January 4, 2007
| TO: | CONTRACT AND POLICY OWNERS AND PAYEES INVESTED IN | |
| NORTHWESTERN MUTUAL SERIES FUND, INC. THROUGH THE | ||
| NML VARIABLE ANNUITY ACCOUNT A | ||
| NML VARIABLE ANNUITY ACCOUNT B | ||
| NML VARIABLE ANNUITY ACCOUNT C | ||
| NORTHWESTERN MUTUAL VARIABLE LIFE ACCOUNT |
A Special Meeting of the Shareholders of Northwestern Mutual Series Fund, Inc. (the "Fund"“Northwestern Mutual Series Fund” or “NMSF”), will be held on May 1, 2003,February 20, 2007, at 8:10:00 a.m., local time, in
Room 522Central Time, at the offices of The Northwestern Mutual Life Insurance Company ("(“Northwestern Mutual"Mutual”), 720 East Wisconsin Avenue, Milwaukee, Wisconsin 53202.
The sole
All of the outstanding shares of Northwestern Mutual Series Fund are held by Northwestern Mutual and therefore, Northwestern Mutual is the only shareholder of the Fund is Northwestern Mutual Life.Series Fund. Northwestern Mutual holds these shares for its General Account and for its separate investment accounts used for its variable annuity contracts and variable life policies. Although you are not a shareholder of the Northwestern Mutual Series Fund, all or part of the net considerations or premiums and accumulated amounts under your variable annuity contract or variable life insurance policy are invested in shares of the Northwestern Mutual Series Fund through NML Variable Annuity Account A, NML Variable Annuity Account B, NML Variable Annuity Account C or Northwestern Mutual Variable Life Account, respectively. Your contract or policy provides that youAccount. You have the right to instruct Northwestern Mutual Life as to how the shares of each Portfolio of the Northwestern Mutual Series Fund attributable to your variable annuity contract or variable life insurance policy should be voted at the Special Meeting.Meeting of the Shareholders.
We have enclosed a copy of a Notice of Special Meeting, Statement to Contract and Policy Owners and Payees and a Voting Instruction Form for each Portfolio of the Northwestern Mutual Series Fund which relates to your contract or policy. This material describes in detailcontains important information about the matters to be considered at the Special Meeting. We urge you to read it carefully. Then, please complete and sign the Voting Instruction Form and return it in the postage paid envelope provided. The number of shares of each
Portfolio ofYou may also provide voting instructions by telephone at 1-888-221-0697 or through the Fund whichwebsite located at www.proxyweb.com. (If you intend to provide instructions by phone or internet, you will be voted in accordance withneed the control number(s) appearing on your instructions
appears on the Voting Instruction Form for each Portfolio.Form(s).)
Voting Instruction Forms must be received, or phone or internet instructions must be provided, prior to 12:00 noon, Central Time, on April 30,
2003.February 19, 2007. Shares of each Portfolio of the Northwestern Mutual Series Fund as to which no timely instructions are received will be voted by Northwestern Mutual in proportion to the instructions received from those contract and policy owners and payees who furnish timely instructions with respect to shares of that Portfolio (or the
Fund as a wholeall Portfolios for those proposals subject to a majority vote ofwhich will be voted on collectively by all Fund
shares)Portfolios).
We recommend that you instruct Northwestern Mutual to vote to elect the directorsDirectors designated in the Statement to Contract and that you answer YES toPolicy Owners and Payees and FOR each of the other proposals.
Sincerely,
/s/ Edward J. Zore
Edward J. Zore
President and Chief Executive
Officer
| Sincerely, | |
| Edward J. Zore | |
| President and Chief Executive Officer | |
| The Northwestern Mutual Life Insurance Company |
NORTHWESTERN MUTUAL SERIES FUND, INC.
720 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
1-414-271-1444
----------------------------
Notice of Special Meeting of Shareholders of
Northwestern Mutual Series Fund, Inc.
----------------------------
To
to be Held on May 1, 2003
February 20, 2007
To the shareholders (the "Shareholders"“Shareholders”) of each of the 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, and Money Market Portfolio (collectively, the "Portfolios"“Portfolios”):
NOTICE IS HEREBY GIVEN that a Special Meeting of the Shareholders (the "Special Meeting"“Special Meeting”) of Northwestern Mutual Series Fund, Inc. (“Northwestern Mutual Series Fund” or “NMSF”), will be held in Room
522 at the offices of The Northwestern Mutual Life Insurance Company, 720 East Wisconsin Avenue, Milwaukee, Wisconsin 53202, on May 1, 2003February 20, 2007 at 8:10:00 a.m., local
time,Central Time, for the following purposes:
1. To elect five directors, each of whom will serve a twelve-year term
until his or her successor is elected and qualified;
2. To approve an Investment Advisory Agreement with Mason Street
Advisors, LLC;
3. To amend certain of the fundamental investment restrictions of the
Portfolios:
(a) (i) To amend the Portfolios' fundamental investment restriction
regarding industry concentration. (This proposal applies to
all of the Portfolios except the Index 500 Stock Portfolio
and the Index 400 Stock Portfolio);
(ii) To amend the industry concentration investment restriction
of the Index 500 Stock Portfolio and Index 400 Stock
Portfolio to provide that such Portfolios may concentrate
their investments as defined under the Investment Company
Act of 1940, as amended. (This proposal applies only to the
Index 500 Stock Portfolio and Index 400 Stock Portfolio
only);
(b) To amend the Portfolios' fundamental investment restriction
regarding issuing senior securities and borrowing;
| 1. | To elect six Directors to Northwestern Mutual Series Fund’s Board of Directors. | ||
| 2. | To approve a proposal that will permit Mason Street Advisors, LLC (“MSA”), in its capacity as the investment advisor for the Northwestern Mutual Series Fund, subject to the approval of the Northwestern Mutual Series Fund Board of Directors, to enter into and materially amend agreements with unaffiliated sub-advisors without obtaining shareholder approval. | ||
| 3. | To approve an amendment to the Investment Advisory Agreement with MSA. | ||
| 4. | To approve an amendment to a component of the investment objective of the Balanced Portfolio. | ||
| 5. | To transact any other business that may properly come before the meeting or any postponements or adjournments thereof. | ||
Shareholders of record as of the close of business on February 28, 2003November 30, 2006 (the "Record Date"“Record Date”), are entitled to notice of, and to vote at, this Special Meeting or any adjournment or postponement thereof.
By Order of the Board of Directors,
/s/ Merrill C. Lundberg
Merrill C. Lundberg
| By Order of the Board of Directors, | |
| Randy M. Pavlick | |
| Secretary | |
| Northwestern Mutual Series Fund, Inc. |
Milwaukee, Wisconsin
March 28, 2003
January 4, 2007
STATEMENT TO CONTRACT AND POLICY OWNERS AND PAYEES
NML VARIABLE ANNUITY ACCOUNT A
NML VARIABLE ANNUITY ACCOUNT B
NML VARIABLE ANNUITY ACCOUNT C
NORTHWESTERN MUTUAL VARIABLE LIFE ACCOUNT
----------------------------
Soliciting Instructions for the
Voting of Shares of Northwestern Mutual Series Fund, Inc.,
at the Special Meeting of the Shareholders
to be Held May 1, 2003
----------------------------
STATEMENT TO CONTRACT AND POLICY OWNERS AND PAYEES
| TABLE OF CONTENTS | ||||
| Page | ||||
| Questions and Answers About the Special Meeting and this Statement | 1 | |||
| The Proposals | 8 | |||
| Proposal 1: | Election of six Directors to the Northwestern Mutual Series Fund Board of Directors. | 8 | ||
| Proposal 2: | To approve a proposal that will permit Mason Street Advisors, LLC, in its capacity as the investment advisor for the Northwestern Mutual Series Fund, subject to the approval of the Northwestern Mutual Series Fund Board of Directors, to enter into and materially amend agreements with unaffiliated sub-advisors without obtaining Shareholder approval. | 15 | ||
| Proposal 3: | To approve an amendment to the Investment Advisory Agreement with Mason Street Advisors, LLC. | 21 | ||
| Proposal 4: | To approve an amendment to a component of the investment objective of the Balanced Portfolio. | 26 | ||
| General Information about NMSF | 32 | |||
| Director and Officer Information | Appendix A | |||
| Nominating Committee Charter | Appendix B | |||
| Security Ownership of NMSF Management | Appendix C | |||
| Proposed Amended Investment Advisory Agreement between Mason Street Advisors, LLC, and Northwestern Mutual Series Fund, Inc. | Appendix D | |||
STATEMENT TO CONTRACT AND POLICY OWNERS AND PAYEES
NML VARIABLE ANNUITY ACCOUNT A
NML VARIABLE ANNUITY ACCOUNT B
NML VARIABLE ANNUITY ACCOUNT C
NORTHWESTERN MUTUAL VARIABLE LIFE ACCOUNT
QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING AND THIS STATEMENT
INFORMATION ABOUT VOTING
Q. Who is soliciting myWhy did you send me this booklet?
A. This booklet contains the Notice of Special Meeting of Shareholders (the “Notice”) and Statement to Contract and Policy Owners and Payees (also called a Proxy Statement) that provides you with information you should review before voting instruction?
A.on the Proposals that will be presented at the Special Meeting for the Portfolios of Northwestern Mutual Series Fund, Inc. (“Northwestern Mutual Series Fund” or “NMSF”) listed in the accompanying Notice and below (each a “Portfolio” and, collectively, the “Portfolios”).
Shares of the Portfolios are not sold directly to individuals. The Portfolios offer their shares through separate accounts of The Northwestern Mutual Life Insurance Company ("(“Northwestern Mutual"Mutual”) is
soliciting instructions for voting at, including the Special Meeting of the
Shareholders ofNML Variable Annuity Account A, NML Variable Annuity Account B, NML Variable Annuity Account C and Northwestern Mutual Series Fund, Inc. ("Northwestern Mutual
Series Fund" or "NMSF"Variable Life Account (collectively, the “Variable Accounts”). These instructionsmaterials are solicited frombeing provided to owners of individual variable annuity contracts and variable life insurance policies issued by Northwestern Mutual under which considerations or premiums and accumulated amounts are allocated to NMLthe Variable Annuity Account B
("Account B") or Northwestern Mutual Variable Life Account ("Variable Life
Account"), separate investment accounts of Northwestern Mutual.Accounts. Northwestern Mutual invests these amounts in shares of the Portfolios of NMSF (the "Portfolios").in accordance with instructions from owners of individual variable annuity contracts and variable life insurance policies. Although the shares of the Portfolios are owned by Northwestern Mutual, Northwestern Mutual intends to pass through its voting rights to you, and you will vote the shares of each Portfolio associated with your variable insurance contract and/or policy by providing voting instructions to Northwestern Mutual. Northwestern Mutual will vote the shares in accordance with instructions received from the owners and payees of Account B and the Variable Life Account.
Accounts.
References to “you” or “shareholder” throughout these materials includes shareholders of record (i.e., Northwestern Mutual) and contract and policy holders and payees.
Q. What is the purpose of this booklet?
A. The principal purpose of this Statement to Contract and Policy Owners and Payees is to provide you with important information regarding and seek your approval of the matters identified in the table below.
| Portfolios | ||||
| Proposal | Affected | |||
| 1. | To elect six Directors to the Board of Directors of NMSF | Each Portfolio | ||
| 2. | To permit Mason Street Advisors, LLC (“MSA”), in its capacity as the investment advisor for the Northwestern Mutual Series Fund, subject to the approval of the Northwestern Mutual Series Fund Board of Directors, to enter into and materially amend agreements with unaffiliated sub-advisors without obtaining shareholder approval. | Each Portfolio | ||
| 3. | To approve an amendment to the Investment Advisory Agreement with MSA. | Each Portfolio | ||
| 4. | To approve an amendment to a component of the investment objective of the Balanced Portfolio. | Balanced Portfolio | ||
| 5. | To transact such other business as may properly come before the meeting or any postponements or adjournments thereof. | Each Portfolio | ||
Q. Who is eligible to vote and to provide voting instructions?
A. NMSF is divided into fifteen separate Portfolios. NMSF issues a separate
classShareholders of capital stock for each Portfolio. Sharesrecord (i.e., Northwestern Mutual) at the close of each classbusiness on November 30, 2006 (the “Record Date”) are entitled to vote at the Special Meeting or any adjournment or postponement of capital
stockthe Special Meeting. Persons who owned variable annuity contracts or variable life insurance policies or were receiving payments under variable annuity payment plans on November 30, 2006 are held by Account B and the Variable Life Account in their
corresponding divisions.entitled to provide Northwestern Mutual with voting instructions. At the Special Meeting of the Shareholders, Northwestern Mutual will vote shares of NMSF in accordance with instructions received from persons who
own variable annuity contracts or variable life insurance policies or were
receiving payments under variable annuity payment plans on February 28,
2003. The number of NMSF shares for each division of Account Bthese contract and the
Variable Life Account for which the owner of a contract or policy may give
instructions is determined by dividing the contract's or policy's cash
value apportioned to that division, if any, on February 28, 2003, by the
per share value of the corresponding NMSF Portfolio on February 28, 2003.
holders and payees.
2
Portfolio shares as to which no timely instructions are received will be voted by Northwestern Mutual in proportion to the instructions received for those contract and policy owners and payees who furnish timely instructions for that Portfolio (or NMSF as a whole for those proposals subject to a
majority vote of all NMSF shares). If no instructions are received for 50%
or more of NMSF shares for which instructions may be given, Northwestern
Mutual may, in its discretion, vote all shares of NMSF allocated to Account
B and the Variable Life Account for one or more adjournments of the Special
Meeting to permit further solicitation of instructions.
Portfolio.
Q. How do I provide voting instructions?
A. You may provide voting instructions in writing by executing the enclosed Voting Instruction Form or Forms. You may also provide voting instructions by telephone at 1-888-221-0697 or through the website located atwww.proxyweb.com.(If you intend to provide instructions by phone or internet, you will need the control number(s) appearing on your Voting Instruction Form(s).) Voting Instruction Forms that are properly signed, dated and received, or phone or internet instructions that are properly placed, prior to the Special Meetingnoon, Central Time, on February 19, 2007, will be followed as specified. If you sign, date and return the Voting Instruction Form, but do not specify a vote for one or more of the Proposals, the shares which relate to your contract or policy will be voted for the Proposals on which you have not specified a vote as follows:
o
IN FAVOR of electing each of the
five directorsix Director nominees to the Board of Directors ofNMSFNMSF(Proposal 1);IN FAVOR of the proposal that would permit MSA, in itscapacity as the investment advisor for the Northwestern Mutual Series Fund, subject to theapproval of the Northwestern Mutual Series Fund Board of Directors, to enter into and materiallyamend agreements with unaffiliated sub-advisors without obtaining shareholder approval (Proposal
1)2);oIN FAVOR of approving the proposed amendment to the Investment Advisory Agreement
with Mason Street Advisors, LLCwithMSA (Proposal2)3);oIN FAVOR of
the proposed amendmentsan amendment tocertaina component of thefundamentalinvestmentrestrictions that apply to your Portfolio(s) (Proposals 3(a)-3(e)); o IN FAVORobjective of thereclassification of the Index 500 Stock Portfolio and the Index 400 Stock Portfolio as non-diversified funds under the Investment Company Act of 1940, as amended (the "1940 Act") and elimination of the diversification restriction as a fundamental investment restriction for such funds. (This proposal will be voted on by the shareholders of the Index 500 Stock Portfolio and the Index 400 Stock Portfolio only.) (ProposalBalanced Portfolio(Proposal 4); ando IN FAVORIn the discretion of Northwestern Mutual with respect to any other business that may properlycome before the
proposed elimination of certain of the fundamental investment restrictions that apply to your Portfolio(s) (Proposals 5(a)-5(h)).meeting or any postponements or adjournments thereof.
Q. If I sendprovide my Voting Instruction Form invoting instructions now as requested, can I change my instructions later?
A. You may revoke your instructions at any time prior to their exercisenoon, Central Time, on February 19, 2007, by submitting before the meeting, written notice of revocation or a properly completed, executed and later-dated instruction in writing.
2
writing, or by placing subsequent instructions by phone or the internet.
3
Q. How should I sign my Voting Instruction Form?
A. The following general rules for signing Voting Instruction Forms may be of assistance to you and may avoid the time and expense involved in validating your instruction if you fail to sign the Voting Instruction Form properly.
1.Individual Accounts: Sign your name exactly as it appears on the Voting Instruction Form.
2.Joint Accounts: Either party may sign, but the name of the party signing should conform exactly to a name shown in ourNorthwestern Mutual’s records.
3.All other accounts: The capacity of the individual signing the Voting Instruction Form should be indicated unless it is reflected in the form of ownership for your policy or contract. For example:
Ownership Record Valid Signature
---------------- --------------------
Corporate Accounts
(1) ABC Corp. ABC Corp.
(2) ABC Corp. John Doe, Treasurer
(3) ABC Corp., c/o John Doe Treasurer John Doe
(4) ABC Corp. Profit Sharing Plan John Doe, Trustee
Trust Accounts
(1) ABC Trust Jane B. Doe, Trustee
(2) Jane B. Doe, Trustee, v/t/d 12/28/78 Jane B. Doe
Custodian of Estate Accounts
(1) John B. Smith, Cust. John B. Smith
f/b/o John B. Smith, Jr., UGMA
(2) John B. Smith John B. Smith, Jr.
Executor
3
INFORMATION ABOUT THE PROPOSALS
| Ownership Record | Valid Signature |
| Corporate Accounts | |
| (1)ABC Corp. | John Doe, Vice President |
| (2)ABC Corp., c/o John Doe Treasurer | John Doe |
(3)ABC Corp. Profit Sharing Plan | John Doe, Trustee |
| Trust Accounts | |
| (1)ABC Trust | Jane B. Doe, Trustee |
| (2)Jane B. Doe, Trustee, u/t/d 12/28/78 | Jane B. Doe |
| Custodian of Estate Accounts | |
| (1)John B. Smith, Cust. f/b/o John B. Smith, Jr., UGMA | John B. Smith |
| (2)John B. Smith | John B. Smith, Jr. |
| Executor | |
Q. What isHow does Northwestern Mutual and the purpose of this Statement?
A. The principal purpose of this Statement to Owners and Payees is to seek
your approvalDirectors of the matters identified in the table below.
Portfolios
Proposal Affected
-------------------------------------------------- -------------------
1. To elect five directors each of whom will serve a Each Portfolio
twelve-year term or until his or her successor is
elected and qualified;
2. To approve an Investment Advisory Agreement with Each Portfolio
Mason Street Advisors, LLC
3. To approve amendments to certain fundamental
investment restrictions of the Funds:
3(a)(i): To approve a change to the Portfolios' Each Portfolio
fundamental investment restriction (except the Index
regarding industry concentration to 500 Stock Portfolio
provide greater investment flexibility and the Index 400
and to clarify the concentration policy Stock Portfolio)
to provide that concentration is
determined by looking at "net" assets
and to exempt from the 25% limitation
securities of other investment
companies;
(ii): To approve a change to the industry Index 500 Stock
concentration restriction of the Index Portfolio and Index
500 Stock Portfolio and Index 400 Stock 400 Stock Portfolio
Portfolio to provide that such funds may
concentrate their investments as defined
in the 1940 Act;
3(b): To approve a change to the Portfolios' Each Portfolio
fundamental investment restriction
regarding issuing senior securities and
borrowing to provide clarification and
to provide the Portfolios with greater
borrowing flexibility;
3(c): To approve a change to the Portfolios' Each Portfolio
fundamental investment restriction
regarding lending to provide greater
lending flexibility;
4
Proposal Solicited
-------------------------------------------------- -------------------
3(d): To approve a change to the Portfolios' Each Portfolio
fundamental investment restriction
regarding underwriting to provide
clarification;
3(e): To approve a change to the Portfolios' Each Portfolio
fundamental investment restriction
regarding investing in commodities to
provide flexibility as to the types of
investments which may be made by the
Portfolios;
4. To reclassify the Index 500 Stock Portfolio and Index 500 Stock
the Index 400 Stock Portfolio as non-diversified Portfolio and Index
funds under the 1940 Act and to eliminate the 400 Stock Portfolio
diversification restriction as a fundamental
investment restriction for such funds;
5. To eliminate certain fundamental investment
restrictions of the Funds:
5(a): To eliminate the Portfolios' fundamental Each Portfolio
investment restriction regarding (except the Index
diversification; 500 Stock Portfolio
and the Index 400
Stock Portfolio)
5(b): To eliminate the Portfolios' fundamental Each Portfolio
investment restriction regarding (except the T. Rowe
acquiring more than a certain percentage Price Small Cap
of securities of any one issuer; Value Portfolio and
the Capital
Guardian Domestic
Equity Portfolio)
5(c): To eliminate the Portfolios' fundamental Each Portfolio
investment restriction regarding (except the T. Rowe
effecting short sales; Small Cap Value
Portfolio and the
Capital Guardian
Domestic Equity
Portfolio)
5
Proposal Solicited
-------------------------------------------------- -------------------
5(d): To eliminate the Portfolios' fundamental Each Portfolio
investment restriction regarding (except the T. Rowe
purchasing securities on margin; Price Small Cap
Value Portfolio and
the Capital
Guardian Domestic
Equity Portfolio)
5(e): To eliminate the Portfolios' fundamental Each Portfolio
investment restriction regarding making
loans for non-business purposes and to
unseasoned issuers;
5(f): To eliminate the Portfolios' fundamental Each Portfolio
investment restriction regarding (except the T. Rowe
investment in other investment Price Small Cap
companies; Value Portfolio and
the Capital
Guardian Domestic
Equity Portfolio)
5(g): To eliminate the Portfolios' fundamental Each Portfolio
investment restriction regarding (except the T. Rowe
liquidity; Price Small Cap
Value Portfolio and
the Capital
Guardian Domestic
Equity Portfolio)
5(h): To eliminate the Portfolios' fundamental Each Portfolio
investment restriction regarding making (except the T. Rowe
investments for the purpose of Price Small Cap
exercising control or influence; and Value Portfolio and
the Capital
Guardian Domestic
Equity Portfolio)
6. To transact such other business as may properly Each Portfolio
come before the meeting or any postponements or
adjournments thereof.
6
Q. How do the Directors and Northwestern Mutual Series Fund recommend that I instruct the shares to be voted?
A. TheNorthwestern Mutual and the Board of Directors andof Northwestern Mutual Series Fund recommend that you instruct Northwestern Mutual to vote to elect each of the Directors designated in this Statement to Contract and Policy Holders and Payees and FOR each proposal.
of the other proposals.
