,000 13,559
Ciesco LP, 5.10%, 01/22/99 2,000,000 1,994
Ciesco LP, 5.20%, 02/05/99 5,600,000 5,572
Ciesco LP, 5.25%, 02/05/99 1,240,000 1,234
CXC Incorporated, 5.13%, 01/28/99 14,200,000 14,145
-----------
TOTAL 36,504
-----------
INDUSTRIAL INORGANIC CHEMICALS (4.9%)
Monsanto Company, 5.07%, 02/16/99 14,300,000 14,207
-----------
PERSONAL CREDIT INSTITUTIONS (24.7%)
American General Finance, 5.28%,
01/21/99 12,760,000 12,723
Ford Motor Credit Company, 5.03%,
01/22/99 14,200,000 14,158
General Electric Capital Corp.,
5.059%, 01/27/99 2,510,000 2,501
General Electric Capital Corp.,
5.40%, 01/29/99 1,975,000 1,967
General Electric Capital Corp.,
5.48%, 02/03/99 2,234,000 2,223
General Motors Acceptance Corp.,
5.16%, 01/27/99 6,200,000 6,177
General Motors Acceptance Corp.,
5.07%, 01/29/99 8,000,000 7,969
Household Finance Company, 5.35%,
01/15/99 10,555,000 10,533
Variable Funding Capital Corp.,
5.20%, 01/20/99 5,200,000 5,186
Variable Funding Capital Corp.,
5.27%, 02/18/99 8,800,000 8,738
-----------
TOTAL 72,175
-----------
PETROLEUM AND COAL PRODUCTS (1.5%)
E. I. Dupont De Nemours, 5.21%,
01/13/99 4,355,000 4,347
-----------
<CAPTION>
MARKET
VALUE
MONEY MARKET INVESTMENTS (69.2%) PAR (000'S)
- ---------------------------------------------------------------
<S> <C> <C>
SHORT TERM BUSINESS CREDIT (11.1%)
American Express Credit, 5.00%,
01/08/99 9,855,000 $ 9,845
CIT Group, 5.35%, 01/28/99 8,980,000 8,944
Sears Roebuck Acceptance Corp.,
5.10%, 02/22/99 13,900,000 13,798
-----------
TOTAL 32,587
-----------
TOTAL MONEY MARKET INVESTMENTS 201,785
-----------
<CAPTION>
ASSET-BACKED SECURITIES (30.5%)
- ---------------------------------------------------------------
<S> <C> <C>
AUTO RELATED (4.1%)
New Center Asset Trust, 5.39%,
01/08/99 11,990,000 $ 11,977
-----------
FINANCE LESSORS (26.4%)
Asset Securitization, 5.20%,
01/22/99 11,000,000 10,967
Asset Securitization, 5.10%,
03/19/99 2,900,000 2,868
Preferred Receivable Funding, 5.26%,
01/05/99 6,300,000 6,296
Preferred Receivable Funding, 5.40%,
02/02/99 5,900,000 5,872
Preferred Receivable Funding, 5.22%,
02/18/99 2,160,000 2,145
Quincy Capital Corporation, 5.44%,
01/14/99 14,200,000 14,172
Receivable Capital Trust, 5.29%,
02/04/99 8,355,000 8,313
Receivable Capital Trust, 5.299%,
02/04/99 2,036,000 2,026
Short Term Repackage Asset Trust,
5.686%, 04/13/99 10,100,000 10,099
Triple A One Funding, 5.60%,
01/06/99 3,671,000 3,668
Triple A One Funding, 5.28%,
01/29/99 5,148,000 5,127
Triple A One Funding, 5.22%,
02/16/99 5,450,000 5,414
-----------
TOTAL 76,967
-----------
TOTAL ASSET-BACKED SECURITIES 88,944
-----------
TOTAL INVESTMENTS (99.7%), (COST
$290,729,450)^ 290,729
OTHER ASSETS, LESS LIABILITIES
(.3%) 735
-----------
TOTAL NET ASSETS (100.0%) $ 291,464
-----------
</TABLE>
^ Also represents cost for federal income tax purposes.
The Accompanying Notes are an Integral Part of the Financial Statements
B-107
<PAGE>
PART C
OTHER INFORMATION
Item 22. FINANCIAL STATEMENTS
(a) Financial Statements
FINANCIAL STATEMENTS INCLUDED IN THE PROSPECTUS:
Financial Highlights
1998 FINANCIAL STATEMENTS FOR NORTHWESTERN MUTUAL
SERIES FUND, INC. INCLUDED IN THE STATEMENT OF
ADDITIONAL INFORMATION:
Report of Independent Accountants
Statement of Assets and Liabilities
Statement of Operations
Statement of Changes in Net Assets
Financial Highlights
Notes to Financial Statements
Schedules of Investments
Item 23. EXHIBITS
Exhibit A(1) Resolutions to amend the Articles of
Incorporation adopted by the Directors of
Northwestern Mutual Life Series Fund, Inc.
on February 4, 1999.
Exhibit B(2)(a) Amendment to By-Laws of Northwestern Mutual
Series Fund, Inc.
Exhibit B(2)(b) Resolutions to amend the By-laws adopted by
the Directors of Northwestern Mutual Series
Fund, Inc. on February 4, 1999.
Exhibit D(5)(a) Form of Investment Advisory Agreement
between Northwestern Mutual Series Fund,
Inc. (on behalf of the Index 400 Stock
Portfolio), Northwestern Mutual Investment
Services, LLC and The Northwestern Mutual
Life Insurance Company.
Exhibit D(5)(b) Form of Investment Advisory Agreement
between Northwestern Mutual Series Fund,
Inc. (on behalf of the Small Cap Growth
Stock Portfolio), Northwestern Mutual
Investment Services, LLC and The
Northwestern Mutual Life Insurance Company.
Exhibit G(8)(a) Form of Custodian Agreement between
Northwestern Mutual Series Fund, Inc. and
Chase Manhattan Bank.
Exhibit H(9) License Agreement between Standard & Poor's
Corporation and Northwestern Mutual Series
Fund, Inc. (on behalf of the Index 400 Stock
Portfolio).
Exhibit J(11) Consent of PricewaterhouseCoopers LLP.
Exhibit K(16) Schedule of computation for the Money Market
Portfolio's yield quotation for the
seven-day period ended January 31, 1999, as
provided in the Registration Statement.
C-1
<PAGE>
Exhibit 27 Financial Data Schedule for period ended
December 31, 1998.
Item 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
Shares of the Registrant have been offered and sold only to
The Northwestern Mutual Life Insurance Company ("Northwestern
Mutual Life"), a mutual insurance company organized by a
special act of the Wisconsin Legislature, and its separate
investment accounts created pursuant to Wisconsin insurance
laws. Certain of the separate investment accounts are
registered under the Investment Company Act of 1940 as unit
investment trusts, and the purchasers of variable annuity
contracts and variable life insurance policies issued in
connection with such accounts have the right to instruct
Northwestern Mutual Life with respect to the voting of the
Registrant's shares held by those accounts. Subject to such
voting instruction rights, Northwestern Mutual Life and its
separate investment accounts directly control the Registrant.
However, the present practice of Northwestern Mutual Life, as
disclosed elsewhere in this Amended Registration Statement, is
to vote the shares of the Registrant held as general assets in
the same proportions as the shares for which voting
instructions are reserved. Subsidiaries of Northwestern Mutual
Life when considered in the aggregate as a single subsidiary
would not constitute a significant subsidiary.
Item 25. INDEMNIFICATION
Article IX of Registrant's by-laws is included as an exhibit
to the Registration Statement under the Securities Act of 1933
and the Investment Company Act of 1940. The by-laws of
Northwestern Mutual Life permit indemnification by
Northwestern Mutual Life of persons who are serving as
directors of another corporation at the request of
Northwestern Mutual Life. Pursuant to the by-law provision,
the Trustees of Northwestern Mutual Life have adopted a
resolution extending to all of the directors of the Registrant
the benefits of the indemnification arrangements for
employees, officers and Trustees of Northwestern Mutual Life.
Directors' and officers' liability insurance which covers the
directors and officers of the Registrant as well as Trustees
and officers of Northwestern Mutual Life is also in force. The
amount of coverage is $50 million. The deductible amount is
$1,000,000 ($1 million) for claims covered by corporate
indemnification. The cost of this insurance is allocated among
Northwestern Mutual Life and its subsidiaries and no part of
the premium has been paid by the Registrant.
Item 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
In addition to its investment advisory function, Northwestern Mutual
Investment Services, LLC ("NMIS"), the Registrant's investment
adviser, is responsible for the selection, training and supervision
of life insurance agents of Northwestern Mutual Life who engage in
the distribution of variable life insurance policies and variable
annuity contracts issued by Northwestern Mutual Life. The directors
and officers of NMIS also serve as officers of Northwestern Mutual
Life.
Item 27. PRINCIPAL UNDERWRITERS
Not applicable.
C-2
<PAGE>
Item 28. LOCATION OF ACCOUNTS AND RECORDS
Pursuant to the investment advisory agreement, NMIS, the Registrant's
adviser, provides facilities and personnel for maintaining the
Registrant's books and records. Northwestern Mutual Life is also a
party to the agreement and provides space, facilities and personnel
used in carrying out this function. Documents are kept at 720 East
Wisconsin Avenue, Milwaukee, Wisconsin 53202, the address of NMIS and
of Northwestern Mutual Life.
Item 29. MANAGEMENT SERVICES
Not applicable.
Item 30. UNDERTAKINGS
Not applicable.
C-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant, Northwestern Mutual Series Fund,
Inc., has duly caused this Amended Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Milwaukee,
and State of Wisconsin, on the 25th day of February, 1999.
NORTHWESTERN MUTUAL SERIES FUND, INC.
(Registrant)
By:JAMES D. ERICSON
------------------------------
James D. Ericson, President
Pursuant to the requirements of the Securities Act of 1933, this
Amended Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated.
SIGNATURE TITLE
JAMES D. ERICSON President, Director
- ------------------------- and Principal Executive
James D. Ericson Officer
MARK G. DOLL Vice President,
- ------------------------- Treasurer and Principal
Mark G. Doll Financial Officer
BARBARA E. COURTNEY Controller and
- ------------------------- Principal Accounting
Barbara E. Courtney Officer
Dated
February 25,
1999
WILLIAM J. BLAKE* Director
- -------------------------
William J. Blake
STEPHEN N. GRAFF* Director
- -------------------------
Stephen N. Graff
MARTIN F. STEIN* Director
- -------------------------
Martin F. Stein
JOHN K. MACIVER* Director
- -------------------------
John K. MacIver*
WILLIAM A. MCINTOSH* Director
- -------------------------
William A. McIntosh
* By JAMES D. ERICSON
------------------------------------
James D. Ericson, Attorney
in fact, pursuant to the Power
of Attorney attached hereto
C-4
<PAGE>
POWER OF ATTORNEY
The undersigned Directors of Northwestern Mutual Series Fund, Inc. (the
"Company"), hereby constitute and appoint James D. Ericson and Edward J. Zore,
or either of them, their true and lawful attorneys and agents, to sign the names
of the undersigned Directors to any instruments or documents filed as part of or
in connection with or in any way related to the registration statement or
statements and any and all amendments thereto, to be filed under the Securities
Act of 1933 in connection with shares of the common stock of the Company offered
to the public; and each of the undersigned hereby ratifies and confirms all that
said attorneys and agents shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, each of the undersigned has subscribed these
presents, as indicated, February 4, 1999.
STEPHEN N. GRAFF Director
--------------------
Stephen N. Graff
WILLIAM J. BLAKE Director
--------------------
William J. Blake
JOHN K. MACIVER Director
--------------------
John K. MacIver
MARTIN F. STEIN Director
--------------------
Martin F. Stein
JAMES D. ERICSON Director
--------------------
James D. Ericson
WILLIAM A. MCINTOSH Director
--------------------
William A. McIntosh
C-5
<PAGE>
EXHIBIT INDEX
EXHIBITS FILED WITH FORM N-1A
POST-EFFECTIVE AMENDMENT NO. 16 TO
REGISTRATION STATEMENT UNDER SECTION 6 OF
THE SECURITIES ACT OF 1933
AND SECTION 8(b) OF THE INVESTMENT COMPANY ACT OF 1940
FOR
NORTHWESTERN MUTUAL SERIES FUND, INC.
EXHIBIT NUMBER EXHIBIT NAME
- -------------- ------------
Exhibit A(1) Resolutions to amend the Articles of
Incorporation adopted by the Directors of
Northwestern Mutual Series Fund, Inc. on
February 4, 1999.
Exhibit B(2)(a) Amendment to By-Laws of Northwestern Mutual
Series Fund, Inc.
Exhibit B(2)(b) Resolutions to amend the By-laws adopted by the
Directors of Northwestern Mutual Life Series
Fund, Inc. on February 4, 1999.
Exhibit D(5)(a) Form of Investment Advisory Agreement between
Northwestern Mutual Series Fund, Inc. (on
behalf of the Index 400 Stock Portfolio),
Northwestern Mutual Investment Services, LLC
and The Northwestern Mutual Life Insurance
Company.
Exhibit D(5)(b) Form of Investment Advisory Agreement between
Northwestern Mutual Series Fund, Inc. (on
behalf of the Small Cap Growth Stock
Portfolio), Northwestern Mutual Investment
Services, LLC and The Northwestern Mutual Life
Insurance Company.
