<PAGE>
December 31, 1998 ANNUAL REPORT
NORTHWESTERN
MUTUAL LIFE-Registered Trademark-
The Quiet Company-Registered Trademark-
- -----------------------------------------
Northwestern Mutual Variable Life Account
- -----------------------------------------
Northwestern Mutual
Series Fund, Inc.
The Northwestern Mutual
Life Insurance Company
720 East Wisconsin Avenue
Milwaukee, WI 53202
<PAGE>
CONTENTS
<TABLE>
<S> <C>
CONTENTS
Letter to Policyowners 1
Performance Summary for Separate Accounts 2
Overview and Outlook 3
Series Fund Objectives and Schedule of Investments 4
Aggressive Growth Stock Portfolio 4
International Equity Portfolio 7
Growth Stock Portfolio 11
Growth and Income Stock Portfolio 14
Index 500 Stock Portfolio 17
Balanced Portfolio 24
High Yield Bond Portfolio 38
Select Bond Portfolio 42
Money Market Portfolio 48
Accountants' Report 50
Series Fund Financial Statements 51
Aggressive Growth Stock Portfolio 51
International Equity Portfolio 54
Growth Stock Portfolio 57
Growth and Income Stock Portfolio 60
Index 500 Stock Portfolio 63
Balanced Portfolio 66
High Yield Bond Portfolio 69
Select Bond Portfolio 72
Money Market Portfolio 75
Notes to Series Fund Financial Statements 78
Accountants' Report 81
Variable Life Financial Statements 82
Notes to Variable Life Financial Statements 86
Directors and Officers 97
</TABLE>
<TABLE>
<S> <C>
HOW TO GET MORE INFORMATION
ON YOUR VARIABLE COMPLIFE &
VARIABLE LIFE POLICY
NML Express provides 24 hour telephone access
to your account information by dialing
1-800-519-4NML (1-800-519-4665)
Policyowners must provide a policy number plus
a Personal Identification Number (PIN) to
utilize this service. Call toll-free to review
policy values and portfolio performance. If a
signed authorization has been returned to the
Home Office, policyowners may also transfer
among portfolios by phone.
For more information about Northwestern Mutual
Life, visit us on our Website at
WWW.NORTHWESTERNMUTUAL.COM
</TABLE>
<PAGE>
LETTER TO POLICYOWNERS
LETTER TO POLICYOWNERS
January 31, 1999
The year just ended was a period of rather high drama for the U.S. economy and
markets. Virtually all observers began the year anticipating slower economic
growth, possibly even a recession, accompanied by more modest returns in the
stock market, after three years of very large gains. In contrast to
expectations, economic growth continued at a healthy pace, and the major equity
indexes posted a fourth consecutive year of double-digit gains. In the bond
market, ultra-safe 30-year U.S. Treasury bonds produced extraordinary returns of
17% for the year, while the performance of bonds that carry a higher degree of
risk lagged.
Perhaps the most striking aspect of 1998 trends in both stock and bond markets
was volatility. By many measures, the past year was the most volatile since 1987
and one of the most volatile on record. Both the Dow Jones Industrial Average
and the S&P 500 Index rose or fell by 1% or more on approximately one-third of
all trading days. Historically, the market has risen or fallen by 1% or more on
an average of one-fifth of trading days, as measured by the S&P 500 Index in
years after 1926 and the Dow Jones Industrial Average back to 1887.
For many long-term market watchers, the most worrisome aspect of the 1998 gains
was that they applied to such a narrow group of stocks, notably high-tech issues
and large-capitalization consumer-related stocks. Bond markets, too, were
extremely volatile, especially during the third quarter, when a barrage of
concerns caused liquidity to evaporate.
A major message to be drawn from the positive returns posted in this difficult
year is that the U.S. economy and American investors are highly resilient, even
in the face of rather severe pressures. Throughout the year, sagging Asian
economies held down demand for industrial goods, impacting earnings growth of
U.S. multinationals. Russia effectively defaulted on its debt and devalued the
ruble, and fears spread that Latin American countries could follow; these
international woes created problems for multinational banks. Forecasters warned
of unpleasant possibilities, including inflation that would drive up interest
rates, or deflation that could lead to recession. Consumers maintained their
confident posture, maintaining economic growth by continuing to buy houses, cars
and a variety of other goods.
Many observers give much of the credit for continued strength in the economy and
markets to Alan Greenspan and the Federal Reserve Board. In September, the
collapse of Long-Term Capital Management, a major hedge fund, appeared to
threaten the viability of U.S. capital markets. When Mr. Greenspan engineered
the buy-out of Long-Term Capital by a group of financial institutions, investors
concluded that the Fed would do whatever was necessary to avoid a financial
meltdown. A further boost was provided by a series of interest rate cuts in
September and October. With these strong signals, money poured back into stocks;
investors became so confident that they shrugged off both the presidential
impeachment and the bombing of Iraq.
Throughout this market turmoil, the portfolios underlying
Northwestern Mutual's variable life insurance products continued
to perform in line with their stated objectives, providing policyowners returns
that will contribute to achieving long-range insurance and financial goals. We
continue to invest for the long term, and we urge you to take a long-term view
as well, taking current events into account, but basing decisions on long-range
goals and prospects. We appreciate the confidence you have shown in Northwestern
Mutual by selecting us to help you plan for a secure financial future. We pledge
to continue providing you and other policyowners with innovative products that
can meet a variety of needs.
The Northwestern Mutual Life Insurance Company
[SIGNATURE]
James D. Ericson, President and
Chief Executive Officer
--
1
<PAGE>
PERFORMANCE SUMMARY
PERFORMANCE SUMMARY as of December 31, 1998
VARIABLE LIFE--POLICIES ISSUED BEFORE OCTOBER 11, 1995
<TABLE>
<CAPTION>
Aggressive Growth &
Net Investment Growth International Growth Income Index 500 High Yield Select Money
Rates of Return Stock Equity Stock Stock Stock Balanced Bond Bond Market
(as of 12/31/98) Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 year............. 6.80% 4.09% 25.81% 22.28% 27.82% 18.05% (2.53%) 6.32% 4.69%
5 years............ - - - - 182.31% 100.33% - 36.06% 24.47%
Annualized....... - - - - 23.07% 14.91% - 6.35% 4.48%
10 years........... - - - - 360.03% 224.88% - 126.89% 60.22%
Annualized....... - - - - 16.49% 12.51% - 8.54% 4.83%
Since inception.... 103.01%* 58.10%* 155.76%* 144.59%* - - 58.59%* - -
Annualized....... 16.40% 10.32% 22.31% 21.14% - - 10.40% - -
</TABLE>
VARIABLE COMPLIFE--POLICES ISSUED ON OR AFTER OCTOBER 11, 1995**
<TABLE>
<CAPTION>
Aggressive Growth &
Net Investment Growth International Growth Income Index 500 High Yield Select Money
Rates of Return Stock Equity Stock Stock Stock Balanced Bond Bond Market
(as of 12/31/98) Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 year............. 6.91% 4.20% 25.93% 22.40% 27.95% 18.17% (2.43%) 6.43% 4.80%
5 years............ - - - - 183.71% 101.40% - 36.75% 25.09%
Annualized....... - - - - 23.19% 15.03% - 6.46% 4.58%
10 years........... - - - - 364.90% 228.21% - 129.24% 61.81%
Annualized....... - - - - 16.61% 12.62% - 8.65% 4.93%
Since inception.... 103.97%* 58.86%* 156.98%* 145.76%* - - 59.34%* - -
Annualized....... 16.52% 10.44% 22.43% 21.27% - - 10.51% - -
</TABLE>
VARIABLE EXECUTIVE LIFE--POLICIES FIRST OFFERED ON MARCH 2, 1998*** AND
VARIABLE JOINT LIFE--POLICIES FIRST OFFERED ON DECEMBER 28, 1998****
<TABLE>
<CAPTION>
Aggressive Growth &
Net Investment Growth International Growth Income Index 500 High Yield Select Money
Rates of Return Stock Equity Stock Stock Stock Balanced Bond Bond Market
(as of 12/31/98) Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 year............. 7.56% 4.82% 26.69% 23.14% 28.72% 18.88% (1.84%) 7.07% 5.43%
5 years............ - - - - 192.31% 107.10% - 40.12% 28.91%
Annualized....... - - - - 23.93% 15.67% - 6.98% 5.21%
10 years........... - - - - 393.84% 248.78% - 143.62% 70.49%
Annualized....... - - - - 17.32% 13.31% - 9.31% 5.48%
Since inception.... 109.75%* 63.36%* 164.25%* 152.71%* - - 63.85%* - -
Annualized....... 17.22% 11.10% 23.17% 22.00% - - 11.17% - -
</TABLE>
The net investment rates of return shown above should not be considered a
representation of investment results which may be anticipated in the future. The
net investment rates of return include investment income, capital gains and all
common fees of the divisions of the Variable Life Account, but not the
additional charges that are unique to your policy. See the prospectus for a
description of the effect of investment performance on policy benefits. Policy
benefits reflect the investment rates of return of the divisions in which the
policy is invested, and will vary depending on the fees and expenses associated
with your policy.
* Inception date of 5/3/94.
** Product inception date of 10/11/95. Returns prior to 10/11/95 were reflected
using the actual investment experience of each division, adjusted for the
expenses of the product. These returns are not a guarantee of future
performance.
*** Product inception date of 3/2/98 (For use with non-tax qualified executive
benefit plans). Returns prior to 3/2/98 were reflected using the actual
investment experience of each division, adjusted for expenses of the
product. These returns are not a guarantee of future performance.
**** Policy first offerred December 28, 1998 (For use primarily in estate
planning, provides coverage on two insureds with a death benefit payable on
the second death). As of the date of this report no policies were in force.
Returns prior to 12/28/98 were reflected using the actual investment
experience of each division, adjusted for expenses of the product. These
returns are not a guarantee of future performance.
Note: "Standard and Poor's 500" and "S&P 500" are trademarks of The McGraw-Hill
Companies, Inc. and have been licensed for use by The Northwestern Mutual
Life Insurance Company. The Series Fund and its Portfolios are not
sponsored, endorsed, sold or promoted by Standard & Poor's, and Standard
& Poor's makes no representation regarding the advisability of investing
in them.
IMPORTANT NOTE:
The average annual total returns shown with the graphs on the following pages
are not an estimate or a guarantee of future performance. These average annual
total returns reflect reinvestment of investment income and capital gain
distributions, and deduction of investment management fees and fund expenses,
but not product charges. See the prospectus for a description of the effect of
investment performance on policy benefits. Policy benefits reflect the
investment rates of return of the divisions in which the policy is invested, and
will vary depending on the insurance and administrative charges, applicable
sales charges, and the mortality and expense risk charge associated with the
product. These product charges effectively reduce the dollar amount of any net
gains and increase the dollar amount of any net losses. The net investment rates
of return shown above reflect the product charges borne by each division of the
Variable Life Account, but not the additional charges that are unique to your
policy. Your Northwestern Mutual Life agent/registered representative of
Northwestern Mutual Investment Service ("NMIS") can provide you with actual
rates of return for your variable life insurance policy, showing the effect of
all of the applicable charges.