Q. Who owns the shares of the Portfolio?
A. As of February 28, 2003November 30, 2006, there were 5,932,062,925.8777,114,793,908.634 shares of NMSF outstanding. All of the outstanding shares of NMSF are held by Northwestern Mutual and therefore it is the only shareholder of NMSF. Northwestern Mutual Series Fund. The holds these
4
shares of NMSF are allocated to the separate
investment accounts of Northwestern Mutualfor its General Account and held as general assets.for its Variable Accounts used for variable annuity contracts and variable life policies. As of February 28, 2003the close of business on November 30, 2006, Northwestern Mutual held title to shares of the Portfolios allocated among the separate accountsGeneral Account and heldthe Variable Accounts as general assets
as follows:
| Index 500 | Select | Money | ||||||
| Stock | Bond | Market | ||||||
| Portfolio | Portfolio | Portfolio | ||||||
| NML Variable Annuity Account A | 23,113,304.923 | 24,945,760.390 | 17,861,912.910 | |||||
| NML Variable Annuity Account B | 340,294,319.069 | 612,137,707.403 | 233,509,878.220 | |||||
| NML Variable Annuity Account C | 29,719,747.351 | 11,893,961.569 | 3,078,943.890 | |||||
| Variable Life Account | 246,664,433.798 | 111,410,260.023 | 131,782,192.200 | |||||
| General Account | ----- | ----- | ----- | |||||
| Total | 639,791,805.141 | 760,387,689.385 | 386,232,927.220 | |||||
| Balanced | Large Cap | Growth | ||||||
| Portfolio | Core Stock | Stock | ||||||
| Portfolio | Portfolio | |||||||
| NML Variable Annuity Account A | 85,791,438.692 | 10,691,147.522 | 9,337,931.936 | |||||
| NML Variable Annuity Account B | 1,217,380,895.699 | 211,934,250.458 | 160,340,989.441 | |||||
| NML Variable Annuity Account C | 35,110,223.886 | 18,229,566.258 | 12,770,220.898 | |||||
| Variable Life Account | 165,684,847.477 | 157,290,115.609 | 138,790,018.995 | |||||
| General Account | ----- | ----- | ----- | |||||
| Total | 1,503,967,405.754 | 398,145,079.847 | 321,239,161.270 | |||||
| Aggressive | High Yield | Franklin Templeton | ||||||
| Growth | Bond | International Equity | ||||||
| Stock | Portfolio | Portfolio | ||||||
| Portfolio | ||||||||
| NML Variable Annuity Account A | 13,005,949.083 | 8,571,789.367 | 20,328,524.723 | |||||
| NML Variable Annuity Account B | 198,543,201.075 | 264,900,475.406 | 372,139,358.849 | |||||
| NML Variable Annuity Account C | 22,789,935.768 | 8,683,370.380 | 40,943,802.485 | |||||
| Variable Life Account | 120,368,416.951 | 92,820,647.023 | 230,823,656.216 | |||||
| General Account | ----- | ----- | ----- | |||||
| Total | 354,707,502.877 | 374,976,282.176 | 664,235,342.273 | |||||
| Small Cap | T. Rowe Price | International | ||||||
| Growth | Small Cap | Growth | ||||||
| Stock Portfolio | Value Portfolio | Portfolio | ||||||
| NML Variable Annuity Account A | 6,059,534.605 | 5,539,211.714 | 5,061,166.037 | |||||
| NML Variable Annuity Account B | 108,690,907.860 | 97,992,620.275 | 101,992,804.256 | |||||
| NML Variable Annuity Account C | 15,515,646.447 | 589,548.355 | 617,423.370 | |||||
| Variable Life Account | 92,694,448.835 | 70,516,372.521 | 45,657,393.781 | |||||
| General Account | ----- | ----- | ----- | |||||
| Total | 222,960,537.747 | 174,637,752.865 | 153,328,787.444 | |||||
5
| Index 400 | Capital Guardian | Asset Allocation | ||||||
| Stock Portfolio | Domestic | Portfolio | ||||||
| Equity Portfolio | ||||||||
| NML Variable Annuity Account A | 8,725,029.450 | 7,833,189.398 | 8,530,554.184 | |||||
| NML Variable Annuity Account B | 176,039,518.636 | 195,793,617.669 | 191,435,091.960 | |||||
| NML Variable Annuity Account C | 22,674,414.725 | 1,088,649.626 | 1,647,726.192 | |||||
| Variable Life Account | 130,186,360.800 | 103,246,984.855 | 29,642,072.707 | |||||
| General Account | ----- | ----- | ----- | |||||
| Total | 337,625,323.611 | 307,962,441.548 | 231,255,445.043 | |||||
| AllianceBernstein | Janus Capital | |||||||
| Mid Cap Value | Appreciation | T. Rowe Price Equity | ||||||
| Portfolio | Portfolio | Income Portfolio | ||||||
| NML Variable Annuity Account A | 1,349,137.993 | 2,865,067.855 | 3,442,942.041 | |||||
| NML Variable Annuity Account B | 31,397,673.994 | 48,465,112.447 | 62,303,225.355 | |||||
| NML Variable AnnuityAccount C | 277,462.297 | 378,939.538 | 219,277.862 | |||||
| Variable Life Account | 16,898,808.934 | 28,929,127.393 | 29,616,965.687 | |||||
| General Account | 29,253,642.236 | ----- | 27,943,040.801 | |||||
| Total | 79,176,725.454 | 80,638,247.233 | 123,525,451.746 | |||||
Northwestern Mutual Life will vote the shares of NMSF allocated to Account
B and the Variable Life AccountAccounts in accordance with the instructions received from contract and policy owners and payees. Shares allocatedPortfolio shares as to NML Variable Annuity Account A and NML Variable Annuity Account C, which no timely instructions are separate investment accounts of Northwestern Mutual Life used in
connection with annuity contracts offered to HR-10 and corporate pension
and profit-sharing plans,received will be voted by Northwestern Mutual in proportion to the same
proportion as it votes the rest of the shares.instructions received for those contract and policy owners and payees who furnish timely instructions for that Portfolio. Northwestern Mutual Life
will also vote shares of a Portfolio held in its General Account in the same proportion as it votes the rest of the shares of the Portfolio. Each of the
matters to be considered at the Special Meeting will be determined by a
majority vote.
shares.
Northwestern Mutual may, if required by state insurance officials, disregard voting instructions which would require shares of a Portfolio to be voted for a change in the sub-classification or investment objectives of a Portfolio, or to approve or disapprove an investment advisory agreement for a Portfolio. Northwestern Mutual may also disregard voting instructions that would require changes in the investment policy or investment adviseradvisor for a Portfolio, provided that Northwestern Mutual reasonably determines to take this action in accordance with applicable federal law. If Northwestern Mutual disregards voting instructions, a summary of the action and reasons therefortherefore will be included in the next semi-annual report to the owners of the contracts and policies.
8
Q. What other business will be discussed at the Special Meeting?
A. The Board of Directors of NMSF does not intend to present any matters before the Special Meeting other than as described in this Statement, and is not aware of any other matters to be brought before the meeting or any adjournments thereof by others. IF ANY OTHER MATTER LEGALLY COMES BEFORE THE MEETING,
THE SHARES OF EACH PORTFOLIO WHICH SUPPORT YOUR POLICY OR CONTRACT WILL BE
VOTED IN THE DISCRETION OF NORTHWESTERN MUTUAL.
6
If any other matter legally comes before the meeting, the shares of each Portfolio which support your policy or contract will be voted in the discretion of Northwestern Mutual.
Q. How are the Portfolios managed?
A. Northwestern Mutual Series Fund is an open-end, management investment company organized under the laws of the stateState of Maryland, with principal offices located at 720 East Wisconsin Avenue, Milwaukee, WI 53202. Under Maryland law, each Portfolio is a series of NMSF. The management of the business and affairs of NMSF is the responsibility of the NMSF Board of Directors. The Board oversees the Portfolios'Portfolios’ operations, including reviewing and approving the Portfolios' contracts with Mason Street
Advisors, LLC ("MSA"), the NMSF's investment adviser,MSA, and with respect to sub-advised Portfolios for which MSA has appointed a sub-advisor, the Portfolios'Portfolios’ respective sub-advisers. NMSF'ssub-advisors. NMSF’s officers are responsible for the day-to-day management and administration of the Portfolios'Portfolios’ operations. The Portfolio'sPortfolios’ investment adviseradvisor and, if applicable, sub-advisers,sub-advisors, are responsible for selection of individual portfolio securities and for the assets assigned to them.
Q. Who do I contact with questions regarding the Proposals?
A. For questions regarding the Proposals addressed in this Statement, please call the Proxy Information Line at 1-800-225-5665, Monday through Friday from 7:30 am to 5:00 pm, Central Time. You may also contact your Northwestern Mutual Financial Representative for more information.
Q. How can I obtain more information about the Portfolios?
A. The most recent Annual Report for Account B andReports for the Variable Life
AccountAccounts have been mailed to owners of the contracts and policies. These reports include audited financial statements for NMSF'sNMSF’s fiscal year ended December 31, 2002.2005. The most recent Semi-Annual Reports for the Variable Accounts, which contain unaudited financial statements for the six-month period ended June 30, 2006, have also been mailed to owners of the contracts and policies. If you have not received an Annual or Semi-Annual Report for Account B
or thea Variable Life Account, or would like to receive additional copies, free of charge, please contact your Northwestern Mutual Financial Representative, write The Northwestern Mutual Life Insurance Company, 720 East Wisconsin Ave., Milwaukee, Wisconsin, 53202-4797, or call us at 1-888-455-2232.1-888-455-2232 (variable annuities) or 1-866-424-2609 (variable life). The reportsReports are also available on our Websitethe Northwestern Mutual website at www.northwesternmutual.com.
9
www.nmfn.com.
7
THE PROPOSALS
PROPOSAL 1:
ELECTION OF DIRECTORS TO THE BOARD OF DIRECTORS OF NMSF
(All
(All Portfolios)
Which Portfolios'Portfolios’ Shareholders will vote on this Proposal 1?
Proposal 1 applies to all Shareholders of all Portfolios as of the Record Date.
Date, voting together.
Who are the nominees for directors?
At a meeting held on February 6, 2003, theDirectors?
The Board determined to present
Messrs. Louisof Directors of NMSF currently consists of Miriam A. Holland,Allison, William A. McIntosh, Michael G. Smith and Edward J. Zore. At its meeting on December 12, 2006, the NMSF Nominating Committee unanimously nominated Robert H. Huffman III and Michael M. Knetter for election as Directors, and the Board of NMSF unanimously approved the presentation of Messrs. Huffman and Knetter to the shareholders with a recommendation that the shareholders elect each as a Director of NMSF. Also at its December meeting, the Board determined to present to shareholders Messrs. McIntosh, Smith and Zore (who had previously been elected to the Board by the shareholders) for re-election, and Ms. Elizabeth L. Majers as the five director nominees to beAllison (who has not previously been elected by the Shareholdersshareholders) for election. Ms. Allison, and Messrs. McIntosh, Smith, Zore, Huffman and Knetter, are referred to hold office for twelve-year terms or until their successors are
elected and qualified.
as the “nominees.”
The following table below sets forth certain information concerning the nominees.nominees as of October 31, 2006. Messrs. McIntosh and Zore each have served as directorsDirectors of NMSF since their election by the Board on May 8, 1997, and May 18, 2000, respectively. Except forBoth were subsequently elected as Directors by the shareholders on May 1, 2003. Mr. Smith has served on the Board since his election by the shareholders on May 1, 2003. Ms. Allison has served as a director since her election by the Board on August 3, 2006. Messrs. ZoreHuffman and McIntosh, none of the other nomineesKnetter do not currently serve as a
directorDirectors of either Northwestern Mutual Series Fund ("NMSF" or "Series Fund") or
Mason Street Funds, Inc. ("MSF"), both of which are advised by MSA.NMSF.
With the exception of Mr. Zore, none of the nominees is an "interested person"“interested person” of NMSF as defined in Section 2(a)(19) of the Investment Company Act of 1940, Act andas amended (the “1940 Act”). As of the Record Date, no nominee beneficially owned more than 1% of the shares of any Portfolio and the nominees and their immediate families as a group also beneficially owned less than 1% of the Record Date.
shares of any Portfolio. Additional information regarding the nominees, including information regarding the dollar range of Portfolio securities beneficially owned by each nominee, is included in Appendix A to this Statement.
8
| Number of | ||||||||||
| Portfolios in | ||||||||||
| Term of | Fund | |||||||||
| Office | Complex | |||||||||
| Position(s) | and | Overseen | ||||||||
| Nominee Name, | Held | Length | by Director | Other | ||||||
| Age and | With | of Time | Principal Occupation During | or Nominee | Directorships | |||||
| Address | Fund | Served2 | Past Five Years | for Director | Held | |||||
| Independent | ||||||||||
| Directors3 | ||||||||||
| Miriam M. Allison (59) | Director | Since 2006 | Rancher since 2004. Real estate developer since 2002. From 2001 |
| 18 Portfolios | None | |||||||||
| William A. McIntosh | Director | Since 1997 | Financial | |||||||
| 18 Portfolios | MGIC Investment Corporation | |||||||||
| Michael G. Smith | Director | Since 2003 | Private | 18 Portfolios | Trustee of Ivy Fund (26 portfolios) | |||||
| Robert H. Huffman III (46) | None | N/A | Since 2004, Co-Founder and Managing Partner of Relative Value Partners, LLC, a registered investment | 18 Portfolios | None |
9
| Number of | ||||||||||
| Portfolios in | ||||||||||
| Term of | Fund | |||||||||
| Office | Complex | |||||||||
| Position(s) | and | Overseen | ||||||||
| Nominee Name, | Held | Length | by Director | Other | ||||||
| Age and | With | of Time | Principal Occupation During | or Nominee | Directorships | |||||
| Address1 | Fund | Served2 | Past Five Years | for Director | Held | |||||
| Independent | ||||||||||
| Directors3 | ||||||||||
| Michael M. Knetter (46) | None | N/A | Dean of University of Wisconsin-Madison School of Business since 2002. Prior thereto, Associate Dean of the MBA program and Professor of International Economics for the Amos Tuck School of Business at Dartmouth College. | 18 Portfolios | Wausau Paper Corp. and Great Wolf Resorts, Inc. | |||||
| Management | ||||||||||
| Director4 | ||||||||||
| Edward J. Zore | Director | Since 2000 | President and Chief Executive | 18 Portfolios | Manpower, Inc. | |||||
1 The address for each nominee is c/o Northwestern Mutual Series Fund, Inc., 720 East Wisconsin Ave., Milwaukee, Wisconsin, 53202-4797, Attention: Secretary.
2 The NMSF By-laws provide that directors will hold office until the next annual meeting of shareholders and until a partnersuccessor is elected and qualifies, or until his or her death, resignation or removal, provided no director may serve a term or successive terms totaling more than twelve (12) years. The twelve year service limitation commences on the later of May 1, 2003 or the date of the director’s initial election or appointment as a director. Because NMSF does not anticipate holding an annual meeting unless otherwise required by the Investment Company Act of 1940, as amended (“1940 Act”), as a practical matter each of the directors may serve for a term of up to 12 years. A director who attains age seventy on or before the second Wednesday in March must retire not later than the law firmsecond Wednesday of McDermott Will & Emery
("MWE"). MWE hasthe following calendar year.
10
3 These are the director nominees who are not acted as legal counsel to NMSF, its investment adviser,
MSA, Mason Street Funds, Inc. ("MSF") or MSF's principal underwriter, NMIS, in
the past two fiscal years, nor does NMSF believe MWE has engaged in material
transactions with“interested persons” of NMSF or anyMSA, as that term is defined in Section 2(a)(19) of its affiliates, including the receipt1940 Act. They are referred to in this Statement as “Independent Directors.”
4 Mr. Zore is an “interested person” of legal
fees from NMSF's affiliates which were material to eitherNMSF, as defined in Section 2(a)(19) of the NMSF's affiliates
or to MWE. MWE has from time to time represented1940 Act, because he is the President and Chief Executive Officer and a Trustee of Northwestern Mutual, and its
affiliates (other than the Fund, the Series Fund,parent company of MSA, or NMIS) in connection
with certain legal matters, and
12
has represented investor/lender groups (of whichNMSF’s investment advisor. Mr. Zore is also a Director of Northwestern Mutual wasWealth Management Company and Frank Russell Company, corporate affiliates of Northwestern Mutual. Mr. Zore is referred to in this Statement as a party) in connection with financing and/or restructuring matters, and may in the
future represent Northwestern Mutual either directly in connection with such
matters, or indirectly in MWE's capacity as legal counsel to the investor/lender
group. For the year ended December 31, 2001 and 2002, MWE received legal fees
from Northwestern Mutual totaling $85,543 and $5,380, respectively. In addition,
for the year ended December 31, 2001 and 2002, MWE did represent investor/lender
groups of which Northwestern Mutual was a part, in which case the legal fees
generally were not paid by Northwestern Mutual or the investor/lender group.
“Management Director.”
Why are directorsDirectors being elected at the present time?
NMSF currently has five
Since October 2005, two directors resigned and one died. This left three directors (Messrs. McIntosh, Smith and Zore), all of whom havehad previously been elected by NMSF'sthe shareholders. Mr. William J. Blake was first elected as a
director ofPursuant to the NMSF by the shareholders on March 9, 1988. Messrs. Stephen N. Graff
and Martin F. Stein were elected as directors by the shareholders on March 29,
1995. As noted above, Messrs. Edward J. Zore and William A. McIntosh were
elected byBy-laws, the Board has established that, for the continued efficient conduct of NMSF’s business and to provide the Board with the flexibility to address future changes in the Directors, but have not been elected by the shareholderssize of NMSF.
Pursuant to NMSF's By-laws, Mr. William J. Blake will no longerthe Board shall be eligible
to serve as a director because he attained age 70 in 2002. Mr. Blake will retire
as a director effective May 1, 2003.six directors. In August 2006, the Board filled one vacancy with the election of Ms. Allison. Under the 1940 Act, shareholder meetings
must be held to electthe directors whenever fewer thanin office may fill a majorityvacancy provided upon filling the vacancy at least two-thirds of the directors have been elected by the shareholders. Consequently, duethe Board is unable to Mr. Blake's retirementfill the remaining vacancies on their own and must present the fact that Messrs. Zore and McIntosh have not been elected bynominees to fill the remaining two vacancies to the shareholders fewer than a majority of the Board's members will have been
elected by shareholders at the effective date of Mr. Blake's retirement.
Onfor their election.
How long would each nominee serve?
In February 6, 2003, the Board unanimously adopted a resolution increasing
the number of directors from five to seven (effective May 1, 2003)Directors amended NMSF’s By-laws to provide for three additional Board seats to be filled by outside directors and approveda twelve-year term of service limitation commencing on the five director nominees to be elected by shareholders at the Special Meeting.
This Proposallater of May 1, will not affect the status of the two persons currently serving
as Directors who are not nominated for election by shareholders at the Special
Meeting and these Directors, Messrs. Stephen N. Graff and Martin F. Stein, will
continue to hold office.
Each of the nominees, if elected, as well as the two current directors who
are not being elected by shareholders, will serve for twelve-year terms
commencing as of2003, or the date of the Special Meeting,Director’s election or appointment to the Board. For purposes of this term limitation, Messrs. McIntosh, Smith and Zore, if re-elected, will continue to serve twelve-year terms that commenced on May 1, 2003, or until their earlier death, resignation, retirement or removal from office and election and qualification of their successors. On February 6, 2003,Ms. Allison, if elected, will continue to serve a twelve-year term that commenced upon her appointment by the Board on August 3, 2006, or until her earlier death, resignation, retirement or removal from office and election and qualification of Directors amended NMSF's
By-laws to provideher successor. Messrs. Huffman and Knetter, if elected, will serve for twelve-year terms for service oncommencing as of the Boarddate of Directors.
In considering the nominees for election as directors of MSF, the Board
considered the qualifications ofSpecial Meeting, or until each of their earlier death, resignation, retirement or removal from office and election and qualification of their respective successors. Notwithstanding the nominees andforegoing, NMSF By-laws provide that a Director who has attained age seventy (70) on or before the concern forsecond Wednesday in March, shall retire not later than the continued efficient conduct of NMSF's business. In particular, the Board
considered the requirementssecond Wednesday of the 1940 Act as they apply to the election of the
five nominees. Except
13
following calendar year.
11
What are the responsibilities of the Board and how often does the Board meet?
The Board is responsible for the general oversight of the business of Northwestern Mutual Series Fund and for ensuring that the Portfolios are managed in the best interests of each Portfolio'sPortfolio’s respective investors. The Board periodically reviews the Portfolios'Portfolios’ investment performance as well asand the quality of the other services provided to the Portfolios and their shareholders by the Portfolios'Portfolios’ service providers. At least annually, the Board reviews the fees paid by the Portfolios for these services and the overall level of the Portfolios'Portfolios’ operating expenses. The Board typically conducts regular meetings in person four times a year to review the performance and operations of the Portfolios. In addition, the Board or any Committeecommittee may hold special meetings by telephone or in person to discuss specific matters that may require action prior to the next regular meeting.
There were four regular meetings and no special meetings of the Board of Directors held during the fiscal year ended December 31, 2002. All of the
directors2005. Messrs. McIntosh, Smith and Zore attended at least 75%all of the meetings of the Board of Directors held during that time.
the fiscal year ended December 31, 2005.
What are the committees of the Board?
The Board of directors has an Audit Committee whichthat is composedcomprised of theMs. Allison and Messrs. Blake, McIntosh and Stein,Smith, who currently constitute all of whom are independent directors under
the 1940 Act.NMSF’s Independent Directors. The purpose of the Audit Committee is to act for the Board in overseeing the integrityaccounting and financial reporting of NMSF's financial statements.NMSF. To perform this function, the Audit Committee has direct access to NMSF's officesNMSF’s officers and internal auditors, as well as NMSF'sNMSF’s independent auditors. In addition, the Audit Committee may meet with other members of management and employees when in its judgment such meetings are warranted. The Audit Committee met four times during the fiscal year ended December 31, 2002. All members2005, and has met four times during 2006. Messrs. McIntosh and Smith attended all of the meetings of the Audit Committee attended all ofheld during the Audit Committee meetings.
fiscal year ended December 31, 2005.
The Board also has a standing Nominating Committee. The Nominating Committee which also is currently composed of Ms. Allison and Messrs. Blake, McIntosh and Stein.Smith. The function of the Nominating Committee is to make nominationsidentify qualified individuals to become members of the Board in the event that a position is vacated or created, consider all candidates proposed to become members of the Board, nominate, or recommend for independent director membershipnomination by the Board, candidates for election as directors, and set any necessary standards or qualifications for service on the Board. The Nominating Committee willmay solicit suggestions for nominations from any source it deems appropriate. In addition, the Nominating Committee may consider qualified director candidatesand evaluate nominee recommendations from Northwestern Mutual, the sole shareholder of NMSF. Shareholders who wish to recommend a nominee should send the recommendation to NMSF’s Secretary. Recommendations from shareholders are subject to such procedural requirements as may be imposed by the Committee from time to time. Messrs. Huffman and Knetter
12
were recommended as nominees by investors as and when the need arises, in the Committee's sole discretion, to
fill any vacancies on the Board resulting from the death, resignation,
retirement or removal ofexisting independent directors. A copy of the Charter of the Nominating Committee is attached as Appendix B to this Statement. The Nominating Committee meets when necessary to consider nomination of new directors. The Nominating Committeenominees. It did not have occasion to meet during the fiscal year ended December 31, 2002.