Exhibit G(8)(a) Form of Custodian Agreement between
Northwestern Mutual Series Fund, Inc. and Chase
Manhattan Bank.
Exhibit H(9) License Agreement between Standards & Poor's
Corporation and Northwestern Mutual Series
Fund, Inc. (on behalf of the Index 400 Stock
Portfolio).
Exhibit J(11) Consent of PricewaterhouseCoopers LLP.
<PAGE>
Exhibit K(16) Schedule of computation for the Money Market
Portfolio's yield quotation for the seven-day
period ended January 31, 1999, as provided in
the Registration Statement.
Exhibit 27 Financial Data Schedule for period ended
December 31, 1999 for each Portfolio of
Northwestern Mutual Series Fund, Inc.
<PAGE>
Exhibit A(1)
RESOLUTIONS ADOPTED BY THE DIRECTORS OF NORTHWESTERN MUTUAL
SERIES FUND, INC. ON FEBRUARY 4, 1999
RESOLVED, that the Board hereby amends the first two paragraphs of
Article FIFTH of the Articles of Incorporation of the corporation to
read as follows, effective April 26, 1999:
FIFTH: The total number of shares of capital stock which the
corporation shall have authority to issue is twenty-four billion
(24,000,000,000) shares of the par value of One Cent ($0.01) per share
and the aggregate par value of Two Hundred Forty Million Dollars
($240,000,000). Twenty-one billion (21,000,000,000) shares shall be
divided into the following classes of capital stock, each class
comprising the number of shares and having the designations indicated,
subject, however, to the authority to increase and decrease the number
of shares of any class hereinafter granted to the Board of Directors:
<TABLE>
<CAPTION>
NUMBER OF
SHARES CLASS
------ -----
<S> <C>
2,000,000,000 Index 500 Stock Portfolio Capital Stock
1,000,000,000 Select Bond Portfolio Capital Stock
1,000,000,000 Money Market Portfolio Capital Stock
3,000,000,000 Balanced Portfolio Capital Stock
2,000,000,000 Aggressive Growth Stock Portfolio Capital Stock
2,000,000,000 International Equity Portfolio Capital Stock
2,000,000,000 High Yield Bond Portfolio Capital Stock
2,000,000,000 Growth and Income Stock Portfolio Capital Stock
2,000,000,000 Growth Stock Portfolio Capital Stock
2,000,000,000 Index 400 Stock Portfolio Capital Stock
2,000,000,000 Small Cap Growth Stock Portfolio Capital Stock
</TABLE>
The balance of three billion (3,000,000,000) shares of such stock may
be issued in such classes, or in any new class or classes each
comprising such number of shares and having such designations, such
powers, preferences and rights and such qualifications, limitations and
restrictions as shall be fixed and determined from time to time by
resolution or resolutions providing for the issuance of such stock
adopted by the Board of Directors, to whom authority so to fix and
determine the same is hereby expressly granted. In addition, the Board
of
<PAGE>
Directors is hereby expressly granted authority to increase or decrease
the number of shares of any class, but the number of shares of any
class shall not be decreased by the Board of Directors below the number
of shares thereof then outstanding.
BE IT FURTHER RESOLVED, that the officers of the corporation
are authorized and directed to prepare articles supplementary and
amended Articles of Incorporation to reflect the actions taken by these
resolutions, to file such articles supplementary and amended articles
in accordance with the applicable requirements of the laws of Maryland,
and to pay such franchise and bonus taxes as may be due.
<PAGE>
Exhibit B(2)(a)
AMENDMENT TO THE BY-LAWS ADOPTED AT A MEETING OF THE DIRECTORS OF
NORTHWESTERN MUTUAL SERIES FUND, INC. ON AUGUST 6, 1998
AMENDMENT: RESOLVED, that Section 8.07 of the By-laws of the corporation is
hereby amended by inserting the following sentence as the fifth sentence,
effective August 6, 1998:
"The Portfolio may also invest up to 5% of its assets in other equity
securities, rights, warrants, options and other derivatives."
<PAGE>
Exhibit B(2)(b)
RESOLUTIONS ADOPTED BY THE DIRECTORS OF NORTHWESTERN MUTUAL
SERIES FUND, INC. ON FEBRUARY 4, 1999
RESOLVED, that the Board hereby redesignates section 8.10 of the
By-Laws of the corporation as Section 8.12, effective April 26, 1999.
RESOLVED, that the Board hereby adds sections 8.10 and 8.11 of the
By-Laws of the corporation to read as follows, effective April 26,
1999:
8.10 OBJECTIVES OF THE INDEX 400 STOCK PORTFOLIO
The investment objective of the Index 400 Stock Portfolio is
to achieve investment results that approximate the performance of the
S&P MidCap 400 Composite Stock Price Index ("S&P 400 Index"). The
Portfolio will attempt to meet this objective by investing in stocks
included in the S&P 400 Index in proportion to their weightings in the
index. A portion of the assets may be invested in money market
instruments, including U.S. Government and agency securities and
short-term commercial paper, as well as option contracts, stock index
futures contracts, and repurchase agreements.
8.11 OBJECTIVES OF THE SMALL CAP GROWTH STOCK PORTFOLIO
The investment objective of the Small Cap Growth Stock
Portfolio is long-term growth of capital. The Portfolio will seek to
achieve this objective primarily by investing in the common stocks of
companies the advisor believes can reasonably be expected to increase
sales and earnings at a pace which will exceed the growth rate of the
U.S. economy over an extended period. These companies, for the most
part, are small capitalization companies whose stock may experience
substantial price volatility. Under normal circumstances, the Portfolio
will invest at least 80% of its assets in stocks. The Portfolio may
invest in preferred stocks and debt securities with conversion
privileges or warrants. A portion of the assets may be invested in
money market instruments, including U.S. Government and agency
securities and short-term commercial paper.
RESOLVED, that the Board hereby amends Section 8.05 of the By-Laws of
the corporation to read as follows, effective April 30, 1999:
8.05 OBJECTIVES OF THE AGGRESSIVE GROWTH STOCK PORTFOLIO
The investment objective of the Aggressive Growth Stock
Portfolio is long-term growth of capital. The Portfolio will seek to
achieve this objective primarily by investing in the common stock of
companies the advisor believes can reasonably be expected to increase
sales and earnings at a pace which will exceed the growth rate of the
U.S. economy over an extended period. These companies, for the most
part, are mid-sized and smaller companies whose stock may experience
substantial price volatility. Under normal circumstances, the Portfolio
will invest at least 80% of its assets in stocks. The Portfolio may
invest in
<PAGE>
preferred stocks and debt securities with conversion privileges or
warrants. From time to time assets may be invested in investment grade
debt securities and short-term commercial paper and United States
Treasury obligations or temporarily held uninvested for such periods as
may appear to be prudent.
<PAGE>
Exhibit D(5)(a)
INVESTMENT ADVISORY AGREEMENT
THIS AGREEMENT, entered into this 29th day of April, 1999 between
Northwestern Mutual Series Fund, Inc., a Maryland corporation (the "Fund"),
Northwestern Mutual Investment Services, LLC, a Wisconsin limited liability
company ("NMIS") and The Northwestern Mutual Life Insurance Company, a Wisconsin
life insurance company ("Northwestern Mutual Life") (NMIS and Northwestern
Mutual Life being hereinafter collectively referred to as the "Manager").
WHEREAS, the Fund is a series company as contemplated by the Investment
Company Act of 1940 and currently has nine portfolios, each of which is
represented by a separate class of capital stock, and one of which is subject to
this agreement: Index 400 Stock Portfolio (the "Portfolio"); and
WHEREAS, the Fund and Manager wish to enter into an agreement setting
forth the terms on which the Manager will perform certain services for the Fund
and the Portfolio.
NOW, THEREFORE, it is mutually agreed as follows:
1. The Fund hereby employs the Manager to manage the investment and
reinvestment of the assets of the Portfolio, to determine the composition of the
assets of the Portfolio, including the purchase, retention or sale of the
securities and cash contained in the Portfolio and to administer the affairs of
the Portfolio, subject to the supervision of the Board of Directors of the Fund,
for the period and on the terms in this Agreement set forth. The Manager will
perform its duties in accordance with the investment objectives and policies of
the Portfolio as stated in the Fund's Articles of Incorporation, By-laws and
Registration Statement and
<PAGE>
amendments thereto filed with the Securities and Exchange Commission and in
resolutions adopted by the Fund's Board of Directors. The Manager hereby accepts
such employment and agrees during such period, at its own expense, to render the
services and to assume the obligations herein set forth, for the compensation
herein provided. The Manager shall for all purposes herein be deemed to be an
independent contractor and shall, unless otherwise expressly provided or
authorized, have no authority to act for or represent the Fund in any way or
otherwise be deemed an agent of the Fund.
2. The Manager, at its own expense, shall furnish to the Fund office
space in the offices of the Manager or in such other place as may be agreed upon
from time to time, and all necessary office facilities, equipment and personnel
for managing the affairs and investments and keeping the books of the Fund, and
shall arrange, if desired by the Fund, for members of the Manager's organization
to serve without salaries from the Fund as officers or agents of the Fund. The
Manager assumes and shall pay or reimburse the Fund for the compensation (if
any) of the directors and officers of the Fund as such, and all expenses not
hereinafter specifically assumed by the Fund incurred by the Manager or by the
Fund in connection with the management of the investment and reinvestment of the
assets of the Portfolio and the administration of the affairs of the Portfolio.
The Portfolio assumes and shall pay charges and expenses of any custodian or
depository appointed by the Portfolio for the safekeeping of its cash,
securities and other property; charges and expenses of independent auditors;
charges and expenses of any transfer agents and registrars appointed by the
Portfolio; the cost of stock certificates representing shares of the Portfolio;
fees and expenses involved in registering and maintaining registration of the
Portfolio and of its shares with the Securities and Exchange Commission
(including the preparation and printing of prospectuses for filing with the
Commission); all expenses of
2
<PAGE>
shareholders' and directors' meetings and of preparing and printing reports to
shareholders; charges and expenses of legal counsel in connection with the
Portfolio's corporate existence, corporate and financial structure and relations
with its shareholders; broker's commissions and issue and transfer taxes,
chargeable to the Portfolio in connection with securities transactions to which
the Portfolio is a party; and all taxes payable by the Portfolio to federal,
state or other governmental agencies, including foreign taxes.
In connection with purchases or sales of portfolio securities for the
account of the Portfolio, neither the Manager nor any of its directors, officers
or employees will act as a principal or receive any commission as agent.
The services of the Manager to the Fund hereunder are not to be deemed
exclusive, and the Manager shall be free to render similar services to others so
long as its services hereunder are not impaired thereby.
3. For the services to be rendered and the charges and expenses assumed
and to be paid by the Manager as provided in paragraph 2 hereof, the Portfolio
shall pay to the Manager compensation at the annual rate of twenty-five
one-hundredths of one percent of the current value of the net assets of the
Portfolio. Such compensation shall be payable at such intervals, not more
frequently than monthly and not less frequently than quarterly, as the Board of
Directors of the Fund may from time to time determine and specify in writing to
the Manager. Such compensation shall be calculated on the basis of the aggregate
of the averages of all the valuations of the net assets of the Portfolio made as
of the close of business on each valuation day during the period for which such
compensation is paid.
Such compensation shall be charged to the Portfolio on each valuation
day. The amount of the Portfolio's share of the compensation will be deducted on
each valuation day from the
3
<PAGE>
value of the Portfolio prior to determining the Portfolio's net asset value for
the day and shall be transmitted or credited to the Manager.
4. The Portfolio shall cooperate with the Manager in the registration
or qualification of its shares with the Securities and Exchange Commission and
with the securities commissions and departments of such states as shall be
selected by the Manager for qualification of the shares of the Portfolio. The
Portfolio shall use its best efforts to maintain such registration and
qualifications.
5. The Fund shall cause the books and accounts of the Portfolio to be
audited at least once each year by a reputable independent public accountant or
organization of public accountants who shall render a report to the Fund.
6. Subject to the Articles of Incorporation of the Fund and of the
Manager respectively, it is understood that directors, officers, employees,
agents and stockholders of the Fund are or may be interested in the Manager (or
any successor thereof) as directors, officers, employees, agents, or
stockholders, or otherwise, that directors, officers, agents and stockholders of
the Manager are or may be interested in the Fund as directors, officers,
employees, agents or stockholders or otherwise, and that the Manager (or any
such successor) is or may be interested in the Fund as stockholder or otherwise.
7. In the absence of willful misfeasance, bad faith, gross negligence,
or reckless disregard of obligations or duties hereunder on the part of the
Manager or its corporate affiliates, the Manager and its corporate affiliates
shall not be subject to liability to the Fund for any act or omission in the
course of, or connected with, rendering services hereunder or for any losses
that may be sustained in the purchase, holding, or sale of any security. No
provision of this
4
<PAGE>
Agreement shall be construed to protect the Manager and its corporate affiliates
from liability in violation of section 17(i) of the Investment Company Act of
1940.
8. This Agreement shall continue in effect so long as its continuance
is specifically approved at least annually by the vote of a majority of those
directors of the Fund who are not parties to the Agreement or interested persons
of any such party cast in person at a meeting called for the purpose of voting
on such approval and by either a majority of the Board of Directors of the Fund
or a majority of the outstanding voting securities of the Portfolio (as defined
in the Investment Company Act of 1940). Shareholder approval shall be effective
with respect to any Portfolio vote for the approval, notwithstanding that a
majority of the outstanding voting securities of the Fund or of the other
portfolios have not voted for approval.