--
2
<PAGE>
OVERVIEW AND OUTLOOK
- --------------------------------------------------------------------------------
THE ECONOMY
The U.S. economy continued to grow throughout 1998, with growth driven almost
entirely by consumer spending. While manufacturing continues to suffer from weak
foreign demand, factory orders indicate that capital spending on equipment is
holding up. Fourth quarter growth appears to have been fairly strong, with real
growth continuing at a rate of 3% or more. As we enter 1999, it seems unlikely
that the powerful growth of 1998 will be maintained. Last year, the obstacles to
growth were largely external, stemming from the Asian financial crisis. Now, as
companies seek to boost profits by cutting costs, and as recently announced
layoffs take effect, it seems inevitable that growth in household income will
slow and capital budgets will be squeezed. Meantime, foreign demand for U.S.
goods will remain weak.
Economic Growth
and Inflation
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
REAL GDP CPI-U
<S> <C> <C>
1988 3.8% 4.4%
1989 3.4% 4.6%
1990 1.3% 6.1%
1991 -1.0% 3.1%
1992 2.7% 2.9%
1993 2.3% 2.7%
1994 3.5% 2.7%
1995 2.0% 2.5%
1996 2.2% 3.3%
1997 3.8% 1.9%
1998 3.0% 1.7%
</TABLE>
Source: U.S. Department of Commerce. Year-to-year percentage change in
Real Gross Domestic Product is used for real economic growth.
December-to-December percentage change in the Consumer Price Index--
Urban is used for the inflation rate.
- --------------------------------------------------------------------------------
THE EQUITY MARKET
On balance, 1998 was another excellent year for the stock market, but with
dramatic differences in performance of various groups of companies. Technology
names led the way, with soaring values for Internet-related stocks, especially
late in the year.
The Standard & Poor's 500 Index, a market-value weighted benchmark of
large-stock performance, far outpaced the Dow Jones Industrial Average, largely
because the S&P Index includes high-tech names such as Microsoft, Intel and Dell
Computer Corp. The Dow Jones average includes just 30 "blue-chip" stocks, most
of them industrial companies, with only one, IBM, in the realm of technology.
Total return (including capital gains and dividends) for the S&P 500 Index was
28.5% for the year, while return for the Dow-Jones Industrial Average was a much
more modest 18.03%. The Nasdaq Composite Index, which reflects all stocks traded
on the Nasdaq system, had its third best year ever, with an increase of 39.6%.
The Nasdaq Composite was paced by the Nasdaq 100 Index, which was up 85.3%; this
index, which tracks the largest non-financial stocks traded on Nasdaq, is
dominated by high-tech names. In contrast, the Russell 2000 Index, a benchmark
of small company stock performance, was down 3.5% for the year.
Annual Total Returns
from S&P 500 Index
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
12/31/89 31.7%
12/31/90 -3.1%
12/31/91 30.5%
12/31/92 7.6%
12/31/93 10.1%
12/31/94 1.2%
12/31/95 37.4%
12/31/96 22.8%
12/31/97 33.4%
12/31/98 28.5%
</TABLE>
Source: Standard & Poor's
- --------------------------------------------------------------------------------
THE BOND MARKET
For the first time since 1990, the safest bonds performed much better than risky
bonds, amid falling interest rates, low inflation and a late-summer flight from
bonds with any risk. The total return on 30-year Treasury bonds was 17.1%,
compared with 8.9% for the broad Merrill Lynch Domestic Master Index, which
includes investment-grade bonds of various types and maturities. The biggest
boost for treasuries came from a sudden flight from risky investments in late
summer, when markets were deluged with bad news including the devaluation of the
Russian ruble, heightened worries about a global recession, and concerns about a
meltdown of U.S. markets in the wake of the collapse of the giant hedge fund
Long-Term Capital Management. A string of three interest rate cuts by the
Federal Reserve in the fall was the major factor in improved liquidity near the
end of the year, improving performance of investment-grade corporate bonds for
the full year.
Annual Total Returns from
Merrill Lynch Domestic Master Index
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
12/31/89 14.2%
12/31/90 9.1%
12/31/91 15.9%
12/31/92 7.6%
12/31/93 10.0%
12/31/94 -2.8%
12/31/95 18.5%
12/31/96 3.6%
12/31/97 9.7%
12/31/98 8.9%
</TABLE>
Source: Merrill Lynch. The Merrill Lynch Domestic Master Index is an
unmanaged market value weighted index comprised of U.S. Government,
mortgage and investment-grade corporate bonds.
--
3
<PAGE>
AGGRESSIVE GROWTH STOCK PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Objective: Portfolio Strategy: Invested Assets:
Maximum long-term appreciation of Strive for the highest possible rate of capital $1,137,466,000
capital appreciation by investing in companies with potential
for rapid growth.
</TABLE>
AGGRESSIVE GROWTH STOCK PORTFOLIO
The Aggressive Growth Stock Portfolio owns the stocks of emerging growth
companies, generally with market capitalizations of less than $3 billion. Since
growth stock portfolios tend to react strongly to changes in financial and
economic markets, as well as to changes in the prospects for individual
companies, returns of this Portfolio can vary considerably from time to time. A
higher level of risk (with risk defined as variability of returns over time) is
accepted for the potential of greater long-term returns. The focus in stock
selection is on the individual companies' ability to generate revenue, expanding
profit margins and solid balance sheets; industry sector selection is of
secondary importance.
The Aggressive Growth Stock Portfolio achieved returns significantly higher than
the two Wilshire small-stock indexes used as benchmarks, though less than the
broad market averages, which are dominated by the large-company stocks that led
the market throughout the year. Many of the best-performing holdings are smaller
companies that benefited from strength in sectors such as technology and
communications. Retail holdings including O'Reilly Automotive and Kohl's
benefited from continued strength in consumer spending. The Portfolio
participated in the dramatic strength of Knight Trimark, which provides trading
for many online brokers, and QLogic, whose new Fiber Channel product enables
significant improvement in the management of data storage. A continuing area of
emphasis is business services, with holdings including Metzler Group, which
provides consulting services to utility companies, and Cintas, a uniform rental
company.
Sector Allocation
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Technology 26%
Consumer Cyclical 15%
Business Services 12%
Health Care 12%
Industrial & Transportation 10%
Consumer Staples 7%
Finance 6%
Energy 2%
Index Futures 2%
Short-Term Investments 6%
</TABLE>
Top 10 Holdings
12/31/98
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
COMPANY % OF NET ASSETS
Cintas Corporation 2.44%
O...Reilly Automotive, Inc. 2.38%
Paychex, Inc. 2.26%
Cardinal Health, Inc. 2.15%
Jabil Circuit, Inc. 2.09%
The Metzler Group, Inc. 2.03%
Concord EFS, Inc. 2.00%
Catalina Marketing Corporation 1.83%
QLogic Corporation 1.79%
Dollar Tree Stores, Inc. 1.74%
</TABLE>
Performance Relative
to Relevant Indices
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AGGRESSIVE GROWTH STOCK WILSHIRE SMALL WILSHIRE NEXT
PORTFOLIO** CAP INDEX 1750 INDEX
<S> <C> <C> <C>
11/90 $10,000 $10,000 $10,000
12/90 10,189 10,459 10,459
12/91 15,894 15,873 15,325
12/92 16,839 18,188 18,186
12/93 20,057 21,464 21,357
12/94 21,141 20,801 21,065
12/95 29,448 26,330 27,439
12/96 34,661 31,588 31,801
12/97 39,467 40,511 39,348
12/98 42,446 40,366 39,675
AVERAGE ANNUAL TOTAL RETURN
FOR PERIDS ENDED DECEMBER 31, 1998
ONE YEAR FIVE YEARS SINCE INCEPTION
Aggressive Growth
Stock Portfolio 7.56% 16.18% 19.58%
Wilshire Small Cap Index -0.36% 13.46% 18.84%
Wilshire Next 1750 Index 0.83% 13.19% 18.58%
**INCEPTION DATE OF 11/30/90.
</TABLE>
Since the Portfolio invests primarily in small capitalization issues, the
indices that best reflect the Portfolio's performance are the Wilshire Next 1750
Index and Wilshire Small Cap Index.
The Wilshire Next 1750 is an unmanaged, equally weighted index. Included in
this index are those stocks which are ranked 750 to 2500 by market
capitalization in the Wilshire 5000. The largest sectors represented in this
index are technology, financial services and consumer services. Market
capitalization ranges from $1.8 billion to $244 million.
The Wilshire Small Cap Index is a subset of the Wilshire Next 1750 and
includes 250 stocks chosen based upon their size, sector and liquidity
characteristics. Each stock is equally weighted in this unmanaged index. The
average market capitalization is approximately $930 million. The largest sector
weightings include technology, financial services, and consumer services.
On May 3, 1994, the Northwestern Mutual Aggressive Growth Stock Fund, Inc.
(the "Fund") merged into the Northwestern Mutual Series Fund, Inc. Aggressive
Growth Stock Portfolio (the "Portfolio"). The Portfolio had no assets prior to
the merger. After the merger, the assets of the Portfolio were those of the
Fund. The investment objectives, policies, management and expenses of the
Portfolio are identical to those of the Fund. Accordingly, the performance of
the Fund prior to the merge is included with the performance of the Portfolio in
the graph and total return figures above.
This chart assumes an initial investment of $10,000 made on 11/30/90
(commencement of the Fund's operations). Returns shown include deductions for
management and other fund expenses, and reinvestment of all dividends. Returns
exclude deductions for separate account sales loads and account fees. Past
performance is not predictive of future performance. Investment return and
principal value will fluctuate, so that your shares, when redeemed, may be worth
more or less than their original cost. The net investment rates of return shown
on page 2 reflect mortality and expense risk charges deducted from the assets of
the separate account. The cost of insurance protection, which is not reflected
in the returns shown on this chart, would make the return significantly lower.
Investors are urged to obtain a personalized illustration of historical
performance which reflects the cost of insurance protection.
--
4
<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>
--
5
<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
--
6
<PAGE>
INTERNATIONAL EQUITY PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Objective: Portfolio Strategy: Invested Assets:
Long-term appreciation of Participate in the growth of foreign economies $671,106,000
capital through diversification by investing in securities with high long-term
into markets outside the United earnings potential relative to current market
States values.
</TABLE>
INTERNATIONAL EQUITY PORTFOLIO
The International Equity Portfolio offers contract owners the opportunity to
participate in the growth of companies in countries throughout the world,
particularly those with expanding economies. In selecting investments, the
principal focus is on identifying undervalued stocks of companies with strong
finances and good long-term growth opportunities, rather than on choosing
regions of the world in which to invest. The Portfolio is normally fully
invested in equity securities.
The year just ended was challenging for international investors, with
extraordinary volatility. Asian economic problems continued and Latin American
currencies and markets dropped, while most of Europe experienced low inflation,
moderate growth and buoyant markets. The Portfolio remains concentrated in
Europe, although exposure to these markets has been reduced as prices of many
equities reached full valuations. Performance benefited from selected
investments in Asia, where several key markets performed well in the second half
of 1998. The most significant industry emphasis is telecommunications, which
helped performance as prices of many of these securities, particularly European
operators, increased significantly during the year. Newer investments include
selected positions in cyclical industries such as paper and capital equipment,
where low equity prices have created opportunities to invest in quality
companies with growth potential.
The International Equity Portfolio is managed for Northwestern Mutual by
Templeton Investment Counsel, Inc.