14
What are the directorsDirectors paid for their services?
The table below provides compensation details for each of the current directorsDirectors of NMSF.NMSF relating to their service as Directors for the fiscal year ended December 31, 2005. In addition, the table shows the total amount of compensation paid to each directorof the current Directors by NMSF and Mason Street Fundsthe fund complex during the fiscal year
ended December 31, 2002,2005, including compensation paid by MSA. Ms. Allison and Messrs. Huffman and Knetter were not directors during 2005 and therefore are not included in the investment adviser.
chart.
| Pension or | Estimated | Total Compensation | ||
| Aggregate | Retirement Benefits | Annual | From Registrant | |
| Compensation | Accrued As Part of | Benefits Upon | and Fund Complex* | |
| Director | From Registrant | Fund Expenses | Retirement | Paid to Directors |
| William A. McIntosh | None | None | None | 60,000 |
| Michael G. Smith | None | None | None | 60,000 |
| Edward J. Zore | None | None | None | None |
* As ofDuring 2005, the date of this Statement, the "Fund Complex"“Fund Complex” consisted of NMSF and Mason Street Funds.Funds, Inc., a registered open-end investment company for which MSA served as investment advisor. As of March 31, 2006, the investment adviser to the NMSF, paid eachportfolios of the directors of NMSF
a $20,000 retainer and $3,000 per meeting of the Board of Directors of the NMSF
attended during the fiscal year ended December 31, 2002. NMSF and Mason Street Funds, payInc., were reorganized into newly created and existing funds that are part of mutual fund families not overseen by the Directors.
NMSF pays no salaries or compensation to any of theirits officers or directors who
are employed by Northwestern Mutual or MSA.directors. For the 2005 fiscal year, MSA paid on behalf of NMSF each of the Independent Directors then in office directors’ fees in the amount of $45,000, consisting of a $27,000 retainer paid in January and $18,000 in meeting fees. For the 2005 fiscal year, Mason Street Funds, paysInc., paid each of the independent directors an annualIndependent Directors then in office directors’ fees totaling $15,000, consisting of a $9,000 retainer of $5,000, paid in April of eachand $6,000 in meeting fees.
For the 2006 fiscal year, MSA pays each Independent Director a retainer of $35,000 (or a pro rata portion if the director serves for less than the full year), plus $5,000 per regular meeting attended. Director compensation is established by the Directors and $2,000 peris reevaluated annually, typically at its meeting of the Board of Directors of Mason Street Funds
attended.in February. NMSF and Mason Street Funds neither paypays nor accrueaccrues any pension or retirement benefits for the benefit of any director.
Director.
13
Who are the other officers and directorsOfficers of NMSF?
Set forth in
Appendix A is a listing ofand C contain certain information concerning the current Directors of NMSF and
the principal executive officers of NMSF (and portfolio managersNMSF. These officers are appointed by the Board and are not being presented for election by the Portfolios), including their names, ages, position(s) with NMSF, and principal
occupation or employment during the past five years.
On February 28, 2003, the directors and officers of NMSF and director
nominees, as a group, beneficially owned less than 1% of the shares of NMSF and
each Portfolio of NMSF outstanding on that date. Please see Appendix B for
information on the dollar range of indirect interest in each Portfolio of NMSF
owned by each director and director nominee and the dollar range of Mason Street
Funds shares owned by each director and director nominee.
shareholders.
What vote is required to elect the nominees to the Board of Directors of NMSF?
Under Maryland law, the directors are to be elected bynominees for director receiving the vote of a plurality vote.of the outstanding voting shares of NMSF cast at a shareholders meeting shall be elected. Shareholders of all Portfolios will vote together on the election of directors. Therefore, the fivesix nominees who receive the greatest number of affirmative votes cast by the Shareholders of NMSF who are present at the Special Meeting in
person or by proxy will be declared elected. 15
Northwestern Mutual intends, in the absence of contrary instructions, to
vote all of the outstandingPortfolio shares in favor of the election of each nominee. You
may instruct Northwestern Mutual to vote for or refrain from voting with respect
to any or all of the nominees. If an executed Voting Instruction Form is
received without specifying instruction as to a vote as to this proposal, the
shareswhich no timely voting instructions are received will be voted by Northwestern Mutual in proportion to the instructions received for each of the nominees named herein.
those contract and policy owners and payees who furnish timely voting instructions.
Each of the nominees has consented to being named in this Statement to Contract and Policy Holders and Payees and to serve if elected. NMSF knows of no reason why any nominee would be unable or unwilling to serve if elected. Should any of the nominees become unable or unwilling to accept nomination or election prior to the Special Meeting, Northwestern Mutual will exercise its voting power to vote for such substitute person or persons as the directorsDirectors of NMSF may recommend.
What is the Board'sNMSF Board’s recommendation on Proposal 1?
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTEFOR THE
ELECTION OF EACH OF THE FIVESIX NOMINEES TO SERVE ON THE BOARD OF
DIRECTORS.
14
PROPOSAL 2:
APPROVAL TO ENTER INTO AND MATERIALLY AMEND AGREEMENTS WITH
INVESTMENT SUB-ADVISORS ON BEHALF OF INVESTMENT ADVISORY AGREEMENT BY AND
BETWEEN NMSF AND MASON STREET ADVISORS, LLC
ONE OR MORE OF THE PORTFOLIOS
WITHOUT OBTAINING SHAREHOLDER APPROVAL
(All Portfolios)
Which Portfolios' shareholdersPortfolios’ Shareholders will vote on this proposal?Proposal 2?
Proposal 2 applies to shareholders of all Portfolios as of the Portfolios.
Record Date, voting separately by Portfolio. Approval of Proposal 2 with respect to a Portfolio requires the affirmative vote of the holders of a majority of the outstanding voting securities of the Portfolio, as discussed more fully below. The Proposal will be voted upon and implemented by Portfolio, without regard to the actions of the shareholders of any other Portfolio.
What are the shareholdersShareholders being asked to approve?
MSA serves as the investment advisor for each of the Portfolios pursuant to an Investment Advisory Agreement between MSA and NMSF (the “Advisory Agreement”). The Advisory Agreement authorizes MSA to employ one or more investment sub-advisors for the purpose of providing investment management services for any of the Portfolios. Pursuant to this authority, MSA has appointed investment sub-advisors for six of the Portfolios. The 1940 Act generally requires that the appointment of a new sub-advisor or a material modification of an existing sub-advisory agreement for a Portfolio must be approved by the Portfolio’s shareholders. Consequently, if MSA and the NMSF Board determined that it was in the best interests of a Portfolio to replace a sub-advisor, materially amend the terms of an existing arrangement, or appoint a sub-advisor, they must seek the approval of the Portfolio’s shareholders.
In order to provide MSA and the Board with increased flexibility to hire, terminate, and replace sub-advisors without incurring the significant delay and expense associated with obtaining shareholder approval, MSA and NMSF obtained an exemptive order (the “Order”) from the Securities and Exchange Commission (“SEC”). Provided certain conditions are met, the Order would permit MSA to enter into a new sub-advisory agreement or materially amend an existing sub-advisory agreement, subject to approval by the NMSF Board (including a majority of its Independent Directors), but without obtaining the approval of a Portfolio’s shareholders. Such an advisory structure is often referred to as a "manager of managers" arrangement. MSA
15
and the Board can operate a Portfolio as a manager of managers fund in reliance upon the Order only if, among other conditions, the Portfolio’s shareholders have approved the manager of managers arrangement.
Shareholders of each of the Portfolios are therefore being asked to approve the operation of the Portfolios as a manager of managers fund. If Proposal 2 is adopted by a Portfolio, MSA in its capacity as investment advisor for the Portfolio, will be permitted to enter into sub-advisory agreements with respect to the Portfolio, or to materially modify certain sub-advisor agreements with prior approval by the NMSF Board, but without such sub-advisory agreements being approved by the shareholders of the Portfolio. While the Board is seeking the authority for a manager of manager’s arrangement for each of the Portfolios, neither the Board nor MSA have any current plans to hire a sub-advisor for a Portfolio that is not currently managed by a sub-advisor, nor do they have any current plans to add additional sub-advisors to those Portfolios that are managed by sub-advisors. NMSF will implement the new structure and rely on the Order at such time as all of the conditions of the Order are satisfied.
Who would approve sub-advisory agreements under the manager of managers arrangement?
Under this Proposal, the NMSF Board will continue to provide oversight of the sub-advisor selection and engagement process. The Board, recommendsincluding a majority of the Independent Directors, will continue to evaluate and consider for approval all new or amended sub-advisory agreements, and their approval will be required before entering into or materially amending any sub-advisory agreements. Inaddition, under the 1940 Act and the terms of the sub-advisory agreements, the Board, including a majority of the Independent Directors, are required to review annually and consider for renewal each sub-advisory agreement after the initial term. MSA and the sub-advisors have a legal duty to provide to the Board information on pertinent factors relating to the approval, renewal or amendment of a sub-advisory agreement. If the shareholders of a Portfolio approve this Proposal, however, a shareholder vote will no longer be required to approve new sub-advisory agreements or material changes to existing sub-advisory agreements, thereby limiting somewhat the shareholders' control over the Portfolios' operations.
How would a manager of managers arrangement benefit the Portfolios?
The Board believes that it is in the best interests of the shareholders of each Portfolio approveto provide MSA and the Board with increased flexibility to hire, terminate, and replace sub-advisors without incurring the significant delay and potential expense associated with obtaining shareholder approval. A manager of managers arrangement would permit the Portfolios to operate more efficiently and cost-effectively. Currently, NMSF must call and hold a shareholder meeting of a Portfolio before it appoints a new Investmentor replacement sub-advisor, or materially amends a sub-advisory agreement. Additionally, NMSF currently must seek shareholder approval of a new sub-advisory
16
agreement if a sub-advisor is acquired by another company, even if there will be no change in the persons managing the Portfolio. Each time a shareholder meeting is called, NMSF must create and distribute proxy materials and solicit proxy votes from the affected Portfolio's shareholders, and Northwestern Mutual must distribute these materials to and seek directions from the holders of variable annuity contracts and variable life insurance policies. This process is time-consuming and could be costly for NMSF.
Under the terms of the Advisory Agreement, byMSA is responsible for the payment of expenses associated with shareholder meetings with respect to the Balanced, Select Bond and Money Market Portfolios, except to the extent they consist of extraordinary or non-recurring expenses incurred in connection with the operation of these Portfolios. With respect to these three Portfolios, the principal benefit of a manager of managers arrangement will be the increased speed with which the Board can replace an underperforming sub-advisor, hire a new sub-advisor, or modify an existing sub-advisory agreement. Each of the remaining 15 Portfolios and not MSA is responsible for the payment of expenses associated with shareholder meetings. In the past, MSA has assumed those expenses, although it is under no legal obligation to do so (except with respect to any expense waiver or reimbursement agreements it may have or in the future enter into).
Currently, for those Portfolios where MSA determines not to manage the assets directly itself, MSA in its capacity as investment advisor, evaluates potential subadvisors based on their skills in managing assets pursuant to a particular investment style. MSA may then recommend the hiring of the sub-advisor to the Board. If the Board agrees, the recommendation is submitted to the Portfolio’s shareholders for approval. Once a sub-advisor is hired, MSA engages in an ongoing analysis of the continued advisability of retaining the sub-advisor. MSA also negotiates and renegotiates the terms of sub-advisory agreements with the sub-advisor as circumstances warrant and makes recommendations to the Board, as needed. MSA may also recommend to the Board that the services of a sub-advisor be terminated. In determining whether to recommend to the Board the termination of a sub-advisor, MSA considers several factors, including the sub-advisor’s performance record while managing a particular Portfolio. Any replacement sub-advisor must be presented to the Portfolio’s shareholders for approval.
If shareholders approve this Proposal, they would have less control over the Portfolios. However, such an approach would avoid the considerable time delay and potential costs associated with seeking shareholder approval for entering into or materially modifying sub-advisory agreements. Further, such an approach would be consistent with current expectations that MSA will use its experience and expertise to recommend qualified candidates to serve as sub-advisors.
17
The approval of the Proposal would not alter the existing requirement that any material amendment to the Advisory Agreement between NMSF and MSA be approved by shareholders and otherwise made in compliance with the 1940 Act and applicable regulations governing shareholder approval of advisory agreements.
Would a manager of managers arrangement affect the advisory fees paid by the portfolios to MSA or the quality of advisory service the portfolios receive?
This Proposal does not affect the amount of investment advisory fees paid by the Portfolios to MSA. When entering into and amending sub-advisory agreements, MSA will continue to negotiate fees paid to the sub-advisors for their services. These sub-advisory fees are paid directly by MSA and not by the Portfolios. Therefore, any fee reduction or increase negotiated by MSA may be either beneficial or detrimental to MSA. The fees paid to MSA by the Portfolios, and the fees paid by MSA to a sub-advisor, are considered by the Board in approving and renewing the advisory and sub-advisory agreements. Any amendment to the Advisory Agreement providing for an increase in the investment management fee paid to MSA by a Portfolio would continue to require the approval of the shareholders of that Portfolio. Further, regardless of whether shareholders approve this Proposal, MSA will continue to be required to provide the same level of management and administrative services to the Portfolios as it currently provides, in accordance with each Portfolio’s investment advisory agreement and other agreements.
What are the terms of the Order and the Proposed Rule?
On October 17, 2006, the SEC issued the Order permitting MSA and NMSF, on behalf of the Portfolios, to (a) engage new or additional sub-advisors; (b) enter into and modify existing investment sub-advisory agreements; and (c) terminate and replace sub-advisors, without the approval of shareholders, assuming certain conditions are met. Previously, on October 23, 2003, the SEC proposed Rule 15a-5 under the 1940 Act (the “Proposed Rule”) which essentially would grant similar relief to all investment companies to utilize a manager of managers arrangement upon certain conditions, including the receipt of shareholder approval. As a condition of the Order, NMSF and MSA must comply with the Proposed Rule's terms and conditions rather than the Proposed Order’s terms and conditions if the SEC adopts the Proposed Rule.5
Under the terms of both the Order and the Proposed Rule, NMSF and MSA are, and would continue to be, subject to several conditions imposed by the SEC. For example, as requested in this Proposal, the approval of the shareholders of a Portfolio is required before MSA and the Portfolio may implement the arrangements described herein for the Portfolio. In addition, within 90 days of the hiring of a new
5 No assurances can be given if or when the Proposed Rule will be adopted by the SEC, or what its final terms will be when adopted.18
sub-advisor for a Portfolio, the affected Portfolio's shareholders must be provided with an information statement containing information about the sub-advisor, the sub-advisory agreement, and the sub-advisory fee, similar to the information which would have been provided in a proxy statement seeking shareholder approval.6 In addition, in order to rely on the Order, a majority of the Board must consist of independent directors and the nomination of additional independent directors must be at the discretion of the then existing independent directors. Another condition in the Order and Proposed Rule is that shareholder approval will still be required of any sub-advisory agreement with a sub-advisor that is an "affiliated person," as that term is defined in Section 2(a)(3) of the 1940 Act, of NMSF or of MSA.
One condition in the Proposed Rule (that is not part of the Order) is that the Advisory Agreement provide that MSA must supervise and oversee the activities of the sub-advisors under the sub-advisory agreements on behalf of the Portfolios. While MSA currently oversees the activities of the sub-advisors, Proposal 3 (discussed below) seeks approval of an amendment to the Advisory Agreement to expressly provide for this supervision and oversight responsibility in order to satisfy this condition of the Proposed Rule, in contemplation of its adoption.
What vote is required to approve the manager of manager arrangements?
Each Portfolio will vote on this Proposal separately. Approval of the Proposal with respect to a Portfolio requires the affirmative vote of the holders of a "majority of the outstanding voting securities" of the Portfolio, as defined in the 1940 Act. That means, the affirmative vote of the lesser of (1) 67% or more of the Portfolio’s shares present at the Special Meeting if more than 50% of the outstanding shares of the Portfolio are present or represented, or (2) more than 50% of the outstanding shares of the Portfolio. Portfolio shares as to which no timely instructions are received will be voted by Northwestern Mutual in proportion to the instructions received for those contract and policy owners and payees who furnish timely instructions for that Portfolio.
6 The Order permits a Portfolio to disclose in its registration statement and the information statement regarding sub-advisor changes the aggregate compensation paid to multiple sub-advisors for the Portfolio, without disclosing separately the precise amount of fees paid to each sub-advisor. It is believed that the ability to disclose the aggregate amount of sub-advisory fees paid to all sub-advisors for a Portfolio, rather than to each sub-advisor, may encourage sub-advisors to negotiate lower portfolio management fees with MSA. Where only one sub-advisor is appointed for a Portfolio, MSA will continue to disclose the fee paid by it to the sub-advisor for that Portfolio, to the extent required.
19
What is the NMSF Board’s recommendation on Proposal 2?
The Board has determined that approving the manager of managers arrangements for each Portfolio is in the best interests of each Portfolio and their shareholders. Accordingly, after considering the factors and information it considered relevant, the Board, including all of the Independent Directors, unanimously approved the new manager of managers arrangement and voted to recommend its approval to the shareholders of each Portfolio.
THE BOARD OF DIRECTORS, INCLUDING THE INDEPENDENT DIRECTORS,
UNANIMOUSLY RECOMMENDS THAT YOU
VOTEFORTHIS PROPOSAL.
20
PROPOSAL 3:
APPROVAL OF AN AMENDMENT TO THE
INVESTMENT ADVISORY AGREEMENT
BETWEEN NMSF AND MSA
(All Portfolios)
Which Portfolios’ Shareholders will vote on this proposal?
Proposal 3 applies to Shareholders of all Portfolios as of the Record Date, voting separately by Portfolio.
What are the Shareholders being asked to approve?
As discussed more fully in connection with Proposal 2, MSA and NMSF obtained the Order from the SEC permitting MSA to enter into a new sub-advisory agreement or materially amend an existing sub-advisory agreement, subject to approval by the NMSF Board (including a majority of its Independent Directors), without obtaining the approval of a Portfolio’s shareholders. The Order was obtained to provide MSA and the Board with increased flexibility to hire, terminate, and replace sub-advisers without incurring the significant delay and expense associated with obtaining shareholder approval. Also as previously discussed, the SEC has proposed Rule 15a-5 under the 1940 Act which, if adopted as proposed, would essentially grant similar relief to all investment adviser,
Mason Street Advisors, LLC ("MSA"companies to utilize a manager of managers arrangement without the need to obtain an SEC order. As a condition of the Proposed Order, NMSF and MSA must comply with the Proposed Rule's terms and conditions rather than the Order’s terms and conditions if the SEC adopts the Proposed Rule.
One of the terms of the Proposed Rule is that the Advisory Agreement between MSA and NMSF must provide that MSA will supervise and oversee the activities of the sub-advisors under the sub-advisory contracts on behalf of NMSF. While the existing Advisory Agreement authorizes MSA to employ one or more investment sub-advisors for the purpose of providing investment management services for any of the Portfolios, and MSA has in practice monitored the performance of the sub-advisors it has appointed, the Advisory Agreement does not have an express provision providing for this oversight. The Board deemed it advisable to recommend that shareholders of the Portfolios approve an amendment to the Advisory Agreement to comply with this aspect of the Proposed Rule, in contemplation of the eventual adoption of the Proposed Rule. At its meeting in November 2006, the Board, including the Independent Directors, approved the amendment to the Advisory Agreement discussed herein, and directed that it be presented to NMSF shareholders with a recommendation that they approve the amendment.
21
What is the proposed amendment?
At its meeting in November 2006, the Board approved an amendment to the Advisory Agreement consisting of (1) a new Section 10 to read as set forth below, (2) the renumbering of existing Section 10 to Section 11, and (3) certain conforming changes to reflect the new date of the amended Advisory Agreement and the receipt of the Order referenced in Proposal 2 (the “Proposed Amendment”). PresentlyA copy of the Advisory Agreement as proposed to be amended, marked to identify the proposed changes thereto, is included as Appendix D, and the discussion herein is qualified by reference to the attached Advisory Agreement. If the Proposal is adopted, the following would be added as new Section 10:
10. For each Portfolio where the Manager elects to employ a sub-advisor or sub-advisors for the purpose of providing investment management services to the Portfolio, the Manager shall (1) evaluate potential sub-advisors and present to the Board of Directors its recommendation regarding a sub-advisor or sub-advisors the Manager believes is or are well-suited to manage the Portfolio’s assets, (2) determine the portion of the Portfolio’s assets to be managed by each sub-advisor when it deems appropriate, (3) supervise and oversee the activities of the sub-advisors, including monitoring and evaluating the investment performance of the sub-advisor or sub-advisors, and (4) recommend the termination or replacement of a sub-advisor or sub-advisors when deemed appropriate by Manager.
Currently, for each Portfolio where MSA elects to employ a sub-advisor or sub-advisors for the purpose of providing investment management services to the Portfolio, MSA evaluates potential sub-advisors for the Portfolio based on its evaluation of the sub-advisor’s skills in managing assets pursuant to the Portfolio’s particular investment objective, policies and strategies. MSA may then recommend the hiring of the sub-advisor to the Board. Once a sub-advisor is hired, MSA engages in an ongoing analysis of the continued advisability of retaining the sub-advisor based on the factors it deems relevant. MSA also negotiates and renegotiates the terms of sub-advisory agreements with the sub-advisor as circumstances warrant and makes recommendations to the Board as needed. MSA may also recommend to the Board that the services of a sub-advisor be terminated. In determining whether to recommend to the Board the termination of a sub-advisory agreement, MSA considers several factors, including the sub-advisor's performance record while managing a particular Portfolio. The Proposed Amendment memorializes these practices in the Advisory Agreement.
Except for the Proposed Amendment, the provisions of the Advisory Agreement will remain the same. This Proposal does not affect the amount of fees paid by the Portfolios to MSA under the Advisory Agreement, or MSA’s existing voluntary agreements to waive its fees and/or reimburse expenses to maintain the expense caps
22
described in the NMSF Prospectus for certain of the Portfolios. The Schedule to the Advisory Agreement attached as Appendix D includes the fees paid by the Portfolios to MSA under the Advisory Agreement. The Board last considered and approved the renewal of the Advisory Agreement, as required by the 1940 Act, at its meeting held in February 2006.
What factors did the Board consider in approving the Proposed Agreement?