This Agreement may at any time be terminated without the payment of any
penalty either by vote of the Board of Directors of the Fund or by vote of the
majority of the voting securities of the Portfolio, on sixty days' written
notice to the Manager. This Agreement may also be terminated by the Manager on
ninety days' written notice to the Fund. This Agreement shall immediately
terminate in the event of its assignment (as defined in the Investment Company
Act of 1940). Any notice under this Agreement shall be given in writing,
addressed and delivered, or mailed postpaid, to the other party at any office of
such party.
9. This Agreement may be amended at any time by mutual consent of the
parties, provided that such consent on the part of the Fund shall have been
approved, with respect to the Portfolio, by vote of a majority of the
outstanding voting securities of the Portfolio (as defined in the Investment
Company Act of 1940) as provided in paragraph 8.
5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the day and year first above written.
Attest: NORTHWESTERN MUTUAL
SERIES FUND, INC.
By
- -------------------------------- -----------------------------------
Merrill C. Lundberg, Secretary James D. Ericson, President
Attest: NORTHWESTERN MUTUAL
INVESTMENT SERVICES, LLC
By
- -------------------------------- -----------------------------------
Merrill C. Lundberg, Secretary Richard L. Hall, President
Attest: THE NORTHWESTERN MUTUAL LIFE
INSURANCE COMPANY
By
- -------------------------------- -----------------------------------
John M. Bremer, Secretary James D. Ericson, President
6
<PAGE>
Exhibit D(5)(b)
INVESTMENT ADVISORY AGREEMENT
THIS AGREEMENT, entered into this 29th day of April, 1999 between
Northwestern Mutual Series Fund, Inc., a Maryland corporation (the "Fund"),
Northwestern Mutual Investment Services, LLC, a Wisconsin limited liability
company ("NMIS") and The Northwestern Mutual Life Insurance Company, a Wisconsin
life insurance company ("Northwestern Mutual Life") (NMIS and Northwestern
Mutual Life being hereinafter collectively referred to as the "Manager").
WHEREAS, the Fund is a series company as contemplated by the Investment
Company Act of 1940 and currently has nine portfolios, each of which is
represented by a separate class of capital stock, and one of which is subject to
this agreement: Small Cap Growth Stock Portfolio (the "Portfolio"); and
WHEREAS, the Fund and Manager wish to enter into an agreement setting
forth the terms on which the Manager will perform certain services for the Fund
and the Portfolio.
NOW, THEREFORE, it is mutually agreed as follows:
1. The Fund hereby employs the Manager to manage the investment and
reinvestment of the assets of the Portfolio, to determine the composition of the
assets of the Portfolio, including the purchase, retention or sale of the
securities and cash contained in the Portfolio and to administer the affairs of
the Portfolio, subject to the supervision of the Board of Directors of the Fund,
for the period and on the terms in this Agreement set forth. The Manager will
perform its duties in accordance with the investment objectives and policies of
the Portfolio as stated in the Fund's Articles of
<PAGE>
Incorporation, By-laws and Registration Statement and amendments thereto filed
with the Securities and Exchange Commission and in resolutions adopted by the
Fund's Board of Directors. The Manager hereby accepts such employment and agrees
during such period, at its own expense, to render the services and to assume the
obligations herein set forth, for the compensation herein provided. The Manager
shall for all purposes herein be deemed to be an independent contractor and
shall, unless otherwise expressly provided or authorized, have no authority to
act for or represent the Fund in any way or otherwise be deemed an agent of the
Fund.
2. Manager, at its own expense, shall furnish to the Fund office space
in the offices of the Manager or in such other place as may be agreed upon from
time to time, and all necessary office facilities, equipment and personnel for
managing the affairs and investments and keeping the books of the Fund, and
shall arrange, if desired by the Fund, for members of the Manager's organization
to serve without salaries from the Fund as officers or agents of the Fund. The
Manager assumes and shall pay or reimburse the Fund for the compensation (if
any) of the directors and officers of the Fund as such, and all expenses not
hereinafter specifically assumed by the Fund incurred by the Manager or by the
Fund in connection with the management of the investment and reinvestment of the
assets of the Portfolio and the administration of the affairs of the Portfolio.
The Portfolio assumes and shall pay charges and expenses of any custodian or
depository appointed by the Portfolio for the safekeeping of its cash,
securities and other property; charges and expenses of independent auditors;
charges and expenses of any transfer agents and registrars appointed by the
Portfolio; the cost of stock certificates representing shares of the Portfolio;
fees and expenses involved in registering and maintaining registration of the
Portfolio and of its shares with the
2
<PAGE>
Securities and Exchange Commission (including the preparation and printing of
prospectuses for filing with the Commission); all expenses of shareholders' and
directors' meetings and of preparing and printing reports to shareholders;
charges and expenses of legal counsel in connection with the Portfolio's
corporate existence, corporate and financial structure and relations with its
shareholders; broker's commissions and issue and transfer taxes, chargeable to
the Portfolio in connection with securities transactions to which the Portfolio
is a party; and all taxes payable by the Portfolio to federal, state or other
governmental agencies, including foreign taxes.
In connection with purchases or sales of portfolio securities for the
account of the Portfolio, neither the Manager nor any of its directors, officers
or employees will act as a principal or receive any commission as agent.
The services of the Manager to the Fund hereunder are not to be deemed
exclusive, and the Manager shall be free to render similar services to others so
long as its services hereunder are not impaired thereby.
3. For the services to be rendered and the charges and expenses assumed
and to be paid by the Manager as provided in paragraph 2 hereof, the Portfolio
shall pay to the Manager compensation at the annual rate of eighty
one-hundredths of one percent of the current value of the first $50 million of
the net assets of the Portfolio, and sixty-five one-hundredths of one percent of
the current value of the next $50 million of such assets and fifty
one-hundredths of one percent of the current value which exceeds $100 million.
Such compensation shall be payable at such intervals, not more frequently than
monthly and not less frequently than quarterly, as the Board of Directors of the
Fund may from time to time determine and specify in writing to the Manager. Such
compensation shall be calculated on the basis of the aggregate of the averages
of
3
<PAGE>
all the valuations of the net assets of the Portfolio made as of the close of
business on each valuation day during the period for which such compensation is
paid.
Such compensation shall be charged to the Portfolio on each valuation
day. The amount of the Portfolio's share of the compensation will be deducted on
each valuation day from the value of the Portfolio prior to determining the
Portfolio's net asset value for the day and shall be transmitted or credited to
the Manager.
4. The Portfolio shall cooperate with the Manager in the registration
or qualification of its shares with the Securities and Exchange Commission and
with the securities commissions and departments of such states as shall be
selected by the Manager for qualification of the shares of the Portfolio. The
Portfolio shall use its best efforts to maintain such registration and
qualifications.
5. The Fund shall cause the books and accounts of the Portfolio to be
audited at least once each year by a reputable independent public accountant or
organization of public accountants who shall render a report to the Fund.
6. Subject to the Articles of Incorporation of the Fund and of the
Manager respectively, it is understood that directors, officers, employees,
agents and stockholders of the Fund are or may be interested in the Manager (or
any successor thereof) as directors, officers, employees, agents, or
stockholders, or otherwise, that directors, officers, agents and stockholders of
the Manager are or may be interested in the Fund as directors, officers,
employees, agents or stockholders or otherwise, and that the Manager (or any
such successor) is or may be interested in the Fund as stockholder or otherwise.
7. In the absence of willful misfeasance, bad faith, gross negligence,
or reckless disregard of obligations or duties hereunder on the part of the
Manager or its
4
<PAGE>
corporate affiliates, the Manager and its corporate affiliates shall not be
subject to liability to the Fund for any act or omission in the course of, or
connected with, rendering services hereunder or for any losses that may be
sustained in the purchase, holding, or sale of any security. No provision of
this Agreement shall be construed to protect the Manager and its corporate
affiliates from liability in violation of section 17(i) of the Investment
Company Act of 1940.
8. This Agreement shall continue in effect so long as its continuance
is specifically approved at least annually by the vote of a majority of those
directors of the Fund who are not parties to the Agreement or interested persons
of any such party cast in person at a meeting called for the purpose of voting
on such approval and by either a majority of the Board of Directors of the Fund
or a majority of the outstanding voting securities of the Portfolio (as defined
in the Investment Company Act of 1940). Shareholder approval shall be effective
with respect to any Portfolio vote for the approval, notwithstanding that a
majority of the outstanding voting securities of the Fund or of the other
portfolios have not voted for approval.
This Agreement may at any time be terminated without the payment of any
penalty either by vote of the Board of Directors of the Fund or by vote of the
majority of the voting securities of the Portfolio, on sixty days' written
notice to the Manager. This Agreement may also be terminated by the Manager on
ninety days' written notice to the Fund. This Agreement shall immediately
terminate in the event of its assignment (as defined in the Investment Company
Act of 1940). Any notice under this Agreement shall be given in writing,
addressed and delivered, or mailed postpaid, to the other party at any office of
such party.
5
<PAGE>
9. This Agreement may be amended at any time by mutual consent of the
parties, provided that such consent on the part of the Fund shall have been
approved, with respect to the Portfolio, by vote of a majority of the
outstanding voting securities of the Portfolio (as defined in the Investment
Company Act of 1940) as provided in paragraph 8.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the day and year first above written.
Attest: NORTHWESTERN MUTUAL
SERIES FUND, INC.
By
- ------------------------------- ---------------------------------
Merrill C. Lundberg, Secretary James D. Ericson, President
Attest: NORTHWESTERN MUTUAL
INVESTMENT SERVICES, LLC
By
- ------------------------------- ---------------------------------
Merrill C. Lundberg, Secretary Richard L. Hall, President
Attest: THE NORTHWESTERN MUTUAL LIFE
INSURANCE COMPANY
By
- ------------------------------- ---------------------------------
John M. Bremer, Secretary James D. Ericson, President
6
<PAGE>
Exhibit G(8)(a)
DOMESTIC CUSTODY AGREEMENT
To: The Chase Manhattan Bank
Global Investor Services North America Insurance
3 Chase Metrotech Center
Brooklyn, N.Y. 11245
Gentlemen:
We are a company registered under the Investment Company Act of 1940,
as amended and hereby request you to open and to maintain on your records a
Custody Account in our name as Entitlement Holder and to credit to such account
Financial Assets as our Securities Intermediary, upon the following terms and
conditions. From time to time, we may instruct you to open additional Custody
Accounts for us. Unless we and you shall otherwise expressly agree in writing,
all such Custody Accounts shall be governed by the terms of this Agreement
Financial Assets credited to the Custody Account shall be segregated at
all times from your proprietary assets. Financial Assets credited to the Custody
Account shall be withdrawable or transferable upon our instructions as
hereinafter described, subject to the further terms and conditions herein.
Definitions. The capitalized terms used herein shall have the meanings
set forth below:
"Agreement" means this Domestic Custody Agreement.
"Cash Account" means a cash account in our name on your records,
designated by us to be credited and debited in respect of all transactions to
the Custody Account pursuant to this Agreement and in which cash shall not be
subject to withdrawal by check or draft.
"Custody Account" means each Securities custody account on your records
to which Financial Assets are or may be credited pursuant to this Agreement.
"Depository" means a Federal Reserve Bank and any clearing corporation
as defined in the Uniform Commercial Code.
<PAGE>
"Entitlement Holder" means the person on the records of a Securities
Intermediary as the person having a Securities Entitlement against the
Securities Intermediary.
"Financial Assets" means Securities. As the context requires a
Financial Asset means either the interest itself or the means by which a
person's claim to it is evidenced, including a certificated or uncertificated
Security, a Security certificate, or a Securities Entitlement.
"Securities" means stocks, bonds, rights, warrants and other negotiable
and non-negotiable paper issued in certificated form or in uncertificated form
and commonly traded or dealt in on securities exchanges or financial markets,
and other obligations of an issuer, or shares, participations and interests in
an issuer recognized in an area in which it is issued or dealt in as a medium
for investment and any other property as shall be acceptable to you for the
Custody Account.
"Securities Entitlement" means the rights and property interest of an
Entitlement Holder with respect to a Financial Asset as set forth in Part 5 of
the Uniform Commercial Code.
"Securities Intermediary" means you, a Depository, and any other
financial institution which in the ordinary course of its business maintains
Securities accounts for others and acts in that capacity.
"Uniform Commercial Code" means Article 8 of the New York Uniform
Commercial Code, as amended.
TRANSACTIONS. Unless you receive contrary written instructions from us,
and subject to the further provisions of this Agreement, you are authorized:
(a) to receive all interest and dividends payable on the Financial
Assets credited to the Custody Account and to credit such interest and dividends
to the Cash Account;
(b) to credit to the Cash Account all proceeds received from sales and
redemptions of Financial Assets for the Custody Account;
(c) to debit the Cash Account for the cost of acquiring Financial
Assets for the Custody Account;
(d) to present Financial Assets (including coupons) for payment upon
maturity, when called for redemption and when income payments are due;
2
<PAGE>
(e) to exchange Financial Assets for other Financial Assets where the
exchange is purely ministerial as, for example, the exchange of Financial Assets
in temporary form for Financial Assets in definitive form or the mandatory
exchange of Financial Assets;
(f) to sell Financial Assets with fractional interests resulting from a
stock split or a stock dividend and to credit the Cash Account with the proceeds
thereof;
(g) to execute in our name, whenever you deem it appropriate, such
ownership and other certificates as may be required to obtain payments with
respect to, or to effect the sale, transfer or other disposition of, Financial
Assets in the Custody Account and to guarantee as our signature the signature so
affixed; and
(h) to receive and hold in the Custody Account Financial Assets which
have transfer limitations imposed upon them by the Securities Act of 1933, as
amended.
