| SEC Info | Home | Search | My Interests | Help | Sign In | Please Sign In | ||||||||||||||||||||
As Of Filer Filing As/For/On Docs:Pgs Issuer Agent 4/07/06 NML Variable Annuity Acct C o..Co N-8A 4/07/06 1:1203 RR Donnelley/FA
Document/Exhibit Description Pages Size 1: N-8A Nml Variable Annuity Account C HTML 7,417K
|
| NML Variable Annuity Account C |
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-8A
NOTIFICATION OF REGISTRATION FILED PURSUANT TO
SECTION 8(a) OF THE INVESTMENT COMPANY ACT OF 1940
The undersigned investment company hereby notifies the Securities and Exchange Commission that it registers under and pursuant to the provisions of Section 8(a) of the Investment Company Act of 1940 and in connection with such notification of registration submits the following information:
| Name: | NML Variable Annuity Account C | |
| Address of Principal Business Office: | 720 East Wisconsin Avenue | |
| Telephone Number: | (414) 271-1444 | |
| Name and Address of Agent for Service of Process: | Robert J. Berdan Vice President, General Counsel and Secretary The Northwestern Mutual Life Insurance Company 720 East Wisconsin Avenue | |
| Copies to: | Michael J. Mazza Counsel The Northwestern Mutual Life Insurance Company 720 East Wisconsin Avenue (414) 665-2052 | |
| Check Appropriate Box: | Registrant is filing a Registration Statement pursuant to Section 8(b) of the Investment Company Act of 1940 concurrently with the filing of Form N-8A Yes ¨ No x | |
| Item 1. Exact name of registrant. | NML Variable Annuity Account C | |
| Item 2. Name of state under the laws of which registrant was organized or created and the date of such organization or creation. | Registrant was organized under the laws of the State of Wisconsin on July 22, 1970. | |
| Item 3. Form of organization of registrant (for example, corporation, partnership, trust, joint stock company, association, fund). | Registrant is organized as a separate account of The Northwestern Mutual Life Insurance Company. | |
| Item 4. Classification of registrant (face-amount certificate company, unit investment trust, or management company). | Registrant is organized as a unit investment trust. | |
| Item 5. If a registrant is a management company:
(a) state whether registrant is a “closed-end” company or an “open-end” company;
(b) state whether registrant is registering as a “diversified” company or a “non-diversified” company. |
Not applicable. | |
| Item 6. Name and address of each investment adviser of registrant. | Not applicable. | |
| Item 7. If registrant is an investment company having a board of directors, state the name and address of each officer and director of registrant. | Not applicable. | |
| Item 8. If registrant is an unincorporated investment company not having a board of directors: | ||
| (a) state the name and address of each sponsor of registrant; | The Northwestern Mutual Life Insurance Company 720 East Wisconsin Avenue | |
| (b) state the name and address of each officer and director of each sponsor of registrant; | ||
| The following lists include all of the Trustees, executive officers and other officers of The Northwestern Mutual Life Insurance Company, without regard to their activities relating to variable annuity contracts or their authority to act or their status as “officers” as that term is used for certain purposes of the federal securities laws and rules thereunder. | ||
2
TRUSTEES – As of April 1, 2006
| Name |
Business Address | |
| Edward E. Barr | 2050 Center Avenue Suite 567 | |
| John M. Bremer | The Northwestern Mutual Life Insurance Company 720 East Wisconsin Avenue | |
| Peter W. Bruce | The Northwestern Mutual Life Insurance Company 720 East Wisconsin Avenue | |
| Robert C. Buchanan | Fox Valley Corporation 100 West Lawrence Street (54911) P.O. Box 727 Appleton, WI (54912-0727) | |
| George A. Dickerman | 68 Normandy Road | |
| David J. Drury | Poblocki & Sons, LLC 922 South 70th Street | |
| Connie K. Duckworth | ARZU 77 Stone Gate Lane | |
| James D. Ericson | 777 East Wisconsin Avenue Suite 3010 | |
| David A. Erne | Reinhart Boener Van Deuren, sc 1000 North Water Street Suite 2100 | |
| J. E. Gallegos | Gallegos Law Firm 460 St. Michaels Drive Building 300 | |
| James P. Hackett | Steelcase, Inc. 901 – 44th Street | |
| Hans Helmerich | Helmerich & Payne, Inc. 1437 South Boulder | |
| Stephen F. Keller | 101 South Las Palmas Avenue | |
3
| Barbara A. King | Landscape Structures, Inc. Route 3 601-7th Street South | |
| Margery Kraus | APCO Worldwide 700 12th Street, NW, Suite 800 | |
| J. Thomas Lewis | 228 St. Charles Avenue Suite 1024 | |
| Daniel F. McKeithan, Jr. | Tamarack Petroleum Company, Inc. 777 East Wisconsin Avenue Suite 1920 | |
| Ulice Payne, Jr. | Addison-Clifton, L.L.C. 13555 Bishop’s Court Suite 245 | |
| H. Mason Sizemore, Jr. | 2054 N.W. Blue Ridge Drive | |
| Peter M. Sommerhauser | Godfrey & Kahn, S.C. 780 North Water Street | |
| John E. Steuri | 52 River Ridge Road | |
| John J. Stollenwerk | Allen-Edmonds Shoe Corporation 201 East Seven Hills Road P.O. Box 998 | |
| Barry L. Williams | Williams Pacific Ventures, Inc. 4 Embarcadero Center, Suite 3700 | |
| Kathryn D. Wriston | c/o Shearman & Sterling 599 Lexington Avenue, Room 1064 | |
| Edward J. Zore | The Northwestern Mutual Life Insurance Company 720 East Wisconsin Avenue | |
EXECUTIVE OFFICERS – As of April 1, 2006
| Name |
Title | |
| Edward J. Zore | President and Chief Executive Officer | |
| John M. Bremer | Chief Operating Officer (Chief Compliance Officer) | |
| Peter W. Bruce | Chief Insurance Officer | |
| Deborah A. Beck | Executive Vice President (Planning and Technology) | |
| William H. Beckley | Executive Vice President (Agencies) |
4
| Mason G. Ross | Executive Vice President & Chief Investment Officer | |
| Mark G. Doll | Senior Vice President (Public Markets) | |
| Christine H. Fiasca | Senior Vice President (Agency Services) | |
| Richard L. Hall | Senior Vice President (Life Product) | |
| William C. Koenig | Senior Vice President & Chief Actuary | |
| Jean M. Maier | Senior Vice President (Insurance Operations) | |
| Meridee J. Maynard | Senior Vice President | |
| Gregory C. Oberland | Senior Vice President & Chief Information Officer | |
| Gary A. Poliner | Senior Vice President & Chief Financial Officer | |
| Marcia Rimai | Senior Vice President (Business Integration Services) | |
| Charles D. Robinson | Senior Vice President (IPS Strategy) | |
| John E. Schlifske | Senior Vice President (Investment Products & Services and Affiliates) | |
| Leonard F. Stecklein | Senior Vice President (IPS) | |
| Robert J. Berdan | Vice President, General Counsel & Secretary | |
| Michael G. Carter | Vice President (Field Compensation & Planning) | |
| Steven T. Catlett | Vice President (Corporate Services) | |
| Eric P. Christophersen | Vice President (Compliance/Best Practices) | |
| David D. Clark | Vice President (Real Estate) | |
| Gloster B. Current | Vice President (Policyowner Services) | |
| John M. Grogan John C. Kelly John L. Kordsmeier |
Vice President (Disability Income) Vice President & Controller Vice President (New Business) | |
| Susan A. Lueger | Vice President (Human Resources) | |
| Jeffrey J. Lueken | Vice President (Securities) | |
| Raymond J. Manista | Vice President (Corporate Planning) | |
| David W. Simbro | Vice President (Long Term Care) | |
| Brenda F. Skelton | Vice President (Communications) | |
| Calvin R. Schmidt | Vice President (Investment Product Operations) | |
| J. Edward Tippetts | Vice President (Wealth Management) | |
| Donald G. Tyler | Vice President (IPS Products & Sales) | |
| Martha M. Valerio | Vice President (Technology Research & Web Resources) | |
| Michael L. Youngman | Vice President (Government Relations) |
OTHER OFFICERS – As of December 1, 2005
| Name |
Title | |
| John Abbott | Director-Field Benefit Consultants | |
| Carl Amick | VP-Risk Management Operations | |
| Jason Anderson | Assistant Director Tax | |
| Mark Backe | Asst. General Counsel & Asst. Secretary | |
| Rebekah Barsch | Vice President Investment Product Lines | |
| Blaise Beaulier | Director of Project Portfolio Management | |
| Beth M. Berger | Asst. General Counsel & Asst. Secretary | |
| Frederick W. Bessette | Asst. General Counsel & Asst. Secretary | |
| Maryann Bialo | Asst. Director DI Benefit | |
| Carrie Bleck | Director Policyowner Services | |
| Melissa Bleidorn | Asst. General Counsel & Asst. Secretary | |
| Sandra Botcher | Asst. General Counsel & Asst. Secretary | |
| Anne Brower | Asst. General Counsel & Asst. Secretary | |
| Michael S. Bula | Asst. General Counsel & Asst. Secretary | |
| Gwen Canady | Director Corporate Reporting | |
| Kurt Carbon | Director Life Lay Standards | |
| Susan A. Cerbins | Asst. General Counsel & Asst. Secretary | |
| Walt Chossek | Director-Finance | |
| Tom Christianson | Director Advanced Business Services | |
| Barbara Courtney | Director Mutual Fund Accounting | |
| Dennis Darland | Asst. Director DI Benefit | |
| Mark Diestelmeier | Asst. General Counsel & Asst. Secretary | |
| Dave Dorshorst | Director Field Services and Support |
5
| John E. Dunn | Asst. General Counsel & Asst. Secretary | |
| James R. Eben | Asst. General Counsel & Asst. Secretary | |
| Cheryl Flanders | Compliance & QA Consultant | |
| Carol Flemma | Director-IPS Bus Development/Comm | |
| Don Forecki | Director Investment Operations | |
| James C. Frasher | Asst. General Counsel & Asst. Secretary | |
| John Garofani | Asst. General Counsel & Asst. Secretary | |
| Sheila Gavin | Asst. General Counsel & Asst. Secretary | |
| Don Gehrke | Director-Inv Client Services | |
| Tim Gerend | Asst. General Counsel & Asst. Secretary | |
| Wally Givler | Vice President Investment Accounting | |
| Kevin M. Gleason | Asst. General Counsel & Asst. Secretary | |
| Bob Gleeson | Vice President & Medical Director | |
| C. Claibourne Greene | Asst. General Counsel & Asst. Secretary | |
| Tom Guay | Vice President Underwriting Standards | |
| Greg Gurlik | Director Long Term Care Product Development | |
| Wayne Heidenreich | Medical Director | |
| Gary Hewitt | Vice President & Treasurer | |
| Patricia Hillmann | Director-Annuity Customer Service | |
| Mark W. Humphrey | Director-Architecture Construction Environmental Services | |
| Sharon A. Hyde | Asst. Director Disability Benefit | |
| Elizabeth Idleman | Asst. General Counsel & Asst. Secretary | |
| Todd Jones | Asst. Director- IPS Finance | |
| David B. Kennedy | Asst. General Counsel & Asst. Secretary | |
| Mollie Kenny | Regulatory Consultant | |
| Don Kiefer | Vice President Actuary | |
| James Koelbl | Asst. General Counsel & Asst. Secretary | |
| Abim Kolawole | Asst. General Counsel & Asst. Secretary | |
| Robert Kowalsky | Vice President & Chief Architect | |
| Carol L. Kracht | Vice President, Deputy General Counsel & Investment Counsel | |
| Pat Krueger | Director Annuity Customer Service | |
| Todd Kuzminski | Director Investment Accounting | |