As discussed in connection with Proposal 2, the Board believes that it is in the best interests of the shareholders of each Portfolio to adopt the manager of managers arrangement as provided in the Order in order to provide MSA and the Board with increased flexibility to hire, terminate, and replace sub-advisors. The Board recognized that the terms of the Order provide that if the Proposed Rule is adopted as proposed, NMSF and MSA must comply with the Proposed Rule's terms and conditions rather than the Order’s terms and conditions in order to continue using the manager of managers structure. The Board considered the terms of the Proposed Rule, and whether the terms of the Advisory Agreement satisfied the condition in the Proposed Order regarding the role of MSA in overseeing the sub-advisors. The Board also considered that if it did not seek to amend the Advisory Agreement in connection with this Special Meeting, it may have to call another meeting when the Proposed Rule is adopted and thus incur delays and potential costs associated with another shareholder meeting.
The Board also considered that if the Proposed Rule was adopted and there was a relatively short period after the announcement of its adoption and its effective date, NMSF may have to cease its use of the manager of managers arrangement until such time as it could obtain the necessary approval of shareholders to amend the Advisory Agreement to the extent required. The Board recognized that there are separate investmentno assurances the Proposed Rule would be adopted, when it would be adopted, or that if adopted, it would be in the form proposed. However, in contemplation of the eventual adoption of the Proposed Rule, the Board concluded that it was in the best interests of the Portfolios to amend the Advisory Agreement at this time to expressly include certain obligations as contemplated by Rule 15a-5 as proposed.
Another consideration of the Board was its acknowledgment of MSA’s current practice of monitoring the performance of the sub-advisors engaged for the Portfolios. The Board considered that the Proposed Amendment was not intended to be a substantive change to the role of MSA but rather a codification of what in practice has been occurring with respect to those Portfolios for which sub-advisors have been appointed. The Board further considered the factors set forth under Proposal 2 above regarding the employment of the manager of manager arrangement, and such other factors and information it deemed relevant. In connection with its approval of the manager of managers arrangement, and the potential need to amend the Advisory Agreement to continue its use of the arrangement upon the adoption of the Proposed Rule, the Board, including a majority of the Independent Directors, concluded that
23
it was in the best interests of the Portfolios to amend the Advisory Agreement at this time to expressly include certain obligations as contemplated by Rule 15a-5, and authorized the submission of the Proposed Amendment to the shareholders with a recommendation that the shareholders vote for the Proposed Amendment.
When will the Proposed Amendment become effective?
If approved by shareholders at the Special Meeting, the Proposed Amendment will become effective on April 30, 2007.
When was the Advisory Agreement last submitted to Shareholders for approval?
With the exception of the AllianceBernstein Mid Cap Value Portfolio, the Janus Capital Appreciation Portfolio, and the T. Rowe Price Equity Income Portfolio (as discussed below), the Advisory Agreement was last submitted to and approved by shareholders on May 1, 2003. The Advisory Agreement was submitted to shareholders at that time primarily for approval to combine eleven individual advisory agreements for the respective Portfolios, the agreements name a
predecessor of MSA as the investment adviser, and the agreements vary in certain
of their provisions. Amendment and restatement of these agreements ininto a single document willmaster agreement to simplify and facilitate the administration of the investment advisory relationship between MSA and NMSF, and its adviser.the approval of a new investment advisory arrangement with MSA with respect to the Large Cap Core Stock Portfolio. The Board, including a
majority ofAllianceBernstein Mid Cap Value Portfolio, the independent directors, approved the proposed Investment Advisory
Agreement at a meeting, called for that purpose, on February 6, 2003.
What are the differences between the proposed Investment Advisory AgreementJanus Capital Appreciation Portfolio, and
the prior agreements which it would replace?
Presently there are eleven separate Investment Advisory Agreements between
NMSF and its adviser. One is for the T. Rowe Price Small Cap Value,
International Growth, Capital Guardian Domestic Equity and Asset Allocation
Portfolios. One is for the Index
16
400 and Small Cap Growth Stock Portfolios. Each of the other nine Portfolios has
a separate investment advisory agreement. The proposed new Investment Advisory
Agreement will provide a single document to set forth the terms of the
investment advisory arrangement between NMSF and MSA for all of the Portfolios,
including three new Portfolios which will begin theirIncome Portfolio each commenced operations on May 1, 2003. The parties to the proposed Investment Advisory Agreement will be NMSF and
MSA. The prior agreements were entered into between NMSF andwas approved by Northwestern Mutual, Investment Services, LLC (and its predecessor, Northwestern Mutual Investment
Services, Inc., for certainthe initial sole shareholder of the prior agreements) before MSA was formed.
These agreements were assigned to MSA as of January 1, 2002. Northwestern Mutual
Investment Services, LLC no longer has any role in the management of the
Portfolios. In addition, the prior agreements (except for the two most recent
agreements, which are for the six Portfolios named in the preceding paragraph)
include Northwestern Mutual as an additional party and refer to Northwestern
Mutual Investment Services, LLC and Northwestern Mutual collectively as the
"Manager" for the purposeseach of those agreements. This format was designed when
the Portfolios, and the predecessors of some of them were managed by individuals
who were employees of Northwestern Mutual, and was intended to address the
possibility that Northwestern Mutual might become registered asin April 2003.
What general information is available about MSA?
MSA is an investment adviser pursuant toadvisor registered under the Investment Advisers Act of 1940. All1940, as amended. MSA is a wholly-owned subsidiary of Northwestern Mutual. As of October 31, 2006, MSA had approximately $74 billion in assets under management. Information regarding the investment
professionals involved in the management of the Portfolios are now employeesdirectors and executive officers of MSA and the Board believes that NMSF and MSA should be the only parties to the
Investment Advisory Agreement.
The prior Investment Advisory Agreements for the four Portfolios for which
sub-advisers have been retained each include a provision expressly permitting
the investment adviser to retain a subadviser to manage the Portfolio. In each
case the investment adviser is responsible for the subadviser's compensation,
with no additional cost to the investors, and any subadvisory agreement must be
adopted and approved in conformity with applicable laws. Under current law
approval by the shareholders is required for any new subadvisory arrangement
unless an exemption is granted by the Securities and Exchange Commission. The
proposed Investment Advisory Agreement includes a provision modeled on the
corresponding paragraph of the prior agreements which contained this provision.
The Board and management of NMSF have no present intention to propose employment
of a subadviser for any of the Portfolios presently managed by MSA. For the
Large Cap Core Stock Portfolio (formerly, the J.P. Morgan Growth and Income
Stock Portfolio) the services of the subadviser have recently been terminated,
as described below.
The two most recent of the prior investment advisory agreements, for six of
the Portfolios (named in the first paragraph of this section), include the
following provision:
17
"In the absence of willful misfeasance, bad faith, gross negligence, or
reckless disregard of obligations or duties hereunder on the part of the
Manager or its corporate affiliates, the Manager and its corporate
affiliates shall not be subject to liability to NMSF for any act or
omission in the course of, or connected with, rendering services hereunder
or for any losses that may be sustained in the purchase, holding, or sale
of any security. No provision of this Agreement shall be construed to
protect the Manager and its corporate affiliates from liability in
violation of Section 17(i) of the Investment Company Act of 1940."
A similar provision is included in the subadvisory agreements for each of
the Portfolios for which a subadviser has been employed,Appendix A. Additional information regarding MSA and at presentNMSF is customarily required by investment advisers for institutional accounts as a
matter of standard practice. The proposed Investment Advisory Agreement includes
an identical provisionprovided in the interest of uniformity. The older of the prior
agreements, for nine of the Portfolios, contain no provision addressing the
liability of the investment adviser.
The dates of the prior Investment Advisory Agreements, and the sub-advisory
agreements for four of the Portfolios, and the dates on which these agreements
were last submitted to a vote of the security holders of the respective
Portfolios for their approval, are set forth in the tables below.
Investment Advisory Agreements
Date of Date of Last Vote
Portfolio Agreement by Security Holders
- --------- -------------- -------------------
Large Cap Core Stock Portfolio .......... April 29, 1994 March 29, 1995
Growth Stock Portfolio .................. April 15, 1994 March 29, 1995
Aggressive Growth Stock Portfolio ....... April 29, 1994 March 25, 1995
High Yield Bond Portfolio ............... April 29, 1994 March 29, 1995
Franklin Templeton International Equity
Portfolio ............................. April 29, 1994 March 29, 1995
Index 500 Stock Portfolio ............... April 29, 1994 April 27, 1994
Select Bond Portfolio ................... April 29, 1994 April 27, 1994
Money Market Portfolio .................. April 29, 1994 April 27, 1994
Balanced Portfolio ...................... April 29, 1994 April 27, 1994
T. Rowe Price Small Cap Value
Portfolio ............................. June 29, 2001 July 30, 2001
International Growth Portfolio .......... June 29, 2001 July 30, 2001
Capital Guardian Domestic Equity
Portfolio ............................. June 29, 2001 July 30, 2001
Asset Allocation Portfolio .............. June 29, 2001 July 30, 2001
Small Cap Growth Stock Portfolio ........ April 29, 1999 April 29, 1999
Index 400 Stock Portfolio ............... April 29, 1999 April 29, 1999
18
Subadvisory Agreements
Date of Date of Last Vote
Portfolio Agreement by Security Holders
- --------- -------------- -------------------
Large Cap Core Stock Portfolio .......... April 15, 1994 March 29, 1995
Franklin Templeton International Equity
Portfolio ............................. April 24, 1994 March 29, 1995
T. Rowe Price Equity Income Portfolio ... June 29, 2001 July 30, 2001
Capital Guardian Domestic Equity
Portfolio ............................. June 29, 2001 July 30, 2001
What provisions of the prior agreements will remain the same if the proposed
Investment Advisory Agreement is approved?
Except for (1) the matters described above, (2) the special matters for the
Large Cap Core Stock Portfolio describedsection below and (3) the dates of execution
for the respective agreements, the provisions of the proposed Investment
Advisory Agreement are identical to the corresponding provisions of the prior
agreements.
The investment advisory fees paid by the respective Portfolios will remain
the same as they are under the prior agreements, except for the reduction in the
investment advisory fee for the Large Cap Core Stock Portfolio, as described
below. The fees for all of the Portfolios are set forth in the Investment
Advisory Fee Schedule included in the proposed Investment Advisory Agreement.
Please see Appendix C.
MSA also serves as the investment adviser for Mason Street Funds, Inc., a
series fund of eleven separate funds that are offered directly to public
investors. Ten of the eleven funds of Mason Street Funds are generally parallel
to ten of the Portfolios and have identical investment objectives. The
investment advisory fees for the Mason Street Funds are generally higher than
the fees for the corresponding Portfolios because the shares of the Portfolios
are offered only to fund variable annuity contracts and variable life insurance
policies which have additional charges and expenses. The table below provides
informationtitled “General Information about the ten funds of Mason Street Funds that correspond to ten of
the Portfolios, including their names, size and rate of compensation paid to
MSA.
19
NMSF.”
Fund Net Assets as of Advisory Fee Paid to MSA
Name of Fund December 31, 2002 (% of Average Net Assets)
- ------------ --------------------- -------------------------
Small Cap Growth Stock Fund ...... $ 254,880,094 0.59%
Aggressive Growth Stock Fund ..... $ 994,074,877 0.52%
International Equity Fund ........ $ 563,101,751 0.67%
Index 400 Stock Fund ............. $ 225,409,641 0.25%
Growth Stock Fund ................ $ 551,420,920 0.42%
Large Cap Core Stock Fund ........ $ 365,944,341 0.57%
Index 500 Stock Fund ............. $1,362,881,250 0.20%
Asset Allocation Fund ............ $ 87,259,766 0.60%
High Yield Bond Fund ............. $ 137,553,180 0.51%
Select Bond Fund ................. $ 584,018,127 0.30%
What brokerage commissions have the Portfolios paid to affiliated brokers?
The affiliated brokers of NMSF are Robert W. Baird & Co. Incorporated
(Baird), Frank Russell Capital, Inc., Frank Russell Securities, Inc. and Russell
Fund Distributors, Inc.
During the fiscal year ended December 31, 2002 five2005, the Directors of NMSF had authorized MSA and certain sub-advisors to place portfolio orders for the Portfolios with Sanford C. Bernstein & Co., Inc. (“Sanford”), a wholly-owned subsidiary of the Portfoliosparent company of AllianceBernstein LP, the sub-advisor to the AllianceBernstein Mid Cap Value Portfolio. This authorization was subject to all applicable legal requirements, including procedures adopted by the Board of Directors. During the
24
fiscal year ended December 31, 2005, the AllianceBernstein Mid Cap Value Portfolio paid $13,783 in brokerage commissions to Baird inSanford (.10% of the amounts set forth in
the table below.Portfolio’s aggregate brokerage commissions paid). None of the Portfolios paid any other brokerage commissions to any of the
other affiliated brokers and only the five Portfolios identified in the table
paid brokerage commissions to Baird.
What vote is included in the proposed Investment Advisory Agreement, had been in
effect for the fiscal year ended December 31, 2002, the management fee paid by
the Large Cap Core Stock Portfolio for the fiscal year would have been
$1,926,000, or $616,000 less than the fee of $2,542,000 which was actually paid
by the Portfolio.
22
What factors did the Directors consider in approving the interim advisory
agreement and proposed Amended Investment Advisory Agreement?
At the request of MSA, the Board of NMSF discussed approval of the interim
advisory agreement with MSA at a meeting held in person on November 7, 2002. In
evaluating the interim advisory agreement, the Board requested and received
information from MSA to assist in its deliberations. The Board considered the
following factors in determining the reasonableness and fairness of the interim
advisory agreement:
The qualifications of MSA to provide investment advisory services for the
Portfolio. The Board reviewed the credentials and experience of the
officers and employees of MSA who would provide investment advisory
services to the Large Cap Core Stock Portfolio, as well as other funds
managed by MSA. For information concerning the names, addresses and
principal occupation of the executive officers and directors of MSA, please
see Appendix B.
The range of investment advisory services to be provided by MSA and the
range of advisory services currently provided by MSA to its other advisory
clients, including the other portfolios and funds of NMSF and Mason Street
Funds. The Board reviewed the services to be provided by MSA under the
interim advisory agreement, and noted that the services were identical to
those currently provided by MSA under the prior investment advisory
agreement.
The performance record of the Portfolio.
The performance record of other funds advised by MSA.
The profitability of MSA. The Board discussed the profitability of MSA's
(and its affiliates') investment advisory and other activities and its
financial condition.
The reduction in the fee for investment advisory services.
The terms of the interim advisory agreement. The Board noted, as stated
above, that the terms of the proposed agreement were in all material
respects identical to the prior investment advisory agreement, except that
J.P. Morgan will no longer serve as subadviser to the Large Cap Core Stock
Portfolio and the fee for advisory services is reduced.
After considering the factors, the Board concluded that it is in the best
interests of the Large Cap Core Stock Portfolio and its shareholdersrequired to approve the amended investment advisory agreement. The Board reached its conclusion
after careful discussion and analysis. The Board believes that it has carefully
and thoroughly examined the pertinent issues and alternatives. In recommending
that you approve the proposed Investment Advisory Agreement, which is identical
to the interim advisory agreement in all substantive respects, the independent
directors have considered what they believe to be in your best interests.
23
Does MSA currently advise any other mutual funds with an investment objective
similar to thatProposed Amendment?
Each Portfolio will vote on this Proposal separately. Approval of the Large Cap Core Stock Portfolio?
MSA currently acts as investment adviserProposal with respect to Mason Street Funds and provides
investment advisory services toa Portfolio requires the Large Cap Core Stock Fund (formerly, the
Growth and Income Stock Fund) ("Large Cap Core Stock Fund") which also was
subadvised by J.P. Morgan until January 31, 2003. The investment objectiveaffirmative vote of the Large Cap Core Stock Portfolio and the Large Cap Core Stock Fund are
identical. Subject to approval by the shareholdersholders of a "majority of the Large Cap Core Stock
Fund, the Large Cap Core Stock Fund will no longer be subadvised and MSA will
provide exclusive investment advisory services to the Large Cap Core Stock Fund.
The table below provides information about the sizeoutstanding voting securities" of the Large Cap Core Stock
Fund and the rate of compensation paid to MSA by the Large Cap Core Stock Fund.
Portfolio, Net Assets as of Advisory Fee paid to MSA
December 31, 2002 (% of Average Net Assets)
-------------------------- -------------------------
Large Cap Core Stock Annual rate based on
Fund ............... $62,108,066 aggregate average daily net
asset value: ......... 0.65%
How will the change from J.P. Morgan to MSA affect me as an investordefined in the Large Cap Core Stock Portfolio?
If1940 Act. That means, the proposed Investment Advisory Agreement is approved by shareholders,
MSA will continue to manage the Large Cap Core Stock Portfolio in accordance
with the Large Cap Core Stock Portfolio's current investment objective of
long-term growth of capital and income.
Prior to the transition from J.P. Morgan on January 31, 2003, MSA reviewed
the existing holdingsaffirmative vote of the Large Cap Core Stock Portfolio and determined which
holdings it expected to sell and what securities it expected to purchase in
order to conform the portfolio to MSA's judgment as to stock selection. Based on
this review, MSA informed the Board that it expected to sell approximately 35%lesser of (1) 67% or more of the dollar value of the existing portfolio, and would reinvest the sale
proceeds in other stocks. Frank Russell Securities, Inc., a broker-dealer
affiliated with MSA ("FRSI"), was used to manage and execute the requisite buy
and sell trades, and these transactions resulted in brokerage costs of $177,900
to the Large Cap Core Stock Portfolio. In addition to these commission costs,
the transactions involved additional costs to the Large Cap Core Stock Portfolio
resulting from the impact of the transactions on the prices received and paid by
the Large Cap Core Stock Portfolio for the securities being sold and bought.
Although these costs cannot be precisely ascertained, FRSI estimated that they
were approximately $1,095,000. In addition, the transactions resulted in the
realization of approximately $76,425,000 of capital losses (or approximately
$0.182 per share of the Large Cap Core Stock Portfolio.)
24
It currently is anticipated that all of the services currently provided to
NMSF by Northwestern Mutual and its affiliates will continue to be provided if
the proposed Investment Advisory Agreement is approved by Shareholders at the
Special Meeting.
During its fiscal year ended December 31, 2002 the Large Cap Core Stock
Portfolio paid $421 in brokerage commissions to Robert W. Baird & Co.
Incorporated (Baird), an affiliated broker of NMSF. This was 0.12% of the
aggregate brokerage commissions paid by the Portfolio. No brokerage commissions
were paid by the Large Cap Core Stock Portfolio to other affiliated brokers of
NMSF during the period. The other affiliated brokers of NMSF are Frank Russell
Capital, Inc., Frank Russell Securities, Inc. and Russell Fund Distributors,
Inc.
When will Proposal 2 be implemented?
If approved by ShareholdersPortfolio’s shares present at the Special Meeting on May 1, 2003, the
proposed Investment Advisory Agreement will become effective on May 1, 2003 and
will expire, unless renewed annually by the Board of Directors of NMSF in
accordance with the requirementsif more than 50% of the 1940 Act. If shareholders do not approveoutstanding shares of the proposed Investment Advisory Agreement withinPortfolio are present or represented, or (2) more than 50% of the requisite 150 days,outstanding shares of the Board of DirectorsPortfolio. Portfolio shares as to which no timely instructions are received will consider other appropriate arrangementsbe voted by Northwestern Mutual in accordance
withproportion to the 1940 Act.
instructions received for those contract and policy owners and payees who furnish timely instructions for that Portfolio.
What is the Board'sNMSF Board’s recommendation on Proposal 2?
3?
THE BOARD OF DIRECTORS, INCLUDING THE INDEPENDENT DIRECTORS,
UNANIMOUSLY RECOMMENDS THAT YOU
VOTEFOR THIS PROPOSAL.
25
PROPOSAL 4:
APPROVAL OF CHANGESAN AMENDMENT TO THE PORTFOLIOS'
FUNDAMENTAL INVESTMENT RESTRICTIONS
Introduction to Proposals 3(a) through 3(e), Proposal 4 and Proposals 5(a)
through 5(h)
Why are the Portfolios proposing to amend or eliminate certain of their
fundamental investment restrictions?
The Portfolios are subject to specific investment restrictions that govern
their investment activities. Under the 1940 Act, certain investment restrictions
are required to be "fundamental," which means that the investment restrictions
can only be changed by a shareholder vote. An investment company may designate
additional restrictions that are fundamental, and it may also adopt
"non-fundamental" restrictions, which may be changed by the company's board of
directors without shareholder approval. These restrictions, whether fundamental
or non- fundamental, limit the investment activities of MSA as the Portfolios'
investment adviser.
The chart that follows briefly describes the differences between
fundamental restrictions and non-fundamental restrictions.
25
Fundamental Non-Fundamental
Restrictions Restrictions
----------------------- -----------------------
Who must approve changes Board of Directors and Board of Directors
in the restrictions? shareholders
How quickly can a change Fairly slowly, since a Fairly quickly, because
in the restrictions be made? vote of shareholders is the change can be
required accomplished by
action of the Board of
Directors alone
What is the relative cost to Costly to change Less costly to change
change a restriction? because a shareholder becaue a change can
vote requires holding a be accomplished by
meeting of action of the Board of
shareholders with Directors alone
proxy solicitation
efforts
Since NMSF was organized in 1983, certain legal and regulatory requirements
applicable to investment companies have changed. For example, certain
restrictions that were historically imposed by state laws and regulations were
preempted by the National Securities Markets Improvement Act of 1996 ("NSMIA"),
and, therefore, these state requirements no longer apply to investment
companies. In addition, the Portfolios are currently subject to certain
fundamental investment restrictions that are more restrictive than those
required under present law or are no longer required at all under present law.
Accordingly, MSA has proposed certain changes to the fundamental investment
restrictions of the Portfolios. The proposed changes would: (i) simplify,
modernize and standardize the fundamental restrictions that are required under
the 1940 Act; and (ii) eliminate those fundamental restrictions that are no
longer required by either the insurance and securities laws of the various
states or federal securities laws.
MSA believes there are several distinct advantages in revising the
Portfolios' fundamental investment restrictions at this time. As discussed in
detail below, the fundamental investment restrictions in many cases duplicate
applicable restrictions under the 1940 Act or, because of changes in applicable
law, impose restrictions that are no longer required. The elimination of
fundamental investment restrictions which duplicate applicable restrictions
under the 1940 Act will not relieve the Portfolios from their obligations to
conduct their investment programs in accordance with such 1940 Act requirements.
Eliminating the duplicative or unnecessary fundamental investment restrictions
will enable the Portfolios to be managed in accordance with the 1940 Act
requirements without reference to any other fundamental investment restriction
and, if the 1940 Act is changed, to respond to provisions of the amended statute
of potential benefit without conducting shareholder meetings with additional
expense and delay.
26
Elimination of these fundamental restrictions will enhance MSA's flexibility to
respond to market, industry, regulatory or technical changes and, therefore, its
ability to manage Portfolio assets in a constantly changing investment
environment. Furthermore, elimination of unnecessary fundamental investment
restrictions will reduce administrative burdens and standardization of the
remaining fundamental investment restrictions is expected to enable the
Portfolios to more efficiently and more easily monitor portfolio compliance.