INSTRUCTIONS. You are authorized to rely and act upon all further
written instructions given or purported to be given by one or more officers,
employees or agents of ours (i) authorized by or in accordance with a corporate
resolution of ours delivered to you or (ii) described as authorized in a
certificate delivered to you by our Secretary or an Assistant Secretary or
similar officer of ours (each such officer, employee or agent or combination of
officers, employees and agents authorized pursuant to clause (i) or described
pursuant to clause (ii) of this paragraph is hereinafter referred to as an
"Authorized Officer"). (The term "instructions" includes, without limitation,
instructions to sell, assign, transfer, deliver, purchase or receive for the
Custody Account, any and all stocks, bonds and other Financial Assets or to
transfer funds in the Cash Account.) You may also rely and act upon instructions
when bearing or purporting to bear the facsimile signature or signatures of any
of the individuals designated by an Authorized Officer regardless of by whom or
by what means the actual or purported facsimile signature or signatures thereon
may have been affixed thereto if such facsimile signature or signatures resemble
the facsimile specimen or specimens from time to time furnished to you by any of
such Authorized Officers, our Secretary or an Assistant Secretary or similar
officer of ours. In addition, you may rely and act upon instructions received by
telephone, telex, facsimile transmission, bank wire or other teleprocess or
electronic instruction or trade information system acceptable to you which you
believe in good faith to have been given by an Authorized Officer or which are
transmitted with proper testing or authentication pursuant to terms and
conditions which you may specify. You may also rely and act upon instructions
transmitted electronically through your TITAN Data Entry System or any similar
3
<PAGE>
electronic instruction system acceptable to you. You shall incur no liability to
us or otherwise as a result of any act or omission by you in accordance with
instructions on which you are authorized to rely pursuant to the provisions of
this paragraph. Any instructions delivered to you by telephone shall promptly
thereafter be confirmed in writing by an Authorized Officer, but you shall incur
no liability for our failure to send such confirmation in writing, the failure
of any such written confirmation to conform to the telephone instructions which
you received, the failure of any such written confirmation to be signed or
properly signed, or your failure to produce such confirmation at any subsequent
time. You shall incur no liability for refraining from acting upon any
instructions which for any reason you, in good faith, are unable to verify to
your own satisfaction. With respect to instructions received hereunder to
transfer funds from the Cash Account to any other account or party, we agree to
implement any callback or other authentication method or procedure or security
device required by you at any time or from time to time. Unless otherwise
expressly provided, all authorizations and instructions shall continue in full
force and effect until canceled or superseded by subsequent authorizations or
instructions received by your safekeeping account administrator with reasonable
opportunity to act thereon. Your authorization to rely and act upon instructions
pursuant to this paragraph shall be in addition to, and shall not limit, any
other authorization which we may give you regarding our accounts with you.
We agree that, if you require test arrangements, authentication methods
or procedures or other security devices to be used with respect to instructions
which we may give hereunder, thereafter instructions given by us shall be given
and processed in accordance with terms and conditions for the use of such
arrangements, methods or procedures or devices as you may put into effect and
modify from time to time. We shall safeguard any testkeys, identification codes
or other security devices which you make available to us and agree that we shall
be responsible for any loss, liability or damage incurred by you or by us as a
result of your acting in accordance with instructions from any unauthorized
person using the proper security device, unless such unauthorized use is the
result of your negligence or willful misconduct. You may electronically record
any instructions given by telephone, and any other telephone discussions with
respect to the Custody Account or transactions pursuant to this Agreement.
If you are instructed by us to purchase or sell Financial Assets for
the Custody Account you may enter purchase and sale orders and confirmations,
and perform any other acts incidental or necessary to the performance thereof
with brokers or dealers or similar agents selected by you, including any broker
or dealer or similar agent affiliated with you, for our account and risk in
accordance with accepted industry practices in the relevant market.
Except as may be provided otherwise in this Agreement, you are
authorized to execute our instructions and take other actions pursuant to this
Agreement in accordance with your customary processing practices for customers
4
<PAGE>
similar to us and, in accordance with such practices, you may retain agents,
including subsidiaries or affiliates of yours, to perform any of your duties and
responsibilities under this Agreement.
In acting upon instructions to deliver Financial Assets against
payment, you are authorized, in accordance with customary securities processing
practices, to deliver such Financial Assets to the purchaser thereof or dealer
therefor (including to an agent for any such purchaser or dealer) against a
receipt, with the expectation of collecting payment from the purchaser, dealer
or agent to whom the Financial Assets were so delivered before the close of
business on the same day.
PAYMENT ORDERS. Funds credited to the Cash Account shall be transferred
by us by means of instruction (a "payment order") to one of your account
administrators assigned by you for the Custody Account, which you will identify
to us. We agree that payment orders and communications seeking to cancel or
amend payment orders which are issued by telephone, telecopier or in writing
shall be subject to a mutually agreed security procedure and you may execute or
pay payment orders issued in our name when verified by you in accordance with
such procedure.
In executing or paying a payment order you may rely upon the
identifying number (e.g. Fedwire routing number or account) or any party as
instructed in the payment order. We assume full responsibility for any
inconsistency between the name and identifying number of any party in payment
orders issued to you in our name.
REGISTRATION. Unless you receive contrary instructions from us, you are
authorized to keep Financial Assets in your own vaults or in book entry form
registered in your name or in the name of your nominee or nominees or, where
Financial Assets are eligible for deposit in a Depository, such as The
Depository Trust Company or Participants Trust Company, you may use any such
Depository and permit the registration of registered Financial Assets in the
name of its nominee or nominees, and we agree to indemnify and hold you and the
nominees harmless from any liability as holders of record. We shall accept the
return or delivery of Financial Assets of the same class and denomination as
those deposited with you by us or otherwise received by you for the Custody
Account, and you need not retain the particular certificates so deposited or
received.
If any of our Financial Assets registered in your name or the name of
your nominee or held in a Depository and registered in the name of the
Depository's nominee are called for partial redemption by the issuer of such
Financial Assets, you are authorized to allot the called portion to the
respective beneficial holders of the Financial Assets in any manner deemed to be
fair and equitable by you in your sole discretion.
5
<PAGE>
SEGREGATED ACCOUNT. Upon receipt of instructions from us you will
establish and maintain a segregated account or accounts on your records for and
on our behalf, in which may be credited cash and/or Financial Assets:
(a) in accordance with the provisions of an agreement among us and a
broker-dealer (registered under the Securities and Exchange Act of 1934
("Exchange Act") and a member of the National Association of Securities Dealers,
Inc. ("NASD"), or any futures commission merchant registered under the Commodity
Exchange Act, relating to compliance with the rules of the Options Clearing
Corporation and of any registered national securities exchange (or the
Commoditiy Futures Trading Commission or any registered contract market), or of
any similar organization, regarding escrow or other arrangements in connection
with the transactions by us;
(b) for the purpose of segregating cash or financial assets with
options purchased or sold by us; and
(c) for other proper corporate purposes as per the instruction of an
Authorized Officer.
STATEMENTS. You shall notify us of each Financial Asset transaction
effected for the Custody Account and of income on and redemptions of the
Financial Assets in the Custody Account, as well as furnish us a listing of such
Financial Assets, at such times upon which you and we mutually agree. Periodic
statements shall be rendered to us as we may reasonably require, but not less
frequently than monthly. You shall at all times maintain proper books and
records that shall identify the Financial Assets as ours. Your books and records
relating to the Custody Account shall be available for inspection upon
reasonable notice to you during your regular business hours by duly authorized
officers, employees, or agents of ours, or by legally authorized regulatory
officials who are then in the process of reviewing our financial affairs upon
proof to you of such official status.
Unless we shall send to you a written exception or objection to any
statement of account within 60 days of our receipt of such statement from you,
we shall be deemed to have approved such statement. In such event, or where we
have otherwise approved such statement, you shall, to the extent permitted by
law, be released, relieved and discharged with respect to all matters set forth
in such statement or reasonably implied therefrom as though it had been settled
by the decree of a court of competent jurisdiction in an action where we and all
persons having or claiming an interest in the Custody Account or Cash Account
were parties.
6
<PAGE>
CORPORATE ACTIONS. You shall send us such proxies (signed in blank, if
issued in your name or the name of your nominee or a nominee of a Depository)
and communications with respect to Financial Assets in the Custody Account as
call for voting or relate to legal proceedings within a reasonable time after
sufficient copies are received by you for forwarding to customers. In addition,
you shall follow coupon payments, redemptions, exchanges or similar matters with
respect to Financial Assets in the Custody Account and advise us of rights
issued, tender offers or any other discretionary rights with respect to such
Financial Assets, in each case, of which you receive notice at your central
corporate actions department from the issuer or from the Depository in which
such Financial Assets are maintained or notice published in publications and
reported in reporting services routinely used by you for this purpose.
CUSTODIAN RESPONSIBILITY. You shall exercise reasonable care in the
performance of your duties in accordance with the commercial standards and
market practices in the relevant market. In respect of all your duties and
obligations pursuant to the terms of this Agreement, you shall be liable to us
only to the extent of our general damages suffered or incurred as a result of
any act or omission of you or your officers, employees or agents which
constitutes negligence or willful misconduct. General damages shall mean only
those damages as directly and necessarily result from such act or omission
without reference to any special conditions or circumstances of ours or of any
transaction, whether or not you have been advised of any such special conditions
or circumstances. Anything in this Agreement to the contrary notwithstanding, in
no event shall you be liable to us under this Agreement for special, indirect or
consequential loss or damage of any kind whatsoever, whether or not you are
advised as to the possibility of such loss or damage and regardless of the form
of action in which any such loss or damage may be claimed.
You shall not be liable for the acts or omissions of (or the bankruptcy
or insolvency of) any Depository. If, however, as a result of any act or
omission of, or the bankruptcy or insolvency of, any Depository we suffer any
loss or liability, you will take such steps with respect thereto in order to
effect a recovery as you shall reasonably deem appropriate under the
circumstances (including the bringing and settling of legal proceedings),
provided that unless you shall be liable as set forth in the immediately
preceding paragraph of this Agreement, for such loss or liability by virtue of
the negligence or misconduct of you or your officers, employees or agents, the
amount of any cost or expense in effecting, or attempting to effect, such
recovery shall be for our account, and you shall have the right to charge such
cost or expense to the Cash Account. We further agree to be bound by the
Depository rules and procedures applicable to you as a participant in respect of
any Financial Assets held by you in your account with such Depository.
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All collection and receipt of funds or Financial Assets and all payment
and delivery of funds or Financial Assets under this Agreement shall be made by
you as our agent, at our risk with respect to our actions or omissions and those
of persons other than you, including, without limitation, the risk associated
with the securities processing practice of delivering Financial Assets against a
receipt and the risk that the counterparty in any transaction into which we
enter will not transfer funds or Financial Assets or otherwise perform in
accordance with our expectation of its obligations thereunder (including,
without limitation, where, as a result of such nonperformance, a Depository
reverses, or requires repayment of, any credit given in connection with the
transfer of Financial Assets).
In no event shall you be responsible or liable for any loss due to
forces beyond your control, including, but not limited to, acts of God, flood,
fire, nuclear fusion, fission or radiation, war (declared or undeclared),
terrorism, insurrection, revolution, riot, strikes or work stoppages for any
reason, embargo, closure or disruption of any market, government action,
including any laws, ordinances, regulations or the like which restrict or
prohibit the providing of the services contemplated by this Agreement, inability
to obtain equipment or communications facilities, or the error in transmission
of information caused by any machines or systems or the failure of equipment or
interruption of communications facilities, and other causes whether or not of
the same class or kind as specifically named above. In the event that you are
unable substantially to perform for any of the reasons described in the
immediately preceding sentence, you shall so notify us as soon as reasonably
practicable.
You shall be responsible for only those duties expressly stated in this
Agreement or expressly contained in instructions to perform the services
described herein given to you pursuant to the provisions of this Agreement and
accepted by you and, without limiting the foregoing, you shall have no duty or
responsibility:
(a) to question instructions, to supervise the investment of, or make
recommendations with respect to the purchase, retention or sale of, Financial
Assets relating to the Custody Account, to review or reconcile trade
confirmations received from brokers, or to maintain for your benefit any
insurance on Financial Assets in the Custody Account;
(b) with regard to any Financial Asset in the Custody Account as to
which a default in the payment of principal or interest has occurred, (i) to
give notice of default or make demand for payment to the issuer, or (ii) to take
any other action with respect to such default, except, in each instance, where
you have been requested by us and you have agreed in writing to do so;
(c) except as otherwise specifically provided in this section under the
heading "Custodian Responsibility", for any act or omission, or for the solvency
or insolvency, or notice to us of the solvency or insolvency, of any broker
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or agent which is selected by you with reasonable care or by us or any other
person to effect any transaction for the Custody Account or to perform any
service under this Agreement;
(d) to evaluate, or report to us regarding, the financial condition of
any person, firm or corporation to which you deliver Financial Assets or funds
pursuant to this Agreement;
(e) for any loss occasioned by delay in the actual receipt of notice by
you of any payment, redemption or other transaction in respect to which you are
authorized to take some action pursuant to this Agreement; or
(f) for any errors or omissions made by any pricing services used by
you to value Financial Assets credited to the Custody Account as part of any
service subscribed to by us from you.