| Donna Lemanczyk | Director-Investment Closing | |
| Elizabeth Lentini | Asst. General Counsel & Asst. Secretary | |
| Sally J. Lewis | Asst. General Counsel & Asst. Secretary | |
| James Lodermeier | Senior Actuary | |
| George R. Loxton | Asst. General Counsel & Asst. Secretary | |
| Cindy Lubbert | Asst. Director-DI Underwriting | |
| Dean Mabie | Asst. General Counsel & Asst. Secretary | |
| Jon Magalska | Actuary | |
| Steve Mannebach | Director Field Management Development | |
| Anthony C. Marino | Asst. General Counsel & Asst. Secretary | |
| Jeff Marks | Director Special Projects | |
| Steve Martinie | Asst. General Counsel & Asst. Secretary | |
| Ted Matchulat | Director Product Compliance | |
| Allan McDonnell | Director-Order Entry Desk/Retail Svc | |
| James L. McFarland | Asst. General Counsel & Asst. Secretary | |
| Patrick McKeown | Investment Research Consultant | |
| Larry S. Meihsner | Asst. General Counsel & Asst. Secretary | |
| Bob Meilander | Vice President Corporate Actuary | |
| Christopher Menting | Asst. General Counsel & Asst. Secretary | |
| Richard E. Meyers | Asst. General Counsel & Asst. Secretary | |
| Joanne Migliaccio | Director Field Services and Support | |
| Michael Mihm | Asst. Director-IPS Field Consulting | |
| Lynn Milewski | Director Annuity New Business | |
| Daniel Moakley | Asst. General Counsel & Asst. Secretary | |
| Jill Mocarski | Medical Director | |
| Karen Molloy | Director Banking & Cash Management |
6
| Diane Moro-Goane | Director Marketing Materials Review | |
| Scott J. Morris | Asst. General Counsel & Asst. Secretary | |
| Jennifer W. Murphy | Asst. General Counsel & Asst. Secretary | |
| Tim Nelson | Director Market Conduct | |
| David K. Nelson | Asst. General Counsel & Asst. Secretary | |
| Mary S. Nelson | Asst. General Counsel & Asst. Secretary | |
| Jeffrey Niehaus | Director-Business Retirement Markets | |
| Kathy Oman | Director-IPS Projects and Planning | |
| Timothy Otto | Asst. General Counsel & Asst. Secretary | |
| Art Panighetti | Vice President Tax | |
| Randy M. Pavlick | Asst. General Counsel & Asst. Secretary | |
| David W. Perez | Asst. General Counsel & Asst. Secretary | |
| Judith L. Perkins | Asst. General Counsel & Asst. Secretary | |
| Pete Peterson | Director Long Term Care Administration | |
| William C. Pickering | Asst. General Counsel & Asst. Secretary | |
| Nora M. Platt | Asst. General Counsel & Asst. Secretary | |
| Harvey W. Pogoriler | Asst. General Counsel & Asst. Secretary | |
| Randy Powell | Medical Director | |
| Dave Remstad | Vice President Specialty Markets | |
| Tom Richards | Vice President Agency Development | |
| Dan Riedl | President NMIS | |
| Kathleen M. Rivera | Vice President and Deputy General Counsel | |
| Bethany Rodenhuis | Vice President Audit | |
| Tammy Roou | Asst. General Counsel & Asst. Secretary | |
| Matt Sauer | Director-IPS Compensation | |
| Linda Schaefer | Director-Special Investigative Unit | |
| Thomas F. Scheer | Asst. General Counsel & Asst. Secretary | |
| Jane Ann Schiltz | Vice President Business Markets | |
| Kathleen H. Schluter | Vice President & Tax Counsel | |
| Sue Schmeidel | Director Field Development | |
| Rodd Schneider | Asst. General Counsel & Asst. Secretary | |
| Catherine L. Shaw | Asst. General Counsel & Asst. Secretary | |
| Sherri Shickert | Director Policyowner Services | |
| David Silber | Asst. General Counsel & Asst. Secretary | |
| Stephen M. Silverman | Asst. General Counsel & Asst. Secretary | |
| Mark W. Smith | Associate General Counsel & Asst. Secretary | |
| Warren Smith | Assistant Director-Architecture | |
| Diane Smith | Assistant Director Policyowner Services | |
| Richard Snyder | Director-Mutual Fund Prod | |
| Steve Sperka | Director DI Benefits | |
| Karen Stevens | Asst. General Counsel & Asst. Secretary | |
| Steve Stone | Director IS Finance | |
| Brenda J. Stugelmeyer | Asst. General Counsel & Asst. Secretary | |
| Cheryl Svehlek | Director-Administration | |
| Rachel Taknint | Vice President, Department Planning and Operations & Associate General Counsel | |
| Paul Tews | Director Investment Planning | |
| Kellen Thiel | Director-Managed Products | |
| Derek Tyus | Director of Strategic Analysis & Planning | |
| Mary Beth Van Groll | Vice President Information Systems | |
| Natalie Versnik | Director Policyowner Services | |
| Andy Ware | Vice President Actuary | |
| Joel Weiner | Medical Director | |
| Catherine A. Wilbert | Asst. General Counsel & Asst. Secretary | |
| Don Wilkinson | Vice President Agency Administration | |
| Jeff Williams | Director Compliance Risk Management | |
| Brian Wilson | Director-IPS National Sales | |
| John Wilson | Director Long Term Care Sales Support | |
| Robert Wright | Director-Affinity Funds | |
| Catherine M. Young | Asst. General Counsel & Asst. Secretary |
7
| Terry R. Young | Asst. General Counsel & Asst. Secretary | |
| Rick Zehner | Vice President Life Products | |
| Patti Zimmermann | Director Investment Technology & Development | |
| Philip Zwieg | Vice President Information Systems |
The business addresses for all of the executive officers and other officers is 720 East Wisconsin Avenue, Milwaukee, Wisconsin 53202.
| (c) state the name and address of each trustee and each custodian of registrant. | Not applicable. | |
| Item 9. | ||
| (a) State whether registrant is currently issuing and offering its securities directly to the public. |
Yes. | |
| (b) If registrant is currently issuing and offering its securities to the public through an underwriter, state the name and address of such underwriter. |
Northwestern Mutual Investment Services, LLC | |
| (c) If the answer to Item 9(a) is “no” and the answer to Item 9(b) is “not applicable,” state whether registrant presently proposes to make a public offering of its securities. |
Not applicable. | |
| (d) State whether registrant has any securities currently issued and outstanding. |
Yes. | |
| (e) If the answer to Item 9(d) is “yes,” state as of a date not to exceed ten days prior to the filing of this notification of registration the number of beneficial owners of registrant’s outstanding securities (other than short-term paper) and the name of any company owning more 10 percent or more of registrant’s outstanding voting securities. |
As of March 31, 2006, 222 variable annuity contracts issued in connection with NML Variable Annuity Account C were outstanding. All such contracts were issued as contracts for plans qualifying for special treatment under various provisions of the Internal Revenue Code. | |
| Item 10. State the current value of registrant’s total assets. | As of March 31, 2006, total assets of NML Variable Annuity Account C had a value of $531,515,482 | |
| Item 11. State whether registrant has applied or intends to apply for a license to operate as a small business investment company under the Small Business Investment Act of 1958. | No. | |
| Item 12. Attach as an exhibit a copy of the registrant’s last regular periodic report to its securityholders, if any. | A copy of the last regular report to contract owners dated December 31, 2005 is attached. | |
8
SIGNATURES
Pursuant to the requirements of the Investment Company Act of 1940, the sponsor of the registrant has caused this notification of registration to be signed on behalf of the registrant in the City of Milwaukee, and State of Wisconsin, on the 7th day of April, 2006.
| Signature: | ||||||||
| NML VARIABLE ANNUITY ACCOUNT C | ||||||||
| By: |
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY | |||||||
| Attest: |
/s/ JOHN E. DUNN |
By: |
||||||
| John E. Dunn, Assistant General Counsel & Assistant Secretary | John E. Schlifske, Senior Vice President (Investment Products & Services and Affiliates) | |||||||
9
December 31, 2005 THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
Group Combination Annuity Account C
| Unallocated group combination annuity contracts for: | Annual Reports | |
| Self-employed persons and their eligible employees | Northwestern Mutual Series Fund, Inc. | |
| Fidelity® VIP Mid Cap Portfolio | ||
| Qualified corporate retirement plans | ||
| Russell Investment Funds | ||
Letter to Contract Owners
In a year marked by contrasts, the economy and the markets held up remarkably well throughout 2005. The destructive hurricanes that hit the Southern coast threatened to derail economic growth mid-year but, surprisingly, the economy never skipped a beat. On the contrary, the potential for rebuilding turned what was considered a disaster into a potential economic stimulus that bolstered stock market returns late in the year, particularly in the Industrials and Materials sectors. Substantially higher energy prices affected the entire country but failed to dampen consumer spending, and consumer confidence ended the year higher.
Buoyed by fiscal and monetary policies aimed at constraining taxes and raising interest rates gradually, U.S. gross domestic product increased at a healthy rate in 2005. Promised government spending in the wake of Hurricane Katrina, coupled with rising home values throughout most of the year, aided the economy and boosted consumer confidence. Housing continued to play a major role in economic activity during 2005, as rising home values allowed homeowners to borrow against the equity in their homes at attractive long-term rates. Huge mortgage equity withdrawals fueled consumer demand for everything from home appliances to autos.
The U.S. stock market advanced overall for the third consecutive year in 2005, though returns were lower than in the previous two years. Despite rising oil prices, higher short-term interest rates and the hurricanes, U.S. corporations enjoyed a solid year, reporting good corporate earnings and strong consumer demand. The market enjoyed low volatility throughout the year, and all major indexes posted gains. The S&P 500 Index — a benchmark of U.S. equity performance — gained 4.91% for the year, while mid- capitalization stocks and international equities were the clear winners in 2005. Mid-cap stocks gained 12.56%, as measured by the S&P MidCap 400 Index, and foreign stocks gained 14.02%, as measured by the EAFE Index. Energy was once again the top performing sector for the year.
It was a fairly uneventful year in the bond market, which was also marked by low volatility. Bonds posted a positive, but small, gain of 2.57% for the year, as measured by the Citigroup US Broad Investment Grade Bond Index. High yield bonds, which had enjoyed above-average returns in 2003 and 2004, gained 2.07% for the year, as measured by the Citigroup High Yield Cash Pay Index. The yield on the 10-year Treasury bond barely moved over the twelve-month period, ending the year at 4.39%, up from 4.21% on January 1, 2005. Short-term interest rates, however, continued to climb as the Federal Reserve Board raised rates eight times in 2005, increasing the federal funds rate by 200 basis points, or 2%, to 4.25% at year end, the highest the rate has been since May 2001.