Asset Allocation
12/31/98
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Europe 57%
Latin America 8%
Asia 12%
Australia/New Zealand 6%
North America 5%
Other 1%
Non-equity holdings 11%
</TABLE>
Top 10 Holdings
12/31/98
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C> <C>
COMPANY Country % OF NET ASSETS
Aegon NV Netherlands 2.57%
Merita Limited "A" Finland 2.31%
AXA-UAP SA France 2.25%
Zurich Versicherungs-Gesellschaft Switzerland 2.19%
Koninklijke Philips Electronics N.V. Netherlands 2.08%
ING Groep NV Netherlands 1.90%
Banque Nationale de Paris, ADR (144a) France 1.80%
YPF S.A., ADR Argentina 1.74%
Iberdrola S.A. Spain 1.64%
National Power U.K. 1.60%
</TABLE>
Performance Relative to the EAFE Index
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
INTERNATIONAL EQUITY PORTFOLIO# EAFE INDEX
<S> <C> <C>
4/93 $10,000 $10,000
12/93 $12,464 $10,970
12/94 $12,451 $11,859
12/95 $14,266 $13,228
12/96 $17,264 $14,068
12/97 $19,384 $14,364
12/98 $20,319 $17,284
AVERAGE ANNUAL TOTAL RETURN
FOR PERIODS ENDED DECEMBER 31, 1998
ONE YEAR
International Equity Portfolio 4.82%
EAFE Index 20.33%
# INCEPTION DATE OF 4/30/93.
<CAPTION>
<S> <C> <C>
4/93
12/93
12/94
12/95
12/96
12/97
12/98
FIVE YEARS SINCE INCEPTION
International Equity Portfolio 10.27% 13.32%
EAFE Index 9.52% 10.13%
# INCEPTION DATE OF 4/30/93.
</TABLE>
As depicted in the graph, the International Equity Portfolio is compared against
the Morgan Stanley Capital International EAFE ("Europe-Australasia-Far East")
Index. The index is composed of approximately 1100 companies in 20 countries in
Europe and the Pacific Basin. The objective of the index is to reflect the
movements of stock markets in these countries by representing an unmanaged
(indexed) portfolio within each country. The indices are constructed so that
companies chosen represent about 60% of market capitalization in each market;
industry composition of the market is reflected; and a cross section of large,
medium, and small capitalization stocks is included, taking into account
liquidity concerns. The index is calculated in U. S. dollars.
On May 3, 1994, the Northwestern Mutual International Equity Fund, Inc. (the
"Fund") merged into the Northwestern Mutual Series Fund, Inc., International
Equity Portfolio (the "Portfolio"). The Portfolio had no assets prior to the
merger. After the merger, the assets of the Portfolio were those of the Fund.
The investment objectives, policies, management and expenses of the Portfolio
are identical to those of the Fund. Accordingly, the performance of the Fund
prior to the merger is included with the performance of the Portfolio in the
graph and total return figures above.
This chart assumes an initial investment of $10,000 made on 4/30/93
(commencement of the Fund's operations). Returns shown include deductions for
management and other fund expenses, and reinvestment of all dividends. Returns
exclude deductions for separate account sales loads and account fees. Past
performance is not predictive of future performance. Investment return and
principal value will fluctuate, so that your shares, when redeemed, may be worth
more or less than their original cost. The net investment rates of return shown
on page 2 reflect mortality and expense risk charges deducted from the assets of
the separate account. The cost of insurance protection, which is not reflected
in the returns shown on this chart, would make the return significantly lower.
Investors are urged to obtain a personalized illustration of historical
performance which reflects the cost of insurance protection.
--
7
<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>
--
8
<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>
--
9
<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
--
10
<PAGE>
GROWTH STOCK PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Objective: Portfolio Strategy: Invested Assets:
Long-term appreciation of Hold a diversified mix of high quality growth $421,282,000
capital with moderate risk stocks of medium and large companies with
above-average potential for earnings growth.
</TABLE>
GROWTH STOCK PORTFOLIO
The Growth Stock Portfolio is invested in high quality companies of large to
medium capitalization with strong financial characteristics and the ability to
generate internal growth. A key factor in stock selection is the choice of
industries with good earnings potential, based on analysis of economic trends to
determine their impact on various sectors of the economy. Stock selection is
made through "top down" analysis: first industry and market sector choices are
made based on the economic environment, and then the most promising companies
within each sector are selected as holdings. A strategy of this portfolio is to
go beyond the most familiar "blue chip" names to seek out medium-sized companies
with stock prices that do not yet reflect their potential for growth.
Diversification across 70 to 90 stocks in a wide range of industry groups
reduces the portfolio's risk profile.
The Portfolio benefited from the equity market's strength during 1998,
especially from continued market leadership by the largest companies. Holdings
in the overweighted consumer cyclical segment, especially retailers such as
Kohl's and Wal-Mart, performed quite well, as optimistic consumers used
increasing disposable income to maintain their spending spree. Despite the
portfolio's underweighted position in high-tech stocks, major increases in the
prices of holdings such as Intel and Microsoft were an important factor in the
overall gains. Especially during the fourth quarter, holdings of pharmaceuticals
including Merck and Bristol-Myers contributed to performance. An underweighting
of basic industry stocks was beneficial, as weak demand from Asia hurt demand
for capital goods.
Sector Allocation
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Consumer Cyclicals 16%
Consumer Staples 16%
Technology 14%
Health Care 10%
Basic Materials/Capital Goods 10%
Finance 8%
Energy 5%
Other Industries 9%
Index Futures 6%
Cash Equivalents 6%
</TABLE>
Top 10 Holdings
12/31/98
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
GENERAL ELECTRIC COMPANY 2.78%
<S> <C>
MCI WorldCom, Inc. 2.62%
Microsoft Corporation 2.59%
International Business Machines Corporation 2.17%
Kohl's Corporation 2.05%
Wal-Mart Stores, Inc. 2.05%
Cisco Systems, Inc. 1.95%
Pfizer Inc. 1.95%
Harley-Davidson, Inc. 1.93%
Fiserv, Inc. 1.93%
</TABLE>
Performance Relative to S&P 500 Index
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
GROWTH STOCK
<S> <C> <C>
PORTFOLIO# S&P 500 INDEX
5/94 $10,000 $10,000
12/94 $10,155 $10,320
12/95 $13,285 $14,180
12/96 $16,063 $17,413
12/97 $20,858 $23,211
12/98 $26,425 $29,826
AVERAGE ANNUAL TOTAL RETURN
FOR PERIODS ENDED DECEMBER 31, 1998
ONE YEAR SINCE INCEPTION
Growth Stock Portfolio 26.69% 23.17%
S&P 500 Index 28.50% 26.41%
#NOTE: INCEPTION DATE OF 5/3/94.
</TABLE>
The Standard & Poor's 500 Composite Stock Price Index is an unmanaged index of
500 selected common stocks, most of which are listed on the New York Stock
Exchange. The index is heavily weighted toward stocks with large market
capitalizations and represents approximately two-thirds of the total market
value of all domestic common stocks.
This chart assumes an initial investment of $10,000 made on 5/3/94
(commencement of operations). Returns shown include deductions for management
and other fund expenses, and reinvestment of all dividends. Returns exclude
deductions for separate account sales loads and account fees. Past performance
is not predictive of future performance. Investment return and principal value
will fluctuate, so that your shares, when redeemed, may be worth more or less
than their original cost. The net investment rates of return shown on page 2
reflect mortality and expense risk charges deducted from the assets of the
separate account. The cost of insurance protection, which is not reflected in
the returns shown on this chart, would make the return significantly lower.
Investors are urged to obtain a personalized illustration of historical
performance which reflects the cost of insurance protection.
--
11
<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>
--
12
<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
--
13
<PAGE>
GROWTH AND INCOME STOCK PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Objective: Portfolio Strategy: Invested Assets:
Long-term growth of capital and Actively manage a portfolio of equity securities with $570,970,000
income, consistent with moderate a goal of exceeding the total return of the S&P 500
investment risk Index.
</TABLE>
GROWTH AND INCOME STOCK PORTFOLIO
The Growth and Income Stock Portfolio invests mainly in large-capitalization
stocks, with a focus on seeking the best values in the market based on long-term
earnings forecasts. A sector balance very close to that of the S&P 500 Index is
normally maintained, with the emphasis on undervalued stocks within each
industry group; a valuation discipline mandates the sale of stocks regarded as
overvalued. More focus is placed on capital appreciation and dividend growth
than on current dividends. The Portfolio is normally fully invested in equity
securities.
The last year has been a difficult time for the value-oriented investment style
that guides the Growth and Income Stock Portfolio. While returns from the S&P
500 Index were quite good, market leadership was very narrow, with few small to
mid-size companies participating. The technology and retail sectors were up
dramatically, while returns from cyclical industries such as basic industry,
capital goods and transportation were low or negative. Technology holdings such
as Cisco, EMC, IBM, and Sun Microsystems contributed greatly to the Portfolio's
total return of 23.1% for the year. Other strong performers were consumer stocks
including Anheuser-Busch and Philip Morris and Comcast, a cable television
company. Energy holdings were hurt by falling oil prices, while capital goods
stocks were weak, in line with their industries.
The Growth and Income Stock Portfolio is managed for Northwestern Mutual by J.
P. Morgan Investment Management, Inc.
Sector Allocation
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Technology 17%
Finance 15%
Basic Materials/Capital Goods 15%
Consumer Staples 14%
Consumer Cyclical 10%
Health Care 9%
Energy 7%
Other Industries 12%
Cash Equivalents 2%
</TABLE>
Top 10 Holdings
12/31/98
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
COMPANY % OF NET ASSETS
MCI WorldCom, Inc. 3.30%
Monsanto Co 3.22%
BankAmerica Corp 3.15%
American Home Products Corp. 2.92%
Philip Morris Companies Inc. 2.90%
International Business Machines Corporation 2.79%
Bristol Myers Squibb Co. 2.65%
Mobil Corp. 2.59%
Procter & Gamble Company 2.58%
Waste Mangement Inc. 2.50%
</TABLE>
Performance Relative to S&P 500 Index
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
GROWTH & INCOME STOCK PORTFOLIO
5/94 $10,000
<S> <C> <C>
12/94 $10,034
12/95 $13,156
12/96 $15,783
12/97 $20,523
12/98 $25,271
Growth & Income Stock Portfolio
S&P 500 Index
<CAPTION>
S&P 500 INDEX
5/94 $10,000
<S> <C> <C>
12/94 $10,320
12/95 $14,180
12/96 $17,413
12/97 $23,211
12/98 $29,826
AVERAGE ANNUAL TOTAL RETURN
FOR PERIODS ENDED DECEMBER 31, 1998
ONE YEAR SINCE INCEPTION
Growth & Income Stock Portfolio 23.14% 22.00%
S&P 500 Index 28.50% 26.41%
</TABLE>
The Standard & Poor's 500 Composite Stock Price Index is an unmanaged index of
500 selected common stocks, most of which are listed on the New York Stock
Exchange. The index is heavily weighted toward stocks with large market
capitalizations and represents approximately two-thirds of the total market
value of all domestic common stocks.
This chart assumes an initial investment of $10,000 made on 5/3/94
(commencement of operations). Returns shown include deductions for management
and other fund expenses, and reinvestment of all dividends. Returns exclude
deductions for separate account sales loads and account fees. Past performance
is not predictive of future performance. Investment return and principal value
will fluctuate, so that your shares, when redeemed, may be worth more or less
than their original cost. The net investment rates of return shown on page 2
reflect mortality and expense risk charges deducted from the assets of the
separate account. The cost of insurance protection, which is not reflected in
the returns shown on this chart, would make the return significantly lower.