The proposed standardized fundamental investment restrictions cover those
areas for which the 1940 Act requires the Portfolios to have fundamental
restrictions. They reflect all current regulatory and legal requirements under
the 1940 Act, and are written to provide flexibility to respond to future legal,
regulatory, market or technical changes. The proposed standardized amendments
will not affect the Portfolios' investment objectives, each of which will
continue to be fundamental and subject to change only with shareholder approval.
Although the proposed amendments to the fundamental investment restrictions will
give the Portfolios greater flexibility to respond to future investment
opportunities, the Board has been advised by MSA that it does not anticipate
that the changes, individually or in the aggregate, will result at this time in
a material change in the level of investment risk associated with investment in
the Portfolios. Nor does MSA anticipate that the proposed changes in fundamental
investment restrictions will, individually or in the aggregate, change
materially the manner in which the Portfolios are managed and operated. If
approved, the changes will be effective as of the date of shareholder approval.
PROPOSAL 3:
APPROVAL OF AMENDMENTS TO CERTAIN FUNDAMENTAL INVESTMENT RESTRICTIONSA
COMPONENT OF THE PORTFOLIOS
INVESTMENT OBJECTIVE OF
(Balanced Portfolio)
Which Portfolios' shareholdersPortfolios’ Shareholders will vote on this proposal?
Proposal 3?
Proposal 3(a)(i) is applicable to the Shareholders of each of the
Portfolios (except the Index 500 Stock Portfolio and the Index 400 Stock
Portfolio) as of the Record Date.
Proposal 3(a)(ii) is applicable only4 applies to Shareholders of the Index 500 Stock
Portfolio and Index 400 StockBalanced Portfolio as of the Record Date.
Proposals 3(b)-(e)
What are applicableShareholders being asked to the approve?
Shareholders of eachthe Balanced Portfolio are being asked to approve a change to a component of the PortfoliosPortfolio’s fundamental investment objective. The Balanced Portfolio’s current investment objective has two components: primary and supplemental. The primary component is to realize as high a level of total return as is consistent with prudent investment risk (the “Primary Objective”). The Primary Objective remains unchanged. The second component supplements the Primary Objective by utilizing the investment objectives and policies for the Index 500 Portfolio, Select Bond Portfolio and Money Market Portfolio (the “Supplemental Objective”). Shareholders are being asked to approve the removal of the Record Date.
The existing fundamentalSupplemental Objective as an investment restrictions for the Portfolios,
together with the proposed fundamental investment restrictions, are presented
below for those fundamental investment restrictions that are proposed to be
amended. Following the restrictions, the legal authority for each investment
restriction is presented, along with a discussionobjective of the rationaleBalanced Portfolio.
What are the reasons for the proposed change.
27
PROPOSAL 3(a)(i): TO AMEND THE PORTFOLIOS'
FUNDAMENTAL INVESTMENT RESTRICTION
REGARDING INDUSTRY CONCENTRATION
Current Fundamental Investment Restriction: Eachchange?
The Balanced Portfolio will not invest
more than 25% ofinvests in the value ofstock, bond and money market sectors in the total assets ofmanner as described for the Index 500 Portfolio, in securities of
issuers in any one industry except for investments bythe Select Bond Portfolio and the Money Market Portfolio, Asset Allocationrespectively. The Index 500 Portfolio’s investment objective is to seek investment results that approximate the performance of the Standard & Poor’s 500® Composite Stock Price Index (the “S&P 500® Index”). The S&P 500® Index is an unmanaged index of 500 selected common stocks, and is comprised primarily of large capitalization companies that represent a broad spectrum of the U.S. economy and a substantial part of the U.S. stock market’s total capitalization. Using a computer program, the Index 500 Portfolio (and therefore the equity portion of the Balanced Portfolio) invests in stocks included in the S&P 500® Index in proportion to their weighting in the S&P 500® Index in order to track the performance of the S&P 500® Index. The Supplemental Objective, therefore, limits diversification of the equity component of the Balanced Portfolio to investments in those large capitalization companies that comprise the S&P 500® Index.
MSA believes, and the Board of Directors concurs, that in order to provide MSA with more flexibility to achieve the Balanced Portfolio’s Primary Objective, the Portfolio should have the ability to further diversify its holdings by investing in companies with small and mid-sized market capitalizations and foreign companies,
26
in addition to large capitalization companies such as those that comprise the S&P 500® Index, when and to the extent MSA, as investment advisor for the Portfolio, deems appropriate. MSA believes that by broadening the investment mandate among a greater number of asset classes, MSA can reduce the Portfolio’s volatility and overall risk and potentially improve returns. If the Proposal is approved, therefore, the Balanced Portfolio would no longer be required to invest the equity component of its assets only in securities of large capitalization companies that comprise the S&P 500® Index, and would have the flexibility to invest in securities of small, mid and/or large capitalization companies and foreign companies. The investment strategy of the Balanced Fund would also be modified to reflect this increased flexibility.
With respect to the components of the Supplemental Objective that reference the objective of the Select Bond Portfolio and Money Market Portfolio, MSA has recommended, and the Board of Directors has concurred, that these references are not necessary and their removal would avoid confusion as to the objective of the Balanced Portfolio.
The Primary Objective of the Balanced Portfolio and the primary investment objective of the Select Bond Portfolio are identical (i.e., to realize as high a level of total return as is consistent with prudent investment risk). MSA, as investment advisor to the Balanced Portfolio, in seeking to achieve the Balanced Portfolio’s Primary Objective, would continue to invest its fixed income component subject to the same investment policies currently applicable to the Select Bond and Money Market Portfolios. The Select Bond Portfolio normally invests at least 80% of its net assets in a diversified portfolio of investment grade debt securities, and may invest up to 20% of net assets in non-investment grade, high yield/high risk bonds (also known as junk bonds). It may also invest up to 30% of its net assets in foreign bonds. These investment policies will continue to apply for the fixed income component of the Balanced Portfolio. While historically the Balanced Portfolio has not purchased assets in the high yield/high risk bonds (even though it had the authority to do so), MSA anticipates that it will begin to purchase high yield/high risk bonds for the Balanced Portfolio as is consistent with the Balanced Portfolio’s Primary Objective, and being subject to the existing limit on investments in these types of Securities. MSA believes that by diversifying the Balanced Portfolio among investment grade and non-investment grade bonds, along with investing in multiple equity classes, it may better achieve its Primary Objective by potentially (i) reducing the Portfolios volatility and (ii) improving returns.
The investment objective of the Money Market Portfolio is to realize maximum current income to the extent consistent with liquidity and stability of capital. It invests only in high-quality, short term money market instruments that present minimal credit risks, as determined by MSA. MSA intends to continue to manage the money market component of the Balanced Portfolio with this same goal and subject to similar investment policies.
27
| Current Balanced Portfolio | Proposed Changes to Balanced | |
| Portfolio | ||
| Investment Objective | To realize as high a level of total return as is consistent with prudent investment risk. The Balanced Portfolio’s investment objective is supplemented by investment objectives and policies for the stock, bond and money market sectors. These are presently substantially identical to those which have been established for the Index 500 Stock, Select Bond and Money Market Portfolios. | To realize as high a level of total return as is consistent with prudent investment risk, through income and capital appreciation. |
28
| Current Balanced Portfolio | Proposed Changes to Balanced | |
| Portfolio | ||
| Investment Strategy | Investing in the stock, bond and money market sectors as described for the Index 500 Stock, Select Bond and Money Market Portfolios, management attempts to capitalize on the variation in return potential produced by the interaction of changing financial markets and economic conditions while maintaining a balance over time between investment opportunities and their associated potential risks by following a flexible policy of allocating assets across the three market sectors. Management may adjust the percentage of assets in each market sector in response to changing market and economic conditions. The Portfolio normally has some portion of its assets in all three asset categories. However, up to 100% may be invested in money market instruments, and not more than 75% may be invested in either the stock or bond sector. | Investing in the stock, bond and money market sectors, management attempts to capitalize on the variation in return potential produced by the interaction of changing financial markets and economic conditions while maintaining a balance over time between investment opportunities and their associated potential risks by following a flexible policy of allocating assets across the three market sectors. The Portfolio is actively managed to attempt to capitalize on changing financial markets and economic conditions following a flexible policy for allocating assets according to a benchmark of 35-55% equities; 40-60% debt and 0-20% in money market instruments. However, these benchmarks are not minimum and maximum limits and MSA may invest a greater or lesser percentage in any component. |
| The equity component is invested in a manner designed to track the performance of the S&P 500® Index, which is comprised primarily of large capitalization companies. | Equity investments will be actively managed and may consist of small, mid and large capitalization companies and foreign stocks based on MSA’s economic and market outlook, and its perceived opportunities in each class. Up to 25% of net assets may be invested in foreign stocks. |
29
Debt securities will generally consist primarily of investment grade debt securities with maturities exceeding one year, though the Portfolio may invest up to 20% of the Portfolio’s total net assets in non-investment grade high yield/high risk bonds. Money market instruments will consist of high-quality, short term money market instruments that present minimal credit risks, as determined by MSA. Up to 30% of the Portfolio’s net assets may be invested in foreign bonds. | Debt securities will generally consist of investment grade debt securities with maturities exceeding one year, though the Portfolio may invest up to 20% of the Portfolio’s total net assets in non-investment grade high yield/high risk bonds. Money market instruments will consist of high-quality, short term money market instruments that present minimal credit risks, as determined by MSA. Up to 30% of the Portfolio’s net assets may be invested in foreign bonds. |
What are the risks to the Balanced Portfolio of investing in securities of small and mid-sized companies, foreign companies and high yield/high risk bonds?
Small and mid-sized companies may involve greater risk of loss and price fluctuation. The trading markets for securities of small and mid-sized companies may be less liquid and more volatile than securities of larger companies. This means that the Portfolio could have greater difficulty buying or selling a security of a small or mid-sized company at an acceptable price, especially in periods of market volatility. In addition, small and mid-sized companies can have more limited product lines, markets, and financial resources than larger, more well-established companies.
Foreign securities can involve additional risks relating to political, economic, or regulatory conditions in foreign countries. These risks include fluctuations in foreign currencies; withholding or other taxes; and trading, settlement, custodial, and other operational risks. Foreign securities may also be subject to the less stringent investor protection and disclosure standards of some foreign markets. All of these factors can make foreign investments more volatile and potentially less liquid than U.S. Treasury Bills, other obligationsinvestments. In addition, foreign markets can perform differently from the U.S. market.
30
Non-investment grade high yield/high risk bonds (sometimes referred to as junk bonds) tend to offer higher yields than higher-rated securities of or guaranteedcomparable maturities. However, they usually present greater risk of loss of income and principal. They are directly affected by the U.S. Governmentmarket perception of the creditworthiness of the securities’ issuers and are more likely to react to developments affecting market and credit risk than higher rated securities. The yield and price, therefore, may experience greater volatility than is the case with higher rated securities. In addition, the secondary market for these securities, which is concentrated in relatively few market makers, may not be as liquid and, under adverse market conditions, the secondary market could contract further. Judgment plays a more significant role in valuing these securities than those securities for which more objective market data are available.
Will there be any change in the Balanced Portfolio’s management fee or its
agencies, certificates of deposit or bankers' acceptances.
Proposed Fundamental Investment Restriction: Eachother operating expenses?
If the Proposal is approved by Shareholders, the management fee paid to MSA by the Balanced Portfolio will remain the same. MSA does not purchase securities, ifexpect any change to the Balanced Portfolio’s other operating expenses as a result of such purchase, the Portfolio's
investments wouldchange except that, with more asset classes available, the ability to invest in foreign stocks, and the intention to invest more in high yield/high risk securities, portfolio turnover may be concentrated, within the meaninggreater. Larger portfolio turnover rates result in more transaction costs which are paid out of the 1940 Act and the
rules and regulations thereunder, in securities of issuers in a particular
industry or group of industries. Investments in other investment companies shall
not be considered an investment in any industry or group of industries for
purposes of this restriction. This investment restriction shall not apply to
securities issued or guaranteed by the U.S. government or any of its agencies or
instrumentalities or securities of other investment companies.
What are the legal requirements governing concentrationassets of the Portfolios'
investments?
UnderBalanced Portfolio and, like other Portfolio expenses, can reduce returns. In addition, upon the 1940 Act, an investment company's policy of concentrating its
investments in securities of companies in the same industry must be fundamental.
An investment company "concentrates" its investments, for purposesimplementation of the 1940
Act,changes, if it invests more than 25% of its "net"approved by shareholders, there will be an initial increase in these transaction costs as some assets (exclusive of certain items
such as cash, U.S. government securities, securities of other investmentare moved from large capitalization companies to smaller companies and tax-exempt securities) in a particular industry or group of
industries. An investment company is not permittedforeign securities.
When will the proposed change become effective?
If approved by shareholders at the Special Meeting, the proposed amendment to concentrate its
investments in a particular industry unless it so states.
What effect will amending the currentBalanced Portfolio’s fundamental investment restriction haveobjective will become effective on April 30, 2007.
What vote is required to approve the Portfolios' abilities to concentrate investments?
The proposed fundamental investment restriction would amend the current
fundamental investment restriction of allProposal?
Only shareholders of the Portfolios (except the Index
500 StockBalanced Portfolio and Index 400 Stock Portfolio) by clarifying the
concentration policy's application to the Portfolios' "net" assets (valued at
the time of purchase), rather than to the Portfolios' "total" assets. This is
consistent with the SEC's interpretationwill vote on this Proposal. Approval of the 1940 Act limitations on
concentrationProposal requires the affirmative vote of investments. Further, the proposed investment restriction would
provide clarification becauseholders of a "majority of the proposed restriction would explicitly exempt
fromoutstanding voting securities" of the 25% limitation securities of other investment companiesBalanced Portfolio, as permitted bydefined in the 1940 Act. Notwithstanding this exemption,That means, the Portfolios would continue to
be subject to 1940 Act limitations on investments in other investment companies.
Generally, underaffirmative vote of the 1940 Act, an investment company may not purchaselesser of (1) 67% or more of the Balanced Portfolio’s shares present at the Special Meeting if more than 3%50% of another investment company's totalthe outstanding voting stock, commitshares of the Balanced Portfolio are present or represented, or (2) more than 5%50% of its assetsthe outstanding shares of the Balanced Portfolio. Balanced Portfolio shares as to which no timely instructions are received will be voted by Northwestern Mutual in proportion to the purchase of another investment company's securities
or have more than 10% of its
28
total assets invested in securities of other investment companies. The proposed
investment flexibility will helpinstructions received for those contract and policy owners and payees who furnish timely instructions for the Portfolios respond to future legal,
regulatory, market or technical developments. If the 1940 Act is changed, the
Portfolios would be able to respond to any provision of the amended statute that
is of potential benefit without conducting a shareholder meeting with attendant
delay and expense. However, adoption of the proposed investment restriction is
not expected to change materially the way in which the Portfolios are currently
managed or operated, as the Portfolios will continue to be subject to the 25%
concentration restriction and the Portfolios presently do not intend to pursue
their investment objectives by concentrating in shares of other open-end
investment companies.
Please note that Proposal 4, applicable to the Index 500 Stock Portfolio
and Index 400 Stock Portfolio only, relates to a change from diversified to
non-diversified status under the 1940 Act. If Proposal 4 is approved by
shareholders of such funds, the Board of Directors is recommending that the
industry concentration restriction of such funds be changed to permit such funds
to concentrate their investments within the meaning of the 1940 Act. See
Proposal 3(a)(ii).
Balanced Portfolio.
31
What is the Board'sNMSF Board’s recommendation on Proposal 3(a)(i)?
4?
THE BOARD OF DIRECTORS, INCLUDING THE INDEPENDENT DIRECTORS,
UNANIMOUSLY RECOMMENDS THAT YOU
VOTEFOR PROPOSAL 3(a)(i).
PROPOSAL 3(a)(ii):
TO AMEND THE INDUSTRY CONCENTRATION RESTRICTION
FOR THE INDEX 500 STOCK PORTFOLIO AND THE INDEX 400
STOCK PORTFOLIO TO PERMIT SUCH PORTFOLIOS
TO CONCENTRATE THEIR INVESTMENTS
Current Fundamental Investment Restriction: Each Portfolio will not invest
more than 25% of the value of the total assets of the Portfolio in securities of
issuers in any one industry except for investments by the Money Market
Portfolio, Asset Allocation Portfolio and the Balanced Portfolio in U.S.
Treasury Bills, other obligations of or guaranteed by the U.S. Government or its
agencies, certificates of deposit or bankers' acceptances.
Proposed Fundamental Investment Restriction: The Index 500 Stock Portfolio
and the Index 400 Stock Portfolio may concentrate their investments within the
meaning of the Investment Company Act of 1940, as amended, and the rules and
regulations thereunder, and any exemptive relief that may be granted by the SEC,
to the extent deemed necessary by the investment advisor in order for such funds
to track their respective indices.
29
What are the legal requirements governing concentration of the Portfolios'
investments?
Under the 1940 Act, the Portfolios must have an investment policy
describing their ability to concentrate their investments within the meaning of
1940 Act. For a discussion of the SEC's interpretation of the 1940 Act's limits
on concentration of investments, see Proposal 3(a)(i).
What effect will permitting the Index 500 Stock Portfolio and Index 400 Stock
Portfolio to concentrate their investments within the meaning of the 1940 Act
have on such funds?
As described in Proposal 4, the Board of Directors is recommending that the
Index 500 Stock Portfolio and Index 400 Stock Portfolio be changed from
diversified to non-diversified funds under the 1940 Act. As discussed further in
Proposal 4, the purpose of such proposed change is to enable such funds to
fulfill their investment objective of tracking their respective indices.
Similarly, MSA has recommended that the Index 500 Stock Portfolio and Index 400
Stock Portfolio be able to "concentrate" their investments within the meaning of
the 1940 Act to the extent required in order to track their respective indices.
The purpose of this change is to eliminate a potential conflict between each
index fund's indexing objective and the current fundamental investment
restriction which forbids investment of more than 25% of the value of the total
assets of each fund in securities of issuers in any one industry. Specifically,
the proposed amendment of the investment restriction will insure that the funds
can continue to track their target indices even if this would result in industry
concentration which would violate the current restriction. Potentially the
industry weightings reflected in either or both of the target indices could
cause the fund which tracks the index to violate the 25% limit for any one
industry which is set forth in the current restriction. This is because the
aggregate market capitalization of the companies in a particular industry, as
represented in the index, could potentially exceed 25% of the aggregate market
capitalization of all of the companies represented in the index. In that case
the affected fund would be forced to make a difficult choice: continue to track
the index, in which case the fund would violate its investment restriction; or
comply with its investment restriction, in which case the fund would fail to
track the index. The Board of Directors of NMSF believes that an index fund
should always track its target index as closely as possible, regardless of the
industry weightings that may be reflected in the construction of the index at a
particular date or during a particular period. Permitting the Index 500 Stock
Portfolio and the Index 400 Stock Portfolio to concentrate their investments is
not expected to materially impact the day-to-day operations of the index funds.
The index funds will be "concentrated" within the meaning of the 1940 Act only
as necessary to track their respective indices. In such case, the funds would be
considered riskier than funds which were not concentrated. This is because the
performance of a fund whose investments are concentrated can be helped (or hurt)
to a greater degree by the performance of just a few securities.
30
What is the Board's recommendation on Proposal 3(a)(ii)?
THE BOARD OF DIRECTORS, INCLUDING THE INDEPENDENT DIRECTORS, UNANIMOUSLY
RECOMMEND THAT YOU VOTE FOR PROPOSAL 3(a)(ii).
PROPOSAL 3(b):
TO AMEND THE PORTFOLIOS' FUNDAMENTAL INVESTMENT
RESTRICTION REGARDING ISSUING SENIOR SECURITIES
AND BORROWING
Current Fundamental Investment Restriction: Each Portfolio will not issue
senior securities or borrow money except for short-term credits as may be
necessary for the clearing of transactions and except for temporary purposes to
the extent of 5% of the total assets of the Portfolio. Reverse repurchase
agreements and financial futures contracts are not considered to be "senior
securities" or "borrowing money" for the purpose of this restriction.
Proposed Fundamental Investment Restrictions:
1. No Portfolio may issue securities senior to the Portfolios' presently
authorized shares of the Portfolio except to the extent permitted by
the 1940 Act and the rules and regulations thereunder, or pursuant to
any exemptive relief that may be granted by the SEC. This restriction
shall not be deemed to prohibit the Portfolio from (a) making any
permitted borrowings, loans, mortgages or pledges; (b) entering into
options, futures contracts, forward contracts, repurchase transactions
or reverse repurchase transactions, (c) engaging in when-issued and
delayed delivery transactions, or (d) making short sales of securities
to the extent permitted by the 1940 Act and the rules and regulations
thereunder, or pursuant to any exemptive relief that may be granted by
the SEC.
2. No Portfolio may borrow money, except that a Portfolio may borrow
money to the extent permitted by the 1940 Act and the rules and
regulations thereunder, or to the extent permitted by any exemptive
relief that may be granted by the SEC.
Please note the Portfolios' current fundamental investment restriction
relates to both issuance of senior securities and borrowing. The proposed
restrictions in effect separate the current restriction into two separate
restrictions applicable to issuing senior securities and borrowing,
respectively. The discussion below addresses each of these restrictions.
What are the legal requirements governing the issuance of senior securities by
the Funds?
Under the 1940 Act, the Portfolios must have an investment policy
describing their ability to issue senior securities. A "senior security" is
defined under the 1940 Act generally as an obligation of an investment company,
with respect to its earnings
31
or assets, that takes precedence over the claims of the investment company's
shareholders with respect to the same earnings or assets. The 1940 Act generally
prohibits an open-end fund from issuing senior securities in order to limit the
ability of investment companies to use leverage. In general, an investment
company uses leverage when it borrows money to enter into securities
transactions, or acquires an asset without being required to make payment until
a later point in time.
SEC Staff interpretations allow an investment company to engage in a number
of types of transactions that might otherwise be considered to create "senior
securities" or "leverage," provided certain conditions are met that are designed
to protect investment company shareholders. For example, some transactions that
may create senior security concerns include short sales, certain options and
futures transactions, reverse repurchase agreements and securities transactions
that obligate the investment company to pay money at a future date (such as
when-issued, forward commitment or delayed delivery transactions). According to
current regulatory interpretations, when engaging in such transactions, an
investment company must mark on its or its custodian bank's books, or set aside
in a segregated account with the investment company's custodian bank, cash or
other liquid securities to meet the SEC Staff's collateralization requirements.
This procedure limits the investment company's ability to engage in these types
of transactions and thereby limits the investment company's exposure to risk
associated with these transactions.
What effect will amending the current fundamental restriction have on the
Portfolios' transactions that may be deemed an issuing of senior securities?