While the consensus calls for 3.5% GDP growth in the first half of 2006, we believe several factors may work together to keep growth lower in the coming months. Gasoline prices were high throughout 2005, but higher home heating costs only began to reach consumers late in the year. Taken together, higher energy costs may put a dampening effect on other consumer spending as we head into the new year. We expect positive, but slower, growth in 2006, given a continued slowdown in housing sales, a fairly valued stock market, and additional interest rate hikes that could be reflected in higher mortgage rates. We caution investors to recognize that risks exist this late in the business cycle, when slower economic growth is typical.
Despite our tempered enthusiasm, the remarkable resiliency of the U.S. economy cannot be understated. Consumer confidence remains high despite concerns, and productivity continues to be a real positive for our economy. In the past, U.S. corporations have continued to find ways to compete successfully in the global marketplace, and we see no fundamental reason for this to change.
Our best advice continues to be to keep your expectations in line. Slow, steady growth is best achieved with a well-thought-out plan and a well-balanced portfolio of investments. Working with your financial representative to determine the mix of assets best suited to your risk level and stage of life is the key to long-term investment success.
|
|
| |
| Edward J. Zore President and Chief Executive Officer |
Mark G. Doll Senior Vice President Investments | |
| The Northwestern Mutual Life Insurance Company | ||
| (Northwestern Mutual) | ||
i
How To Get More Information
Northwestern Mutual Express:
1-800-519-4665
Contact Your Northwestern Mutual Investment Services representative, if you have questions about your contract or any of the contract owner privileges.
Information on the Internet:
Northwestern Mutual Financial Network
For information about Northwestern Mutual visit us on our Website.
ii
Contents
| Performance Summary for NML Variable Annuity Account C |
||||
| Northwestern Mutual Series Fund, Inc. - Annual Report |
||||
| Fidelity VIP Mid Cap Portfolio - Annual Report (This report follows the end of the Northwestern Mutual Series Fund, Inc.) |
||||
| Russell Investment Funds - Annual Report (This report follows the end of the Fidelity VIP Mid Cap Portfolio.) |
||||
| Prospectus Supplement |
||||
The performance data quoted represents past performance. Past performance is historical and does not guarantee future performance. Investment return and principal value will fluctuate, so that shares, when redeemed, may be worth more or less than their original cost. Current performances may be lower or higher than the performance data quoted. For the most recent month-end performance information visit www.nmfn.com.
iii
Performance Summary as of December 31, 2005
Front Load Contract
| Total return(j) at unit value (as of 12/31/05) |
Small Cap Growth Stock Division |
T. Rowe Price Small Cap Value Division |
Aggressive Growth Stock Division |
International Growth Division |
Franklin Templeton International Equity Division |
AllianceBernstein Value Division |
Index 400 Stock Division |
||||||||||||||
| 1 year |
5.49 | % | 1.73 | % | 0.70 | % | 11.96 | % | 5.81 | % | 0.06 | % | 6.62 | % | |||||||
| 5 years |
27.57 | % | — | (11.71 | %) | — | 22.72 | % | — | 38.43 | % | ||||||||||
| Annualized |
4.99 | % | — | (2.46 | %) | — | 4.18 | % | — | 6.72 | % | ||||||||||
| 10 years(g) |
— | — | 88.07 | % | — | 106.29 | % | — | — | ||||||||||||
| Annualized |
— | — | 6.52 | % | — | 7.51 | % | — | — | ||||||||||||
| Since division inception in Account C |
150.63 | %(b) | 60.94 | %(c) | — | 47.00 | %(c) | — | 56.41 | %(d) | 81.14 | %(b) | |||||||||
| Annualized |
14.76 | % | 11.37 | % | — | 9.11 | % | — | 18.25 | % | 9.31 | % | |||||||||
| Since portfolio inception(a) |
— | — | — | — | — | — | — | ||||||||||||||
| Annualized |
— | — | — | — | — | — | — | ||||||||||||||
| Current Yield(h) |
|||||||||||||||||||||
| Simplified Load Contract | |||||||||||||||||||||
| 1 year |
9.68 | % | 5.77 | % | 4.71 | % | 16.41 | % | 10.02 | % | 4.04 | % | 10.86 | % | |||||||
| 5 years |
29.46 | % | — | (10.39 | %) | — | 24.62 | % | — | 40.52 | % | ||||||||||
| Annualized |
5.30 | % | — | (2.17 | %) | — | 4.50 | % | — | 7.04 | % | ||||||||||
| 10 years(g) |
— | — | 85.26 | % | — | 103.25 | % | — | — | ||||||||||||
| Annualized |
— | — | 6.36 | % | — | 7.35 | % | — | — | ||||||||||||
| Since division inception in Account C |
151.95 | %(b) | 63.97 | %(c) | — | 49.70 | %(c) | — | 61.01 | %(d) | 82.03 | %(b) | |||||||||
| Annualized |
14.85 | % | 11.84 | % | — | 9.56 | % | — | 19.54 | % | 9.39 | % | |||||||||
| Since portfolio inception(a) |
— | — | — | — | — | — | — | ||||||||||||||
| Annualized |
— | — | — | — | — | — | — | ||||||||||||||
| Current Yield(h) |
|||||||||||||||||||||
All total return figures are for divisions of NML Variable Annuity Account C and are based on the change in unit value, which reflects expenses, such as account charges and fees applied at the contract level; figures for the Front Load contract reflect a maximum sales load of 4.5%; figures for the Simplified Load contract reflect an installation fee in the amount of $750. The data reflects an initial contract value of $25,000, the minimum size.
| (a) | Returns stated are as of the inception date of the portfolio which preceeds availability in Account C. See the following footnotes for portfolio inception dates: |
| (b) | Inception date of 4/30/99. |
| (c) | Inception date of 7/31/01. |
| (d) | Inception date of 5/1/03. |
| (e) | Inception date of this division in Account C was 5/1/03. Actual fund inception was 12/28/98. Performance quoted prior to 5/1/03 is based on actual investment experience, adjusted for expenses of the product and premium charges. |
| (f) | Inception date of this division in Account C was 4/30/99. Actual fund inception was 1/2/97. Performance quoted prior to 4/30/99 is based on actual investment experience of the fund, adjusted for expenses of the product and premium charges. |
| (g) | 10 year return for this division in Account C. |
| (h) | For the seven-day period ended December 31, 2005, the Money Market Portfolio’s yield was 3.97% and was equivalent to a compound effective yield of 4.05%. The seven-day yield does not include deductions that are included in the separate accounts. The yield quotation more closely reflects the current earnings of the Money Market Portfolio than the total return quotation. |
| (j) | Returns shown include any fee waivers in effect and deductions for all Fund expenses. In the absence of fee waivers, total return would be reduced. For the Money Market Division, total returns include the effect of a fee waiver from December 2, 2002 through December 31, 2004. |
iv
| Janus Capital Appreciation Division |
Growth Stock Division |
Large Cap Core Stock Division |
Capital Guardian Domestic Equity Division |
T. Rowe Price Equity Income Division |
Index 500 Stock Division |
Asset Allocation Division |
Balanced Division |
High Yield Bond Division |
Select Bond Division |
|||||||||||||||||||
| 11.01 | % | 2.20 | % | 2.91 | % | 2.52 | % | (1.14 | %) | (0.63 | %) | 1.52 | % | (1.71 | %) | (3.80 | %) | (3.01 | %) | |||||||||
| — | (14.22 | %) | (10.89 | %) | — | — | (5.48 | %) | — | 9.17 | % | 39.14 | % | 29.15 | % | |||||||||||||
| — | (3.02 | %) | (2.28 | %) | — | — | (1.12 | %) | — | 1.77 | % | 6.83 | % | 5.25 | % | |||||||||||||
| — | 97.27 | % | 65.70 | % | — | — | 112.52 | % | — | 92.35 | % | 74.25 | % | 65.23 | % | |||||||||||||
| — | 7.03 | % | 5.18 | % | — | — | 7.83 | % | — | 6.76 | % | 5.71 | % | 5.15 | % | |||||||||||||
| 57.58 | %(d) | — | — | 21.32 | %(c) | 39.25 | %(d) | — | 15.77 | %(c) | — | — | — | |||||||||||||||
| 18.58 | % | — | — | 4.47 | % | 13.21 | % | — | 3.37 | % | — | — | — | |||||||||||||||
| — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||
| — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||
| 15.42 | % | 6.26 | % | 7.00 | % | 6.59 | % | 2.78 | % | 3.31 | % | 5.55 | % | 2.20 | % | 0.02 | % | 0.84 | % | |||||||||
| — | (12.92 | %) | (9.56 | %) | — | — | (4.03 | %) | — | 10.84 | % | 41.24 | % | 31.13 | % | |||||||||||||
| — | (2.73 | %) | (1.99 | %) | — | — | (0.82 | %) | — | 2.08 | % | 7.15 | % | 5.57 | % | |||||||||||||
| — | 94.34 | % | 63.20 | % | — | — | 109.39 | % | — | 89.48 | % | 71.63 | % | 62.73 | % | |||||||||||||
| — | 6.87 | % | 5.02 | % | — | — | 7.67 | % | — | 6.60 | % | 5.55 | % | 4.99 | % | |||||||||||||
| 62.20 | %(d) | — | — | 23.59 | %(c) | 43.32 | %(d) | — | 17.92 | %(c) | — | — | — | |||||||||||||||
| 19.87 | % | — | — | 4.91 | % | 14.44 | % | — | 3.80 | % | — | — | — | |||||||||||||||
| — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||
| — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||
v
Performance Summary, continued as of December 31, 2005
Front Load Contract
| Total return(j) at unit value (as of 12/31/05) |
Money Market Division |
Fidelity VIP Mid Cap Division |
Russell |
Russell Aggressive Equity Division |
Russell U.S. |
Russell Core Bond Division |
Russell Real Estate Securities Division |
||||||||||||||
| 1 year |
(2.28 | %) | 11.98 | % | 1.78 | % | 0.92 | % | 7.87 | % | (3.21 | %) | 7.18 | % | |||||||
| 5 years |
3.29 | % | 63.19 | %(e) | (7.51 | %) | 29.83 | % | 14.14 | % | 22.49 | % | 116.36 | % | |||||||
| Annualized |
0.65 | % | 10.29 | % | (1.55 | %) | 5.36 | % | 2.68 | % | 4.14 | % | 16.69 | % | |||||||
| 10 years(g) |
30.78 | % | — | — | — | — | — | — | |||||||||||||
| Annualized |
2.72 | % | — | — | — | — | — | — | |||||||||||||
| Since division inception in Account C |
— | 94.25 | %(e) | (13.68 | %)(f) | 41.51 | %(f) | 21.10 | %(f) | 32.10 | %(f) | 152.54 | %(b) | ||||||||
| Annualized |
— | 28.25 | % | (2.18 | %) | 5.34 | % | 2.91 | % | 4.26 | % | 14.89 | % | ||||||||
| Since portfolio inception(a) |
— | 229.89 | %(e) | 53.23 | %(f) | 81.86 | %(f) | 43.81 | %(f) | 53.75 | %(f) | — | |||||||||
| Annualized |
— | 18.57 | % | 4.86 | % | 6.88 | % | 4.12 | % | 4.90 | % | — | |||||||||
| Current Yield(h) |
4.05 | % | |||||||||||||||||||
| Simplified Load Contract | |||||||||||||||||||||
| 1 year |
1.60 | % | 16.43 | % | 5.83 | % | 4.93 | % | 12.16 | % | 0.64 | % | 11.44 | % | |||||||
| 5 years |
4.84 | % | 65.57 | %(e) | (6.14 | %) | 31.75 | % | 15.87 | % | 24.32 | % | 119.62 | % | |||||||
| Annualized |
0.95 | % | 10.61 | % | (1.26 | %) | 5.67 | % | 2.99 | % | 4.45 | % | 17.04 | % | |||||||
| 10 years(g) |
28.76 | % | — | — | — | — | — | — | |||||||||||||
| Annualized |
2.56 | % | — | — | — | — | — | — | |||||||||||||
| Since division inception in Account C |
— | 99.96 | %(e) | (13.21 | %)(f) | 42.23 | %(f) | 21.73 | %(f) | 32.78 | %(f) | 153.86 | %(b) | ||||||||
| Annualized |
— | 29.65 | % | (2.10 | %) | 5.42 | % | 2.99 | % | 4.34 | % | 14.98 | % | ||||||||
| Since portfolio inception(a) |
— | 230.88 | %(e) | 51.87 | %(f) | 80.24 | %(f) | 42.53 | %(f) | 52.38 | %(f) | — | |||||||||
| Annualized |
— | 18.62 | % | 4.76 | % | 6.77 | % | 4.02 | % | 4.79 | % | — | |||||||||
| Current Yield(h) |
4.05 | % | |||||||||||||||||||
All total return figures are for divisions of NML Variable Annuity Account C and are based on the change in unit value, which reflects expenses, such as account charges and fees applied at the contract level; figures for the Front Load contract reflect a maximum sales load of 4.5%; figures for the Simplified Load contract reflect an installation fee in the amount of $750. The data reflects an initial contract value of $25,000, the minimum size.