Investors are urged to obtain a personalized illustration of historical
performance which reflects the cost of insurance protection.
--
14
<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>
--
15
<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
--
16
<PAGE>
INDEX 500 STOCK PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Objective: Portfolio Strategy: Net Assets:
Long-term capital appreciation Invest in a portfolio designed to approximate $1,690,680,000
through cost-effective the composition and returns of the S&P 500
participation in broad market Index.
performance
</TABLE>
INDEX 500 STOCK PORTFOLIO
The Index 500 Stock Portfolio is designed to achieve results that approximate
the performance of the Standard & Poor's 500 Composite Stock Price Index. This
composite of 500 stocks of large U.S.-based companies, compiled by Standard &
Poor's Corporation, is generally regarded as a good proxy for the overall U.S.
equity market; the Portfolio therefore enables contract owners to participate in
overall performance of the equity market. The Portfolio continues to achieve the
objective of matching the results of the S&P 500 before expenses.
Sector Allocation
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Technology 19%
Finance 16%
Consumer Staples 15%
Health Care 12%
Basic Materials/Capital Goods 11%
Consumer Cyclicals 9%
Energy 6%
Other Industries 12%
</TABLE>
Top 10 Holdings
12/31/98
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
TOP 10 HOLDINGS 12/31/98 % OF NET ASSETS
<S> <C>
Microsoft Corporation 3.41%
General Electric Company 3.32%
Intel Corporation 1.99%
Wal-Mart Stores, Inc. 1.82%
Exxon Corporation 1.78%
Merck & Co., Inc. 1.76%
International Business Machines Corporation 1.72%
The Coca-Cola Company 1.65%
Pfizer Inc. 1.64%
Lucent Technologies Inc. 1.45%
</TABLE>
Performance Relative to S&P 500 Index
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
INDEX 500 PORTFOLIO S&P 500 INDEX
<S> <C> <C> <C>
12/88 $10,000 $10,000
12/89 $11,839 $13,170
12/90 $11,328 $12,762
12/91 $14,702 $16,654
12/92 $15,369 $17,920
12/93 $16,891 $19,730
12/94 $17,096 $19,966
12/95 $23,464 $27,434
12/96 $28,802 $33,689
12/97 $38,364 $44,907
12/98 $49,384 $57,706
AVERAGE ANNUAL TOTAL RETURN
FOR PERIODS ENDED DECEMBER 31, 1998
ONE YEAR FIVE YEARS TEN YEARS
Index 500 Portfolio 28.72% 23.93% 17.32%
S&P 500 Index 28.50% 23.94% 19.16%
</TABLE>
On April 30, 1993, the Portfolio was indexed to approximate the performance of
the Standard & Poor's 500 Composite Stock Price Index. Before that date, the
Portfolio was actively managed.
The Standard & Poor's 500 Composite Stock Price Index is an unmanaged index
of 500 selected common stocks, most of which are listed on the New York Stock
Exchange. The index is heavily weighted toward stocks with large market
capitalizations and represents approximately two-thirds of the total market
value of all domestic common stocks.
This chart assumes an initial investment of $10,000 made on 12/31/88.
Returns shown include deductions for management and other fund expenses, and
reinvestment of all dividends. Returns exclude deductions for separate account
sales loads and account fees. Past performance is not predictive of future
performance. Investment return and principal value will fluctuate, so that your
shares, when redeemed, may be worth more or less than their original cost. The
net investment rates of return shown on page 2 reflect mortality and expense
risk charges deducted from the assets of the separate account. The cost of
insurance protection, which is not reflected in the returns shown on this chart,
would make the return significantly lower. Investors are urged to obtain a
personalized illustration of historical performance which reflects the cost of
insurance protection.
--
17
<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>
--
18
<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>
--
19
<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>
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20
<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>
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21
<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>
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22
<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
--
23
<PAGE>
BALANCED PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Objective: Portfolio Strategy: Invested Assets:
A high level of current income Achieve consistent returns and low volatility $3,282,071,000
and capital growth with a low by diversifying among assets
risk profile
</TABLE>
In order to capitalize on changing financial market and economic conditions, the
Balanced Portfolio's asset allocation is adjusted as appropriate among three
investment classes: stocks, bonds and money market instruments. The equity
portion of the Portfolio is indexed, meaning that the Portfolio is designed to
achieve results that approximate the performance of the Standard & Poor's 500
Composite Stock Price Index, which is generally regarded as a good proxy for the
overall U.S. equity market. The bond portion of the Portfolio is actively
managed, with investments in high quality bonds adjusted frequently as to
maturity, market sectors and duration. Liquidity is maintained by holding a
portion of the Portfolio in money market investments, which are high quality
short-term debt securities.
During 1998 the portfolio continued to emphasize equities, remaining relatively
fully invested during most of the year. The market's volatility was used as an
opportunity to adjust the asset mix, with the equity position reduced before the
stock market's pronounced drops in early September and again in early October
and equity exposure increased on market weakness. The fact that the equity
portion of the Portfolio is indexed to the S&P 500 boosted performance in
several ways: the portfolio benefited from the continued market leadership of
the high-tech and large companies that dominate this index, as well as from the
absence of small-capitalization and foreign stocks. Performance of the bond
portion of the Portfolio was hurt by weakness during the year in all bonds
except Treasury securities.
Percentage Holdings
12/31/98
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Equities (including
futures) 57%
Bonds 34%
Short-Term Investments 9%
</TABLE>
Performance Relative
to Relevant Indices
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
BALANCED PORTFOLIO MERRILL LYNCH DOMESTIC MASTER INDEX ML 91-DAY T-BILL
<S> <C> <C> <C>
12/88 10,000 $10,000 $10,000
12/89 11,566 $11,418 $10,899
12/90 11,742 $12,458 $11,816
12/91 14,482 $14,433 $12,570
12/92 15,295 $15,526 $13,064
12/93 16,810 $17,083 $13,481
12/94 16,837 $16,600 $14,046
12/95 21,280 $19,675 $14,893
12/96 24,143 $20,381 $15,683
12/97 29,338 $22,350 $16,518
12/98 34,879 $24,332 $17,382
AVERAGE ANNUAL TOTAL RETURN
FOR PERIODS ENDED DECEMBER 31, 1998
ONE YEAR FIVE YEARS
Balanced Portfolio 18.88% 15.72%
MLDM Index 8.87% 7.33%
ML 91-Day T-Bill 5.23% 5.22%
S&P 500 Index 28.50% 23.94%
<CAPTION>
S&P 500 INDEX
<S> <C>
12/88 $10,000
12/89 $13,170
12/90 $12,762
12/91 $16,654
12/92 $17,920
12/93 $19,730
12/94 $19,966
12/95 $27,434
12/96 $33,689
12/97 $44,907
12/98 $57,706
TEN YEARS
Balanced Portfolio 13.31%
MLDM Index 9.30%
ML 91-Day T-Bill 5.68%
S&P 500 Index 19.16%
</TABLE>
In the graph, the Portfolio is compared against three indices representing the
three major components of the Portfolio: equities, fixed income, and cash
equivalent investments.
The Standard & Poor's 500 Composite Stock Price Index is an unmanaged index
of 500 selected common stocks, most of which are listed on the New York Stock
Exchange. The index is heavily weighted toward stocks with large market
capitalizations and represents approximately two-thirds of the total market
value of all domestic common stocks.
The Merrill Lynch Domestic Master Index is an unmanaged market value
weighted index comprised of U.S. Government, mortgage and investment-grade
corporate bonds. The index measures the income provided by, and the price
changes of, the underlying securities.
This chart assumes an initial investment of $10,000 made on 12/31/88.
Returns shown include deductions for management and other fund expenses, and
reinvestment of all dividends. Returns exclude deductions for separate account
sales loads and account fees. Past performance is not predictive of future
performance. Investment return and principal value will fluctuate, so that your
shares, when redeemed, may be worth more or less than their original cost. The
net investment rates of return shown on page 2 reflect mortality and expense
risk charges deducted from the assets of the separate account. The cost of
insurance protection, which is not reflected in the returns shown on this chart,
would make the return significantly lower. Investors are urged to obtain a
personalized illustration of historical performance which reflects the cost of
insurance protection.
--
24
<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>
--
25
<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>
--
26
<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>
--
27
<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>
--
28
<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>
--
29
<PAGE>
NORTHWESTERN MUTUAL SERIES FUND, INC.
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>
--
30
<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>
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31
<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>
--
32
<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>
--
33
<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>
--
34
<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>
--
35
<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>
--
36
<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
--
37
<PAGE>
HIGH YIELD BOND PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Objective: Portfolio Strategy: Invested Assets:
High current income and capital Generate superior performance by investing in a $184,782,000
appreciation with moderate risk diversified mix of fixed income securities rated
below investment grade
</TABLE>
HIGH YIELD BOND PORTFOLIO
Investing in a portfolio of high yield bonds provides investors who can accept a
moderate level of risk with a high level of current income, coupled with the
opportunity for capital gains. Holdings of particular interest include solid
investments in entities that have the possibility of a positive event, such as a
significant improvement in credit rating or earnings or a change in ownership.
In a high-yield portfolio, some credit losses over time are inevitable; high
coupons and diversification across many holdings mitigate the impact of
individual securities on the performance of the total Portfolio.
The Portfolio underperformed somewhat in 1998 based on setbacks experienced
during the third quarter. However, consistent with long-term performance, the
portfolio did outperform its benchmarks in the first, second and fourth quarters
of the year.
Extraordinary volatility in global securities markets during the last half of
1998 has been accompanied by minimal liquidity, resulting in significant
weakness in trading levels of high yield bonds. During the third quarter, a
series of negative events in emerging markets, capped by Russia's devaluation of
the ruble, inspired a dramatic global flight to quality. In the United States,
highly-leveraged hedge funds that were heavily invested in emerging markets had
to raise cash quickly to cover losses and meet redemptions. With few ready bids
for emerging market assets, domestic high yield bonds were especially hard hit.
Many higher quality, more liquid securities, such as those emphasized in the
Portfolio, traded down very quickly.
The result has been an unusually wide yield spread between U.S. Treasury
securities (the ultimate quality instrument) and corporate issues of all types,
especially smaller and/or more leveraged high yield issues. The eight-month
period ending in October 1998 was the second worst such period in the last 20
years for high-yield returns. Although market values have dropped for holdings
of many individual securities, particularly media and telecommunications bonds,
the Portfolio has had no defaults. The Portfolio ended the year positioned
relatively defensively, with moderate credit risk, and above-average seniority;
exposure to highly cyclical industries and emerging markets is minimal.
Investors should remember that, although the Portfolio's total return (defined
as income plus change in market value) has been slightly negative for the year,
interest payments have continued to provide steady cash flow. At year end, the
Portfolio had a yield of more than 13%, at a time when Treasury securities yield
less than 5% and inflation is below 2%. In addition, investors in bonds have the
issuer's pledge to pay face value at maturity; in contrast, equity investors
participate in future earnings streams, with no guarantees. For long-term
investors willing to accept some price volatility, high-yield securities, which
continue to trade near third-quarter lows, may be attractive at current levels.