SETTLEMENTS. We agree with you that all credits of Financial Assets and
proceeds by you to the Custody Account and the Cash Account, respectively, on
the settlement or payable date shall be provisional when made and you shall be
entitled to reverse any such credits subject to actual receipt or collection of
immediately available funds, and you shall have the right to reverse any such
provisional credits or erroneous entries to the Cash Account retroactively to
the date upon which the correct entry, or no entry, should have been made.
We shall have sufficient immediately available funds each day in the
Cash Account to pay for the settlement of all Financial Assets delivered against
payment to you and credited to the Custody Account. Should we fail to have
sufficient immediately available funds in the Cash Account to settle these
deliveries of Financial Assets pursuant to the preceding sentence (a "Deficit"),
you, in your sole discretion, may elect (i) to reject the settlement of any or
all of the Financial Assets delivered to you that day to the Custody Account,
(ii) to settle the deliveries on our behalf and debit the Cash Account (A) for
the amount of such Deficit and (B) for the amount of the funding or other cost
or expense incurred or sustained by you for our failure to have sufficient
immediately available funds in the Cash Account by the applicable settlement
deadlines for you, or (iii) to reverse the posting of the Financial Assets
credited to the Custody Account.
The foregoing rights are in addition to and not in limitation of any
other rights or remedies available to you under this Agreement or otherwise. Any
advances made by you to us in connection with the purchase, sale, redemption,
transfer or other designation of Financial Assets or in connection with
disbursements of funds to any party, which create or result in an overdraft in
the Cash Account shall be deemed a loan by you to us, payable on demand, and
bear interest on the amount of the loan each day that the loan remains unpaid at
your
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prime rate in effect as announced by you from time to time (unless another rate
has been separately agreed upon, in writing, between you and us in respect of
such advances).
No prior action or course of dealing on your part with respect to the
settlement of Financial Asset transactions on our behalf shall be used by or
give rise to any claim or action by us against you for your refusal to pay or
settle for Financial Asset transactions we have not timely funded as required
herein.
RESPONSIBLE AS PRINCIPAL. We agree that we shall be responsible to you
as a principal for all of our obligations to you arising under or in connection
with this Agreement, notwithstanding that we may be acting on behalf of other
persons, and we warrant our authority to deposit in the Custody Account and Cash
Account, respectively, any Financial Assets and funds which you or your agents
receive therefor and to give instructions relative thereto. We further agree
that you shall not be subject to, nor shall your rights and obligations with
respect to this Agreement and the Custody Account or the Cash Account be
affected by, any agreement between us and any such person.
CREDITING AND DEBITING PROCEDURES. With respect to all transactions for
the Custody Account and the Cash Account, including, without limitation,
dividend and interest payments and sales and redemptions of Financial Assets,
availability of funds credited to the Custody Account and Cash Account shall be
based on the type of funds used in the trade settlement or payment, including,
but not limited to, same day availability for federal or same day funds and next
business day availability for clearing house or next day funds. Furthermore,
with respect to all purchases and sales of Financial Assets for the Custody
Account, the proceeds from the sale of Financial Assets shall be credited to the
Cash Account on the date proceeds are received by you and the cost of Financial
Assets purchased shall be debited to the Cash Account on the date Financial
Assets are received by you, unless we request your contractual settlement
service for the Custody Account in which case the following provisions shall
apply with respect to the delivery and receipt of Financial Assets for the
Custody Account for those Financial Assets and transactions as to which you
customarily offer this service.
(a) When we instruct you to deliver or receive Financial Assets, on the
contractual settlement date you shall credit the Cash Account with the expected
proceeds of the transaction and debit the Custody Account for the Financial
Assets which we have instructed you to deliver, in the case of deliveries, and
debit the Cash Account for the cost of the Financial Assets which we have
instructed you to receive and credit the Custody Account with such Financial
Assets, in the case of receives. These credits and debits are provisional
accounting entries which you shall reverse on our instructions and which you may
reverse,
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even in the absence of instructions from us, if the transaction with respect to
which they were made fails to settle within a reasonable period, determined by
you in your discretion, after the contractual settlement date, except that if
you deliver Financial Assets which are returned by the recipient thereof, you
may reverse such credits and debits at any time. You have no obligation to use
this crediting and debiting procedure with respect to a delivery of Financial
Assets if we do not have actually in our account sufficient Financial Assets to
make the delivery.
(b) As with other transactions processed by you, your responsibility
with respect to transactions for which you use this crediting and debiting
procedure shall be governed by the provisions of this Custody Agreement,
including the section headed "Custodian Responsibility". We agree that your
using this procedure is not an assurance by you that the transaction will
actually settle on the contractual settlement date and does not impose any
additional responsibility on you with respect to the transaction. Without
limiting your right to reverse credits and debits described above, the account
statements which you furnish to us shall reflect transactions as to which you
use this procedure as if they had actually settled on the contractual settlement
date, unless prior to the date to which the statement relates, you have reversed
such credits and debits.
(c) We agree that you may terminate this contractual settlement service
to us at any time and for any reason.
With respect to Financial Assets or transactions as to which you do not
customarily offer this service, you shall (i) in the case of deliveries of
Financial Assets, credit the proceeds of the transaction to the Cash Account on
the date they are received by you and debit the Financial Assets from the
Custody Account on the date they are delivered by you, and (ii) in the case of
Financial Assets received, debit the Cash Account for the cost of such Financial
Assets and credit the Custody Account with such Financial Assets on the date the
Financial Assets are received by you.
TAXES. Unless we have already done so, we shall deliver promptly to you
with respect to each Custody Account established under this Agreement, two duly
completed and executed copies of the proper United States Internal Revenue
Service Form W-9, certifying our status as a United States person and that we
are entitled to receive United States source payments under or in connection
with this Agreement without deduction as withholding or at a reduced rate of
withholding for United States federal income taxes We agree to provide duly
executed and completed updates of such form (or successor applicable form), on
or before the date that such form expires or becomes obsolete or after the
occurrence of an event requiring a change in the most recent form previously
delivered by us to you. We shall be responsible for the payment of all taxes
relating to the Financial Assets in the Custody Account.
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You are authorized to deduct from the cash received or credited to the
Cash Account any taxes or levies required by any revenue or governmental
authority for whatever reason in respect of the Custody Account.
We agree to pay, indemnify and hold you harmless from and against any
and all liabilities, penalties, interest or additions to tax with respect to, or
resulting from, any delay in, or failure by, you (i) to pay, withhold or report
any Federal, state, local or foreign taxes imposed on, or in respect of, the
property held in the Custody Account(s), or this Agreement, or (ii) to report
interest, dividend or other income paid or credited to the Cash Account, whether
such failure or delay by you to pay, withhold or report tax or income is a
result of (x) our failure to comply with the terms of this section, or (y) your
own acts or omissions; provided, however, we shall not be liable to you for any
penalty or additions to tax due as a result of your failure to pay or withhold
tax or to report to us interest, dividend or other income paid or credited to
the Cash Account solely as a result of your negligent acts or omissions.
FEES. We agree to pay you compensation for your services pursuant to
this Agreement at the fees of which you shall notify us from time to time.
INDEMNIFICATION. (a) We agree to indemnify and hold you and your
directors, officers, agents and employees (collectively the "Indemnitees")
harmless from and against any and all claims, liabilities, losses, damages,
fines, penalties, and expenses, including out-of-pocket and incidental expenses
and legal fees ("Losses") that may be imposed on, incurred by, or asserted
against, the Indemnitees or any of them for following any instructions or other
directions upon which you are authorized to rely pursuant to the terms of this
Agreement.
(b) In addition to and not in limitation of paragraph (a) immediately
above, we also agree to indemnify and hold the Indemnitees and each of them
harmless from and against any and all Losses that may be imposed on, incurred
by, or asserted against, the Indemnitees or any of them in connection with or
arising out of your performance under this Agreement, provided the Indemnitees
have not acted with negligence or engaged in willful misconduct.
SECURITY INTEREST. We hereby pledge, assign and grant to you a
continuing security interest in the Financial Assets in the Custody Account and
any Financial Assets in your possession and under your control for credit to the
Custody Account, as security for any and all obligations, matured or unmatured,
direct or indirect, absolute or contingent, now due or hereafter to become due
from us to you pursuant to this Agreement.
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SET-OFF. You may, without notice to us, set-off any sums held for us or
standing to the credit of any of our cash accounts with you in and toward the
satisfaction of any obligation of us to you under this Agreement, whether or not
any such sums or credits or obligations are matured or unmatured, direct or
indirect, absolute or contingent, and may do so notwithstanding that the
accounts may be maintained at different branches of yours and may not be
expressed in the same currency.
TERMINATION. Either party may terminate this Agreement at any time upon
thirty days written notice. Notice by us shall specify the names of the persons
to whom you shall deliver the securities in the Custody Account and to whom the
cash in the Cash Account shall be paid. If notice of termination is given by
you, we shall, within thirty (30) days following the giving of such notice,
deliver to you a written notice specifying the names of the persons to whom you
shall deliver the securities in the Custody Account and to whom the Cash in the
Cash Account shall be paid. In either case, you will deliver such securities and
cash to the persons so specified. You may in your discretion withhold from such
delivery such cash and securities as may be necessary to settle transactions
pending at the time of such delivery. If within thirty (30) days following the
giving of a notice of termination by you, you do not receive from us a written
notice specifying the names of the persons to whom you shall deliver the
securities in the Custody Account and to whom the cash in the Cash Account shall
be paid, you may, at your election, deliver such securities and pay such cash to
a bank or trust company doing business in the State of New York to be held and
disposed of pursuant to the provisions of this Agreement, or may continue to
hold such securities and cash until a written notice as aforesaid is delivered
to you, provided that your obligations shall be limited to safekeeping. Our
obligations pursuant to the paragraphs under the headings "Registration",
"Settlements", "Fees", "Indemnification," "Taxes" and "Security Interest" shall
survive the termination of this Agreement.
NOTICES. Notices with respect to termination, specification of
Authorized Officers and terms and conditions for instructions required hereunder
shall be in writing, and shall be deemed to have been duly given if delivered
personally, and when delivered by courier service or by mail, postage prepaid
when received, to the following addresses (or to such other address as either
party hereto may from time to time designate by notice duly given in accordance
with this paragraph):
To us at:
Northwestern Mutual Series Fund, Inc.
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c/o The Northwestern Mutual Life Insurance Company
Attn: Public Markets/Investment Operations
720 East Wisconsin Avenue
Milwaukee, WI 53202
To you, to the attention of the individual designated by you as the
safekeeping account administrator for our account, at:
The Chase Manhattan Bank
Global Investor Services North America Insurance
3 Chase Metrotech Center
Brooklyn, N.Y. 11245
GOVERNING LAW, SUCCESSORS AND ASSIGNS, HEADINGS. This Agreement shall
be governed by and construed in accordance with the internal laws of the State
of New York, and shall be binding on our and your respective successors and
assigns. The headings of the paragraphs hereof are included for convenience of
reference only and do not form a part of this Agreement.
PRIOR PROPOSALS. This Agreement (including any Riders relating to
additional services in respect of the Custody Account we may request of you)
shall contain the complete agreement of the parties hereto with respect to the
Custody Account (except as may be expressly provided to the contrary herein) and
supersedes and replaces any previously made proposals, representations,
warranties or agreements with respect thereto by either or both of the parties
hereto. This Agreement shall become effective upon execution hereof by us and
acceptance by you.
SEPARABILITY. Any provisions of this Agreement which may be determined
by competent authority to be prohibited or unenforceable in any jurisdiction
shall, as to such jurisdiction, be ineffective to the extent of such prohibition
or unenforceability without invalidating the remaining provisions hereof, and
any such prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other jurisdiction.
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RESERVATION OF RIGHT. You shall have the right not to accept for
deposit to the Custody Account any Financial Assets which are in a form or
condition which you, in your sole discretion, determine not to be suitable for
the services you provide under this Agreement.
Your rights and remedies under this Agreement are in addition to, and
not in limitation of, any other rights and remedies you may have under
applicable law.
ADDITIONAL DUTIES. If we shall ask you to perform duties or
responsibilities not specifically set forth in this Agreement and you choose to
perform such additional duties or responsibilities, you shall be held to the
same standard of care and you shall be entitled to all the protective provisions
(including but not limited to limitation of liability and indemnification) set
forth herein.
COUNTERPARTS. This Agreement may be executed in several counterparts
each of which shall be deemed to be an original and together shall constitute
one and the same agreement.
MERGERS. Any corporation or banking assciation into which you may be
merged or with which you may be consolidated, or any corporation or banking
association resulting from any merger or consolidation to which you shall be a
party, or any corporation or banking association succeeding to your corporate
custody business, shall succeed to all your rights, obligations and immunities
hereunder without the execution or filing of any paper or further act on the
part of any of the parties hereto, anything herein to the contrary
notwithstanding.
REPRESENTATION. You represent and warrant that you are qualified as a
custodian under Section 26(a) of the Investment Company Act of 1940 and warrant
that you will remain so qualified or upon ceasing to be so qualified shall
promptly notify us in writing.
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NORTHWESTERN MUTUAL SERIES
FUND, INC.