| (a) | Returns stated are as of the inception date of the portfolio which preceeds availability in Account C. See the following footnotes for portfolio inception dates: |
| (b) | Inception date of 4/30/99. |
| (c) | Inception date of 7/31/01. |
| (d) | Inception date of 5/1/03. |
| (e) | Inception date of this division in Account C was 5/1/03. Actual fund inception was 12/28/98. Performance quoted prior to 5/1/03 is based on actual investment experience, adjusted for expenses of the product and premium charges. |
| (f) | Inception date of this division in Account C was 4/30/99. Actual fund inception was 1/2/97. Performance quoted prior to 4/30/99 is based on actual investment experience of the fund, adjusted for expenses of the product and premium charges. |
| (g) | 10 year return for this division in Account C. |
| (h) | For the seven-day period ended December 31, 2005, the Money Market Portfolio’s yield was 3.97% and was equivalent to a compound effective yield of 4.05%. The seven-day yield does not include deductions that are included in the separate accounts. The yield quotation more closely reflects the current earnings of the Money Market Portfolio than the total return quotation. |
| (j) | Returns shown include any fee waivers in effect and deductions for all Fund expenses. In the absence of fee waivers, total return would be reduced. For the Money Market Division, total returns include the effect of a fee waiver from December 2, 2002 through December 31, 2004. |
vi
Annual Report December 31, 2005
Northwestern Mutual Series Fund, Inc.
A Series Fund Offering Eighteen Portfolios
| • | Small Cap Growth Stock Portfolio |
| • | T. Rowe Price Small Cap Value Portfolio |
| • | Aggressive Growth Stock Portfolio |
| • | International Growth Portfolio |
| • | Franklin Templeton International Equity Portfolio |
| • | AllianceBernstein Mid Cap Value Portfolio |
| • | Index 400 Stock Portfolio |
| • | Janus Capital Appreciation Portfolio |
| • | Growth Stock Portfolio |
| • | Large Cap Core Stock Portfolio |
| • | Capital Guardian Domestic Equity Portfolio |
| • | T. Rowe Price Equity Income Portfolio |
| • | Index 500 Stock Portfolio |
| • | Asset Allocation Portfolio |
| • | Balanced Portfolio |
| • | High Yield Bond Portfolio |
| • | Select Bond Portfolio |
| • | Money Market Portfolio |
Northwestern Mutual Series Fund, Inc.
| 1 | ||
| 6 | ||
| 13 | ||
| 18 | ||
| 24 | ||
| 30 | ||
| 35 | ||
| 43 | ||
| 47 | ||
| 52 | ||
| 57 | ||
| 62 | ||
| 67 | ||
| 76 | ||
| 91 | ||
| 104 | ||
| 112 | ||
| 121 | ||
| 124 | ||
| 126 | ||
| 128 | ||
| 137 | ||
| 146 | ||
| 151 | ||
| 152 | ||
| 153 | ||
| Continuance of the Sub-Advisory Agreement Between Mason Street Advisors and Sub-Advisor |
154 | |
The views expressed in the portfolio manager commentaries set forth in the following pages reflect those of the portfolio managers only through the end of the period covered by this report and do not necessarily represent the views of any affiliated organization. These views are subject to change at any time based upon market conditions or other events and should not be relied upon as investment advice. Mason Street Advisors, LLC. disclaims any responsibility to update these views.
Small Cap Growth Stock Portfolio
| Objective: | Portfolio Strategy: | Net Assets: | ||
| Maximum long-term appreciation of capital | Strive for the highest possible rate of capital appreciation by investing in companies with potential for rapid growth. | $503 million |
The Small Cap Growth Stock Portfolio seeks long-term growth of capital. The Portfolio seeks to achieve this objective by investing in emerging companies with rapidly growing revenues and earnings supported by financial strength and capable management. Holdings are smaller companies with a median market capitalization of approximately $1 billion; the range of market capitalization is generally between $200 million and $3 billion. The manager of this Portfolio has a strong orientation to quality and a commitment to broad diversification. In evaluating individual companies, factors such as the growth rates of revenues and earnings, opportunities for margin expansion, financial strength and quality of management are important variables.
The overall U.S. stock market advanced for the third consecutive year in 2005, though returns were lower than in the previous two years. Despite rising oil prices, higher short-term interest rates, and two devastating Gulf Coast hurricanes, stocks rallied thanks to solid economic growth, brisk merger activity, and better-than-expected corporate earnings. Small- and mid-capitalization stocks outperformed large-cap stocks once again this year; however, mid-cap stocks took the lead in 2005 over both large- and small-cap issues.
For the year ended December 31, 2005, the Small Cap Growth Portfolio returned 11.18%, substantially outperforming both the Russell 2000 Index, which had a return of 4.55%, and the S&P SmallCap 600 Index, which returned 7.68% for the same period. (These indices are unmanaged, cannot be invested in directly, and do not include administrative expenses or sales charges.) The Portfolio also outperformed its peer group, Small-Cap Growth Funds, which had an average return of 7.50% for the same period, according to Lipper Analytical Services, Inc. (“Lipper”), an independent mutual fund ranking agency.
The Portfolio’s outperformance for 2005 can be attributed primarily to good stock selection, particularly in the Consumer Discretionary, Health Care and Energy sectors. Stocks of special note include Health Care holdings Radiation Therapy Services, Inc. and LCA Vision, Inc., Technology holding Plexus Corp. and Greenhill & Co. Inc., an investment banking firm. Each of these stocks reported strong growth rates during the year. Our Energy holdings also added to performance, as most stocks in the sector experienced exceptional gains in 2005 due to the rising prices of oil and natural gas and the continued strong demand for energy worldwide. One Energy stock that added substantially to our return in 2005, Grant Prideco, Inc., is also among the Portfolio’s top ten holdings. The company, which supplies steel tubing for the Energy sector, benefited from increased demand in oil but also gained synergies from a recent acquisition.
Several stocks in the Portfolio turned in disappointing returns for 2005, including Kanbay International, an Indian IT outsourcing company which experienced a slowdown in business, and Westell Technologies, Inc., a telecom equipment company that was hurt as one of its major customers scaled back orders. Cogent Inc., a fingerprint technology company that lagged in 2005 as business contracts slowed, and Tekelec, a Technology holding that experienced a slow down in customer demand, also detracted from performance.
Sector weightings had a slightly negative impact on total return for 2005. We were overweight Telecom Services, which hurt performance as that sector had negative performance for the year. In contrast, our underweight position in Industrials negatively impacted return because that sector experienced above-average gains during 2005.
Heading into 2006, we believe the Portfolio is well positioned to take advantage of what we expect to be a pullback in the more aggressive sectors of the market. The Portfolio does not hold large positions in those areas, so a correction would actually benefit us. Throughout the year, we intend to remain focused on individual stock selection, looking for companies with above-average growth potential, and we believe we should continue to find attractive candidates for the Portfolio.
Small Cap Growth Stock Portfolio
1
Small Cap Growth Stock Portfolio
This chart assumes an initial investment of $10,000 made on 4/30/99 (commencement of the Portfolio’s operations). Returns shown reflect fee waivers, deductions for management and other portfolio expenses, and reinvestment of all dividends. In the absence of fee waivers, total return would be reduced. Returns exclude deductions for separate account sales loads and account fees. Total returns, which reflect deduction of charges for the separate account, are shown beginning on page iv of the Performance Summary of the Separate Account report.
Stocks of smaller or newer companies, such as those held in this Fund, are more likely to realize more substantial growth as well as suffer more significant losses than larger or more established issuers. Investments in such companies can be both more volatile and more speculative. Investing in small company stocks involves a greater degree of risk than investing in medium or large company stocks.
Since the Portfolio invests primarily in small capitalization issues, the indices that best reflect the portfolio’s performance are the Standard and Poor’s (S&P) SmallCap 600 Index and Russell 2000 Index. The indices cannot be invested in directly and do not include sales charges.
The Russell 2000 Index measures the performance of the 2,000 smallest companies in the Russell 3000 Index. The Russell 3000 Index measures the performance of the 3,000 largest U.S. companies based on total market capitalization. These 3,000 companies represent approximately 98% of the investable US equity market. As of the latest reconstitution, the average market capitalization of companies in the Russell 3000 was approximately $4.8 billion; the median market capitalization was approximately $944.7 million. Market capitalization of companies in the Index ranged from $386.9 billion to $182.6 million.
The Russell 2000 Index represents approximately 8% of the total market capitalization of the Russell 3000 Index. As of the latest reconstitution, the average market capitalization of companies in the Russell 2000 was approximately $664.9 million; the median market capitalization was approximately $539.5 million. The largest company in the Index had an approximate market capitalization of $1.8 billion.
The Standard & Poor’s SmallCap 600 Index is an unmanaged index of 600 selected common stocks of smaller U.S. -based companies compiled by Standard & Poor’s Corporation. As of December 31, 2005, the 600 companies in the composite had a median market capitalization of $793.1 million and total market value of $564.3 billion. The SmallCap 600 represents approximately 2.9% of the market value of Compustat’s database of over 9,443 equities.
The Lipper Variable Insurance Products (VIP) Small Cap Growth Funds Average is calculated by Lipper Analytical Services, Inc. and reflects the average investment return of portfolios underlying variable life and annuity products. The category consists of Funds that, by portfolio practice, invest at least 75% of their equity assets in companies with market capitalizations (on a three-year weighted basis) less than 250% of the dollar-weighted median of the smallest 500 of the middle 1,000 securities of the S&P SuperComposite 1500 Index. Small-cap growth funds typically have an above-average price-to-earnings ratio, price-to-book ratio, and three-year sales-per-share growth value, compared to the S&P SmallCap 600 Index. Source: Lipper, Inc.