Percentage Holdings by Industry Sector
12/31/98
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Telecommunications 19%
Leisure 11%
Consumer Related/Health Care 11%
Broadcasting/Media 11%
Basic Materials/Energy 11%
Cable Television 9%
Transportation 7%
Other Industries 7%
Finance 6%
Services 5%
Cash and Other 3%
</TABLE>
Performance Relative to
Lehman Brothers High Yield Index
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
HIGH YIELD LEHMAN BROTHERS HIGH YIELD
BOND PORTFOLIO# INTERMEDIATE MARKET INDEX
<S> <C> <C>
5/94 $10,000 $10,000
12/94 $10,302 $10,188
12/95 $12,030 $11,952
12/96 $14,409 $13,409
12/97 $16,693 $15,020
12/98 $16,388 $15,244
AVERAGE ANNUAL TOTAL RETURN
FOR PERIODS ENDED DECEMBER 31, 1998
ONE YEAR SINCE INCEPTION
High Yield Bond Portfolio -1.84% 11.17%
Lehman Brothers Index 1.49% 9.46%
#NOTE: INCEPTION DATE OF 5/3/94
</TABLE>
The total return performance for the High Yield Bond Portfolio is shown in
comparison with the Lehman Brothers High Yield Intermediate Market Index. The
Lehman Brothers index is an appropriate measure of portfolio performance since
it has a quality and maturity profile that resembles the High Yield Bond
Portfolio.
The Lehman Brothers High Yield Intermediate Market Index is made up of
dollar-denominated, nonconvertible, SEC publicly registered fixed rate
noninvestment grade issues. The bonds will have remaining maturities of between
one and ten years and have an outstanding par value of at least $100 million.
Yankee and global bonds (SEC registered) of issuers in G-7 countries are
included. Original issue zero coupon bonds and step-up coupon structures are
also included; however, the index excludes pay-in-kind (PIK) bonds. Each bond
must be rated Ba1 or lower by Moody's Investor Service. If a Moody's rating is
unavailable, the bonds must be rated BB+ or lower by Standard & Poor's, or by
Fitch if an S&P rating is unavailable. A few unrated bonds are included in the
index; to be eligible they must have previously held a high yield rating or have
been associated with a high yield issuer. The index is an unmanaged market value
weighted index and measures the income provided by, and the price changes of,
the underlying securities.
This chart assumes an initial investment of $10,000 made on 5/3/94
(commencement of operations). Returns shown include deductions for management
and other fund expenses, and reinvestment of all dividends. Returns exclude
deductions for separate account sales loads and account fees. Past performance
is not predictive of future performance. Investment return and principal value
will fluctuate, so that your shares, when redeemed, may be worth more or less
than their original cost. The net investment rates of return shown on page 2
reflect mortality and expense risk charges deducted from the assets of the
separate account the cost of insurance protection, which is not reflected in the
returns shown on this chart, would make the return significantly lower.
Investors are urged to obtain a personalized illustration of historical
performance which reflects the cost of insurance protection.
--
38
<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>
--
39
<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>
--
40
<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
--
41
<PAGE>
SELECT BOND PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Objective: Portfolio Strategy: Invested Assets:
A stable and relatively high Invest in high grade corporate bonds, U.S. $298,034,000
level of long-term total government bonds and bonds of government
return and preservation of agencies.
capital
</TABLE>
SELECT BOND PORTFOLIO
The Select Bond Portfolio invests primarily in high quality debt securities,
mainly government bonds, corporate bonds and mortgage-backed securities.
Exposure to market sectors is adjusted as yield spreads change among the various
classes of securities. Duration and maturities are altered with moderate
adjustments in recognition or anticipation of interest rate changes.
Like most actively managed bond funds, the Select Bond Portfolio underperformed
the broad market indexes in 1998. The main reason is that the indexes have a
significant component of U.S. Treasury securities, which provided significantly
higher returns than any other class of bonds during the year, as investors
sought to minimize risk.
Early in the year, the portfolio suffered from a limited exposure to Asian
bonds. In August, the failure of Long-Term Capital Management, a very large
hedge fund, raised doubts regarding the survival of many banks and brokerage
firms. Liquidity in the bond market became almost non-existent as investors
dumped securities perceived as risky, creating chaos in markets and
extraordinarily wide spreads between bid and offer prices. The values of
high-yield bonds plummeted, and, with minimal liquidity, it became difficult to
gauge the value of even investment grade bonds. Meanwhile, values of Treasury
bonds soared, driven by a combination of interest rate reductions and investors'
flight to quality. In the fourth quarter, liquidity began to redevelop and
spreads among bond classes narrowed, though they remained wider than at the
beginning of the year.
At present, the portfolio has a major position in mortgage-backed securities,
which are being used as a substitute for corporate bonds. While these well-
structured mortgage-backed securities involve some risk of prepayment, we
believe that they are safer than high-grade corporate bonds with comparable
yields, many of which are subject to economic problems in Asia and other
international markets.
The unusual volatility of the bond market over the last year, with true values
of securities difficult to determine at times in the face of very limited
liquidity, has raised questions regarding the appropriate level of risk in a
conservatively managed portfolio. We enter 1999 with the portfolio structured in
a more risk-averse manner, with limited credit risk and a neutral position with
regard to duration. We believe the portfolio is well positioned to provide
protection in the event that the economy weakens in the months ahead.
Percentage Holdings
12/31/98
[CHART]
The Corporate Bonds sector includes bonds of companies headquartered outside the
United States. The Government and Government Agencies category includes taxable
bonds of domestic and foreign governments and a small position in municipal
bonds. Consistent with the Portfolio's stated parameters, no more than 20% of
the Portfolio is invested in foreign securities, and no more than 10% is
invested in high-yield securities.
Performance Relative to
Merrill Lynch Domestic Master Index
[CHART]
Since the Portfolio invests broadly in U.S. Government, mortgage and corporate
bonds, a useful basis for comparing returns is the Merrill Lynch Domestic Master
Index. The index is an unmanaged market value weighted index comprised of U.S.
Government, mortgage and investment-grade corporate bonds. The index measures
the income provided by, and the price changes of, the underlying securities.
This chart assumes an initial investment of $10,000 made on 12/31/88.
Returns shown include deductions for management and other fund expenses, and
reinvestment of all dividends. Returns exclude deductions for separate account
sales loads and account fees. Past performance is not predictive of future
performance. Investment return and principal value will fluctuate, so that your
shares, when redeemed, may be worth more or less than their original cost. The
net investment rates of return shown on page 2 reflect mortality and expense
risk charges deducted from the assets of the separate account. The cost of
insurance protection, which is not reflected in the returns shown on this chart,
would make the return significantly lower. Investors are urged to obtain a
personalized illustration of historical performance which reflects the cost of
insurance protection.
--
42
<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>
--
43
<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>
--
44
<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>
--
45
<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>
--
46
<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.
--
47
<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.
--
48
<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
--
49
<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.
[SIG]
Milwaukee, Wisconsin
January 25, 1999
--
50
<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
---
51
<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
---
52
<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
---
53
<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
---
54
<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
---
55
<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
---
56
<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
---
57
<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
---
58
<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
---
59
<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
---
60
<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
---
61
<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
---
62
<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
---
63
<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
---
64
<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
---
65
<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
---
66
<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
---
67
<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
---
68
<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
--
69
<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
--
70
<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
--
71
<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
--
72
<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
--
73
<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
--
74
<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
---
75
<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
---
76
<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
---
77
<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.
--
78
<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
--
79
<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.
--
80
<PAGE>
VARIABLE LIFE ACCOUNTANTS' REPORT
[LOGO]
Report of Independent Accountants
To The Northwestern Mutual Life Insurance Company and
Policyowners of Northwestern Mutual Variable Life Account
In our opinion, the accompanying combined statement of assets and liabilities
and the related combined and separate statements of operations and changes in
equity present fairly, in all material respects, the financial position of
Northwestern Mutual Variable Life Account and Aggressive Growth Stock Division,
International Equity Division, Growth Stock Division, Growth and Income Stock
Division, Index 500 Stock Division, Balanced Division, High Yield Bond Division,
Select Bond Division, and the Money Market Division thereof at December 31,
1998, the results of each of their operations and the changes in each of their
equity for each of the two years in the period ended December 31, 1998, in
conformity with generally accepted accounting principles. These financial
statements are the responsibility of The Northwestern Mutual Life Insurance
Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
direct confirmation of the number of shares owned at December 31, 1998 with
Northwestern Mutual Series Fund, Inc., provide a reasonable basis for the
opinion expressed above.
[SIG]
Milwaukee, Wisconsin
January 25, 1999
--
81
<PAGE>
VARIABLE LIFE FINANCIAL STATEMENTS
NORTHWESTERN MUTUAL VARIABLE LIFE ACCOUNT
Financial Statements
DECEMBER 31, 1998
STATEMENT OF ASSETS AND LIABILITIES
(IN THOUSANDS)
<TABLE>
<S> <C> <C>
ASSETS
Investments at Market Value:
Northwestern Mutual Series Fund, Inc.