By:
------------------------
Title:
----------------------
Date:
-----------------------
Accepted by:
THE CHASE MANHATTAN BANK
By:
---------------------------
Title:
------------------------
Date:
-------------------------
16
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Exhibit H(9)
EXHIBIT H(9)
LICENSE AGREEMENT
LICENSE AGREEMENT, dated as of February 19, 1999 (the "Commencement
Date") by and between STANDARD & POOR'S, a division of The McGraw-Hill
Companies, Inc. ("S&P"), a New York corporation, having an office at 25
Broadway, New York, NY 10004, and THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
("Licensee"), a Wisconsin corporation having an office at 720 East Wisconsin
Avenue, Milwaukee, Wisconsin 53202.
WHEREAS, S&P compiles, calculates, maintains and owns rights in and to
the S&P MidCap 400 Index and to the proprietary data therein contained (such
rights being hereinafter individually and collectively referred to as the "S&P
MidCap 400 Index"); and
WHEREAS, S&P uses in commerce and has trade name and trademark rights
to the designations "Standard & Poor's-Register Mark-", "S&P-Register
Mark-", "S&P MidCap 400 Index" and "Standard & Poor's MidCap Index", in
connection with the S&P MidCap 400 Index (such rights being hereinafter
individually and collectively referred to as the "S&P Marks"); and
WHEREAS, Licensee wishes to use the S&P MidCap 400 Index, either
(i) directly or (ii) through a separate arrangement between Licensee and the
issuer, distributor, advisor and/or sponsor of an investment product, the
returns of which are based on the S&P MidCap 400 Index, as a component of the
product or products described in Exhibit A attached hereto and made a part
hereof (individually and collectively referred to as the "Product"); and
WHEREAS, Licensee wishes to use the S&P Marks in connection with the
issuance, marketing and/or promotion of the Product and in connection with
making disclosure about the Product under applicable law, rules and regulations
in order to indicate that S&P is the source of the S&P MidCap 400 Index; and
<PAGE>
WHEREAS, Licensee wishes to obtain S&P's authorization to use the S&P
MidCap 400 Index and the S&P Marks in connection with the Product pursuant to
the terms and conditions hereinafter set forth.
NOW, THEREFORE, the parties hereto agree as follows:
1. GRANT OF LICENSE.
(a) Subject to the terms and conditions of this Agreement, S&P hereby
grants to Licensee a non-transferable, non-exclusive license (i) to use the S&P
MidCap 400 Index as a component of the Product, either (A) directly or (B)
indirectly through an arrangement between Licensee and the issuer, distributor,
advisor and/or sponsor of an investment product, the returns of which are based
on the S&P MidCap 400 Index, to be marketed and/or promoted by Licensee and (ii)
to use and refer to the S&P Marks in connection with the distribution, marketing
and promotion of the Product (including in the name of the Product) and in
connection with making such disclosure about the Product as Licensee deems
necessary or desirable under any applicable law, rules, regulations or
provisions of this Agreement, but, in each case, only to the extent necessary to
indicate the source of the S&P MidCap 400 Index. It is expressly agreed and
understood by Licensee that no rights to use the S&P MidCap 400 Index and the
S&P Marks are granted hereunder other than those specifically described and
expressly granted herein.
(b) Licensee agrees and acknowledges that the license granted pursuant
to this Agreement is limited to the Product(s) identified and described in
Exhibit A and that if Licensee wishes to use the S&P MidCap 400 Index and/or S&P
Marks in connection with any additional Product(s), it shall first be required
to enter into a written amendment to this Agreement on terms mutually acceptable
to S&P and Licensee.
2. TERM.
The term of this Agreement shall commence on the Commencement Date and
shall continue in effect thereafter until it is terminated in accordance with
its terms.
<PAGE>
3. LICENSE FEES.
(a) Licensee shall pay to S&P the license fees ("License Fees")
specified and provide the data called for in Exhibit B, attached hereto and made
a part hereof.
(b) During the term of this Agreement and for a period of one (1) year
after its termination, S&P shall have the right, during normal business hours
and upon reasonable notice to Licensee, to audit on a confidential basis the
relevant books and records of Licensee to determine that License Fees have been
accurately determined. The costs of such audit shall be borne by S&P unless it
determines that it has been underpaid by five percent (5%) or more; in such
case, costs of the audit shall be paid by Licensee.
4. TERMINATION.
(a) At any time during the term of this Agreement, either party may give
the other party sixty (60) days prior written notice of termination if the
terminating party believes in good faith that material damage or harm is
occurring to the reputation or goodwill of that party by reason of its continued
performance hereunder, and such notice shall be effective on the date specified
therein of such termination, unless the other party shall correct the condition
causing such damage or harm within the notice period.
(b) In the case of breach of any of the material terms or conditions of
this Agreement by either party, the other party may terminate this Agreement by
giving sixty (60) days prior written notice of its intent to terminate, and such
notice shall be effective on the date specified therein for such termination
unless the breaching party shall correct such breach within the notice period.
(c) S&P shall have the right, in its sole discretion, to cease
compilation and publication of the S&P MidCap 400 Index and, in such event, to
terminate this Agreement if S&P does not offer a replacement or substitute
index. In the event that S&P intends to discontinue the S&P MidCap 400 Index,
S&P shall give
<PAGE>
Licensee at least one (1) year's written notice prior to such discontinuance,
which notice shall specify whether a replacement or substitute index will be
made available.
Licensee shall have the option hereunder within sixty (60) days after
receiving such written notice from S&P to notify S&P in writing of its intent to
use the replacement or substitute index, if any, under the terms of this
Agreement. In the event that Licensee does not exercise such option or no
substitute or replacement index is made available, this Agreement shall be
terminated as of the date specified in the S&P notice and the License Fees to
the date of such termination shall be computed as provided in Subsection 4(f).
(d) Licensee may terminate this Agreement upon ninety (90) days prior
written notice to S&P if (i) Licensee is informed of the final adoption of any
legislation or regulation or the issuance of any interpretation that in
Licensee's reasonable judgment materially impairs Licensee's ability to market
and/or promote the Product; (ii) any material litigation or regulatory
proceeding regarding the Product is threatened or commenced; or (iii) Licensee
elects to terminate the public offering or other distribution of the Product or
the investment objective of the Product is no longer to track the performance of
the S&P MidCap 400 Index, as may be applicable. In such event the License Fees
to the date of such termination shall be computed as provided in Subsection
4(f).
(e) S&P may terminate this Agreement upon ninety (90) days (or upon such
lesser period of time if required pursuant to a court order) prior written
notice to Licensee if (i) S&P is informed of the final adoption of any
legislation or regulation or the issuance of any interpretation that in S&P's
reasonable judgment materially impairs S&P's ability to license and provide the
S&P MidCap 400 Index and S&P Marks under this Agreement in connection with such
Product; or (ii) any litigation or proceeding is threatened or commenced and S&P
reasonably believes that such litigation or proceeding would have a material and
adverse effect upon the S&P Marks and/or the S&P MidCap 400 Index or upon the
ability of S&P to perform under this Agreement. In such event the
<PAGE>
License Fees to the date of such termination shall be computed as provided in
Subsection 4(f).
(f) In the event of termination of this Agreement as provided in
Subsections 4(a), (b), (c), (d) or (e), the License Fees to the date of such
termination shall be computed by prorating the amount of the applicable annual
License Fees shown in Exhibit B on the basis of the number of elapsed days in
the current term.
(g) Upon termination of this Agreement, Licensee shall cease to use the
S&P MidCap 400 Index and the S&P Marks in connection with the Product; provided
that Licensee may continue to utilize any previously printed materials which
contain the S&P Marks for a period of ninety (90) days following such
termination.
5. S&P'S OBLIGATIONS.
(a) It is the policy of S&P to prohibit its employees who are directly
responsible for changes in the components of the S&P MidCap 400 Index from
purchasing or beneficially owning any interest in the Product and S&P believes
that its employees comply with such policy. Licensee shall have no
responsibility for ensuring that such S&P employees comply with such S&P policy
and shall have no duty to inquire whether any investors or sellers of the
Product are such S&P employees. S&P shall have no liability to the Licensee with
respect to its employees' adherence or failure to adhere to such policy.
(b) S&P shall not and is in no way obliged to engage in any marketing or
promotional activities in connection with the Product or in making any
representation or statement to investors or prospective investors in connection
with the promotion by Licensee of the Product.
(c) S&P agrees to provide reasonable support for Licensee's development
and educational efforts with respect to the Product as follows: (i) S&P shall
provide Licensee, upon request but subject to any agreements of confidentiality
with respect thereto, copies of the results of any marketing research conducted
by or on behalf of S&P with respect to the S&P MidCap 400 Index;
<PAGE>
and (ii) S&P shall respond in a timely fashion to any reasonable requests for
information by Licensee regarding the S&P MidCap 400 Index.
(d) S&P or its agent shall calculate and disseminate the S&P MidCap 400
Index at least once each fifteen (15) seconds in accordance with its current
procedures, which procedures may be modified by S&P.
(e) S&P shall promptly correct or instruct its agent to correct any
mathematical errors made in S&P's computations of the S&P MidCap 400 Index which
are brought to S&P's attention by Licensee, provided that nothing in this
Section 5 shall give Licensee the right to exercise any judgment or require any
changes with respect to S&P's method of composing, calculating or determining
the S&P MidCap 400 Index; and, provided further, that nothing herein shall be
deemed to modify the provisions of Section 9 of this Agreement.
6. INFORMATIONAL MATERIALS REVIEW.
Licensee shall use its best efforts to protect the goodwill and
reputation of S&P and of the S&P Marks in connection with its use of the S&P
Marks under this Agreement. Licensee shall submit to S&P for its review and
approval all informational materials pertaining to and to be used in connection
with the Product, including, where applicable, all prospectuses, plans,
registration statements, application forms, contracts, videos, advertisements,
brochures and promotional and any other similar informational materials
(including documents required to be filed with governmental or regulatory
agencies) that in any way use or refer to S&P, the S&P MidCap 400 Index, or the
S&P Marks (the "Informational Materials"). S&P's approval shall be required with
respect to the use of and description of S&P, the S&P Marks and the S&P MidCap
400 Index and shall not be unreasonably withheld or delayed by S&P.
Specifically, S&P shall notify Licensee of its
<PAGE>
approval or disapproval of any Informational Materials within forty-eight (48)
hours (excluding Saturday, Sunday and New York Stock Exchange Holidays)
following receipt thereof from Licensee. Any disapproval shall indicate S&P's
reasons therefor. Any failure by S&P to respond within such forty-eight (48)
hour period shall be deemed to constitute a waiver of S&P's right to review such
Informational Materials. Informational Materials shall be addressed to S&P, c/o
Sandra Weinberger, Specialist - Index Licensing/Marketing, Equity Index
Services, at the address specified in Subsection 12(d). Informational Materials
may be submitted via facsimile (to 212-208-8911 or 212-412-0429) if they are
less than 20 pages and legible after transmission. Once Informational Materials
have been approved by S&P, subsequent Informational Materials which do not alter
the use or description of S&P, the S&P Marks or the S&P MidCap 400 Index need
not be submitted for review and approval by S&P.
7. PROTECTION OF VALUE OF LICENSE.
(a) During the term of this Agreement, S&P shall use its best efforts to
maintain in full force and effect federal registrations for "Standard &
Poor's-Register Mark-" and "S&P-Register Mark-". S&P shall at S&P's own expense
and sole discretion exercise S&P's common law and statutory rights against
infringement of the S&P Marks, copyrights and other proprietary rights.
(b) Licensee shall cooperate with S&P in the maintenance of such rights
and registrations and shall take such actions and execute such instruments as
S&P may from time to time reasonably request, and shall use the following notice
when referring to the S&P MidCap 400 Index or the S&P Marks in any Informational
Material:
"Standard & Poor's-Register Mark-", "S&P-Register Mark-", "Standard &
Poor's MidCap 400 Index", and "S&P MidCap 400 Index" are trademarks
of The McGraw-Hill Companies, Inc. and have been licensed for use by
The Northwestern Mutual Life Insurance
<PAGE>
Company. The Product is not sponsored, endorsed, sold or
promoted by Standard & Poor's and Standard & Poor's makes no
representation regarding the advisability of investing in the
Product. [Please see the Statement of Additional Information
which sets forth certain additional disclaimers and limitations
of liabilities on behalf of S&P.]
or such similar language as may be approved in advance by S&P, it being
understood that such notice need only refer to the specific S&P Marks referred
to in the Informational Material.
8. PROPRIETARY RIGHTS.
(a) Licensee acknowledges that the S&P MidCap 400 Index is selected,
coordinated, arranged and prepared by S&P through the application of methods and
standards of judgment used and developed through the expenditure of considerable
work, time and money by S&P. Licensee also acknowledges that the S&P MidCap 400
Index and the S&P Marks are the exclusive property of S&P, that S&P has and
retains all proprietary rights therein (including, but not limited to trademarks
and copyrights) and that the S&P MidCap 400 Index and its compilation and
composition and changes therein are in the control and discretion of S&P.
(b) S&P reserves all rights with respect to the S&P MidCap 400 Index and
the S&P Marks except those expressly licensed to Licensee hereunder.
(c) Each party shall treat as confidential and shall not disclose or
transmit to any third party any documentation or other written materials that
are marked as "Confidential and Proprietary" by the providing party
("Confidential Information"). Confidential Information shall not include (i) any
information that is available to the public or to the receiving party hereunder
from sources other than the providing party (provided that such source is not
subject to a confidentiality agreement with regard to such information) or (ii)
any information that is independently developed by the receiving party without
use of or reference to information from the providing party. Notwithstanding the
foregoing, either party may reveal Confidential Information to
<PAGE>
any regulatory agency or court of competent jurisdiction if such information to
be disclosed is (a) approved in writing by the other party for disclosure or (b)
required by law, regulatory agency or court order to be disclosed by a party,
provided, if permitted by law, that prior written notice of such required
disclosure is given to the other party and provided further that the providing
party shall cooperate with the other party to limit the extent of such
disclosure. The provisions of this Sub-section 8(c) shall survive any
termination of this Agreement for a period of five (5) years from disclosure by
either party to the other of the last item of such Confidential Information.