Sector Allocation is based on Net Assets.
Sector Allocation and Top 10 Holdings are subject to change.
Investing in small company stocks involves a greater degree of risk than investing in medium or large company stocks.
2
Small Cap Growth Stock Portfolio
Small Cap Growth Stock Portfolio
Expense Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs and (2) ongoing costs, including management fees and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (July 1, 2005 to December 31, 2005).
Actual Expenses
The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs or separate account charges. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs or separate account charges were included, your costs would have been higher.
| Beginning Account Value July 1, 2005 |
Ending Account Value December 31, 2005 |
Expenses Paid During Period July 1, 2005 to December 31, 2005* | |||||||
| Actual |
$ | 1,000.00 | $ | 1,058.60 | $ | 2.88 | |||
| Hypothetical (5% return before expenses) |
$ | 1,000.00 | $ | 1,022.10 | $ | 2.83 | |||
| * | Expenses are equal to the Fund’s annualized expense ratio of 0.56%, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). |
Small Cap Growth Stock Portfolio
3
Small Cap Growth Stock Portfolio
Northwestern Mutual Series Fund, Inc.
Schedule of Investments
| Common Stocks (98.6%) | Shares/ $ Par |
Value $(000’s) | ||
| Consumer Discretionary (13.7%) |
||||
| Aaron Rents, Inc. |
268,092 | 5,651 | ||
| *Digital Theater Systems, Inc. |
20,191 | 299 | ||
| *Golf Galaxy, Inc. |
363,600 | 6,963 | ||
| *Guitar Center, Inc. |
86,700 | 4,336 | ||
| *Hibbett Sporting Goods, Inc. |
370,600 | 10,555 | ||
| *LIFE TIME FITNESS, Inc. |
101,300 | 3,859 | ||
| Lithia Motors, Inc. |
77,900 | 2,449 | ||
| *LKQ Corp. |
75,600 | 2,617 | ||
| *O’Reilly Automotive, Inc. |
189,500 | 6,066 | ||
| Orient-Express Hotels, Ltd. — Class A |
291,037 | 9,173 | ||
| *Outdoor Channel Holdings, Inc. |
354,800 | 4,790 | ||
| *Pinnacle Entertainment, Inc. |
267,600 | 6,612 | ||
| *Ruth’s Chris Steak House, Inc. |
318,110 | 5,758 | ||
| Total |
69,128 | |||
| Consumer Staples (1.8%) |
||||
| *Peet’s Coffee & Tea, Inc. |
104,200 | 3,162 | ||
| *United Natural Foods, Inc. |
231,900 | 6,123 | ||
| Total |
9,285 | |||
| Energy (5.7%) |
||||
| *FMC Technologies, Inc. |
182,000 | 7,811 | ||
| *Grant Prideco, Inc. |
238,900 | 10,541 | ||
| *Grey Wolf, Inc. |
717,600 | 5,547 | ||
| *James River Coal Co. |
120,100 | 4,588 | ||
| Total |
28,487 | |||
| Financials (9.2%) |
||||
| BankAtlantic Bancorp, Inc. — Class A |
190,100 | 2,661 | ||
| *Bankrate, Inc. |
39,868 | 1,177 | ||
| Boston Private Financial Holdings, Inc. |
145,700 | 4,432 | ||
| First Republic Bank |
99,800 | 3,694 | ||
| Greater Bay Bancorp |
260,600 | 6,677 | ||
| Greenhill & Co., Inc. |
188,600 | 10,592 | ||
| Investors Financial Services Corp. |
53,730 | 1,979 | ||
| *Nexity Financial Corp. |
228,300 | 3,059 | ||
| optionsXpress Holdings, Inc. |
338,700 | 8,315 | ||
| Placer Sierra Bancshares |
139,700 | 3,871 | ||
| Total |
46,457 | |||
| Health Care (19.0%) |
||||
| *Adams Respiratory Therapeutics, Inc. |
151,100 | 6,144 | ||
| *Foxhollow Technologies, Inc. |
154,900 | 4,614 | ||
| *Horizon Health Corp. |
349,900 | 7,918 | ||
| *Kyphon, Inc. |
116,400 | 4,753 | ||
| LCA-Vision, Inc. |
192,600 | 9,150 | ||
| *Pediatrix Medical Group, Inc. |
119,500 | 10,584 | ||
| *Providence Service Corp. |
265,586 | 7,646 | ||
| *Psychiatric Solutions, Inc. |
162,200 | 9,528 | ||
| *Radiation Therapy Services, Inc. |
286,100 | 10,102 | ||
| *ResMed, Inc. |
186,300 | 7,137 | ||
| *Salix Pharmaceuticals, Ltd. |
197,750 | 3,476 | ||
| *Symbion, Inc. |
197,500 | 4,543 | ||
| Common Stocks (98.6%) | Shares/ $ Par |
Value $(000’s) | ||
| Health Care continued |
||||
| *Syneron Medical Ltd., ADR |
156,340 | 4,964 | ||
| *Ventana Medical Systems, Inc. |
119,300 | 5,052 | ||
| Total |
95,611 | |||
| Industrials (17.7%) |
||||
| *ACCO Brands Corp. |
97,500 | 2,389 | ||
| *The Advisory Board Co. |
144,600 | 6,893 | ||
| *Beacon Roofing Supply, Inc. |
341,700 | 9,817 | ||
| Brady Corp. — Class A |
123,900 | 4,483 | ||
| Bucyrus International, Inc. — Class A |
35,380 | 1,865 | ||
| C.H. Robinson Worldwide, Inc. |
242,100 | 8,965 | ||
| The Corporate Executive Board Co. |
87,100 | 7,813 | ||
| *Corrections Corp. of America |
196,550 | 8,839 | ||
| Forward Air Corp. |
285,250 | 10,453 | ||
| *Hudson Highland Group, Inc. |
352,400 | 6,118 | ||
| Knight Transportation, Inc. |
362,867 | 7,522 | ||
| *Marlin Business Services, Inc. |
343,320 | 8,202 | ||
| *Portfolio Recovery Associates, Inc. |
125,300 | 5,819 | ||
| Total |
89,178 | |||
| Information Technology (22.7%) |
||||
| *Blackboard, Inc. |
211,900 | 6,141 | ||
| *Cogent, Inc. |
38,200 | 866 | ||
| *Cognizant Technology Solutions Corp. — |
169,100 | 8,513 | ||
| *Entegris, Inc. |
768,000 | 7,235 | ||
| *Essex Corp. |
409,800 | 6,987 | ||
| *Euronet Worldwide, Inc. |
193,100 | 5,368 | ||
| *Genesis Microchip, Inc. |
231,500 | 4,188 | ||
| *iPayment Holdings, Inc. |
90,600 | 3,762 | ||
| *Kanbay International, Inc. |
435,900 | 6,926 | ||
| *Kenexa Corp. |
65,789 | 1,388 | ||
| *MKS Instruments, Inc. |
414,750 | 7,420 | ||
| *Plexus Corp. |
362,200 | 8,236 | ||
| *RADWARE, Ltd. |
335,300 | 6,089 | ||
| *Sonic Solutions |
386,100 | 5,834 | ||
| *Tekelec |
589,000 | 8,187 | ||
| *Tessera Technologies, Inc. |
287,100 | 7,422 | ||
| *THQ, Inc. |
211,850 | 5,053 | ||
| *TNS, Inc. |
92,700 | 1,778 | ||
| *Unica Corp. |
259,900 | 3,132 | ||
| *Verint Systems, Inc. |
204,200 | 7,039 | ||
| *Westell Technologies, Inc. — Class A |
547,200 | 2,462 | ||
| Total |
114,026 | |||
| Materials (4.5%) |
||||
| Airgas, Inc. |
280,550 | 9,231 | ||
| *Intertape Polymer Group, Inc. |
75,400 | 676 | ||
| Silgan Holdings, Inc. |
247,100 | 8,925 | ||
| Steel Technologies, Inc. |
138,400 | 3,874 | ||
| Total |
22,706 | |||
4
Small Cap Growth Stock Portfolio
Small Cap Growth Stock Portfolio
| Common Stocks (98.6%) | Shares/ $ Par |
Value $(000’s) | ||
| Telecommunication Services (4.2%) |
||||
| *Alamosa Holdings, Inc. |
270,300 | 5,030 | ||
| *JAMDAT Mobile, Inc. |
255,900 | 6,802 | ||
| *UbiquiTel, Inc. |
933,500 | 9,232 | ||
| Total |
21,064 | |||
| Utilities (0.1%) |
||||
| ITC Holdings Corp. |
16,300 | 458 | ||
| Total |
458 | |||
| Total Common Stocks |
496,400 | |||
| Money Market Investments (3.2%) | ||||
| Autos (1.0%) |
||||
| Daimler Chrysler Auto, |
5,000,000 | 4,985 | ||
| Total |
4,985 | |||
| Federal Government & Agencies (0.2%) |
||||
| Federal National Mortgage Association, 4.32%, 3/22/06 |
1,000,000 | 991 | ||
| Total |
991 | |||
| Miscellaneous Business Credit Institutions (1.0%) |
||||
| General Electric Capital, |
4,900,000 | 4,899 | ||
| Total |
4,899 | |||
| Money Market Investments (3.2%) | Shares/ $ Par |
Value $(000’s) |
|||
| Short Term Business Credit (1.0%) |
|||||
| Sheffield Receivables, 4.35%, 1/4/06 |
5,000,000 | 4,998 | |||
| Total |
4,998 | ||||
| Total Money Market Investments |
15,873 | ||||
| Total Investments (101.8%) |
512,273 | ||||
| Other Assets, Less Liabilities (-1.8%) |
(9,265 | ) | |||
| Total Net Assets (100.0%) |
503,008 | ||||
| * | Non-Income Producing |
ADR after the name of a security represents — American Depository Receipt.
| (a) | At December 31, 2005 the aggregate cost of securities for federal tax purposes (in thousands) was $437,492 and the net unrealized appreciation of investments based on that cost was $74,781 which is comprised of $91,067 aggregate gross unrealized appreciation and $16,286 aggregate gross unrealized depreciation. |
The Accompanying Notes are an Integral Part of the Financial Statements.
Small Cap Growth Stock Portfolio
5
T. Rowe Price Small Cap Value Portfolio
| Objective: | Portfolio Strategy: | Net Assets: | ||
| Long-term growth of capital | Invest in small companies whose common stocks are believed to be undervalued. | $245 million |
6
T. Rowe Price Small Cap Value Portfolio
The T. Rowe Price Small Cap Value Portfolio invests in companies with market capitalizations in the range of the S&P SmallCap 600 whose current stock prices do not appear to reflect their underlying value. For this Portfolio, value is defined broadly, with consideration given to stock price relative to long-term growth prospects and business franchises, in addition to typical value measures such as assets, current earnings and cash flow. The major emphasis is on selection of individual stocks, with secondary consideration given to industry weightings in order to keep the Portfolio broadly diversified among economic sectors.
In 2005, the Portfolio posted a healthy gain of 7.21% and performed in line with the benchmark, S&P SmallCap 600 Index, which returned 7.68% for the year. Strong stock selection in the Industrials and Information Technology sectors, as well as an overweight in Energy stocks, contributed to the Portfolio’s performance. In contrast, disappointing stock picks in the Consumer Discretionary and Health Care sectors detracted from relative results.