Aggressive Growth Stock
34,420 shares (cost $102,404).............. $ 119,230
International Equity
46,760 shares (cost $73,163)............... 78,416
Growth Stock
29,383 shares (cost $49,267)............... 66,025
Growth and Income Stock
43,428 shares (cost $60,081)............... 70,528
Index 500 Stock
58,115 shares (cost $126,062).............. 191,141
Balanced
71,092 shares (cost $108,217).............. 158,110
High Yield Bond
15,509 shares (cost $16,804)............... 14,516
Select Bond
10,143 shares (cost $12,181)............... 12,669
Money Market
39,300 shares (cost $39,300)............... 39,300 $ 749,935
---------
Due from Sale of Fund Shares.................................. 95
Due from Northwestern Mutual Life Insurance Company........... 328
---------
Total Assets.................................................. $ 750,358
---------
---------
LIABILITIES
Due to Northwestern Mutual Life Insurance Company........... $ 95
Due on Purchase of Fund Shares.............................. 328
---------
Total Liabilities....................................... 423
---------
EQUITY (NOTE 8)
Variable Life Policies Issued Before October 11, 1995....... 392,772
Variable Complife Policies Issued On or After October 11,
1995....................................................... 356,862
Variable Executive Life Policies Issued On or After March 2,
1998....................................................... 301
---------
Total Equity............................................ 749,935
---------
Total Liabilities and Equity............................ $ 750,358
---------
---------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements
--
82
<PAGE>
VARIABLE LIFE FINANCIAL STATEMENTS
NORTHWESTERN MUTUAL VARIABLE LIFE ACCOUNT
Statements of Operations and Changes in Equity
(IN THOUSANDS)
<TABLE>
<CAPTION>
AGGRESSIVE GROWTH INTERNATIONAL EQUITY
COMBINED STOCK DIVISION DIVISION
----------------------------- ----------------------------- -----------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1998 1997 1998 1997 1998 1997
------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividend Income............... $ 24,922 $ 24,262 $ 3,287 $3,345 $ 3,591 $ 1,286
Mortality and Expense Risks... 2,755 1,788 424 271 308 197
Taxes......................... 1,178 767 181 116 132 85
------------- ------------- ------------- ------------- ------------- -------------
Net Investment Income......... 20,989 21,707 2,682 2,958 3,151 1,004
------------- ------------- ------------- ------------- ------------- -------------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS
Realized Gain on
Investments............... 4,332 4,871 523 231 284 203
Unrealized Appreciation
(Depreciation) of
Investments During the
Period.................... 68,780 42,532 4,928 5,109 (1,424) 2,358
------------- ------------- ------------- ------------- ------------- -------------
Net Gain (Loss) on
Investments............... 73,112 47,403 5,451 5,340 (1,140) 2,561
------------- ------------- ------------- ------------- ------------- -------------
Increase in Equity Derived
from Investment
Activity.................. 94,101 69,110 8,133 8,298 2,011 3,565
------------- ------------- ------------- ------------- ------------- -------------
EQUITY TRANSACTIONS
Policyowners' Net
Deposits.................. 258,672 170,672 30,145 21,502 20,672 12,656
Policy Loans, Surrenders,
and Death Benefits........ (37,427) (23,728) (6,454) (4,003) (4,327) (2,787)
Mortality and Other (net)... (39,611) (28,427) (5,193) (3,791) (3,785) (2,368)
Transfers from Other
Divisions................. 133,775 86,366 20,371 19,008 15,743 14,866
Transfers to Other
Divisions................. (133,773) (86,366) (6,419) (4,091) (5,013) (2,149)
------------- ------------- ------------- ------------- ------------- -------------
Increase in Equity Derived
from Equity Transactions.... 181,636 118,517 32,450 28,625 23,290 20,218
------------- ------------- ------------- ------------- ------------- -------------
Net Increase in Equity........ 275,737 187,627 40,583 36,923 25,301 23,783
EQUITY
Beginning of Year........... 474,198 286,571 78,647 41,724 53,116 29,333
------------- ------------- ------------- ------------- ------------- -------------
End of Year................. $749,935 $474,198 $119,230 $78,647 $78,417 $53,116
------------- ------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- ------------- -------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements
---
83
<PAGE>
NORTHWESTERN MUTUAL VARIABLE LIFE ACCOUNT
Statements of Operations and Changes in Equity
(IN THOUSANDS)
<TABLE>
<CAPTION>
GROWTH & INCOME INDEX 500
GROWTH STOCK DIVISION STOCK DIVISION STOCK DIVISION
----------------------------- ----------------------------- -----------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1998 1997 1998 1997 1998 1997
------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividend Income............... $ 956 $ 1,413 $ 537 $ 7,776 $ 4,530 $ 2,579
Mortality and Expense Risks... 211 105 234 120 671 395
Taxes......................... 91 45 100 52 287 169
------------- ------------- ------------- ------------- ------------- -------------
Net Investment Income......... 654 1,263 203 7,604 3,572 2,015
------------- ------------- ------------- ------------- ------------- -------------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS
Realized Gain on
Investments............... 143 172 220 173 1,125 2,375
Unrealized Appreciation
(Depreciation) of
Investments During the
Period.................... 10,533 4,151 10,574 (1,823) 31,738 17,772
------------- ------------- ------------- ------------- ------------- -------------
Net Gain (Loss) on
Investments............... 10,676 4,323 10,794 (1,650) 32,863 20,147
------------- ------------- ------------- ------------- ------------- -------------
Increase in Equity Derived
from Investment
Activity.................. 11,330 5,586 10,997 5,954 36,435 22,162
------------- ------------- ------------- ------------- ------------- -------------
EQUITY TRANSACTIONS
Policyowners' Net
Deposits.................. 12,991 7,334 14,771 7,537 29,665 19,733
Policy Loans, Surrenders,
and Death Benefits........ (2,859) (1,314) (2,902) (1,842) (8,924) (5,039)
Mortality and Other (net)... (2,494) (1,329) (2,847) (1,457) (5,367) (4,127)
Transfers from Other
Divisions................. 16,839 8,851 17,225 10,673 37,076 20,024
Transfers to Other
Divisions................. (2,015) (1,341) (3,106) (1,104) (5,443) (3,783)
------------- ------------- ------------- ------------- ------------- -------------
Increase in Equity Derived
from Equity Transactions.... 22,462 12,201 23,141 13,807 47,007 26,808
------------- ------------- ------------- ------------- ------------- -------------
Net Increase in Equity........ 33,792 17,787 34,138 19,761 83,442 48,970
EQUITY
Beginning of Year........... 32,233 14,446 36,389 16,628 107,699 58,729
------------- ------------- ------------- ------------- ------------- -------------
End of Year................. $66,025 $32,233 $70,527 $36,389 $191,141 $107,699
------------- ------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- ------------- -------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements
---
84
<PAGE>
NORTHWESTERN MUTUAL VARIABLE LIFE ACCOUNT
Statements of Operations and Changes in Equity
(IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCED DIVISION HIGH YIELD BOND DIVISION SELECT BOND DIVISION
----------------------------- ----------------------------- -----------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1998 1997 1998 1997 1998 1997
------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividend Income............... $ 8,344 $ 5,105 $ 1,489 $1,370 $ 743 $ 436
Mortality and Expense Risks... 681 558 53 29 51 35
Taxes......................... 292 239 22 12 22 15
------------- ------------- ------------- ------------- ------------- -------------
Net Investment Income......... 7,371 4,308 1,414 1,329 670 386
------------- ------------- ------------- ------------- ------------- -------------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS
Realized Gain on
Investments............... 1,893 1,655 47 26 97 36
Unrealized Appreciation
(Depreciation) of
Investments During the
Period.................... 14,317 15,262 (1,828) (531) (58) 234
------------- ------------- ------------- ------------- ------------- -------------
Net Gain (Loss) on
Investments............... 16,210 16,917 (1,781) (505) 39 270
------------- ------------- ------------- ------------- ------------- -------------
Increase in Equity Derived
from Investment
Activity.................. 23,581 21,225 (367) 824 709 656
------------- ------------- ------------- ------------- ------------- -------------
EQUITY TRANSACTIONS
Policyowners' Net
Deposits.................. 17,811 15,394 3,490 1,922 2,004 1,820
Policy Loans, Surrenders,
and Death Benefits........ (8,879) (7,260) (690) (349) (620) (311)
Mortality and Other (net)... (3,232) (3,395) (641) (339) (250) (560)
Transfers from Other
Divisions................. 7,905 4,266 5,399 3,276 3,951 2,000
Transfers to Other
Divisions................. (5,398) (4,734) (1,476) (425) (2,217) (756)
------------- ------------- ------------- ------------- ------------- -------------
Increase in Equity Derived
from Equity Transactions.... 8,207 4,271 6,082 4,085 2,868 2,193
------------- ------------- ------------- ------------- ------------- -------------
Net Increase in Equity........ 31,788 25,496 5,715 4,909 3,577 2,849
EQUITY
Beginning of Year........... 126,322 100,826 8,801 3,892 9,092 6,243
------------- ------------- ------------- ------------- ------------- -------------
End of Year................. $158,110 $126,322 $14,516 $8,801 $12,669 $9,092
------------- ------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- ------------- -------------
<CAPTION>
MONEY MARKET DIVISION
-----------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1998 1997
------------- -------------
<S> <C> <C>
INVESTMENT INCOME
Dividend Income............... $ 1,445 $ 952
Mortality and Expense Risks... 122 78
Taxes......................... 51 34
------------- -------------
Net Investment Income......... 1,272 840
------------- -------------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS
Realized Gain on
Investments............... -- --
Unrealized Appreciation
(Depreciation) of
Investments During the
Period.................... -- --
------------- -------------
Net Gain (Loss) on
Investments............... -- --
------------- -------------
Increase in Equity Derived
from Investment
Activity.................. 1,272 840
------------- -------------
EQUITY TRANSACTIONS
Policyowners' Net
Deposits.................. 127,123 82,774
Policy Loans, Surrenders,
and Death Benefits........ (1,772) (823)
Mortality and Other (net)... (15,802) (11,061)
Transfers from Other
Divisions................. 9,266 3,402
Transfers to Other
Divisions................. (102,686) (67,983)
------------- -------------
Increase in Equity Derived
from Equity Transactions.... 16,129 6,309
------------- -------------
Net Increase in Equity........ 17,401 7,149
EQUITY
Beginning of Year........... 21,899 14,750
------------- -------------
End of Year................. $39,300 $21,899
------------- -------------
------------- -------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements
---
85
<PAGE>
NOTES TO FINANCIAL STATEMENTS
NORTHWESTERN MUTUAL VARIABLE LIFE ACCOUNT
Notes to Financial Statements
DECEMBER 31, 1998
NOTE 1 -- Northwestern Mutual Variable Life Account (the "Account") is
registered as a unit investment trust under the Investment Company Act of 1940
and is a segregated asset account of The Northwestern Mutual Life Insurance
Company ("Northwestern Mutual") used to fund variable life insurance policies.
NOTE 2 -- The preparation of the financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. Principal
accounting policies are summarized below.
NOTE 3 -- All assets of each Division of the Account are invested in shares of
the corresponding Portfolio of Northwestern Mutual Series Fund, Inc. (the
"Fund"). The shares are valued at the Fund's offering and redemption price per
share. The Fund is a diversified open-end investment company registered under
the Investment Company Act of 1940.
NOTE 4 -- Dividend income from the Fund is recorded on the record date of the
dividends. Transactions in Fund shares are accounted for on the trade date. The
basis for determining cost on sale of Fund shares is identified cost. Purchases
and sales of Fund shares for the year ended December 31, 1998 by each Division
are shown below:
<TABLE>
<CAPTION>
PURCHASES SALES
------------ ------------
<S> <C> <C>
Aggressive Growth Division....... $ 36,381,397 $ 1,248,015
International Equity Division.... 27,429,118 990,001
Growth Stock Division............ 23,393,892 279,458
Growth & Income Stock
Division....................... 24,059,882 715,896
Index 500 Stock Division......... 52,625,759 2,046,627
Balanced Division................ 20,647,579 5,068,597
High Yield Bond Division......... 8,131,249 635,946
Select Bond Division............. 5,351,461 1,813,834
Money Market Division............ 47,332,350 29,930,945
</TABLE>
NOTE 5 -- A deduction for mortality and expense risks is determined daily and
paid to Northwestern Mutual. Generally, for Variable Life policies issued before
October 11, 1995, and Variable Complife policies issued on or after October 11,
1995 the deduction is at an annual rate of .50% and .60%, respectively, of the
net assets of the Account. A deduction for the mortality and expense risks for
the Variable Executive Life policies issued on or after March 3, 1998 is
determined monthly at an annual rate of .75% of the amount invested in the
Account for the Policy for the first ten Policy years, and .30% thereafter. The
mortality risk is that insureds may not live as long as estimated. The expense
risk is that expenses of issuing and administering the policies may exceed the
estimated costs.
Certain deductions are also made from the annual, single or other premiums
before amounts are allocated to the Account. These deductions are for (1) sales
load, (2) administrative expenses, (3) taxes and (4) a risk charge for the
guaranteed minimum death benefit.
Additional mortality costs are deducted from the policy annually and are paid to
Northwestern Mutual to cover the cost of providing insurance protection. This
cost is actuarially calculated based upon the insured's age, the 1980
Commissioners Standard Ordinary Mortality Table and the amount of insurance
provided under the policy.
NOTE 6 -- Northwestern Mutual is taxed as a "life insurance company" under the
Internal Revenue Code. The variable life insurance policies which are funded in
the Account are taxed as part of the operations of Northwestern Mutual. Policies
provide that a charge for taxes may be made against the assets of the Account.