The proposed investment restriction would amend the Portfolios' current
investment restriction and would explicitly permit the Portfolios to engage in
options, futures contracts, forward contracts and repurchase transactions, and
to make short sales as permitted under the 1940 Act, and any exemptions
available by rule or order under the 1940 Act. Essentially, the proposed
fundamental investment restriction clarifies the Portfolios' ability to engage
in certain investment transactions which, while appearing to raise senior
security concerns, have been interpreted as not constituting the issuance of
senior securities under the federal securities laws. For example, certain of the
Portfolios currently engage in certain of these types of transactions (such as
options and futures transactions) as described in the Portfolios' Prospectus and
Statement of Additional Information. The proposed investment restriction has
been drafted to provide flexibility for the Portfolios to respond to legal,
regulatory and market developments, including changes in the SEC staff
interpretations and procedures described above, without holding a shareholder
meeting with attendant expense and delay.
The Portfolios currently have another fundamental investment restriction,
discussed in Proposal 5(c) below, that prohibits the Portfolios from engaging in
short sales of securities. The adoption of this revised fundamental investment
restriction pursuant to this Proposal 3(b) would result in the Portfolios' short
sales fundamental
32
investment restriction being incorporated into the senior securities restriction
and would permit the Portfolios to engage in short sales to the extent permitted
by the 1940 Act. In a typical short sale, a Portfolio would borrow securities
from a broker that it anticipates will decline in value in order to sell the
securities to a third party. The Portfolios would be obligated to return
securities of the same issue and quantity at a future date and would realize a
profit or loss depending upon whether the market price of the security decreases
or increases between the date of the short sale and the date on which the
Portfolios must return the borrowed securities unless the short sale is made
"against the box" (a sale where the Portfolio owns or has the right to acquire
at no additional cost securities identical to those sold short). Because the
value of a particular borrowed security can increase without limitation, the
Portfolios potentially could realize losses with respect to short sales (other
than those which are "against the box") that could be significantly greater than
the value of the securities at the time they are sold short. At present,
investment companies may engage in short sales of securities only in limited
circumstances under the 1940 Act.
If the proposed amendment to the fundamental restriction on issuing senior
securities/borrowing is approved by shareholders, the ability of the Portfolios
to engage in transactions involving the issuance of senior securities, including
short sales, will be subject to a non-fundamental investment restriction
prohibiting borrowings for the purpose of leveraging in an amount in excess of
15% of the Portfolio's total assets. This non-fundamental investment restriction
is discussed below. The non-fundamental investment restriction would be subject
to change by the Board of Directors, without shareholder approval, if they
believe such a change would be in the best interests of Shareholders. The Board
of Directors presently has no intention of changing this non-fundamental
investment restriction.
MSA does not anticipate that any additional risk to the Portfolios will
occur as a result of amending the current investment restriction because the
Portfolios have no present intention of changing their current investment
policies or engaging to a significant extent in transactions that may be
interpreted as issuing senior securities, other than as currently provided in
the Portfolios' Prospectus and Statement of Additional Information.
What are the legal requirements governing borrowing by the Portfolios?
The 1940 Act requires investment companies to adopt a policy with respect
to the borrowing of money, which cannot be changed without shareholder approval,
and imposes certain limitations on borrowing activities of investment companies.
The limitations on borrowing are generally designed to protect shareholders and
their investments by restricting an investment company's ability to subject its
assets to any claims of creditors who might have a claim to the investment
company's assets or rights upon liquidation that would take precedence over the
claims of shareholders. In addition, the 1940 Act limitations reflect a
Congressional intent to limit an investment company's exposure to payments to
creditors so that the investment
33
company will not experience difficulty in managing a portfolio to meet debt
payment obligations while still meeting redemption requests on demand.
The current fundamental investment restriction is more restrictive than
required by the 1940 Act. In this regard, an investment company under the 1940
Act is presently permitted to borrow up to 5% of its total assets from any
person for temporary purposes, and also may borrow from banks, provided that if
borrowings exceed 5%, the investment company must have assets totaling at least
300% of the borrowing when the amount of the borrowing is added to the company's
other assets. Thus, an investment company may borrow, in the aggregate, from
banks and others, amounts up to one-third (33 1/3%) of its total assets
(including those assets represented by the borrowing). Investment companies may
desire to borrow money to meet redemptions while waiting for cash from sales of
new shares or the proceeds from the sale of portfolio securities or to avoid
being forced to sell portfolio securities. This technique provides investment
companies with greater flexibility to buy and sell portfolio securities for
investment or tax considerations, rather than because of a need for short-term
cash.
What effect will amending the current fundamental restriction have on the
Portfolios' borrowing activities?
The proposed fundamental investment restriction would provide that the
Portfolios may borrow, from banks or any other permissible parties, to the
extent permitted by the 1940 Act or any exemptions therefrom. The current
restriction confines the Portfolios' permissible borrowing activities to
temporary measures for extraordinary or emergency purposes (and, even then, to
amounts not in excess of 5% of net assets or to meet redemption requests). The
proposed restriction would expand the circumstances when the Portfolios may
borrow to include any situations permitted by the 1940 Act (for example, if the
Portfolios intended to engage in leverage). For each of the Portfolios, the
permissible aggregate amount of outstanding borrowings for extraordinary or
emergency purposes at any particular time would be increased from 5% of net
assets to the maximum extent then permitted by the 1940 Act, presently 33 1/3%
of total Portfolio assets.
The current fundamental investment restriction prohibits the Portfolios
from borrowing for leveraging or investment. In general, an investment company
uses leverage when it borrows money to enter into securities transactions or
acquires an asset without being required to make payment until a later point in
time. Under the proposed fundamental investment restriction, the Portfolio may
borrow for leverage or investment to the extent permitted under the 1940 Act or
any exemptive order granted by the SEC. However, if the proposed fundamental
restriction is approved by Shareholders, the Portfolios will be subject to a
non-fundamental investment restriction on borrowing limiting the extent to which
the Funds may engage in borrowing for leverage or investment. The purpose of
this non-fundamental
34
investment restriction is to limit the risk associated with borrowing for such
purposes. The proposed non-fundamental investment restriction would provide as
follows:
"No Portfolio may borrow money for purposes of leveraging or investment in
an amount in excess of 15% of total assets."
Since the proposed borrowing restriction would provide the Portfolios with
greater borrowing flexibility, the Portfolios may be subject to additional
costs, as well as the risks inherent in borrowing, such as reduced total return
and increased volatility of net asset value. The use of leverage may subject a
Portfolio to a greater risk of loss. The Portfolios also could be forced to sell
securities at inopportune times to repay loans. The foregoing non-fundamental
investment restriction has been proposed by the Board of Directors to address
these risks. The Board may change the proposed non-fundamental investment
restriction for each of the Portfolios on borrowing for purposes of leveraging
or investment if they believe that such a change would be in the best interests
of the shareholders of that Portfolio. The Board presently has no intention of
changing the proposed non-fundamental investment restriction on the use of
leverage.
What is the Board's recommendation on Proposal 3(b)?
THE BOARD OF DIRECTORS, INCLUDING THE INDEPENDENT DIRECTORS, UNANIMOUSLY
RECOMMENDS THAT SHAREHOLDERS VOTE FOR PROPOSAL 3(b).
PROPOSAL 3(c):
TO AMEND THE PORTFOLIOS' FUNDAMENTAL INVESTMENT
RESTRICTION REGARDING LENDING
Current Fundamental Investment Restriction: Each Portfolio will not make
loans aggregating more than 10% of the total assets of the Portfolio at any one
time, provided that neither the purchase of a portion of an issue of publicly
distributed bonds, debentures, or other debt securities, nor the purchase of
short-term debt securities, is to be considered as a loan.
Proposed Fundamental Investment Restriction: No Portfolio may make loans to
other persons except to the extent permitted by the Investment Company Act of
1940 and the rules and regulations thereunder, and pursuant to any exemptive
relief that may be granted by the SEC. This restriction shall not prevent the
Portfolio from making loans (a) through the lending of its portfolio securities,
(b) through the purchase of debt securities, loan participations and/or engaging
in direct corporate loans in accordance with its investment objectives and
policies, (c) to the extent the entry into a repurchase agreement is deemed to
be a loan, or (d) to affiliated investment companies to the extent permitted by
the Investment Company Act of 1940 and the rules and regulations thereunder, or
any exemptions therefrom that may be granted by the SEC.
35
What are the legal requirements governing lending by the Portfolios?
Under the 1940 Act, an investment company's policy regarding lending must
be fundamental. SEC staff interpretations of the 1940 Act generally prohibit
funds from lending more than one-third of their total assets, except through the
purchase of debt obligations and the use of repurchase agreements. Certain
investment techniques could, under certain circumstances, be considered to be
loans. For example, if a Portfolio invests in debt securities, such investments
might be considered to be a loan from the Portfolio to the issuer of the debt
securities. In order to ensure that the Portfolios may invest in certain debt
securities or repurchase agreements, which also could technically be
characterized as the making of loans, the Portfolios' current fundamental
investment restrictions specifically exclude such instruments from their
prohibitions. In the case of debt securities, they must be publicly distributed.
The Portfolios' current fundamental investment restriction does not explicitly
permit the Portfolios to lend their portfolio securities. Securities lending is
a practice that has become common in the investment company industry, and
involves the temporary loan of portfolio securities to parties that use the
securities for the settlement of other securities transactions. The collateral
delivered to a Portfolio in connection with such a transaction may then be
invested to provide the Portfolio with additional income it might not otherwise
have. Lending securities is permitted under the 1940 Act, subject to certain
limitations. Securities lending involves certain risks if the borrower fails to
return the securities.
What effect will amending the current fundamental investment restriction have on
the Portfolios' lending activities?
The proposed fundamental investment restriction is somewhat similar to the
Portfolios' current fundamental investment restriction, but would provide the
Portfolios with somewhat greater lending flexibility. Under the current
restriction, each Portfolio may not make loans aggregating more than 10% of the
total assets of the Portfolio at any one time. Under the proposed restriction,
the Portfolios may lend to the full extent permitted by the 1940 Act (currently
one-third of total assets). Although the proposed restriction retains the
exceptions contained in the existing investment restriction, it would explicitly
permit lending of Portfolios securities and repurchase agreements. It also would
explicitly permit the Portfolios to invest in loan participations and direct
corporate loans, which recently have become more common as investments for
investment companies. In addition, debt securities would be excepted whether or
not they are publicly traded or of a type customarily purchased by institutional
investors. Investments in debt securities that are not publicly traded would
continue to be subject to provisions of the 1940 Act, which currently limit the
amount of illiquid securities that may be acquired by investment companies, and
to applicable guidelines adopted by the Board of Directors, including liquidity
and valuation guidelines. Furthermore, the proposed restriction contemplates the
possibility of the Portfolios engaging in interfund lending, a practice that has
recently
36
become more common in the investment company industry. However, the Portfolios
currently have no plan or intention to engage in interfund lending.
Although the proposed lending restriction would increase the percentage of
total assets of the Portfolios that could be subject to lending transactions, it
is not anticipated that adoption of the proposed lending restriction would
involve any additional material risk as the proposed investment restriction is
not expected to affect significantly the way the Portfolios are currently
managed and operated.
What is the Board's recommendation on Proposal 3(c)?
THE BOARD OF DIRECTORS, INCLUDING THE INDEPENDENT DIRECTORS, UNANIMOUSLY
RECOMMENDS THAT SHAREHOLDERS VOTE FOR PROPOSAL 3(c).
PROPOSAL 3(d):
TO AMEND THE PORTFOLIOS' FUNDAMENTAL INVESTMENT
RESTRICTION REGARDING UNDERWRITING
Current Fundamental Investment Restriction: Each Portfolio will not act as
a securities underwriter for other issuers, but each Portfolio may purchase
securities under circumstances where, if the securities are later publicly
offered or sold by the Portfolio, it might be deemed to be an underwriter for
purposes of the Securities Act of 1933.
Proposed Fundamental Investment Restriction: Each Portfolio may not engage
in the business of underwriting the securities of other issuers, except as
permitted by the Investment Company Act of 1940 and the rules and regulations
thereunder, or pursuant to any exemptive order that may be granted by the SEC.
This restriction does not prevent the Portfolio from engaging in transactions
involving the acquisition, disposition or resale of Portfolio securities,
regardless of whether the Portfolio may be considered an underwriter under the
Securities Act of 1933, as amended, and does not prevent the Portfolio from
selling its own shares.
What are the legal requirements governing underwriting by the Portfolios?
Under the 1940 Act, the Portfolios' policies concerning underwriting are
required to be fundamental. Under the federal securities laws, a person or
company generally is considered an underwriter if it participates in the public
distribution of securities of other issuers, usually by purchasing the
securities from the issuer with the intention of re-selling the securities to
the public. Underwriters are subject to stringent regulatory requirements and
are often exposed to substantial liability. As a result, virtually all
investment companies operate in a manner that allows them to avoid acting as
underwriters.
From time to time, however, an investment company may purchase a security
for investment purposes that it later sells or redistributes to institutional
investors or others
37
under circumstances where the investment company could possibly be considered to
be an underwriter under the technical definition of "underwriter" contained in
the securities laws. For example, an investment company often purchases
securities in private securities transactions where a resale could raise a
question relating to whether or not the company is technically acting as an
underwriter. However, interpretations of the Staff of the SEC clarify that
re-sales of privately-placed securities by institutional investors do not make
the institutional investor an underwriter in these circumstances. The proposed
restriction encompasses these interpretations.
What effect will amending the current underwriting restrictions have on the
Portfolios?
The proposed fundamental investment restriction is similar to the
Portfolios' current fundamental investment restriction insofar as it relates to
the Portfolios' underwriting activities. However, the proposed underwriting
restrictions, in addition to specifically permitting the Portfolios to dispose
of portfolio securities that they own, would clarify that the Portfolios may
sell their own shares without being deemed an underwriter. Under the 1940 Act,
an investment company will not be considered an underwriter if it sells its own
shares pursuant to a written distribution plan that complies with various
requirements of that statute. It is not anticipated that adoption of the
proposed restriction would involve any additional risk as the proposed
restriction would not affect the way the Portfolios are currently managed.
What is the Board's recommendation on Proposal 3(d)?
THE BOARD OF DIRECTORS, INCLUDING THE INDEPENDENT DIRECTORS, UNANIMOUSLY
RECOMMENDS THAT SHAREHOLDERS VOTE FOR PROPOSAL 3(d).
38
PROPOSAL 3(e):
TO AMEND THE PORTFOLIOS' FUNDAMENTAL INVESTMENT
RESTRICTION REGARDING INVESTING IN COMMODITIES
Current Fundamental Investment Restriction: Each Portfolio will not invest
in commodities or commodity contracts. However, each Portfolio (except the
Select Bond, Money Market and High Yield Bond Portfolios) may invest in stock
index futures contracts, including indexes on specific industries, and the
Select Bond, High Yield Bond, T. Rowe Price Small Cap Value, Capital Guardian
Domestic Equity, International Growth, Franklin Templeton International Equity,
Asset Allocation and Balanced Portfolios may invest in interest rate futures
contracts in accordance with their investment objectives and policies. The
International Growth, Franklin Templeton International Equity, T. Rowe Price
Small Cap Value, Capital Guardian Domestic Equity and High Yield Bond Portfolios
may invest in foreign currency futures contracts.
Proposed Fundamental Investment Restriction: No Portfolio may purchase or
sell physical commodities, unless acquired as a result of ownership of
securities or other instruments. This restriction does not prohibit the
Portfolio from engaging in transactions involving foreign currency, futures
contracts and options, forward contracts, swaps, caps, floors, collars,
securities purchased on a forward commitment or delayed-delivery basis, or other
derivative investments, or other financial instruments that are secured by
physical commodities, in accordance with the Investment Company Act of 1940 and
the rules and regulations thereunder, or pursuant to any exemptive relief that
may be granted by the SEC.
What are the legal requirements governing transactions in commodities by the
Portfolios?
Under the 1940 Act, an investment company's investment restriction
regarding its investments in commodities must be fundamental. The most common
types of commodities are physical commodities, such as wheat, cotton, rice and
corn. However, under federal law, futures contracts are considered to be
commodities, and therefore, financial futures contracts, such as futures
contracts related to stocks, currencies, stock indices or interest rates, also
are considered to be commodities. Investment companies typically invest in
financial futures contracts and options related to such contracts for hedging or
other investment purposes.
What effect will amending the current fundamental restriction have on the
Portfolios' investments in commodities?
The proposed fundamental restriction concerning investments in commodities
would clarify that the Portfolios have the flexibility to invest in the listed
financial instruments and engage in the types of transactions listed in
accordance with the 1940 Act. In addition, while the current restriction has
confined certain of the Portfolios' permissible activities to acquisitions of
certain types of financial instruments, the
39
proposed fundamental investment restriction expands the types of instruments
that all of the Portfolios may acquire and the types of transactions in which
all of the Portfolios may engage. The proposed fundamental investment
restriction would provide all of the Portfolios with flexibility to invest in
the noted financial instruments as well as other derivative instruments. The
addition of "other derivative instruments" to the list of permitted financial
instruments will enable the Portfolios to exclude certain derivative instruments
from this restriction to the extent future SEC interpretations may expand the
types of instruments that can be excluded from the definition of commodities.
The proposed fundamental investment restriction, like the current restriction,
also permits investments to be made in these instruments for any purpose,
including investment or hedging purposes. Using financial futures instruments
can involve substantial risks, and will be utilized by a Portfolio only if MSA,
as investment adviser to each of the Portfolios, believes such investments are
advisable for that Portfolio. For example, price movements of a futures contract
or option may not be identical to price movements of portfolio securities or a
securities index resulting in a risk that when a Portfolio buys a futures
contract or option as a hedge, the hedge may not be completely effective.
What is the Board's recommendation on Proposal 3(e)?
THE BOARD OF DIRECTORS, INCLUDING THE INDEPENDENT DIRECTORS, UNANIMOUSLY
RECOMMENDS THAT SHAREHOLDERS VOTE FOR PROPOSAL 3(e).
PROPOSAL 4:
RECLASSIFICATION OF THE S&P 500 INDEX PORTFOLIO AND THE
S&P 400 INDEX PORTFOLIO AS NON-DIVERSIFIED FUNDS UNDER
THE 1940 ACT AND ELIMINATION OF THE DIVERSIFICATION
RESTRICTION AS A FUNDAMENTAL INVESTMENT RESTRICTION
Which Portfolios' shareholders will vote on this Proposal 4?
Proposal 4 applies only to the Shareholders of each of the S&P 500 Index
Portfolio and the S&P 400 Index Portfolio as of the Record Date, with each
Portfolio voting separately. Proposal 4 requests shareholder approval to
reclassify the S&P 500 Index Portfolio and S&P 400 Index Portfolio as
non-diversified funds under the 1940 Act and to eliminate the diversification
restriction as a fundamental investment restriction. As noted in the
Introduction to Proposals 3-5, under the 1940 Act, only certain policies and
restrictions are required to be fundamental (and subject to change only with
prior shareholder and Board approval). The S&P 500 Index Portfolio and S&P 400
Index Portfolio currently are diversified funds under the 1940 Act and are
subject to the fundamental investment restriction set forth below.
Current Fundamental Investment Restriction: Each Portfolio will not with
respect to at least 75% of the total assets of the Portfolio, invest more than
5% of the
40
value of such assets in the securities of any one issuer (except securities
issued or guaranteed by the U.S. Government or its agencies), or invest in more
than 10% of the outstanding securities of any one issuer.
What legal requirements govern the Portfolios' diversification policies?
Under the 1940 Act, an investment company must classify itself as either
diversified or nondiversified. However, an investment company's status as a
"diversified" or "non-diversified" fund under the 1940 Act is not required to be
a fundamental investment restriction. The difference is that diversified funds
are subject to stricter limits on the amount of assets that can be invested in
any one company. Under the 1940 Act, a "diversified" investment company may not
purchase the securities of any one issuer, if, at the time of purchase, as to
75% of the investment company's total assets, (i) more than 5% of the company's
total assets would be invested in securities of that issuer, or (ii) more than
10% of the voting securities of an issuer would be held by the fund. Under the
1940 Act, these 5% and 10% limitations do not apply to securities issued or
guaranteed by the U.S. government, its agencies or instrumentalities, or to the
securities of other investment companies. Under the 1940 Act, a
"non-diversified" investment company is not subject to such restrictions.
However, the Internal Revenue Code also has certain diversification requirements
for funds that are "regulated investment companies," including all of the
Portfolios. For non-diversified funds, the IRS diversification requirements mean
that the limits above effectively apply to 50% of the Portfolios' total assets
(in lieu of 75%).
What effect will changing the S&P 500 Index Portfolio and S&P 400 Index
Portfolio to non-diversified funds and eliminating the diversification
restriction as a fundamental investment restriction have on such funds?
Proposal 4, which relates only to the S&P 500 Index Portfolio and the S&P
400 Index Portfolio, is asking for shareholder approval to reclassify the two
index-orientated funds of NMSF as "non-diversified" under the 1940 Act. The
purpose of this change is to eliminate a potential conflict between each index
fund's indexing objective and the 1940 Act's requirements for diversified funds.
Specifically, the change to non-diversified status will ensure that the funds
can continue to track their target indices even if the indices become dominated
by a small number of stocks. Classifying an index or index-orientated fund as
diversified has the potential to prevent the fund from meeting its indexing
objective. This is because it is possible in certain markets for the largest
positions in an index to appreciate significantly relative to the index's other
positions, causing the index to be dominated by a handful of companies. A
diversified index fund tied to such an index would be forced to make a difficult
choice: continue to track the index, in which case the fund would violate its
diversification policy; or comply with its diversification policy, in which case
the fund would fail to track the index. The Board of Directors of NMSF believes
that an index fund should always track its target index as closely as possible,
regardless of market conditions. Reclassifying the S&P 500 Index Portfolio and
S&P 400 Index Portfolio as non-diversified funds under the 1940 Act will not
materially impact the
41
day-to-day operations of the index funds. Unless and until changes in the
composition of such funds' target indices require otherwise, each fund will
continue to meet the standards that apply to diversified funds. A fund will
exceed the limits that apply to diversified funds only as necessary to track its
target index. In such a case, the funds would be considered riskier than a
diversified fund investing in the same securities. This is because the
performance of a diversified fund can be hurt or (helped) to a greater degree by
the performance of just a few securities. Finally, as noted above, under the
1940 Act, a fund is not required to have a fundamental policy regarding its
status as either diversified or non-diversified.
Proposal 4 complements Proposal 3(a)(ii), which will permit the two index
Portfolios to concentrate their investments to the extent necessary for them to
track their respective indices.
What is the Board's recommendation on Proposal 4?
THE BOARD OF DIRECTORS, INCLUDING THE INDEPENDENT DIRECTORS, UNANIMOUSLY
RECOMMENDS THAT SHAREHOLDERS VOTE FOR PROPOSAL 4.