The U.S. stock market advanced for the third consecutive year in 2005, though returns were lower than in the previous two years. Despite rising oil prices, higher short-term interest rates, and two devastating Gulf Coast hurricanes, stocks rallied thanks to solid economic growth, brisk merger activity, and better-than-expected corporate earnings. Mid-cap stocks were the top performers for the year, and in the fourth quarter small-cap issues lagged their large-cap counterparts. In the small-cap segment of the market, value stocks narrowly outperformed growth.
Energy stocks were the top performers in the S&P SmallCap 600 Index in 2005. A significant overweight in the Energy sector contributed the most to the Portfolio’s performance, although stock selection in the sector detracted slightly from relative results. The best individual contributors were Todco, a shallow-water contract drilling operation that benefited from a sharp rise in day rates, and oil drilling equipment provider Tetra Technologies, which performed well as drilling activity picked up.
Stock selection was most successful in the Financials sector. Real estate investment trust Kilroy Realty, which is based in Southern California and owns a portfolio of office and industrial properties, benefited from increased occupancy and strong demand in its region. Malpractice insurer Proassurance posted strong returns as earnings surpassed expectations by a wide margin.
Stock selection in the Industrial and Information Technology sectors also enhanced relative results. The best contributors in the Industrial sector included construction equipment maker JLG Industries, which rallied as commercial construction activity increased, and freight company UTI Worldwide, which rose thanks to increased shipping demand and a firmer pricing environment. Performance in the Technology sector was driven by software companies, including analytical software maker SPSS, which saw its earnings nearly double in 2005.
On the downside, Consumer Discretionary stocks were the weakest performers as high gas prices restrained consumer spending. Stock selection in this sector also detracted from Portfolio performance relative to the index, especially among specialty retailers. Aaron Rents, which leases furniture and office equipment, fell after the Gulf Coast hurricanes led to a disappointing earnings report, while Haverty Furniture reported lower-than-expected sales in its chain of furniture stores.
The Health Care sector was another area where stock selection proved disappointing in 2005. In particular, the Portfolio’s biotechnology holdings performed poorly. Lexicon Genetics fell sharply after terminating the development of one of its cancer-related medications.
As we anticipated, performance leadership shifted from small-cap stocks to large-caps in the last quarter of 2005. As the economy slows to a more moderate growth rate in 2006, we expect large-cap stocks to continue to lead the market in the coming year. If this trend continues, it may create more investment opportunities in the small-cap segment of the market, which would be a welcome change given the current paucity of attractively valued small-cap stocks.
T. Rowe Price Small Cap Value Portfolio
This chart assumes an initial investment of $10,000 made on 7/31/01 (commencement of the Portfolio’s operations). Returns shown reflect fee waivers, deductions for management and other portfolio expenses, and reinvestment of all dividends. In the absence of fee waivers, total return would be reduced. Returns exclude deductions for separate account sales loads and account fees. Total returns, which reflect deduction of charges for the separate account, are shown beginning on page iv of the Performance Summary of the Separate Account report.
The Russell 2000 Index measures the performance of the 2,000 smallest companies in the Russell 3000 Index. The Russell 3000 Index measures the performance of the 3,000 largest U.S. companies based on total market capitalization. These 3,000 companies represent approximately 98% of the investable US equity market. As of the latest reconstitution, the average market capitalization of companies in the Russell 3000 was approximately $4.8 billion; the median market capitalization was approximately $944.7 million. Market capitalization of companies in the Index ranged from $386.9 billion to $182.6 million.
The Russell 2000 Index represents approximately 8% of the total market capitalization of the Russell 3000 Index. As of the latest reconstitution, the average market capitalization of companies in the Russell 2000 was approximately $664.9 million; the median market capitalization was approximately $539.5 million. The largest company in the Index had an approximate market capitalization of $1.8 billion.
The Standard & Poor’s SmallCap 600 Index is an unmanaged index of 600 selected common stocks of smaller U.S. -based companies compiled by Standard & Poor’s Corporation. As of December 31, 2005, the 600 companies in the composite had a median market capitalization of $793.1 million and total market value of $564.3 billion. The SmallCap 600 represents approximately 2.9% of the market value of Compustat’s database of over 9,443 equities. These indices are unmanaged, cannot be invested in directly, and do not include administrative expenses or sales charges.
The Lipper Variable Insurance Products (VIP) Small Cap Core Funds Average is calculated by Lipper Analytical Services, Inc. and reflects the average investment return of portfolios underlying variable life and annuity products. The category consists of Funds that, by portfolio practice, invest at least 75% of their equity assets in companies with market capitalizations (on a three-year weighted basis) less than 250% of the dollar-weighted median of the smallest 500 of the middle 1,000 securities of the S&P SuperComposite 1500 Index. Small-cap core funds have more latitude in the companies in which they invest. These funds typically have an average price-to-earnings ratio, price-to- book ratio, and three-year sales-per-share growth value, compared to the S&P SmallCap 600 Index. Source: Lipper, Inc.
Sector Allocation is based on Net Assets.
Sector Allocation and Top 10 Holdings are subject to change.
T. Rowe Price Small Cap Value Portfolio
7
T. Rowe Price Small Cap Value Portfolio
Expense Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs and (2) ongoing costs, including management fees and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (July 1, 2005 to December 31, 2005).
Actual Expenses
The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs or separate account charges. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs or separate account charges were included, your costs would have been higher.
| Beginning Account Value July 1, 2005 |
Ending Account Value December 31, 2005 |
Expenses Paid During Period July 1, 2005 to December 31, 2005* | |||||||
| Actual |
$ | 1,000.00 | $ | 1,079.10 | $ | 4.57 | |||
| Hypothetical (5% return before expenses) |
$ | 1,000.00 | $ | 1,020.50 | $ | 4.45 | |||
| * | Expenses are equal to the Fund’s annualized expense ratio of 0.87%, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). |
8
T. Rowe Price Small Cap Value Portfolio
T. Rowe Price Small Cap Value Portfolio
Northwestern Mutual Series Fund, Inc.
Schedule of Investments
| Common Stocks (95.1%) | Shares/ $ Par |
Value $ (000’s) | ||
| Consumer Discretionary (12.8%) |
||||
| Aaron Rents, Inc. |
140,400 | 2,959 | ||
| Aaron Rents, Inc. — Class A |
4,725 | 91 | ||
| *AnnTaylor Stores Corp. |
9,700 | 335 | ||
| *Big Lots, Inc. |
26,300 | 316 | ||
| *Cablevision Systems Corp. |
10,100 | 237 | ||
| Centerplate, Inc. |
30,700 | 398 | ||
| *Cox Radio, Inc., — Class A |
12,500 | 176 | ||
| CSS Industries, Inc. |
41,200 | 1,266 | ||
| *Culp, Inc. |
32,600 | 154 | ||
| Dillard’s, Inc. — Class A |
7,700 | 191 | ||
| *Discovery Holding Co. |
5,800 | 88 | ||
| Dow Jones & Co., Inc. |
10,900 | 387 | ||
| *Entercom Communications Corp. |
13,200 | 392 | ||
| Family Dollar Stores, Inc. |
20,200 | 501 | ||
| Fred’s, Inc. |
61,900 | 1,007 | ||
| The Gap, Inc. |
26,800 | 473 | ||
| Hancock Fabrics, Inc. |
59,000 | 240 | ||
| Hasbro, Inc. |
17,300 | 349 | ||
| Haverty Furniture Companies, Inc. |
95,500 | 1,231 | ||
| *IAC/InterActiveCorp |
6,450 | 183 | ||
| Journal Register Co. |
66,000 | 987 | ||
| *Lamar Advertising Co. — Class A |
3,800 | 175 | ||
| Mattel, Inc. |
43,700 | 691 | ||
| Matthews International Corp. — Class A |
73,900 | 2,691 | ||
| Meredith Corp. |
9,100 | 476 | ||
| The New York Times Co. — Class A |
19,100 | 505 | ||
| Newell Rubbermaid, Inc. |
16,600 | 395 | ||
| Outback Steakhouse, Inc. |
13,500 | 562 | ||
| Pearson PLC, ADR |
33,000 | 392 | ||
| RadioShack Corp. |
8,100 | 170 | ||
| *RARE Hospitality International, Inc. |
78,350 | 2,381 | ||
| Reuters Group PLC, ADR |
5,300 | 235 | ||
| Ruby Tuesday, Inc. |
30,000 | 777 | ||
| *Saga Communications, Inc. — Class A |
80,600 | 876 | ||
| *Scholastic Corp. |
9,500 | 271 | ||
| SCP Pool Corp. |
64,425 | 2,398 | ||
| Skyline Corp. |
29,000 | 1,056 | ||
| Stanley Furniture Co., Inc. |
57,600 | 1,335 | ||
| Stein Mart, Inc. |
129,600 | 2,352 | ||
| The TJX Companies, Inc. |
21,400 | 497 | ||
| Tribune Co. |
17,200 | 520 | ||
| *Univision Communications, Inc. — Class A |
16,300 | 479 | ||
| The Washington Post Co. — Class B |
193 | 148 | ||
| *Weight Watchers International, Inc. |
2,700 | 133 | ||
| Total |
31,476 | |||
| Consumer Staples (2.1%) |
||||
| Alliance One International, Inc. |
63,000 | 246 | ||
| Campbell Soup Co. |
19,600 | 583 | ||
| Casey’s General Stores, Inc. |
74,300 | 1,842 | ||
| The Clorox Co. |
8,700 | 495 | ||
| Common Stocks (95.1%) | Shares/ $ Par |
Value $ (000’s) | ||
| Consumer Staples continued |
||||
| The Estee Lauder Companies, Inc. — Class A |
8,000 | 268 | ||
| H.J. Heinz Co. |
13,800 | 465 | ||
| McCormick & Co., Inc. |
1,800 | 56 | ||
| Nash Finch Co. |
24,000 | 612 | ||
| *Wild Oats Markets, Inc. |
48,600 | 587 | ||
| Total |
5,154 | |||
| Energy (8.7%) |
||||
| *Atwood Oceanics, Inc. |