Generally, for Variable Life policies issued before October 11, 1995,
Northwestern Mutual charges the Account at an annual rate of .20% of the
Account's net assets and reserves the right to increase, decrease or eliminate
the charge for taxes in the future. Generally, for Variable Complife policies
issued on or after October 11, 1995, and for Variable Executive Life policies
issued on or after March 3, 1998, there is no charge being made against the
assets of the Account for federal income taxes, but Northwestern Mutual reserves
the right to charge for taxes in the future.
NOTE 7 -- The Account is credited for the policyowners' net annual premiums at
the respective policy anniversary dates regardless of when policyowners actually
paid their premiums. Northwestern Mutual's equity represents any unpaid portion
of net annual premiums. This applies to Variable Life and Variable Complife
policies only.
--
86
<PAGE>
NORTHWESTERN MUTUAL VARIABLE LIFE ACCOUNT
Notes to Financial Statements
(in thousands)
DECEMBER 31, 1998
NOTE 8 -- Equity Values by Division are shown below:
<TABLE>
<CAPTION>
VARIABLE LIFE
POLICIES ISSUED BEFORE
OCTOBER 11, 1995
EQUITY OF:
------------------------ TOTAL
POLICYOWNERS NML EQUITY
------------- --------- ---------
<S> <C> <C> <C>
Aggressive Growth Stock Division......................................................... $ 42,391 $ 3,793 $ 46,184
International Equity Division............................................................ 32,539 3,074 35,613
Growth Stock Division.................................................................... 22,888 1,510 24,398
Growth and Income Stock Division......................................................... 26,309 1,808 28,117
Index 500 Stock Division................................................................. 95,615 4,943 100,558
Balanced Division........................................................................ 134,029 5,006 139,035
High Yield Bond Division................................................................. 4,916 428 5,344
Select Bond Division..................................................................... 6,911 417 7,328
Money Market Division.................................................................... 5,918 277 6,195
------------- --------- ---------
$ 371,516 $ 21,256 $ 392,772
------------- --------- ---------
------------- --------- ---------
</TABLE>
<TABLE>
<CAPTION>
VARIABLE COMPLIFE
POLICIES ISSUED ON OR
AFTER OCTOBER 11, 1995
EQUITY OF:
------------------------ TOTAL
POLICYOWNERS NML EQUITY
------------- --------- ---------
<S> <C> <C> <C>
Aggressive Growth Stock Division........................................................ $ 54,132 $ 18,846 $ 72,978
International Equity Division........................................................... 31,302 11,492 42,794
Growth Stock Division................................................................... 30,575 11,026 41,601
Growth and Income Stock Division........................................................ 30,515 11,841 42,356
Index 500 Stock Division................................................................ 65,609 24,890 90,499
Balanced Division....................................................................... 14,142 4,909 19,051
High Yield Bond Division................................................................ 6,565 2,594 9,159
Select Bond Division.................................................................... 4,161 1,171 5,332
Money Market Division................................................................... 13,154 19,938 33,092
------------- --------- ---------
$ 250,155 $ 106,707 $ 356,862
------------- --------- ---------
------------- --------- ---------
</TABLE>
<TABLE>
<CAPTION>
VARIABLE EXECUTIVE LIFE
POLICIES ISSUED ON OR
AFTER MARCH 2, 1998
-------------------------
TOTAL
EQUITY
-------------------------
<S> <C>
Aggressive Growth Stock Division...................................................................... $ 67
International Equity Division......................................................................... 10
Growth Stock Division................................................................................. 25
Growth and Income Stock Division...................................................................... 55
Index 500 Stock Division.............................................................................. 84
Balanced Division..................................................................................... 24
High Yield Bond Division.............................................................................. 13
Select Bond Division.................................................................................. 9
Money Market Division................................................................................. 14
-----
$ 301
-----
-----
</TABLE>
--
87
<PAGE>
NOTES
--
88
<PAGE>
NORTHWESTERN
MUTUAL
LIFE-REGISTERED TRADEMARK-
P. O. Box 3220
Milwaukee, Wisconsin
53201-3220
Fax: (414) 299-4268
APPLICABLE ONLY FOR VARIABLE COMPLIFE, VARIABLE WHOLE LIFE,
VARIABLE EXTRA ORDINARY LIFE & VARIABLE SINGLE PREMIUM LIFE
VARIABLE LIFE TRANSFER / ALLOCATION / DOLLAR COST AVERAGING
POLICYOWNER SERVICES
<TABLE>
<S> <C> <C>
Insured Policy Number Date
GA# SA# Business Number:
Home Number:
</TABLE>
A TOTAL OF SIX DIVISIONS MAY BE ELECTED WITH A MINIMUM OF 10% IN EACH DIVISION.
THIS APPLIES TO EXISTING ASSETS, FUTURE ALLOCATIONS AND DOLLAR COST AVERAGING.
<TABLE>
<S><C> <C>
1. REDISTRIBUTION OF EXISTING ASSETS:
Complete this section if you want to redistribute the money already
invested. Future investments will continue to be allocated as they were
prior to the transfer, unless section 2 is completed.
INVESTMENT DIVISIONS CHANGE TO
Select Bond ------------%
International Equity ------------%
Money Market ------------%
Balanced ------------%
Index 500 Stock ------------%
Aggressive Growth Stock ------------%
High Yield Bond ------------%
Growth Stock ------------%
Growth and Income Stock ------------%
Total ----100 ----%
2. ALLOCATION OF FUTURE PREMIUM/DIVIDENDS:
Complete this section to change where your future Premium/ Dividends are
invested. Allocations of future investments will be effective with the next
Premium/Dividend deposit.
ALLOCATION OF
FUTURE
INVESTMENT DIVISIONS PREMIUMS/DIVIDENDS
Select Bond ------------%
International Equity ------------%
Money Market ------------%
Balanced ------------%
Index 500 Stock ------------%
Aggressive Growth Stock ------------%
High Yield Bond ------------%
Growth Stock ------------%
Growth and Income Stock ------------%
Total ----100 ----%
3. DOLLAR COST AVERAGING (DCA): FOR VCL ONLY
Effective date for the first DCA transfer.
/ / The month following the date this form is signed. Must have assets in
Money Market on that date. Choose Money Market in section 1 and Money
Market in section 2
/ / With the next Premium/Dividend deposit, choose Money Market in section
2.
How would you like the fund transferred? Choose one:
Option One:
/ / Transfer in monthly installments so that at year end, Money Market
valance will be zero.
Option Two:
/ / Specified amount to be transferred monthly of $ ----------------.
Select Bond ------------%
International Equity ------------%
Balanced ------------%
Index 500 Stock ------------%
Aggressive Growth Stock ------------%
High Yield Bond ------------%
Growth Stock ------------%
Growth and Income Stock ------------%
Total ----100 ----%
4. TERMINATION OF DOLLAR COST AVERAGING:
/ / IMMEDIATELY / / NEXT POLICY ANNIVERSARY
Any existing funds will remain in the Money Market Division unless you elect
to transfer assets. Future premium and dividends will be allocated on the
policy anniversary date according to your allocation instructions.
</TABLE>
5. SPECIAL INSTRUCTIONS:
- --------------------------------------------------------------------------------
------------------------------------------------------------------------------
6. EFFECTIVE DATE:
This asset transfer and/or allocation of future investments shall be
effective on the date it is received (complete and signed) at NML's Home
Office. Forms received prior to 3:00 p.m. Central time will be effective on
the day of receipt.
7. SIGNATURE OF OWNER(S)/TRUSTEE REQUIRED (TITLE MUST BE INCLUDED):
- ------------------------------ Date signed ------------------------------
- ------------------------------- Date signed ------------------------------
18-1425 (2/96) WORD 6
-
89
<PAGE>
ADDITIONAL INFORMATION
1. REDISTRIBUTION OF EXISTING ASSETS: The Owner may transfer the assets invested
for a Variable Life or Variable CompLife policy to any of the Divisions, as
long as these assets, following the transfer, are allocated among not more
than six Divisions. Transfers may be made as often as twelve times in a
policy year.
2. ALLOCATION OF FUTURE PREMIUM/DIVIDENDS: Allocation of the first net annual
premium will be allocated to the Money Market Division until the Initial
Allocation Date. On the Initial Allocation Date, amounts in the Money Market
Division will be allocated in accordance with the application.
3. DOLLAR COST AVERAGING (DCA): If DCA is chosen, Money Market must be one of
the Divisions elected for future premium/dividend allocation. A total of six
Divisions may be elected between current and future assets and DCA.
4. TERMINATION OF DOLLAR COST AVERAGING (DCA): Any assets still in the Money
Market Division will remain, unless YOU elect to transfer them.
HOW TO SUBMIT THIS FORM
FIRST CLASS MAIL
Please mail form to Northwestern Mutual Life, P.O. Box 3220, Milwaukee, WI
53201-3220.
FAX
The properly completed and signed form may be FAXed to the Home Office at
414-299-4268.
The original form is NOT needed. Please keep it for your records.
SIGNATURE INSTRUCTIONS
SIGNATURE BY OWNER
All Owners must sign their name as it appears in the policy contract. If the
Owner's name has changed since the policy was issued, he/she should add his/her
present surname to his/her name as it appears in the policy contract.
SIGNATURE BY ASSIGNEE
If the policy is assigned, the assignee must sign the form. See rules below if
the assignee is a corporation, partnership or trust.
SIGNATURE ON BEHALF OF CORPORATION
If the policyowner is a corporation, an officer of the corporation must sign on
behalf of the corporation with his/her title. The name of the corporation must
appear above the signature.
SIGNATURE ON BEHALF OF PARTNERSHIP
If the policyowner is a partnership, the name of the partnership must appear
above the signature. A partner other than the Insured must sign.
SIGNATURE ON BEHALF OF TRUST
If the partnership is a trust, the authorized Trustee must sign his/her name,
followed by the word "Trustee." The name of the trust must appear above the
signature.
----
90
<PAGE>
VARIABLE EXECUTIVE LIFE
[LOGO]
SEND TO: ADVANCED BUSINESS SERVICES - E13
NORTHWESTERN MUTUAL LIFE INS CO
720
East Wisconsin Avenue
720 E. WISCONSIN AVENUE
Milwaukee,
Wisconsin 53202
MILWAUKEE, WI 53202
ASSET TRANSFER / PREMIUM ALLOCATION / DOLLAR COST AVERAGING
<TABLE>
<S> <C>
Policy Number(s)*:
Insured Name(s):
Group ID Number:
Group Name:
Owner Name*
</TABLE>
* USE A SEPARATE FORM FOR EACH OWNER. A LISTING OF POLICIES CAN BE ATTACHED WHEN
THE SAME TRANSACTION IS BEING REQUESTED ON SEVERAL POLICIES. IF SAME CHANGE DOES
NOT APPLY TO ALL POLICIES IN THE GROUP, ATTACH A SEPARATE LISTING.
- --------------------------------------------------------------------------------
SECTION 1 - ASSET TRANSFER:
This transfer does not impact the allocation of any future premiums. To change
how future premiums are invested, complete SECTION 2 below. To transfer the
entire amount in a division, indicate "ALL".