PROPOSAL 5:
ELIMINATION OF CERTAIN INVESTMENT RESTRICTIONS
Which Portfolios' shareholders will vote on this Proposal 5?
Proposal 5(a) applies to Shareholders of each of the Portfolios as of the
Record Date, except the S&P 500 Index Portfolio and the S&P 400 Index Portfolio.
Proposals 5(b), (c), (d), (f), (g) and (h) pertain to Shareholders of each of
the Portfolios as of the Record Date, except the T. Rowe Price Small Cap Value
Portfolio and the Capital Guardian Domestic Equity Portfolio. Proposal 5(e)
applies to Shareholders of each of the Portfolios as of the Record Date.
Why is the Board recommending that these fundamental restrictions be eliminated,
and what effect will these eliminations have on the Portfolios?
Certain of the Portfolios' fundamental investment restrictions were
originally drafted to comply with state laws and regulations. Since NSMIA
eliminated the states' ability to substantively regulate investment companies,
the Portfolios are no longer required to include certain fundamental investment
restrictions as discussed in the introduction to Proposals 3 through 5. In
addition, certain of these fundamental investment restrictions are not required
to be fundamental under the 1940 Act.
MSA has proposed that these fundamental investment restrictions be
eliminated to reduce administrative burdens associated with unnecessary
restrictions and to provide additional flexibility to the Portfolios to pursue
their respective investment objectives in accordance with applicable laws in
effect from time to time, including the 1940 Act, without reference to other
requirements. By reducing the total number
42
of investment restrictions that can be changed only by a shareholder vote, MSA
believes that the Portfolios will be able to minimize the costs and delays
associated with holding future shareholder meetings to revise fundamental
policies that become outdated or inappropriate.
MSA does not anticipate that eliminating the investment restrictions will
result in any material additional risk to the Portfolios. Although certain of
the current fundamental investment restrictions of the Portfolios, as drafted,
are no longer legally required, the Portfolios' investments in these particular
areas will continue to be subject to the limitations and protections of the 1940
Act, and any exemptive orders granted under the 1940 Act. Further, the
Portfolios have no current intention to change their present investment
practices as a result of eliminating these investment restrictions, except to
the limited extent described below.
PROPOSAL 5(a):
ELIMINATION OF THE PORTFOLIOS' FUNDAMENTAL
INVESTMENT RESTRICTION REGARDING DIVERSIFICATION
Current Fundamental Investment Restriction: Each Portfolio will not with
respect to at least 75% of the total assets of the Portfolio, invest more than
5% of the value of such assets in the securities of any one issuer (except
securities issued or guaranteed by the U.S. Government or its agencies), or
invest in more than 10% of the outstanding securities of any one issuer.
Which Portfolios' shareholders will vote on this Proposal 5(a)?
Proposal 5(a) applies to all shareholders of each of the Portfolios as of
the Record Date, except the S&P 500 Index Portfolio and S&P 400 Index Portfolio.
What legal requirements govern the Portfolios' diversification policies?
As noted in Proposal 4, under the 1940 Act, an investment company must
classify itself as either a "diversified" or "non-diversified" fund under the
1940 Act. However, an investment company's status as either "diversified" or
"non-diversified" is not required to be a fundamental investment restriction.
For a further discussion of the technical requirements applicable to diversified
funds under the 1940 Act, see Proposal 4.
What effect will eliminating the fundamental investment restriction regarding
diversification have on the Portfolios?
Elimination of this investment restriction is not expected to have any
impact on the day-to-day management of the Portfolios. All of the Portfolios
(except the S&P 500 Index Portfolio and S&P 400 Index Portfolio if Proposal 4 is
approved by shareholders of such funds) will continue to be subject to the
requirements applicable to "diversified funds" under the 1940 Act. In compliance
with the diversification requirements under the 1940 Act, the 5% and 10%
restrictions will not apply to securities of other investment companies (as well
as securities issued by the U.S.
43
government, its agencies or instrumentalities) notwithstanding the fact that
this carve-out is not explicitly provided for in the current fundamental
investment restriction.
What is the Board's recommendation on Proposal 5(a)?
THE BOARD OF DIRECTORS, INCLUDING THE INDEPENDENT DIRECTORS, UNANIMOUSLY
RECOMMENDS THAT SHAREHOLDERS VOTE FOR PROPOSAL 5(a).
PROPOSAL 5(b):
ELIMINATION OF THE PORTFOLIOS' FUNDAMENTAL INVESTMENT RESTRICTION REGARDING
ACQUIRING MORE THAN A CERTAIN
PERCENTAGE OF SECURITIES OF ANY ONE ISSUER
Current Fundamental Investment Restriction: Each Portfolio will not acquire
more than 25% of any class of equity securities of any one issuer.
What are the legal requirements governing the Portfolios' acquisition of
securities of any one issuer?
There is no requirement under the 1940 Act that a fund have a fundamental
investment restriction limiting the percentage of a funds' assets which may be
invested in any one issuer. As noted in Proposals 4 and 5(a), a fund must
classify itself as either diversified or non-diversified under the 1940 Act
(although such classification is not required to be a fundamental investment
restriction). As noted in Proposals 4 and 5(a), all of the Portfolios are
diversified funds under the 1940 Act (except prospectively, the Index 500 Stock
Portfolio and Index 400 Stock Portfolio if Proposal 4 is approved). As such, the
Portfolios will be limited by the diversification restrictions of the 1940 Act
as to the percentage of securities of any one issuer in which they may invest.
In addition, as noted in Proposal 4, if Proposal 4 is approved by shareholders,
the Index 500 Stock Portfolio and the Index 400 Stock Portfolio will remain
subject to the IRS diversification requirements applicable to "regulated
investment companies."
What effect would elimination of this restriction have on the Portfolios?
Elimination of this investment restriction is not expected to have any
impact on the day-to-day management of the Portfolios. All of the Portfolios
(except, prospectively, the Index 500 Stock Portfolio and Index 400 Stock
Portfolio if Proposal 4 is approved by shareholders of such funds) will continue
to be subject to the requirements of "diversified funds" under the 1940 Act and
all of the Portfolios will continue to be subject to the diversification
requirements under the Internal Revenue Code.
What is the Board's recommendation on Proposal 5(b)?
THE BOARD OF DIRECTORS, INCLUDING THE INDEPENDENT DIRECTORS, UNANIMOUSLY
RECOMMENDS THAT SHAREHOLDERS VOTE FOR PROPOSAL 5(b).
44
PROPOSAL 5(c):
ELIMINATION OF THE PORTFOLIOS' FUNDAMENTAL INVESTMENT
RESTRICTIONS REGARDING SHORT SALES
Current Fundamental Investment Restriction: Each Portfolio will not make
short sales of securities.
What are the legal requirements governing the Portfolios' short sales?
As discussed in Proposal 3(b) above, the current fundamental investment
restriction limits the Portfolios' ability to make short sales. Proposal 3(b)
also explains that MSA has proposed that the short sales investment restriction
be removed as a separate investment restriction and combined in the Portfolios'
investment restriction regarding issuance of senior securities. The effect of
the proposed fundamental investment restriction governing issuing senior
securities (and effecting short sales) is discussed in Proposal 3(b) above. If
Proposal 3(b) is approved, MSA and the Board are recommending that this
investment restriction governing short sales then be eliminated because the
Portfolios will be subject to a fundamental investment restriction governing
short sales described in Proposal 3(b) above.
What effect would elimination of this investment restriction have on the
Portfolios?
The proposed elimination of this investment restriction would permit the
Portfolios to effect short sales as permitted by the 1940 Act and any exemptive
relief granted by the SEC, as contemplated by the proposed fundamental
investment restriction described in Proposal 3(b). The ability of the Portfolios
to effect short sales, however, will continue to be subject to the current
regulatory requirements, interpretations and procedures described in Proposal
3(b) which operate to limit the Portfolios' exposure to risks associated with
these transactions. At present, investment companies may engage in short sales
of securities only in limited circumstances under the 1940 Act. Elimination of
the fundamental investment restriction would allow the Portfolios to respond to
any beneficial changes in these regulatory interpretations and procedures or in
the provisions of the 1940 Act governing short sales without conducting a
shareholder meeting with attendant expense and delay.
If the proposed amendment to the Portfolios' fundamental restriction
governing issuing senior securities/borrowing is approved by Shareholders, the
Portfolios will be subject to the following non-fundamental investment
restriction:
"No Portfolio may borrow money for purposes of leverage or investment in
excess of 15% of total assets."
While this non-fundamental investment restriction constrains the
Portfolios' ability to effect short sales, the Board may change the
non-fundamental investment restriction for each Portfolio if they believe that
such a change would be in the best interest of that Portfolio. The use of
leverage may subject the Portfolios to greater risk
45
of loss. The Board presently has no intention of changing the non-fundamental
investment restriction on the use of leverage.
What is the Board's recommendation on Proposal 5(c)?
THE BOARD OF DIRECTORS, INCLUDING THE INDEPENDENT DIRECTORS, UNANIMOUSLY
RECOMMENDS THAT SHAREHOLDERS VOTE FOR PROPOSAL 5(c).
PROPOSAL 5(d):
ELIMINATION OF THE PORTFOLIOS' FUNDAMENTAL INVESTMENT
RESTRICTION REGARDING PURCHASING SECURITIES ON MARGIN
Current Fundamental Investment Restriction for the Portfolios: Each
Portfolio will not purchase any security on margin, but each Portfolio may
obtain such short-term credits as are necessary for the clearance of the
purchases and sales of securities.
What are the legal requirements governing the Portfolios' purchasing securities
on margin?
Purchases of securities on margin by investment companies currently are
prohibited under the 1940 Act. Margin purchases generally involve the purchase
of securities with money borrowed from a broker with cash or securities being
used as collateral for the loans. An investment company is not required to have
a fundamental investment restriction regarding margin purchases under the 1940
Act. The investment restriction regarding purchasing securities on margin was
originally included as a fundamental investment restriction in response to
various state law requirements which were preempted by NSMIA.
What effect would elimination of this restriction have on the Portfolios?
Elimination of the fundamental investment restriction related to margin
accounts would allow the Portfolios if the 1940 Act is changed, to respond to
any provisions of the amended statute that are of potential benefit without the
delay and expense of conducting a shareholder meeting.
What is the Board's recommendation on Proposal 5(d)?
THE BOARD OF DIRECTORS, INCLUDING THE INDEPENDENT DIRECTORS, UNANIMOUSLY
RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR PROPOSAL 5(d).
46
PROPOSAL 5(e):
TO ELIMINATE THE PORTFOLIOS' FUNDAMENTAL INVESTMENT
RESTRICTION REGARDING MAKING LOANS FOR
NON-BUSINESS PURPOSES OR TO UNSEASONED ISSUERS
Current Fundamental Investment Restriction: Each Portfolio will not make
loans to persons who intend to use the proceeds for non-business purposes or to
companies which (including predecessors) have been in business for less than
three years. Repurchase agreements are not considered to be "loans" for the
purpose of this restriction.
What are the legal requirements governing the Portfolios' making loans to
unseasoned issuers?
Under the 1940 Act, an investment company is not required to have a
fundamental investment restriction regarding making loans for non-business
purposes or to companies (including predecessors) that have been in business
less than three years ("unseasoned issuers"). The current fundamental investment
restriction was originally included in the Portfolio's investment restrictions
in response to various state law requirements. Under NSMIA, however, the
Portfolios are no longer legally required to retain such a policy as a
fundamental investment restriction. MSA therefore has recommended that this
restriction be eliminated.
What effect will eliminating the fundamental investment restriction regarding
loans to unseasoned issuers have on the portfolios?
Elimination of this investment restriction should not have a material
impact on the day-to-day operations of the Portfolios. Although the Portfolios
have not and do not intend to make loans for non-business purposes and have not
and do not currently intend to invest in unseasoned issuers, elimination of the
restriction will provide MSA with greater investment flexibility. Investments in
unseasoned issuers can be more volatile than investments in more seasoned
issuers.
What is the Board's recommendation on Proposal 5(e)?
THE BOARD OF DIRECTORS, INCLUDING THE INDEPENDENT DIRECTORS, UNANIMOUSLY
RECOMMENDS THAT SHAREHOLDERS VOTE FOR PROPOSAL 5(d).
47
PROPOSAL 5(f):
TO ELIMINATE THE PORTFOLIOS' FUNDAMENTAL
INVESTMENT REGARDING INVESTMENT IN OTHER
INVESTMENT COMPANIES
Current Fundamental Investment Restriction: Each Portfolio will not
purchase the securities of any other investment company, except in open-market
transactions involving no commission or profit to a dealer (other than the
customary broker's commission) or in connection with mergers, consolidations or
acquisitions of assets, in amounts not exceeding 10% of the total assets of the
Portfolio.
What are the legal requirements governing the Portfolios' investment in other
investment companies?
The current fundamental investment restriction limits the Portfolios'
ability to invest in the securities of other open-end investment companies and
was originally included in the Portfolios' fundamental investment restrictions
in response to various state law requirements. Under NSMIA, however, the
Portfolios are no longer legally required to retain such a policy as a
fundamental investment restriction. MSA therefore has recommended that this
restriction be eliminated.
What effect will eliminating the fundamental investment restriction have on the
Portfolios' investment activities?
Upon elimination of this investment restriction, the Portfolios would
remain subject to the 1940 Act's restrictions on an investment company's
investments in other open-end investment companies. The 1940 Act's restrictions
presently state that an investment company may not purchase more than 3% of
another investment company's total outstanding voting stock, commit more than 5%
of its assets to the purchase of another investment company's securities, or
have more than 10% of its total assets invested in securities of all other
investment companies. If certain conditions are met, investment companies may
invest all of their assets in one or more investment companies.
Elimination of this investment restriction should not have a significant
impact on the day-to-day management of the Portfolios. The Portfolios presently
do not intend to pursue their investment objectives through the purchase of
other open-end investment company securities in excess of 1940 Act limitations.
What is the Board's recommendation on Proposal 5(f)?
THE BOARD OF DIRECTORS, INCLUDING THE INDEPENDENT DIRECTORS, UNANIMOUSLY
RECOMMENDS THAT SHAREHOLDERS VOTE FOR PROPOSAL 5(e).
48
PROPOSAL 5(g):
TO ELIMINATE THE PORTFOLIOS' FUNDAMENTAL INVESTMENT
RESTRICTION REGARDING LIQUIDITY
Current Fundamental Investment Restriction: Each Portfolio will not invest
more than 15% of the value of the total assets of the Portfolio in securities
which are restricted as to disposition under federal securities laws and in
other illiquid assets. For the Money Market Portfolio the limit is 10%.
What are the legal requirements governing the Portfolios' investment in
restricted and illiquid securities?
Under the 1940 Act, a fund is not required to have a fundamental investment
restriction regarding liquidity or investment in restricted securities. However,
under the 1940 Act, mutual funds are not permitted to invest more than 15% of
their assets in illiquid securities because such securities may be difficult to
sell in order to meet, on a timely basis, redemption requests and may be
difficult to value accurately in the absence of actual purchases and sales. For
a money market fund the limit is 10%. In general, the SEC defines an illiquid
security as one which cannot be sold in the ordinary course of business within
seven days at approximately the value at which the Portfolio has valued the
security.
What effect will amending the fundamental investment restriction have on the
Portfolios?
Eliminating this investment restriction should not have a significant
impact on the day-to-day management of the Portfolios. The Portfolios will
continue to be subject to the restrictions on illiquid and restricted securities
imposed by the 1940 Act. By eliminating the restriction, the Portfolios will be
able to respond more quickly to market and regulatory developments impacting the
definition of illiquid or restricted securities because no shareholder vote will
be required to amend a current investment restriction.
What is the Board's recommendation on Proposal 5(g)?
THE BOARD OF DIRECTORS, INCLUDING THE INDEPENDENT DIRECTORS, UNANIMOUSLY
RECOMMENDS THAT SHAREHOLDERS VOTE FOR PROPOSAL 5(g).
49
PROPOSAL 5(h):
TO ELIMINATE THE PORTFOLIOS' FUNDAMENTAL INVESTMENT
RESTRICTION REGARDING INVESTING FOR
CONTROL OR INFLUENCE
Current Fundamental Investment Restriction: Each Portfolio will not invest
for the purpose of influencing management or exercising control, but freedom of
action is reserved with respect to exercise of voting rights in respect of each
Portfolio's securities.
What are the legal requirements governing the Portfolios' policy of investing
for control or influence?
The investment restriction was enacted in response to various state
securities laws and is no longer required under NSMIA. The investment
restriction was intended to ensure that an investment company would not be
engaged in the business of managing another company. Typically, if an investment
company acquires a large percentage of the securities of a single issuer, it
will be deemed to have invested in such issuer for the purposes of exercising
control or management. In certain circumstances, the fundamental investment
restriction could be read to unduly restrict MSA, or a Portfolio, from exerting
influence with the management of issuers in which a Portfolio has invested when
to do so would be in the Portfolio's interests.
What effect will eliminating the fundamental restriction have on the Portfolios'
policy on investing for control or influence?
Eliminating this investment restric tio n will not have any significant
impact on the day-to-day management of any of the Portfolios because none of the
Portfolios have a present intention of investing in an issuer for the purposes
of exercising control or management. The Portfolios currently are diversified
funds and, as such, are subject to limitations under the 1940 Act as to the
percentage of securities of any one issuer that each Portfolio may acquire as
discussed in Proposal 4. If Proposal 4 is approved by shareholders, the Index
500 Stock Portfolio and Index 400 Stock Portfolio would become non-diversified
funds under the 1940 Act. Notwithstanding this change in designation, the
objectives of the Index 500 Stock Portfolio and Index 400 Stock Portfolio are to
track their respective indices and not to invest in issuers for the purpose of
exercising control or management.
What is the Board's recommendation on Proposal 5(h)?
THE BOARD OF DIRECTORS, INCLUDING THE INDEPENDENT DIRECTORS, UNANIMOUSLY
RECOMMEND THAT SHAREHOLDERS VOTE FOR PROPOSAL 5(h).
50
GENERAL INFORMATION ABOUT THE FUND
Who are the executive officers of NMSF?
Information about the executive officers and directors of NMSF and the
portfolio managers for the Portfolios is set forth in Appendix A.
What is the security ownership of management and certain holders?
Northwestern Mutual owns all of the outstanding shares of NMSF on behalf of its separate investment accountsGeneral Account and as general assets.the Variable Accounts. Information about Northwestern Mutual'sMutual’s ownership forof each Portfolio is set forth above in this
statement.above. Information about ownership interests of directors, director nominees and executive officers, through their interests in variable annuity contracts
and variable life insurance policies,Executive Officers of NMSF is set forth in Appendix B.
C.
Who are the investment adviseradvisor and subadvisersub-advisors of the Portfolios?
The investment adviseradvisor of NMSF is MSA, a wholly-owned company of Northwestern Mutual. MSA'sMSA’s and Northwestern Mutual’s address is 720 East Wisconsin Avenue, Milwaukee, Wisconsin 53202. MSA and its predecessor, Northwestern Mutual Investment Securities,Services, LLC ("NMIS"(“NMIS”), have served as investment adviseradvisor to the Portfolios, subject to control of the Board of Directors, since NMSF'sNMSF’s incorporation. MSA provides investment advice and recommendations regarding the purchase and sale of securities for the Portfolios. The personnel and related facilities of
Northwestern Mutual are utilized by MSA in performing its investment advisory
function. For the Franklin Templeton International Equity Portfolio, MSA has retained the following sub-advisors for the following Portfolios: Templeton Investment Counsel, LLC, ("Templeton"), 500 East Browerd Boulevard, Fort Lauderdale, Florida 33394, a wholly-owned indirect subsidiary of Franklin Resources, Inc., as sub-adviser.is the sub-advisor to the Franklin Templeton International Equity Portfolio. Capital Guardian Trust Company, 333 South Hope Street, Los Angeles, California 90071, a wholly-owned indirect subsidiary of The Capital Group Companies, Inc., is the sub-advisersub-advisor for the Capital Guardian Domestic Equity Portfolio. T. Rowe Price Associates, Inc., 100 East Pratt Street, Baltimore, Maryland 21202, a wholly-owned subsidiary of T. Rowe Price Group, Inc., a publicly traded financial services holding company, is the sub-advisersub-advisor for the T. Rowe Price Small Cap Value Portfolio and the T. Rowe Price Equity Income Portfolio. Brown Brothers Harriman & Co. provides fund accounting servicesJanus Capital Management LLC, 151 Detroit Street, Denver, Colorado, 80206, a direct subsidiary of Janus Capital Group, is the sub-advisor for the Franklin Templeton International EquityJanus Capital Appreciation Portfolio. Brown Brothers Harriman & Co.AllianceBernstein L.P., 1345 Avenue of the Americas, New York, New York, 10105, is located at 40 Water Street, Boston, Massachusetts 02109.
the sub-advisor for the AllianceBernstein Mid Cap Value Portfolio.
32
Who are NMSF’s independent auditors?
NMSF’s principal accountant is PricewaterhouseCoopers LLP (the “Accountant”). The Accountant has been appointed by NMSF’s Audit Committee, which is comprised solely of independent directors. As such, pursuant to Rule 32a-4 under the Portfolios' auditors1940 Act, the Portfolios’ shareholders are not being asked at this time to ratify the selection of the Accountant. Representatives of the Accountant will not be present at the Special Meeting.
The Accountant billed NMSF aggregate fees for services rendered to NMSF for the last two fiscal years as follows:
| Fees and Services to NMSF | ||||
| 2005 | 2004 | |||
| Audit Fees | $303,000 | $303,000 | ||
| Audit-Related Fees | 0 | 0 | ||
| Tax Fees | $47,078 | $48,126 | ||
| All Other Fees | 0 | 0 | ||
“Audit Related Fees” relate to assurance and how much were they compensatedrelated services that are reasonably related to the performance of the audit or review of NMSF’s financial statements that are traditionally performed by the independent auditor. Tax services include such things as tax return preparation or review, tax compliance, tax planning and tax advice.
During the fiscal years ended December 31, 2004 and 2005, the aggregate non-audit fees (exclusive of the “tax fees” included in the last
fiscal year?
Upon the recommendation of the Audit Committee of the Board of Directors of
NMSF, the Board selected the firm of PricewaterhouseCoopers LLP ("PwC") as
independent auditors of MSF for the fiscal year ending December 31, 2002. PwC
has informed the Audit Committee for MSF that it has no material direct or
indirect
51
financial interest in any of the Portfolios and that investments in the
Portfolios by its personnel and their family members are prohibited where
appropriate to maintain the auditor's independence. In the opinion of the Audit
Committee, the services provided by PwC are compatible with maintaining its
independence. Information concerning the compensation paid to PwC is set forth
below.
Audit Fees. The aggregate feestable above) billed by PwCthe Accountant for other professional services rendered for the audit of NMSF's annual financial statements for the fiscal
year ended December 31, 2002 were $159,995.