9. WARRANTIES; DISCLAIMERS.
(a) S&P represents and warrants that S&P has the right to grant the
rights granted to Licensee herein and that the license granted herein shall not
infringe any trademark, copyright or other proprietary right of any person not a
party to this Agreement.
(b) Licensee agrees expressly to be bound itself by and furthermore to
include all of the following disclaimers and limitations in each prospectus or
each Statement of Additional Information ("SAI") relating to the Product,
provided the SAI is incorporated by reference into the prospectus and the
prospectus contains disclosure regarding the S&P MidCap 400 Index that conforms
to the notice in Subsection 7(b), including a cross reference to the SAI
disclosure. Licensee shall furnish a copy of the prospectus and SAI thereof to
S&P:
The Product is not sponsored, endorsed, sold or promoted by Standard &
Poor's, a division of The McGraw-Hill Companies, Inc. ("S&P"). S&P makes no
representation or warranty, express or implied, to the owners of the Product or
any member of the public regarding the advisability of investing in securities
generally or in the Product particularly or the ability of the S&P MidCap 400
Index to track general stock market performance. S&P's only relationship to the
Licensee is the licensing of certain trademarks and trade names of S&P and of
the S&P MidCap 400 Index which is determined, composed and calculated by S&P
without regard to the Licensee or the Product. S&P has no obligation to take the
<PAGE>
needs of the Licensee or the owners of the Product into consideration in
determining, composing or calculating the S&P MidCap 400 Index. S&P is not
responsible for and has not participated in the determination of the prices and
amount of the Product or the timing of the issuance or sale of the Product or in
the determination or calculation of the equation by which the Product is to be
converted into cash. S&P has no obligation or liability in connection with the
administration, marketing or trading of the Product.
S&P DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE S&P
MIDCAP 400 INDEX OR ANY DATA INCLUDED THEREIN AND S&P SHALL HAVE NO LIABILITY
FOR ANY ERRORS, OMISSIONS, OR INTERRUPTIONS THEREIN. S&P MAKES NO WARRANTY,
EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY LICENSEE, OWNERS OF THE
PRODUCT, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE S&P MidCap 400 INDEX
OR ANY DATA INCLUDED THEREIN. S&P MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND
EXPRESSLY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE OR USE WITH RESPECT TO THE S&P MIDCAP 400 INDEX OR ANY DATA
INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL S&P
HAVE ANY LIABILITY FOR ANY SPECIAL, PUNITIVE, INDIRECT, OR CONSEQUENTIAL DAMAGES
(INCLUDING LOST PROFITS), EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES.
Any changes in the foregoing disclaimers and limitations must be
approved in advance in writing by an authorized officer of S&P.
(c) Each party represents and warrants to the other that it has the
authority to enter into this Agreement according to its terms and that its
performance does not violate any laws, regulations or agreements applicable to
it.
(d) Licensee represents and warrants to S&P that the Product shall at
all times comply with the description in Exhibit A.
<PAGE>
(e) Licensee represents and warrants to S&P that the Product shall not
violate any applicable law, including but not limited to banking, commodities
and securities laws.
(f) Neither party shall have any liability for lost profits or indirect,
punitive, special, or consequential damages arising out of this Agreement, even
if notified of the possibility of such damages. Without diminishing the
disclaimers and limitations set forth in Subsection 9(b), in no event shall the
cumulative liability of S&P to Licensee exceed the average annual License Fees
actually paid to S&P hereunder.
(g) Use of any marks by Licensee in connection with its Product
(including in the name of such Product) which are not the S&P Marks is at
Licensee's sole risk.
(h) The provisions of this Section 9 shall survive any termination of
this Agreement.
10. INDEMNIFICATION.
(a) Licensee shall indemnify and hold harmless S&P, its affiliates and
their officers, directors, employees and agents against any and all judgments,
damages, costs or losses of any kind (including reasonable attorneys' and
experts' fees) as a result of any claim, action, or proceeding that arises out
of or relates to (a) this Agreement, except insofar as it relates to a breach by
S&P of its representations or warranties hereunder, or (b) the Product;
provided, however, that S&P notifies Licensee promptly of any such claim, action
or proceeding. Licensee shall periodically reimburse S&P for its reasonable
expenses incurred under this Subsection 10(a). S&P shall have the right, at its
own expense, to participate in the defense of any claim, action or proceeding
against which it is indemnified hereunder; provided, however, it shall have no
right to control the defense, consent to judgment, or agree to settle any such
claim, action or proceeding without the written consent of Licensee without
waiving the indemnity hereunder. Licensee, in the defense of any such claim,
action or proceeding except with the written consent of S&P, shall not consent
to entry of any judgment or enter into any settlement which either (a) does not
include, as an unconditional term, the
<PAGE>
grant by the claimant to S&P of a release of all liabilities in respect of such
claims or (b) otherwise adversely affects the rights of S&P. This provision
shall survive the termination or expiration of this Agreement.
(b) S&P shall indemnify and hold harmless Licensee, its affiliates and
their officers, directors, employees and agents against any and all judgments,
damages, costs or losses of any kind (including reasonable attorneys' and
experts' fees) as a result of any claim, action, or proceeding that arises out
of or relates to any breach by S&P of its representations or warranties under
this Agreement; provided, however, that (a) Licensee notifies S&P promptly of
any such claim, action or proceeding; (b) Licensee grants S&P control of its
defense and/or settlement; and (c) Licensee cooperates with S&P in the defense
thereof. S&P shall periodically reimburse Licensee for its reasonable expenses
incurred under this Subsection 10(b). Licensee shall have the right, at its own
expense, to participate in the defense of any claim, action or proceeding
against which it is indemnified hereunder; provided, however, it shall have no
right to control the defense, consent to judgment, or agree to settle any such
claim, action or proceeding without the written consent of S&P without waiving
the indemnity hereunder. S&P, in the defense of any such claim, action or
proceeding, except with the written consent of Licensee, shall not consent to
entry of any judgment or enter into any settlement which either (a) does not
include, as an unconditional term, the grant by the claimant to Licensee of a
release of all liabilities in respect of such claims or (b) otherwise adversely
affects the rights of Licensee. This provision shall survive the termination or
expiration of this Agreement.
11. SUSPENSION OF PERFORMANCE.
Neither S&P nor Licensee shall bear responsibility or liability for any
losses arising out of any delay in or interruptions of their respective
performance of their obligations under this Agreement due to any act of God, act
of governmental authority, act of the public enemy or due to war, the outbreak
or escalation of hostilities, riot, fire, flood, civil commotion, insurrection,
labor difficulty (including, without limitation, any strike, or other work
stoppage or slow down), severe or adverse
<PAGE>
weather conditions, communications line failure, or other similar cause beyond
the reasonable control of the party so affected.
12. OTHER MATTERS.
(a) This Agreement is solely and exclusively between the parties hereto
and shall not be assigned or transferred by either party, without prior written
consent of the other party, and any attempt to so assign or transfer this
Agreement without such written consent shall be null and void.
(b) This Agreement constitutes the entire agreement of the parties
hereto with respect to its subject matter and may be amended or modified only by
a writing signed by duly authorized officers of both parties. This Agreement
supersedes all previous agreements between the parties with respect to the
subject matter of this Agreement. There are no oral or written collateral
representations, agreements, or understandings except as provided herein.
(c) No breach, default, or threatened breach of this Agreement by either
party shall relieve the other party of its obligations or liabilities under this
Agreement with respect to the protection of the property or proprietary nature
of any property which is the subject of this Agreement.
(d) Except as set forth in Section 6 hereof with respect to
Informational Materials, all notices and other communications under this
Agreement shall be (i) in writing, (ii) delivered by hand, by registered or
certified mail, return receipt requested, or by facsimile transmission to the
address or facsimile number set forth below or such address or facsimile number
as either party shall specify by a written notice to the other and (iii) deemed
given upon receipt.
<PAGE>
NOTICE TO S&P: Standard & Poor's
25 Broadway
New York, NY 10004
Attn.: Robert Shakotko
Senior Vice President
Index Services
Fax #: (212) 208-8911
NOTICE TO LICENSEE: The Northwestern Mutual Life
Insurance Company
720 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
Attn: Russell Augustin
Fax #: (414) 299 5718
(e) Licensee shall notify S&P in writing of the name of each and every
insurance company that utilizes the Product for purposes of such insurance
company's variable insurance contracts. Licensee shall update such notice from
time to time as necessary.
(f) This Agreement shall be interpreted, construed and enforced in
accordance with the laws of the State of New York.
(g) Each party agrees that in connection with any legal action or
proceeding arising with respect to this Agreement, they will bring such action
or proceeding only in the United States District Court for the Southern District
of New York or in the Supreme Court of the State of New York in and for the
First Judicial Department and each party agrees to submit to the jurisdiction of
such court and venue in such court and to waive any claim that such court is an
inconvenient forum.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as of the date first set forth above.
<PAGE>
THE NORTHWESTERN MUTUAL STANDARD & POOR'S
LIFE INSURANCE COMPANY a division of
The McGraw-Hill Companies, Inc.
BY: BY:
--------------------------- --------------------------------
- -----------------------------------------------------------------------------
(Print Name) (Print Name)
- -----------------------------------------------------------------------------
(Print Title) (Print Title)
<PAGE>
EXHIBIT A
PRODUCT DESCRIPTION
Product: Northwestern Mutual Series Fund, Inc. - Index 400 Stock Portfolio (the
"Product") is an investment vehicle, underlying one or more insurance products,
which has an investment objective of tracking the price and yield performance of
publicly-traded common stocks of companies as represented by the S&P MidCap 400
Index.
and
Product: Variable Annuity-Variable Life (the "Product") is any variable
insurance product(s), the underlying value of which is linked to the performance
of an investment vehicle whose investment objective is to track the price and
yield performance of publicly-traded common stocks of companies as represented
by the S&P MidCap 400 Index.
<PAGE>
EXHIBIT B
LICENSE FEES
Licensee shall pay S&P License Fees computed as follows:
The annual License Fees shall be the greater of $15,000 (the "Minimum Annual
Fee") or one basis point (.0001) of the average daily net assets of the Product
computed quarterly. The Minimum Annual Fee shall be payable on the Commencement
Date and each one-year anniversary thereof. Amounts in excess of the Minimum
Annual Fee shall be paid to S&P within thirty (30) days after the close of each
calendar quarter in which they are incurred; each such payment shall be
accompanied by a statement setting forth the basis for its calculation.
The parties agree that the terms upon which License Fees are calculated pursuant
to this Exhibit B shall be considered "Confidential Information" for purposes of
Subsection 8(c) of this Agreement.
<PAGE>
Exhibit J(11)
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Statement of Additional
Information constituting part of this Post-Effective Amendment No. 16 to the
Registration Statement on Form N-1A (the "Registration Statement") of our
report dated January 25, 1999, relating to the financial statements and
financial highlights of Northwestern Mutual Series Fund, Inc., which appears
in such Statement of Additional Information, and to the incorporation by
reference of our report into the Prospectus which constitutes part of this
Registration Statement. We also consent to the reference to us under the
heading "Financial Highlights" in such Prospectus and to the reference to us
under the heading "Investment Advisory and Other Services" in such Statement
of Additional Information.