17,500 | 1,366 | ||
| CARBO Ceramics, Inc. |
25,200 | 1,424 | ||
| *Cimarex Energy Co. |
11,449 | 492 | ||
| *Cooper Cameron Corp. |
16,200 | 671 | ||
| Diamond Offshore Drilling, Inc. |
11,200 | 779 | ||
| *Forest Oil Corp. |
58,150 | 2,650 | ||
| *Grant Prideco, Inc. |
15,600 | 688 | ||
| *Hanover Compressor Co. |
28,600 | 404 | ||
| *Lone Star Technologies, Inc. |
24,300 | 1,255 | ||
| Murphy Oil Corp. |
11,900 | 642 | ||
| Penn Virginia Corp. |
52,700 | 3,025 | ||
| *TETRA Technologies, Inc. |
80,500 | 2,457 | ||
| Todco — Class A |
60,000 | 2,284 | ||
| *Union Drilling, Inc. |
12,000 | 174 | ||
| *W-H Energy Services, Inc. |
35,100 | 1,161 | ||
| *Whiting Petroleum Corp. |
45,500 | 1,820 | ||
| Total |
21,292 | |||
| Financials (20.6%) |
||||
| Allied Capital Corp. |
57,100 | 1,677 | ||
| American Capital Strategies, Ltd. |
23,400 | 847 | ||
| Aon Corp. |
10,000 | 360 | ||
| Apartment Investment & Management Co. — Class A |
9,100 | 345 | ||
| Aspen Insurance Holdings, Ltd. |
11,400 | 270 | ||
| Axis Capital Holdings, Ltd. |
17,800 | 557 | ||
| Bedford Property Investors, Inc. |
42,200 | 926 | ||
| Boston Private Financial Holdings, Inc. |
22,900 | 697 | ||
| The Charles Schwab Corp. |
4,500 | 66 | ||
| Citizens Banking Corp. |
2,900 | 80 | ||
| Columbia Equity Trust, Inc. |
34,700 | 560 | ||
| Commerce Bancshares, Inc. |
3,476 | 181 | ||
| East West Bancorp, Inc. |
84,000 | 3,065 | ||
| Equity Office Properties Trust |
5,100 | 155 | ||
| Federated Investors, Inc. — Class B |
4,600 | 170 | ||
| First Financial Fund, Inc. |
93,269 | 1,590 | ||
| First Potomac Realty Trust |
55,600 | 1,479 | ||
| First Republic Bank |
86,000 | 3,183 | ||
| Genworth Financial, Inc. |
16,300 | 564 | ||
| Glenborough Realty Trust, Inc. |
33,600 | 608 | ||
| Huntington Bancshares, Inc. |
20,600 | 489 | ||
| Innkeepers USA Trust |
49,200 | 787 | ||
| Investors Financial Services Corp. |
11,100 | 409 | ||
T. Rowe Price Small Cap Value Portfolio
9
T. Rowe Price Small Cap Value Portfolio
| Common Stocks (95.1%) | Shares/ $ Par |
Value $ (000’s) | ||
| Financials continued |
||||
| Janus Capital Group, Inc. |
31,900 | 594 | ||
| Jefferson-Pilot Corp. |
8,600 | 490 | ||
| Kilroy Realty Corp. |
53,700 | 3,324 | ||
| *LaBranche & Co., Inc. |
9,700 | 98 | ||
| LaSalle Hotel Properties |
53,700 | 1,972 | ||
| Lazard, Ltd. — Class A |
11,600 | 370 | ||
| *Markel Corp. |
5,600 | 1,775 | ||
| Marsh & McLennan Companies, Inc. |
26,100 | 829 | ||
| Max Re Capital, Ltd. |
62,600 | 1,626 | ||
| The Midland Co. |
39,500 | 1,424 | ||
| NetBank, Inc. |
76,000 | 546 | ||
| Northern Trust Corp. |
10,100 | 523 | ||
| Ohio Casualty Corp. |
10,000 | 283 | ||
| PNC Financial Services Group, Inc. |
6,800 | 420 | ||
| *ProAssurance Corp. |
71,500 | 3,479 | ||
| Radian Group, Inc. |
1,700 | 100 | ||
| Regions Financial Corp. |
8,400 | 287 | ||
| Scottish Annuity Re Group, Ltd. |
28,700 | 705 | ||
| The St. Paul Travelers Companies, Inc. |
16,230 | 725 | ||
| Strategic Hotel Capital, Inc. |
65,400 | 1,346 | ||
| *SVB Financial Group |
65,500 | 3,068 | ||
| Synovus Financial Corp. |
19,400 | 524 | ||
| TCF Financial Corp. |
9,600 | 261 | ||
| Texas Regional Bancshares, Inc. — Class A |
113,550 | 3,213 | ||
| *Triad Guaranty, Inc. |
19,900 | 875 | ||
| UnumProvident Corp. |
21,200 | 482 | ||
| Valley National Bancorp |
1,600 | 39 | ||
| Waddell & Reed Financial, Inc. — Class A |
8,100 | 170 | ||
| Washington Real Estate Investment Trust |
41,400 | 1,256 | ||
| Willis Group Holdings, Ltd. |
7,800 | 288 | ||
| XL Capital, Ltd. — Class A |
4,500 | 303 | ||
| Total |
50,460 | |||
| Health Care (5.0%) |
||||
| Analogic Corp. |
13,200 | 632 | ||
| Arrow International, Inc. |
35,430 | 1,027 | ||
| Becton, Dickinson and Co. |
3,200 | 192 | ||
| *Cephalon, Inc. |
5,600 | 363 | ||
| *Chiron Corp. |
13,300 | 591 | ||
| *Diversa Corp. |
99,000 | 475 | ||
| *Exelixis, Inc. |
80,800 | 761 | ||
| Health Management Associates, Inc. — Class A |
4,000 | 88 | ||
| *HEALTHSOUTH Corp. |
74,300 | 364 | ||
| *Human Genome Sciences, Inc. |
17,000 | 146 | ||
| *Lexicon Genetics, Inc. |
120,600 | 440 | ||
| *Lincare Holdings, Inc. |
12,600 | 528 | ||
| *MedImmune, Inc. |
7,800 | 273 | ||
| *Myriad Genetics, Inc. |
79,000 | 1,643 | ||
| *OSI Pharmaceuticals, Inc. |
8,900 | 250 | ||
| Owens & Minor, Inc. |
84,800 | 2,334 | ||
| *Tenet Healthcare Corp. |
51,800 | 397 | ||
| Universal Health Services, Inc. — Class B |
11,600 | 542 | ||
| Common Stocks (95.1%) | Shares/ $ Par |
Value $ (000’s) | ||
| Health Care continued |
||||
| Valeant Pharmaceuticals International |
7,900 | 143 | ||
| West Pharmaceutical Services, Inc. |
43,200 | 1,081 | ||
| Total |
12,270 | |||
| Industrials (20.3%) |
||||
| *Accuride Corp. |
31,200 | 402 | ||
| *Allied Waste Industries, Inc. |
53,700 | 469 | ||
| American Standard Companies, Inc. |
9,600 | 384 | ||
| Ameron International Corp. |
23,900 | 1,089 | ||
| C&D Technologies, Inc. |
63,500 | 484 | ||
| *Casella Waste Systems, Inc. — Class A |
99,000 | 1,266 | ||
| Cintas Corp. |
6,800 | 280 | ||
| Deere & Co. |
9,100 | 620 | ||
| *Dollar Thrifty Automotive Group, Inc. |
55,300 | 1,995 | ||
| EDO Corp. |
32,500 | 879 | ||
| *Electro Rent Corp. |
91,700 | 1,367 | ||
| ElkCorp |
20,500 | 690 | ||
| Equifax, Inc. |
9,800 | 373 | ||
| Franklin Electric Co., Inc. |
62,500 | 2,471 | ||
| *FTI Consulting, Inc. |
55,000 | 1,509 | ||
| G & K Services, Inc. — Class A |
46,300 | 1,817 | ||
| *Genesee & Wyoming, Inc. |
52,100 | 1,956 | ||
| *The Genlyte Group, Inc. |
29,600 | 1,586 | ||
| Herman Miller, Inc. |
5,200 | 147 | ||
| IDEX Corp. |
50,800 | 2,088 | ||
| *Insituform Technologies, Inc. — Class A |
83,000 | 1,608 | ||
| *JLG Industries, Inc. |
86,400 | 3,946 | ||
| *Kirby Corp. |
46,000 | 2,400 | ||
| Laidlaw International, Inc. |
18,500 | 430 | ||
| Landstar System, Inc. |
131,300 | 5,481 | ||
| Macquarie Infrastructure Co. Trust |
45,000 | 1,386 | ||
| Manpower, Inc. |
10,600 | 493 | ||
| McGrath Rentcorp |
83,900 | 2,332 | ||
| Nordson Corp. |
49,200 | 1,993 | ||
| *Pike Electric Corp. |
20,300 | 329 | ||
| Raytheon Co. |
11,800 | 474 | ||
| Rockwell Collins, Inc. |
3,000 | 139 | ||
| The ServiceMaster Co. |
5,500 | 66 | ||
| Southwest Airlines Co. |
38,900 | 639 | ||
| Synagro Technologies, Inc. |
57,900 | 245 | ||
| Union Pacific Corp. |
5,400 | 435 | ||
| UTI Worldwide, Inc. |
31,440 | 2,919 | ||
| *Waste Connections, Inc. |
36,200 | 1,247 | ||
| Woodward Governor Co. |
14,500 | 1,247 | ||
| Total |
49,681 | |||
| Information Technology (10.2%) |
||||
| *Andrew Corp. |
15,900 | 171 | ||
| *ATMI, Inc. |
38,000 | 1,063 | ||
| AVX Corp. |
31,300 | 453 | ||
| Belden CDT, Inc. |
61,000 | 1,490 | ||
| *The BISYS Group, Inc. |
40,000 | 560 | ||
| *Brooks Automation, Inc. |
158,000 | 1,980 | ||
| *Entegris, Inc. |
125,598 | 1,183 | ||
| *Intuit, Inc. |
13,000 | 693 | ||
| *Jabil Circuit, Inc. |
9,400 | 349 | ||
10
T. Rowe Price Small Cap Value Portfolio
T. Rowe Price Small Cap Value Portfolio
| Common Stocks (95.1%) | Shares/ $ Par |
Value $ (000’s) | ||
| Information Technology continued |
||||
| KLA-Tencor Corp. |
4,500 | 222 | ||
| Landauer, Inc. |
20,400 | 940 | ||
| *Littelfuse, Inc. |
45,600 | 1,243 | ||
| Methode Electronics, Inc. — Class A |
48,200 | 481 | ||
| Molex, Inc. — Class A |
23,700 | 583 | ||
| MoneyGram International, Inc. |
19,948 | 520 | ||
| *MPS Group, Inc. |
153,700 | 2,101 | ||
| *Novellus Systems, Inc. |
21,400 | 516 | ||
| *Packeteer, Inc. |
100,800 | 783 | ||
| *Premiere Global Services, Inc. |
107,300 | 872 | ||
| *Progress Software Corp. |
67,000 | 1,901 | ||
| *RSA Security, Inc. |
86,600 | 973 | ||
| *Spansion, Inc. — Class A |
12,200 | 170 | ||
| *SPSS, Inc. |
58,325 | 1,804 | ||
| StarTek, Inc. |
42,900 | 772 | ||
| *Synopsys, Inc. |
26,500 | 532 | ||
| *Websense, Inc. |
38,900 | 2,553 | ||
| Total |
24,908 | |||
| Materials (10.4%) |
||||
| Abitibi-Consolidated, Inc. |
32,500 | 132 | ||
| Airgas, Inc. |
64,100 | 2,109 | ||
| Alcan, Inc. |
8,200 | 336 | ||
| AptarGroup, Inc. |
40,750 | 2,127 | ||
| Arch Chemicals, Inc. |
53,100 | 1,588 | ||
| Bowater, Inc. |
9,400 | 289 | ||
| Carpenter Technology Corp. |
33,500 | 2,361 | ||
| Chesapeake Corp. |
20,100 | 341 | ||
| Deltic Timber Corp. |
35,400 | 1,836 | ||
| Domtar, Inc. |
61,500 | 355 | ||
| Florida Rock Industries, Inc. |
50,337 | 2,469 | ||
| Gibraltar Industries, Inc. |
74,000 | 1,698 | ||
| International Paper Co. |
20,200 | 679 | ||
| MacDermid, Inc. |
54,900 | 1,532 | ||
| MeadWestvaco Corp. |
7,400 | 207 | ||
| *Meridian Gold, Inc. |
77,100 | 1,686 | ||
| Metal Management, Inc. |
57,000 | 1,326 | ||
| Myers Industries, Inc. |
54,067 | 788 | ||
| *Nalco Holding Co. |
49,600 | 878 | ||
| Potash Corp. of Saskatchewan, Inc. |
2,400 | 193 | ||
| *Symyx Technologies, Inc. |
42,400 | 1,157 | ||
| Wausau Paper Corp. |
96,400 | 1,142 | ||
| Weyerhaeuser Co. |
3,400 | 226 | ||
| Total |
25,455 | |||
| Other Holdings (0.6%) |
||||
| iShares Russell 2000 Value Index Fund |
21,500 | 1,417 | ||
| Total |
1,417 | |||
| Telecommunication Services (0.6%) |
||||
| *Nextel Partners, Inc. |
10,800 | 302 | ||
| *Qwest Communications International, Inc. |
13,900 | 79 | ||
| Telephone and Data Systems, Inc. |
3,200 | 115 | ||
| Common Stocks (95.1%) | Shares/ $ Par |
Value $ (000’s) | ||
| Telecommunication Services continued |
||||
| Telephone and Data Systems, Inc. — Special Shares |
2,100 | 73 | ||
| Telus Corp. |
5,400 | 217 | ||
| *Wireless Facilities, Inc. |
145,600 | 742 | ||
| Total |
1,528 | |||
| Utilities (3.8%) |
||||
| Black Hills Corp. |
43,500 | 1,506 | ||
| Cleco Corp. |
51,000 | 1,063 | ||
| *CMS Energy Corp. |
4,200 | 61 | ||
| Duke Energy Corp. |
12,600 | 346 | ||
| *Dynegy, Inc. — Class A |
43,000 | 208 | ||
| *El Paso Electric Co. |
58,200 | 1,225 | ||
| FirstEnergy Corp. |
1,800 | 88 | ||
| NiSource, Inc. |
32,800 | 684 | ||
| *NRG Energy, Inc. |
7,500 | 353 | ||
| Otter Tail Corp. |
23,400 | 678 | ||
| Pinnacle West Capital Corp. |
12,500 | 517 | ||
| Southwest Gas Corp. |
32,500 | 858 | ||
| TECO Energy, Inc. |
41,300 | 710 | ||
| Vectren Corp. |
34,800 | 945 | ||