<TABLE>
<S> <C> <C> <C> <C> <C>
TRANSFER FROM: (SELECT ONE) TRANSFER TO: (SELECT ONE)
DOLLAR PERCENT NUMBER DOLLAR AMOUNT PERCENT
INVESTMENT DIVISIONS AMOUNT (WHOLE % ONLY) OF UNITS (IF FROM DOLLARS) (WHOLE % ONLY)
Money Market $ % $ %
Aggressive Growth Stock $ % $ %
Balanced $ % $ %
Growth & Income Stock $ % $ %
Growth Stock $ % $ %
High Yield Bond $ % $ %
Index 500 Stock $ % $ %
International Equity $ % $ %
Select Bond $ % $ %
TOTAL $ N/A $ 100%
TOTAL DOLLARS MUST BE EQUAL
</TABLE>
- --------------------------------------------------------------------------------
SECTION 2 - ALLOCATION OF FUTURE PREMIUM:
Complete this section to change where future premiums are invested.
<TABLE>
<S> <C>
PERCENT
INVESTMENT DIVISIONS (WHOLE % ONLY)
Money Market %
Aggressive Growth Stock %
Balanced %
Growth & Income Stock %
Growth Stock %
High Yield Bond %
Index 500 Stock %
International Equity %
Select Bond %
TOTAL 100%
(TOTAL MUST ADD UP TO 100%)
</TABLE>
-
91
<PAGE>
- --------------------------------------------------------------------------------
SECTION 3 - DOLLAR COST AVERAGING (DCA):
REQUESTED AMOUNT TO BE TRANSFERRED MONTHLY OF $__________.
(THE FIRST DCA TRANSFER WILL OCCUR ON THE NEXT MONTHLY PROCESSING DATE OF THE
POLICY. YOU MUST HAVE ASSETS IN THE MONEY MARKET DIVISION BY THAT DATE. DCA IS
AVAILABLE ONLY FROM THE MONEY MARKET DIVISION).
<TABLE>
<S> <C>
INDICATE WHERE DOLLAR COST AVERAGING (DCA) IS TO BE INVESTED:
PERCENT
INVESTMENT DIVISIONS (WHOLE % ONLY)
Money Market N/A
Aggressive Growth Stock %
Balanced %
Growth & Income Stock %
Growth Stock %
High Yield Bond %
Index 500 Stock %
International Equity %
Select Bond %
TOTAL 100%
(TOTAL MUST ADD UP TO 100%)
</TABLE>
- --------------------------------------------------------------------------------
SECTION 4 - TERMINATION OF DOLLAR COST AVERAGING:
At termination of Dollar Cost Averaging, any existing funds will remain in the
Money Market Division.
<TABLE>
<S> <C>
/ / IMMEDIATELY / / SPECIFIED DATE / /
(THE NEXT MONTHLY PROCESSING DATE ON OR FOLLOWING (THE NEXT MONTHLY PROCESSING DATE ON OR FOLLOWING THE
RECEIPT OF THIS REQUEST IN NML'S HOME OFFICE.) DATE
SPECIFIED.)
/ / NEXT POLICY ANNIVERSARY
</TABLE>
- --------------------------------------------------------------------------------
SECTION 5 - SPECIFIED DATE FOR ASSET TRANSFERS/ALLOCATION CHANGES:
This asset transfer and/ or allocation of future premiums shall be effective on
_____________ (INSERT SPECIFIED FUTURE DATE IF DESIRED). If no date is
specified, or if this form is not received at NML's Home Office on or prior to
the close of the New York Stock Exchange on the specified date, this transfer
shall be effective on the date this form is received (complete and signed) at
NML's Home Office.
- --------------------------------------------------------------------------------
SECTION 6 - SPECIAL INSTRUCTIONS:
- --------------------------------------------------------------------------------
SECTION 7 - SIGNATURE OF OWNER(S)/TRUSTEE REQUIRED (TITLE MUST BE INCLUDED):
<TABLE>
<S> <C> <C>
OWNER/TRUSTEE: DATE SIGNED:
PRINT OR TYPE NAME AND TITLE
OWNER/TRUSTEE: DATE SIGNED:
PRINT OR TYPE NAME AND TITLE
ASSIGNEE, IF DATE SIGNED:
ANY:
</TABLE>
Rev 12/98
---
92
<PAGE>
VARIABLE JOINT LIFE
[LOGO]
SEND TO: ADVANCED BUSINESS SERVICES - E13
NORTHWESTERN MUTUAL LIFE INS CO
720 E. WISCONSIN AVENUE
720
East Wisconsin Avenue
MILWAUKEE, WI 53202
Milwaukee,
Wisconsin 53202
ASSET TRANSFER / PREMIUM ALLOCATION / DOLLAR COST AVERAGING
<TABLE>
<S> <C>
Policy Number(s)*:
Insured Name(s):
Owner Name*
</TABLE>
* USE A SEPARATE FORM FOR EACH OWNER.
- --------------------------------------------------------------------------------
SECTION 1 - ASSET TRANSFER:
This transfer does not impact the allocation of any future premiums. To change
how future premiums are invested, complete SECTION 2 below. To request a future
effective date, complete SECTION 5.
<TABLE>
<S> <C>
INDICATE WHERE TO TRANSFER TO:
PERCENT
INVESTMENT DIVISIONS (WHOLE % ONLY)
Money Market %
Aggressive Growth Stock %
Balanced %
Growth & Income Stock %
Growth Stock %
High Yield Bond %
Index 500 Stock %
International Equity %
Select Bond %
TOTAL 100%
(TOTAL MUST ADD UP TO 100%)
</TABLE>
- --------------------------------------------------------------------------------
SECTION 2 - ALLOCATION OF FUTURE PREMIUM:
Complete this section to change where future premiums are invested. To request a
future effective date, complete SECTION 5.
<TABLE>
<S> <C>
INDICATE WHERE TO INVEST FUTURE PREMIUMS:
PERCENT
INVESTMENT DIVISIONS (WHOLE % ONLY)
Money Market %
Aggressive Growth Stock %
Balanced %
Growth & Income Stock %
Growth Stock %
High Yield Bond %
Index 500 Stock %
International Equity %
Select Bond %
TOTAL 100%
(TOTAL MUST ADD UP TO 100%)
</TABLE>
-
93
<PAGE>
- --------------------------------------------------------------------------------
SECTION 3 - DOLLAR COST AVERAGING (DCA):
CHOOSE ONE OPTION:
/ / OPTION ONE: Transfer in monthly installments so that on the policy
anniversary the Money Market balance will be zero.
/ / OPTION TWO: Requested amount to be transferred monthly of $_____________.
(THE FIRST DCA TRANSFER WILL OCCUR ON THE NEXT MONTHLY PROCESSING DATE OF THE
POLICY. YOU MUST HAVE ASSETS IN THE MONEY MARKET DIVISION BY THAT DATE. DCA IS
AVAILABLE ONLY FROM THE MONEY MARKET DIVISION).
<TABLE>
<S> <C>
INDICATE WHERE DOLLAR COST AVERAGING (DCA) IS TO BE INVESTED:
PERCENT
INVESTMENT DIVISIONS (WHOLE % ONLY)
Money Market N/A
Aggressive Growth Stock %
Balanced %
Growth & Income Stock %
Growth Stock %
High Yield Bond %
Index 500 %
International Equity %
Select Bond %
TOTAL 100%
(TOTAL MUST ADD UP TO 100%)
</TABLE>
- --------------------------------------------------------------------------------
SECTION 4 - TERMINATION OF DOLLAR COST AVERAGING:
At termination of Dollar Cost Averaging, any existing funds will remain in the
Money Market Division.
<TABLE>
<S> <C>
/ / IMMEDIATELY / / SPECIFIED DATE / /
(THE NEXT MONTHLY PROCESSING DATE ON OR FOLLOWING (THE NEXT MONTHLY PROCESSING DATE ON OR FOLLOWING THE
RECEIPT OF THIS REQUEST IN NML'S HOME OFFICE.) DATE
SPECIFIED.)
/ / NEXT POLICY ANNIVERSARY
</TABLE>
- --------------------------------------------------------------------------------
SECTION 5 - SPECIFIED DATE FOR ASSET TRANSFERS/ALLOCATION CHANGES:
This asset transfer and/ or allocation of future premiums shall be effective on
_____________ (INSERT SPECIFIED FUTURE DATE IF DESIRED). If no date is
specified, or if this form is not received at NML's Home Office on or prior to
the close of the New York Stock Exchange on the specified date, this transfer
shall be effective on the date this form is received (complete and signed) at
NML's Home Office.
- --------------------------------------------------------------------------------
SECTION 6 - SPECIAL INSTRUCTIONS:
- --------------------------------------------------------------------------------
SECTION 7 - SIGNATURE OF OWNER(S)/TRUSTEE REQUIRED (TITLE MUST BE INCLUDED):
<TABLE>
<S> <C> <C>
OWNER/TRUSTEE: DATE SIGNED:
PRINT OR TYPE NAME AND TITLE
OWNER/TRUSTEE: DATE SIGNED:
PRINT OR TYPE NAME AND TITLE
ASSIGNEE, IF DATE SIGNED:
ANY:
</TABLE>
Rev 12/98
---
94
<PAGE>
NOTES
--
95
<PAGE>
NOTES
--
96
<PAGE>
DIRECTORS AND OFFICERS
NORTHWESTERN MUTUAL SERIES FUND, INC.
DIRECTORS
JAMES D. ERICSON .... PRESIDENT AND CHIEF EXECUTIVE OFFICER, NORTHWESTERN MUTUAL
LIFE,
..................................................................... MILWAUKEE
MARTIN F. STEIN ................ CHAIRMAN OF THE BOARD, EYECARE ONE CORPORATION,
..................................................................... MILWAUKEE
JOHN K. MACIVER ........... PARTNER, MICHAEL BEST & FRIEDRICH, ATTORNEYS AT LAW,
..................................................................... MILWAUKEE
STEPHEN N. GRAFF .......................... RETIRED PARTNER, ARTHUR ANDERSEN LLP
..................................................................... MILWAUKEE
WILLIAM J. BLAKE ............................. CHAIRMAN, BLAKE INVESTMENT CORP.,
..................................................................... MILWAUKEE
WILLIAM A. MCINTOSH .......... RETIRED DIVISION HEAD--U.S. FIXED INCOME, SALOMON
BROTHERS,
....................................................................... CHICAGO
OFFICERS
JAMES D. ERICSON ..................................................... PRESIDENT
MARK G. DOLL ........................................ VICE PRESIDENT & TREASURER
MERRILL C. LUNDBERG .................................................. SECRETARY
BARBARA E. COURTNEY ................................................. CONTROLLER
---
97
<PAGE>
This report is submitted for the general information of owners of
Northwestern Mutual Variable Life policies. This report is not authorized for
distribution to prospective purchasers of variable life policies unless
it is accompanied by an effective prospectus. Northwestern Mutual Life
Variable Life policies are sold through individuals who, in addition to
being licensed life insurance agents of Northwestern Mutual Life, are
registered representatives of Northwestern Mutual Investment Services, LLC, a
wholly-owned subsidiary of Northwestern Mutual Life and a registered
broker-dealer under the Securities Exchange Act of 1934 and a member of the
National Association of Securities Dealers, Inc.
90-1899 (12-98)
NORTHWESTERN
MUTUAL LIFE-Registered Trademark-
PO Box 3095
Milwaukee WI 53201-3095
Change Service Requested