PricewaterhouseCoopers LLP
Milwaukee, Wisconsin
February 25, 1999
<PAGE>
Exhibit K(16)
MONEY MARKET PORTFOLIO
YIELD
1/31/99
<TABLE>
<CAPTION>
DATE NET ASSETS DIVIDENDS
<S> <C> <C>
1/23/99 $290,098,049.82 $ 38,454.54
1/24/99 $290,098,049.82 $ 38,454.54
1/25/99 $290,098,049.82 $ 38,454.55
1/26/99 $288,952,041.38 $ 38,308.38
1/27/99 $288,436,819.33 $ 38,183.29
1/28/99 $288,049,775.29 $ 37,940.74
1/29/99 $291,415,517.65 $ 38,260.94
$2,027,148,303.11 $268,056.98
-----------
-----------
AVG. NET ASSETS $289,592,614.73
YIELD 4.83%
COMPOUNDED YIELD 4.94%
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS OF NORTHWESTERN MUTUAL SERIES FUND, INC. AGGRESSIVE GROWTH STOCK
PORTFOLIO DECEMBER 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 01
<NAME> AGGRESSIVE GROWTH STOCK PORTFOLIO
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 775,929
<INVESTMENTS-AT-VALUE> 1,139,760
<RECEIVABLES> 5,177
<ASSETS-OTHER> 17
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,144,954
<PAYABLE-FOR-SECURITIES> 6,087
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,401
<TOTAL-LIABILITIES> 7,488
<SENIOR-EQUITY> 736,043
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 328,396
<SHARES-COMMON-PRIOR> 319,739
<ACCUMULATED-NII-CURRENT> 390
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 36,213
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 364,820
<NET-ASSETS> 1,137,466
<DIVIDEND-INCOME> 850
<INTEREST-INCOME> 5,107
<OTHER-INCOME> 0
<EXPENSES-NET> 5,568
<NET-INVESTMENT-INCOME> 389
<REALIZED-GAINS-CURRENT> 36,225
<APPREC-INCREASE-CURRENT> 43,459
<NET-CHANGE-FROM-OPS> 80,073
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 389
<DISTRIBUTIONS-OF-GAINS> 39,790
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 23,019
<NUMBER-OF-SHARES-REDEEMED> 25,793
<SHARES-REINVESTED> 11,431
<NET-CHANGE-IN-ASSETS> 70,398
<ACCUMULATED-NII-PRIOR> 390
<ACCUMULATED-GAINS-PRIOR> 39,778
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 26
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 5,594
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 3.34
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0.24
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0.12
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 3.46
<EXPENSE-RATIO> 0.52
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS OF NORTHWESTERN MUTUAL SERIES FUND, INC. INTERNATIONAL EQUITY
PORTFOLIO DECEMBER 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 02
<NAME> INTERNATIONAL EQUITY PORTFOLIO
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 626,944
<INVESTMENTS-AT-VALUE> 673,935
<RECEIVABLES> 8,064
<ASSETS-OTHER> 886
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 682,885
<PAYABLE-FOR-SECURITIES> 7,818
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 3,961
<TOTAL-LIABILITIES> 11,779
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 528,316
<SHARES-COMMON-STOCK> 400,191
<SHARES-COMMON-PRIOR> 390,790
<ACCUMULATED-NII-CURRENT> 19,912
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 75,853
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 47,025
<NET-ASSETS> 671,106
<DIVIDEND-INCOME> 20,714
<INTEREST-INCOME> 2,645
<OTHER-INCOME> 0
<EXPENSES-NET> 5,261
<NET-INVESTMENT-INCOME> 18,098
<REALIZED-GAINS-CURRENT> 78,236
<APPREC-INCREASE-CURRENT> (66,907)
<NET-CHANGE-FROM-OPS> 29,427
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 16,649
<DISTRIBUTIONS-OF-GAINS> 22,793
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 35,076
<NUMBER-OF-SHARES-REDEEMED> 47,205
<SHARES-REINVESTED> 21,530
<NET-CHANGE-IN-ASSETS> 11,256
<ACCUMULATED-NII-PRIOR> 16,682
<ACCUMULATED-GAINS-PRIOR> 22,191
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 5,261
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 1.69
<PER-SHARE-NII> 0.05
<PER-SHARE-GAIN-APPREC> 0.04
<PER-SHARE-DIVIDEND> 0.04
<PER-SHARE-DISTRIBUTIONS> 0.06
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.68
<EXPENSE-RATIO> 0.76
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS OF NORTHWESTERN MUTUAL SERIES FUND, INC. GROWTH STOCK PORTFOLIO
DECEMBER 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 03
<NAME> GROWTH STOCK PORTFOLIO
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 288,025
<INVESTMENTS-AT-VALUE> 421,164
<RECEIVABLES> 1,090
<ASSETS-OTHER> 58
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 422,312
<PAYABLE-FOR-SECURITIES> 807
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 223
<TOTAL-LIABILITIES> 1,030
<SENIOR-EQUITY> 273,705
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 187,469
<SHARES-COMMON-PRIOR> 134,273
<ACCUMULATED-NII-CURRENT> 916
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 11,968
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 134,693
<NET-ASSETS> 421,282
<DIVIDEND-INCOME> 2,918
<INTEREST-INCOME> 2,135
<OTHER-INCOME> 0
<EXPENSES-NET> 1,492
<NET-INVESTMENT-INCOME> 3,561
<REALIZED-GAINS-CURRENT> 11,976
<APPREC-INCREASE-CURRENT> 62,197
<NET-CHANGE-FROM-OPS> 77,734
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 2,645
<DISTRIBUTIONS-OF-GAINS> 4,068
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 56,014
<NUMBER-OF-SHARES-REDEEMED> 6,148
<SHARES-REINVESTED> 3,330
<NET-CHANGE-IN-ASSETS> 178,211
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 4,060
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 15
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,507
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 1.81
<PER-SHARE-NII> 0.02
<PER-SHARE-GAIN-APPREC> 0.46
<PER-SHARE-DIVIDEND> 0.02
<PER-SHARE-DISTRIBUTIONS> 0.02
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 2.25
<EXPENSE-RATIO> 0.46
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS OF NORTHWESTERN MUTUAL SERIES FUND, INC. GROWTH AND INCOME STOCK
PORTFOLIO DECEMBER 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 04
<NAME> GROWTH AND INCOME STOCK PORTFOLIO
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 517,081
<INVESTMENTS-AT-VALUE> 570,447
<RECEIVABLES> 862
<ASSETS-OTHER> 89
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 571,398
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 428
<TOTAL-LIABILITIES> 428
<SENIOR-EQUITY> 450,101
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 351,523
<SHARES-COMMON-PRIOR> 279,536
<ACCUMULATED-NII-CURRENT> 163
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 67,340
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 53,366
<NET-ASSETS> 570,970
<DIVIDEND-INCOME> 6,368
<INTEREST-INCOME> 457
<OTHER-INCOME> 0
<EXPENSES-NET> 2,729
<NET-INVESTMENT-INCOME> 4,096
<REALIZED-GAINS-CURRENT> 67,556
<APPREC-INCREASE-CURRENT> 26,191
<NET-CHANGE-FROM-OPS> 97,843
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 3,933
<DISTRIBUTIONS-OF-GAINS> 731
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 82,937
<NUMBER-OF-SHARES-REDEEMED> 14,061
<SHARES-REINVESTED> 3,111
<NET-CHANGE-IN-ASSETS> 199,035
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 515
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 30
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,759
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 1.33
<PER-SHARE-NII> 0.01
<PER-SHARE-GAIN-APPREC> 0.29
<PER-SHARE-DIVIDEND> 0.01
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.62
<EXPENSE-RATIO> 0.58
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS OF NORTHWESTERN MUTUAL SERIES FUND, INC. INDEX STOCK PORTFOLIO
DECEMBER 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 05
<NAME> INDEX 500 STOCK PORTFOLIO
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 939,455
<INVESTMENTS-AT-VALUE> 1,688,233
<RECEIVABLES> 2,951
<ASSETS-OTHER> 14
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,691,198
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 518
<TOTAL-LIABILITIES> 518
<SENIOR-EQUITY> 896,075
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 514,113
<SHARES-COMMON-PRIOR> 436,104
<ACCUMULATED-NII-CURRENT> 19,630
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 25,873
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 749,102
<NET-ASSETS> 1,690,680
<DIVIDEND-INCOME> 20,213
<INTEREST-INCOME> 2,332
<OTHER-INCOME> 0
<EXPENSES-NET> 2,915
<NET-INVESTMENT-INCOME> 19,630
<REALIZED-GAINS-CURRENT> 27,094
<APPREC-INCREASE-CURRENT> 308,691
<NET-CHANGE-FROM-OPS> 355,415
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 17,811
<DISTRIBUTIONS-OF-GAINS> 28,519
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 79,805
<NUMBER-OF-SHARES-REDEEMED> 17,928
<SHARES-REINVESTED> 16,132
<NET-CHANGE-IN-ASSETS> 537,823
<ACCUMULATED-NII-PRIOR> 17,811
<ACCUMULATED-GAINS-PRIOR> 27,298
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 49
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,964
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 2.64
<PER-SHARE-NII> 0.04
<PER-SHARE-GAIN-APPREC> 0.71
<PER-SHARE-DIVIDEND> 0.04
<PER-SHARE-DISTRIBUTIONS> 0.06
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 3.29
<EXPENSE-RATIO> 0.21
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS OF NORTHWESTERN MUTUAL SEREIS FUND, INC. BALANCED PORTFOLIO DECEMBER
31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 06
<NAME> BALANCED PORTFOLIO
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 2,280,568
<INVESTMENTS-AT-VALUE> 3,267,945
<RECEIVABLES> 16,513
<ASSETS-OTHER> 905
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 3,285,363
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 3,292
<TOTAL-LIABILITIES> 3,292
<SENIOR-EQUITY> 1,945,788
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 1,475,966
<SHARES-COMMON-PRIOR> 1,400,746
<ACCUMULATED-NII-CURRENT> 103,557
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 232,015
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,000,711
<NET-ASSETS> 3,282,071
<DIVIDEND-INCOME> 23,405
<INTEREST-INCOME> 90,182
<OTHER-INCOME> 0
<EXPENSES-NET> 9,039
<NET-INVESTMENT-INCOME> 104,548
<REALIZED-GAINS-CURRENT> 231,770
<APPREC-INCREASE-CURRENT> 187,000
<NET-CHANGE-FROM-OPS> 523,318
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 95,131
<DISTRIBUTIONS-OF-GAINS> 85,841
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 54,658
<NUMBER-OF-SHARES-REDEEMED> 69,339
<SHARES-REINVESTED> 89,901
<NET-CHANGE-IN-ASSETS> 493,577
<ACCUMULATED-NII-PRIOR> 94,962
<ACCUMULATED-GAINS-PRIOR> 85,588
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 9,039
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 1.99
<PER-SHARE-NII> 0.07
<PER-SHARE-GAIN-APPREC> 0.29
<PER-SHARE-DIVIDEND> 0.07
<PER-SHARE-DISTRIBUTIONS> 0.06
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 2.22
<EXPENSE-RATIO> 0.30
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS OF NORTHWESTERN MUTUAL SERIES FUND, INC. HIGH YIELD PORTFOLIO
DECEMBER 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 07
<NAME> HIGH YIELD BOND PORTFOLIO
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 199,645
<INVESTMENTS-AT-VALUE> 180,270
<RECEIVABLES> 5,505
<ASSETS-OTHER> 110
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 185,885
<PAYABLE-FOR-SECURITIES> 589
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 514
<TOTAL-LIABILITIES> 1,103
<SENIOR-EQUITY> 207,516
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 197,519
<SHARES-COMMON-PRIOR> 143,917
<ACCUMULATED-NII-CURRENT> 55
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 3,414
<ACCUM-APPREC-OR-DEPREC> (19,375)
<NET-ASSETS> 184,782
<DIVIDEND-INCOME> 3,197
<INTEREST-INCOME> 16,708
<OTHER-INCOME> 0
<EXPENSES-NET> 876
<NET-INVESTMENT-INCOME> 19,029
<REALIZED-GAINS-CURRENT> (3,333)
<APPREC-INCREASE-CURRENT> (20,988)
<NET-CHANGE-FROM-OPS> (5,292)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 18,974
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 60,216
<NUMBER-OF-SHARES-REDEEMED> 26,994
<SHARES-REINVESTED> 20,380
<NET-CHANGE-IN-ASSETS> 31,744
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 143
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 18
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 894
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 1.06
<PER-SHARE-NII> 0.10
<PER-SHARE-GAIN-APPREC> (0.12)
<PER-SHARE-DIVIDEND> 0.10
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0.94
<EXPENSE-RATIO> 0.50
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS OF NORTHWESTERN MUTUAL SERIES FUND, INC. SELECT BOND PORTFOLIO
DECEMBER 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 08
<NAME> SELECT BOND PORTFOLIO
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 292,981
<INVESTMENTS-AT-VALUE> 294,471
<RECEIVABLES> 3,467
<ASSETS-OTHER> 189
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 298,127
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 93
<TOTAL-LIABILITIES> 93
<SENIOR-EQUITY> 276,525
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 238,596
<SHARES-COMMON-PRIOR> 194,772
<ACCUMULATED-NII-CURRENT> 17,466
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 2,549
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,494
<NET-ASSETS> 298,034
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 18,946
<OTHER-INCOME> 0
<EXPENSES-NET> 803
<NET-INVESTMENT-INCOME> 18,143
<REALIZED-GAINS-CURRENT> 2,546
<APPREC-INCREASE-CURRENT> (2,027)
<NET-CHANGE-FROM-OPS> 18,662
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 15,746
<DISTRIBUTIONS-OF-GAINS> 2,700
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 45,867
<NUMBER-OF-SHARES-REDEEMED> 17,649
<SHARES-REINVESTED> 15,606
<NET-CHANGE-IN-ASSETS> 53,199
<ACCUMULATED-NII-PRIOR> 15,722
<ACCUMULATED-GAINS-PRIOR> 2,050
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 803
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 1.26
<PER-SHARE-NII> 0.08
<PER-SHARE-GAIN-APPREC> 0.00
<PER-SHARE-DIVIDEND> 0.08
<PER-SHARE-DISTRIBUTIONS> 0.01
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.25
<EXPENSE-RATIO> 0.30
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS OF NORTHWESTERN MUTUAL SERIES FUND, INC. MONEY MARKET PORTFOLIO
DECEMBER 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 09
<NAME> MONEY MARKET PORTFOLIO
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 290,729
<INVESTMENTS-AT-VALUE> 290,729
<RECEIVABLES> 805
<ASSETS-OTHER> 3
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 291,537
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 73
<TOTAL-LIABILITIES> 73
<SENIOR-EQUITY> 291,464
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 291,476
<SHARES-COMMON-PRIOR> 194,494
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 291,464
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 12,764
<OTHER-INCOME> 0
<EXPENSES-NET> 687
<NET-INVESTMENT-INCOME> 12,077
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 12,077
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 12,077
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 222,296
<NUMBER-OF-SHARES-REDEEMED> 137,391
<SHARES-REINVESTED> 12,077
<NET-CHANGE-IN-ASSETS> 96,994
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 687
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.04
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0.04
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.30
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