| Xcel Energy, Inc. |
8,800 | 162 | ||
| Total |
9,404 | |||
| Total Common Stocks |
233,045 | |||
| Convertible Corporate Bonds (0.1%) | ||||
| Energy (0.1%) |
||||
| Diamond Offshore Drilling, Inc., |
114,000 | 163 | ||
| Total |
163 | |||
| Utilities (0.0%) |
||||
| Xcel Energy, Inc., 7.50%, 11/21/07 |
2,000 | 3 | ||
| Total |
3 | |||
| Total Convertible Corporate Bonds |
166 | |||
| Preferred Stocks (0.1%) | ||||
| Consumer Discretionary (0.1%) |
||||
| General Motors Corp. |
7,600 | 158 | ||
| Total |
158 | |||
| Industrials (0.0%) |
||||
| Allied Waste Industries, Inc. |
600 | 156 | ||
| Total |
156 | |||
| Total Preferred Stocks |
314 | |||
T. Rowe Price Small Cap Value Portfolio
11
T. Rowe Price Small Cap Value Portfolio
| Money Market Investments (4.9%) | Shares/ $ Par |
Value $ (000’s) |
|||
| Other Holdings (4.9%) |
|||||
| Reserve Investment Fund |
11,937,608 | 11,938 | |||
| Total Money Market Investments |
11,938 | ||||
| Total Investments (100.2%) |
245,463 | ||||
| Other Assets, Less Liabilities (-0.2%) |
(422 | ) | |||
| Total Net Assets (100.0%) |
245,041 | ||||
| * | Non-Income Producing |
ADR after the name of a security represents — American Depository Receipt.
| (a) | At December 31, 2005 the aggregate cost of securities for federal tax purposes (in thousands) was $190,486 and the net unrealized appreciation of investments based on that cost was $54,977 which is comprised of $62,031 aggregate gross unrealized appreciation and $7,054 aggregate gross unrealized depreciation. |
The Accompanying Notes are an Integral Part of the Financial Statements.
12
T. Rowe Price Small Cap Value Portfolio
Aggressive Growth Stock Portfolio
| Objective: | Portfolio Strategy: | Net Assets: | ||
| Maximum long-term appreciation of capital | Strive for the highest possible rate of capital appreciation by investing in companies with potential for rapid growth. | $1.3 billion |
The Aggressive Growth Stock Portfolio seeks emerging growth companies in the middle-capitalization range, generally with market capitalizations of less than $10 billion. The Portfolio’s focus in stock selection is on the individual companies’ ability to generate revenue, expand profit margins and maintain solid balance sheets; industry sector selection is of secondary importance. 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 Aggressive Growth Stock Portfolio returned 6.14% for the year ended December 31, 2005, underperforming its benchmark, the S&P MidCap 400 Index, which returned 12.56% for the year. (This index is unmanaged, cannot be invested in directly, and does not include administrative expenses or sales charges.) The Portfolio also underperformed its peer group, Mid-Cap Growth Funds, which had an average return of 10.61% for the same period, according to Lipper Analytical Services, Inc. (“Lipper”), an independent mutual fund ranking agency.
For a third year in a row, mid-capitalization stocks rewarded investors in 2005. The higher beta stocks — including small- and mid-cap stocks — once again outperformed large cap stocks as investors continued to demonstrate a willingness to take on more risk as they sought higher returns. The S&P 500 Index (a gauge of broad stock market performance) returned 4.91% for the year ending December 31, 2005, and small-cap stocks returned 7.68%, as measured by the S&P 600 SmallCap Index. Mid-cap stocks were the top performers for the year, gaining 12.56%, as measured by the S&P 400 MidCap Index. But market capitalization didn’t matter as far as Energy stocks were concerned in 2005. As in every market cap range, mid-cap Energy stocks were the big winners during this period as oil and natural gas prices continued to rise through much of the year.
The Portfolio’s underperformance in 2005 relative to the Index resulted primarily from poor stock selection in the Technology sector. A number of Technology stocks, including VeriSign Inc., Zebra Technologies Corp., Cogent Inc., Cognos Inc., and Cree Inc., all turned in disappointing returns. VeriSign was hurt by the acquisition of Jamba, a mobile content delivery developer. This division went from massively beating estimates to significantly missing them in twelve months. Zebra Technologies, thought to be a leader in radio frequency identification, has not seen this market develop as quickly as expected, and Cogent reacted to concerns over potential new contract signings.
Two Technology holdings that helped the Portfolio’s return in 2005 were Jabil Circuits and Harris Corp. In addition, all of the Portfolio’s Energy holdings were positive for the year, as the Energy sector outperformed all other sectors again, as energy prices continued to rise. Range Resources Corp., National Oilwell Varco, Newfield Exploration Co., Consol Energy, and BJ Services Co. all produced above-average returns and were particularly helpful to the Portfolio’s performance. Ameritrade Holding Corp., an online brokerage service, and Whole Foods Market Inc., the largest chain of natural and organic food stores, also performed very well.
Our sector allocations were mostly positive for return for 2005. We were neutral weight in Energy compared to the Index, but holdings in that sector added significantly to return as mid-cap Energy stocks gained nearly 50% for the year. An underweight position in Consumer Discretionary stocks also added to return as the sector was dragged down by concerns that rising Energy prices would impact consumer demand for discretionary purchases. Our underweight position in Financials also helped performance. On the negative side, our substantial overweight positions in Health Care and Technology held back performance.
As we head into 2006, we will continue to correct our Technology holdings. We intend to lower our weighting in the Technology sector, which is currently overweight, and have already sold a number of underperforming securities in the sector and replaced them with stocks such as ATI Technologies that have improving fundamentals. Currently, we view the market as fairly valued and would expect some pull back in stocks in the near term. As we have in the past, we intend to rely more on our ability to pick individual stocks rather than focusing on broad economic trends or industry sectors.
Aggressive Growth Stock Portfolio
13
Aggressive Growth Stock Portfolio
This chart assumes an initial investment of $10,000 made on 12/31/95. Returns shown include deductions for management and other portfolio expenses, and reinvestment of all dividends. Returns exclude deductions for separate account sales loads and account fees. Total returns, which reflect deduction of charges for the separate account, are shown beginning on page iv of the Performance Summary of the Separate Account report.
Stocks of smaller or newer companies, such as those held in this Fund, are more likely to realize more substantial growth as well as suffer more significant losses than larger or more established issuers. Investments in such companies can be both more volatile and more speculative Investing in small company stocks involves a greater degree of risk than investing in medium or large company stocks. Investing in medium company stocks involves a greater degree of risk than investing in large company stocks.
Since the Portfolio invests primarily in medium-capitalization (Mid Cap) issues, the index that best reflects the Portfolio’s performance is the S&P MidCap 400 Index. This is a capitalization-weighted index that measures the performance of the mid-range sector of the U.S. stock market. The index cannot be invested in directly and does not include sales charges.
As of December 31, 2005, the 400 companies in the composite had a median market capitalization of $2.6 billion and a total market value of $1.1 trillion. The MidCap 400 represents approximately 5.8% of the market value of the Compustat’s database of about 9,400 equities.
The Lipper Variable Insurance Products (VIP) Mid Cap Growth Funds Average is calculated by Lipper Analytical Services, Inc. and reflects the average investment return of portfolios underlying variable life and annuity products. The category consists of Funds that, by portfolio practice, invest at least 75% of their equity assets in companies with market capitalizations (on a three-year weighted basis) less than 300% of the dollar-weighted median market capitalization of the middle 1,000 securities of the S&P SuperComposite 1500 Index. Mid-cap growth funds typically have an above-average price-to-earnings ratio, price-to-book ratio, and three-year sales-per-share growth value, compared to the S&P MidCap 400 Index. Source: Lipper, Inc.
Sector Allocation is based on Net Assets.
Sector Allocation and Top 10 Holdings are subject to change.
Investing in small company stocks involves a greater degree of risk than investing in medium or large company stocks.
Investing in medium company stocks involves a greater degree of risk than investing in large company stocks.
14
Aggressive Growth Stock Portfolio
Aggressive Growth Stock Portfolio
Expense Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs and (2) ongoing costs, including management fees and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (July 1, 2005 to December 31, 2005).
Actual Expenses
The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs or separate account charges. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs or separate account charges were included, your costs would have been higher.
| Beginning Account Value July 1, 2005 |
Ending Account Value December 31, 2005 |
Expenses Paid During Period July 1, 2005 to December 31, 2005* | |||||||
| Actual |
$ | 1,000.00 | $ | 1,088.80 | $ | 2.72 | |||
| Hypothetical (5% return before expenses) |
$ | 1,000.00 | $ | 1,022.30 | $ | 2.63 | |||
| * | Expenses are equal to the Fund’s annualized expense ratio of 0.52%, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). |
Aggressive Growth Stock Portfolio
15
Aggressive Growth Stock Portfolio
Northwestern Mutual Series Fund, Inc.
Schedule of Investments
| Common Stocks (98.3%) | Shares/ $ Par |
Value $ (000’s) | ||