Financial Information Systems Designto NMSF, MSA and Implementation Fees. During the
fiscal year ended December 31, 2002, PwC did not bill NMSF for any
professional services relating to financial information systems design.
During the fiscal year ended December 31, 2002, PwC billed a total of
$1,083,717 to Robert W. Baird & Co., Incorporated, an affiliate of MSA, for
financial information systems design and no fees to MSA or any other entities controlling, controlled by or under common control with MSA that provided services to MSF for professional services relating to financial
information systems design.
All Other Fees. During the fiscal year ended December 31, 2002, the
aggregate fees billed by PwC for other professional services rendered to
NMSF, MSA and all entities controlling, controlled by or under common
control with MSA that providedongoing services to NMSF, were $782,224,$71,500 and $160,856, respectively.
NMSF has adopted a policy governing the pre-approval of which
$33,250 was billedcertain audit and non-audit related services to be provided by the Accountant. The policy provides for the pre-approval of audit, audit related and tax services for NMSF, for services related to tax return preparation
and excise tax review. The remaining amount of the PwC fees billed related
to audit services (of which $496,165 related to auditas well as certain non-audit services provided to Northwestern Mutual), taxaffiliates of NMSF that provide ongoing services to NMSF. All of the services listed above during fiscal 2004 and other2005 received the pre-approval of the Audit Committee or its designated representative. When considering the approval of audit-related and non-audit services, the Audit Committee considers whether the services to be provided by PwC tothe Accountant are compatible with maintaining the Accountant’s independence.
33
Who will pay for the Special Meeting and related costs?
NMSF will not pay the expenses in connection with the Notice and this Statement or the Special Meeting of Shareholders. MSA and/or an affiliate will pay the expenses, including the printing, mailing, solicitation and vote tabulation expenses, legal fees, and out-of-pocket expenses.
Other information regarding the Special Meeting and the solicitation of votes.
Proxies and voting instructions will be solicited by NMSF primarily by mail. The solicitation may also include telephone, facsimile, internet or oral communication by certain officers or employees of NMSF, MSA and all entities controlling, controlledNorthwestern Mutual, none of whom will be paid for these services. Although it is not currently contemplated, NMSF or MSA may retain an outside proxy solicitation service to assist in soliciting voting instructions by telephone. The costs of any such outside proxy solicitation service will be borne by MSA and/or under common
control with MSA that provided services to NMSF (including Northwestern Mutual).
RepresentativesMutual, and not by NMSF. Any recordholder of PwC are not expected to be present at the Special Meeting.
OTHER BUSINESS
The Board of Directors knows of no other business to be presentedshares giving voting instructions may revoke it before it is exercised at the Special Meeting other than Proposals 1 through 6, and do not intend to bring any
other matters before the Special Meeting. However, if any additional matters
should beby properly presented,submitting a written notice of revocation or a subsequently signed proxy card.
| By Order of the Board of Directors, | |
| Randy M. Pavlick | |
| Secretary | |
| Northwestern Mutual Series Fund, Inc. |
34
APPENDIX A
DIRECTOR AND OFFICER INFORMATION
Officers of Northwestern Mutual will vote the shares it holds
for each Portfolio in its discretion.
By Order of the Board of Directors,
/s/ Merrill C. Lundberg
Merrill C. Lundberg
Secretary
52
APPENDIX A
EXECUTIVE OFFICER AND DIRECTOR INFORMATION
Series Fund, Inc.
Set forth below is a list of the current directors and executive officers of NMSF, and the portfolio managers for the Portfolios, including their names, ages, position(s) with NMSF, and principal occupation or employment during the past five years. An asterisk (*) indicates thatyears, as of October 31, 2006. All of the director is an "interested
person"officers of NMSF as defined in Section 2(a)(19)are also officers of MSA, the 1940 Act.investment advisor to NMSF, with the exception of Messrs. ZoreGivler and GraffPavlick, and Ms. Courtney, who are interested persons of NMSF because they are Trusteesofficers of Northwestern Mutual, the parent corporation of NMSF's investment adviser. Mr. Zore also is
the President and CEO of Northwestern Mutual.
DIRECTORS
| Name, Address, and Age | Position(s) Held with Fund | Term of Office and Length of Time Served | Principal Occupation(s) During |
| Mark G. Doll 720 East Wisconsin Ave. Milwaukee, WI 53202 | President |
| 2003 | Senior Vice President of Northwestern Mutual. President and Director of Mason Street Advisors, LLC since | ||
| Walter M. Givler 720 East Wisconsin Ave. Milwaukee, WI 53202 (49) | Vice President, Chief Financial Officer and Treasurer | 2003 | Vice President of Investment Accounting for Northwestern Mutual since 2002; Vice President and Associate Controller, 2002; Associate Controller from |
| Kate M. Fleming 720 East Wisconsin Ave. Milwaukee, WI 53202 (44) | Vice President Operations | 2004 | Vice President – Operations of Mason Street Advisors, LLC since 2004. Prior thereto, |
Michael W. Zielinski | Chief Compliance Officer | 2006 | Chief Compliance Officer of Mason Street Advisors, LLC since 2006; Counsel, Northwestern Mutual from 2004 - 2006; Associate Counsel, Quasar Distributors, LLC (broker-dealer) from 2003 to 2004; Legal Compliance Officer, U.S. Bancorp Fund Services, LLC (mutual fund service provider) from 2001 to 2003 |
| Barbara E. Courtney 720 East Wisconsin Ave. Milwaukee, WI 53202 (49) | Controller | 1996 | Director of Mutual Fund Accounting of Northwestern Mutual since 2002; prior thereto, Associate Director |
35
| Name, Address, and Age | Position(s) Held with Fund | Term of Office and Length of Time Served | Principal Occupation(s) During Past 5 Years |
| Randy M. Pavlick 720 East Wisconsin Ave. Milwaukee, WI 53202 (47) | Secretary | 2006 | Assistant General Counsel of Northwestern Mutual and Assistant Secretary of Mason Street Advisors, LLC, each since 2004; prior thereto, Vice President and General Counsel of UMB Financial Services, Inc. (mutual fund service provider) from 1993 to 2004 |
| Patricia L. Van Kampen 720 East Wisconsin Ave. Milwaukee, WI 53202 (55) | Vice President–Investments | 1996 | Managing Director of Mason Street Advisors, LLC since 2002; prior thereto, Managing Director of Northwestern Investment |
| Jefferson V. DeAngelis 720 East Wisconsin Ave. Milwaukee, WI 53202 (48) | Vice President– Investments | 1996 | Managing Director of Mason Street Advisors, LLC since 2002; prior thereto, Managing Director of Northwestern Investment Management Company, LLC |
| William R. Walker 720 East Wisconsin Ave. Milwaukee, WI 53202 (49) | Vice President–Investments | 1996 | Managing Director of Mason Street Advisors, LLC since 2002; prior thereto, Managing Director of Northwestern Investment Management Company, LLC |
| Steven P. Swanson 720 East Wisconsin Ave. Milwaukee, WI 53202 (52) | Vice President–Investments | 1996 | Managing Director of Mason Street Advisors, LLC since 2002; prior thereto, Managing Director of Northwestern Investment Management Company, LLC |
| David R. Keuler 720 East Wisconsin Ave. Milwaukee, WI 53202 (45) | Vice President–Investments | 2002 | Managing Director of Mason Street Advisors, LLC since 2003. Director of Mason Street Advisers, LLC from 2002 to 2003. Prior thereto, Director of Northwestern Investment Management Company, LLC |
| Thomas A. Carroll 720 East Wisconsin Ave. Milwaukee, WI 53202 (52) | Vice President–Investments | 2002 | Managing Director of Mason Street Advisors, LLC since 2002; prior thereto, Managing Director of Northwestern Investment Management Company, LLC |
Michael P. Johnson | Vice President–Investments | 2003 | Director of Mason Street Advisors, LLC since 2002; prior thereto, Director of Northwestern Investment Management Company, LLC |
| Jill M. Grueninger 720 East Wisconsin Ave. Milwaukee, WI 53202 (42) | Vice President–Investments | 2006 | Director of Mason Street Advisors, LLC since 2002; prior thereto, Director of Northwestern Investment Management Company, LLC |
36
| Name, Address, and Age | Position(s) Held with Fund | Term of Office and Length of Time Served | Principal Occupation(s) During Past 5 Years |
| R. David Ells 720 East Wisconsin Ave. Milwaukee, WI 53202 (38) | Vice President–Investments | 2006 | Director of Mason Street Advisors, LLC since 2004; Senior Vice President of Deerfield Capital Management, LLC from 2003 - 2004; Senior Vice President of Enterprise Advisers/ Imagine Reinsurance from 2002-2003; prior thereto Director – Portfolio Management of The Liberty Hampshire Company |
| Curtis J. Ludwick 720 East Wisconsin Ave. Milwaukee, WI 53202 (37) | Vice President–Investments | 2006 | Director of Mason Street Advisors, LLC since 2002; prior thereto, Director of Northwestern Investment Management Company, LLC |
| Andrew T. Wassweiler 720 East Wisconsin Ave. Milwaukee, WI 53202 (38) | Vice President–Investments | 2006 | Director of Mason Street Advisors, LLC since 2002; prior thereto, Director of Northwestern Investment Management Company, LLC |
Executive Officers and Directors of Mason Street Advisors, LLC
Set forth below is a listing of the names of the directors and the principal executive officers of MSA and certain information regarding such persons. An asterisk next to a person’s name indicates the individual is also an officer of NMSF. The address of each of the individuals listed below is c/o The Northwestern Mutual Life Insurance Company, 720 East Wisconsin Avenue, Milwaukee, Wisconsin 53202-4797.
| Name | Position with MSA | Principal Occupation |
| Mark G. Doll* | President and Director | Senior Vice President of Northwestern Mutual. President and Director of Mason Street Advisors, LLC. |
| Mason G. Ross | Director | Executive Vice President and Chief Investment Officer of Northwestern |
| Chris M. Bauer | Director | Retired. Previously Chairman and founder First Business |
| Jefferson | Treasurer | Managing Director of Mason Street Advisors, |
| Robert J. Berdan | Secretary | Vice President, General Counsel |
| Michael W.Zielinski | ChiefCompliance Officer | Chief Compliance Officer of |
37
APPENDIX B
NOMINATING COMMITTEE CHARTER
A.Committee Membership
The Nominating Committee (“Committee”) of the Board of Directors (the “Board”) of Northwestern Mutual Series Fund, Inc. (the “Fund”) shall be composed solely of directors who are not “interested persons” of the Fund as defined in Section 2(a)(19) of the Investment Company Act of 1940 (the “Independent Directors”).
B.Objectives of the Committee
The primary purposes and responsibilities of the Committee are to (i) identify individuals qualified to become members of the Board in the event that a position is vacated or created, (ii) consider all candidates proposed to become members of the Board, subject to the procedures and policies set forth in this Charter, the Fund’s Bylaws or resolutions of the Board, (iii) nominate, or recommend for nomination by the Board, candidates for election as Directors, and (iv) set any necessary standards or qualifications for service on the Board.1
C.Board Nominations and Functions
| 1. | In the event of any vacancies on the Board, the Committee shall oversee the process for the identification, evaluation and nomination of potential candidates to serve on the Board. The Committee may solicit suggestions for nominations from | ||
| 2. | The Committee shall evaluate each candidate’s qualifications for Board membership, and, with respect to prospective nominees for Independent Director, their independence from the Fund’s investment advisers and other principal service providers. The Committee shall consider the effect of | ||
| 3. | In assessing the qualifications of a potential candidate for membership on the Board, the Committee may consider the candidate’s potential contribution to the operation of the Board and its committees, and such other factors as it may deem relevant. No person shall be qualified to be a Board member unless | ||
1The members of the Committee shall not be subject to greater fiduciary obligations and shall not be subject to a higher standard of care than the other members of the Board because of their work for the Committee.
38
| the Committee, in consultation with legal counsel, has determined that such person, if elected as a Director, would not cause the Fund to violate (a) applicable law, regulation or regulatory interpretation, (b) its organizational documents, or (c) any policy adopted by the Board regarding either the retirement age of any Board member or the percentage of the Board that would be composed of Independent Directors. | |||
| 4. | While the Committee is solely responsible for the selection and nomination of potential candidates to serve on the Board, the Committee may consider and evaluate nominations properly submitted by shareholders of the Fund. | ||
| 5. | The Committee shall periodically evaluate the composition of the Board to determine whether it may be appropriate to add individuals with different backgrounds or skills from | ||
D.Other Powers and Responsibilities
The Committee shall meet as necessary in connection with any vacancy on or addition to the Board, and otherwise from time to time as appropriate to carry out the Committee’s responsibilities.
The Committee shall have the resources and authority appropriate to discharge its responsibilities, including the ability to engage and compensate from the Fund’s assets, third party consultants to assist with identification and evaluation of potential Independent Directors.
The Committee shall periodically assess this Charter and recommend to the Board any revisions or modifications that the Committee deems necessary or appropriate to the effective discharge of its responsibilities.
ADOPTED: August 3, 2006
39
APPENDIX B
C
SECURITY OWNERSHIP OF NORTHWESTERN MUTUAL NMSF DIRECTORS, DIRECTOR NOMINEES
AND MANAGEMENT
EXECUTIVE OFFICERS
All of the outstanding shares of each Portfolio of NMSF are owned by Northwestern Mutual. Northwestern Mutual on behalf ofholds these shares for its General Account and for its separate investment accounts used for variable annuity contracts and as general
assets.variable life policies. Information about Northwestern Mutual'sMutual’s ownership forof each Portfolio is set forth in the Statement to Contract and Policy Owners and Payees.above. Information about ownership interests of directors, directorDirectors, nominees and executive officers of NMSF, as of DecemberOctober 31, 2002,2006, is set forth in the table below. The ownership interests of these individuals is through their ownership interests in Northwestern Mutual variable annuity contracts and variable life insurance policies.policies and, for the officers, the Northwestern Mutual 401(k) savings plan. No information is given for a Portfolio if a director, director nominee or executive officerExecutive Officer had no beneficial interest in any shares of that Portfolio as of DecemberOctober 31, 2002.
SECURITY OWNERSHIP OF MANAGEMENT
2006. The Independent Directors would no longer be considered independent within the meaning of Section 2(a)(19) of the 1940 Act if they were to invest in variable annuity contracts and variable life policies issued by Northwestern Mutual (which is the only way they could invest in the Portfolios.)
| Shares Beneficially | Percent | |||
| Name | Portfolio | Owned1 | of | |
| Independent Directors | ||||
| Miriam A. Allison | None | |||
| William A. McIntosh | None | |||
| Michael G. Smith | None | |||
| Robert H. Huffman III | None | |||
| Michael M. Knetter | None | |||
| Management Director | ||||
| Edward J. Zore | Aggressive Growth Stock | 163,445 | * | |
| Index 500 Stock | 127,704 | * | ||
| Franklin Templeton International Equity Portfolio | 117,701 | * | ||
| High Yield Bond | 20,969 | * | ||
| Executive Officers | ||||
| Mark G. Doll | Aggressive Growth Stock Portfolio | 8,654 | * | |
| Index 500 Stock Portfolio | 9,995 | * | ||
| Franklin Templeton International Equity | 9,462 | * | ||
| Money Market Portfolio | 1,945 | * | ||
| Walter M. Givler | None | |||
| Kate M. Fleming | Aggressive Growth Stock Portfolio | 10,937 | * | |
| Index 500 Stock Portfolio | 3,132 | * | ||
| Franklin Templeton International Equity | 4,281 | * | ||
40
| Balanced Portfolio | 10,712 | * | ||
| Growth Stock | 3,286 | * | ||
| Large Cap Core Stock Portfolio | 3,914 | * | ||
| Small Cap Growth Stock | 11,743 | * | ||
| Index 400 Stock Portfolio | 7,360 | * | ||
| Michael W. Zielinski | Franklin Templeton International Equity | 1,555 | * | |
| Small Cap Growth Stock | 2,568 | * | ||
| Index 500 Stock Portfolio | 685 | * | ||
| Barbara E. Courtney | Aggressive Growth Stock Portfolio | 18,953 | * | |
| Index 500 Stock Portfolio | 13,562 | * | ||
| Franklin Templeton International Equity | 29,998 | * | ||
| Small Cap Growth Stock | 5,186 | * | ||
| Index | 5,109 | * | ||
| Randy M. Pavlick | Franklin Templeton International Equity Portfolio | 8,570 | * | |
| Index 400 Stock Portfolio | 14,309 | * | ||
| All Nominees and Executive | ||||
| Officers, as a group | ||||
| Aggressive Growth Stock | 201,989 | * | ||
| Index 500 Stock Portfolio | 155,079 | * | ||
| Franklin Templeton International Equity Portfolio | 171,567 | * | ||
| High Yield Bond Portfolio | 20,969 | * | ||
| Money Market Portfolio | 1,945 | * | ||
| Balanced Portfolio | 10,712 | * | ||
| Growth Stock | 3,286 | * | ||
| Large Cap Core Stock Portfolio | 3,914 | * | ||
| Small Cap Growth Stock | 19,497 | * | ||
| Index 400 | 26,778 | * |
1Includes ownership interests in variable annuity contracts, variable life insurance policies and the Northwestern Mutual 401(k) savings plan. Represents shares rounded to the nearest whole share.
(2)
2An "*"“*” represents less than 1% of the outstanding shares of the Portfolio as of the Record Date.
B-2
41
DIRECTOR AND DIRECTOR NOMINEE SHARE
OWNERSHIP BY DOLLAR RANGE
The following two tables showtable shows, as of October 31, 2006, the dollar range of each director and
director nominee's ownership of shares of each Portfolio and the aggregate dollar range of the Series Fund and
each Fund asshares of December 31, 2002.
Director and Director Nominee Holdings
In Northwestern Mutual Series Fund, Inc.
(Indirect Holdings asall Portfolios of December 31, 2002,NMSF owned indirectly based on investmentinvestments in variable annuity contracts and variable life insurance policies issued by Northwestern Mutual)
Mutual and, with respect to Mr. Zore, participation in the Northwestern Mutual 401(k) savings plan.
| Allison | McIntosh | Smith | Zore | Huffman | Knetter | ||||||
| Aggregate Holdings, | NONE | NONE | NONE | OVER $100,000 | NONE | NONE | |||||
| Small Cap Growth Stock Portfolio | None | None | None | None | None | None | |||||
| T. Rowe Price Small Cap Value Portfolio | None | None | None | None | None | None | |||||
| Aggressive Growth | None | None | None | Over $100,000 | None | None | |||||
| International Growth Portfolio | None | None | None | None | None | None | |||||
| Franklin Templeton International Portfolio | None | None | None | $50,001- $100,000 | None | None | |||||
| AllianceBernstein Mid Cap Value Portfolio | None | None | None | None | None | None | |||||
| Index 400 Stock Portfolio | None | None | None | None | None | None | |||||
| Janus Capital Appreciation Portfolio | None | None | None | None | None | None | |||||
| Growth Stock Portfolio | None | None | None | None | None | None | |||||
| Large Cap Core Stock Portfolio | None | None | None | None | None | None | |||||
| Capital Guardian Domestic Equity Portfolio | None | None | None | None | None | None | |||||
| T. Rowe Price Equity Income Portfolio | None | None | None | None | None | None | |||||
| Index 500 Stock Portfolio | None | None | None | Over $100,000 | None | None | |||||
| Asset Allocation Portfolio | None | None | None | None | None | None | |||||
| Balanced Portfolio | None | None | None | None | None | None | |||||
| High Yield Bond Portfolio | None | None | None | $10,001- $50,000 | None | None | |||||
| Select Bond Portfolio | None | None | None | None | None | None | |||||
| Money Market Portfolio | None | None | None | None | None | None | |||||
Messrs. Smith and Director Nominee Holdings
In Mason Street Funds, Inc.
(asHuffman previously owned, but no longer own, units of December 31, 2002)
42
the AllianceBernstein Mid Cap Value Portfolio. According to AllianceBernstein L.P.'s 2005 Annual Report, AllianceBernstein L.P.'s majority owner, AllianceBernstein Corporation, rather than AllianceBernstein Holding L.P., generally has the exclusive right and full authority to manage, conduct, control and operate AllianceBernstein L.P.'s business affairs.
43
APPENDIX C
D
PROPOSED AMENDEDINVESTMENT ADVISORY AGREEMENT
THISAMENDED AGREEMENT, entered into this 1st__ day of May, 2003__, 2007 between Northwestern Mutual Series Fund, Inc., a Maryland corporation ("NMSF"), and Mason Street Advisors, LLC., a Wisconsin limited liability company ("MSA") (MSA being hereinafter referred to as the "Manager").
WHEREAS, NMSF is a series company as contemplated by the Investment Company Act of 1940 and currently has eighteen series, each of which is represented by a separate class of capital stock, and all of which are subject to this agreement: T. Rowe Price Small Cap Value Portfolio, International Growth Portfolio, Capital Guardian Domestic Equity Portfolio, Asset Allocation Portfolio, Small Cap Growth Stock Portfolio, Aggressive Growth Stock 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, T. Rowe Price Equity Income Portfolio, Index 500 Stock Portfolio, Balanced Portfolio, High Yield Bond Portfolio, Select Bond Portfolio and Money Market Portfolio (the "Portfolios"); and
WHEREAS, NMSF and Manager wish to enter into an agreement amending, restating and superseding the existing investment advisory agreements for fifteen of the Portfolios and setting forth the terms on which the Manager will perform certain services for NMSF and all of the Portfolios.
NOW, THEREFORE, it is mutually agreed as follows:
1. NMSF hereby employs the Manager to manage the investment and reinvestment of the assets of each Portfolio, to determine the composition of the assets of each Portfolio, including the purchase, retention or sale of the securities and cash contained in the Portfolio, subject to the supervision of the Board of Directors of NMSF, for the period and on the terms in this Agreement set forth. The Manager will perform its duties in accordance with the investment objectives and policies of each Portfolio as stated in NMSF's Articles of Incorporation, By-laws and Registration Statement and amendments thereto filed with the Securities and Exchange Commission and in resolutions adopted by NMSF's Board of Directors. The Manager hereby accepts such employment and agrees during such period, at its own expense, to render the services and to assume the obligations herein set forth, for the compensation herein provided. The Manager shall for all purposes herein be deemed to be an independent contractor and shall, unless otherwise expressly provided or authorized, have no authority to act for or represent NMSF in any way or otherwise be deemed an agent of NMSF.
44
2. The Manager, at its own expense, shall furnish to each Portfolio office space in the offices of Manager or in such other place as may be agreed upon from time to
C-1
Manager'sManager’s organization to serve without salaries from NMSF as officers or agents of NMSF. The Manager assumes and shall pay or reimburse each Portfolio for their share of the compensation (if any) of the directors and officers of NMSF as such, and all expenses not hereinafter specifically assumed by the Portfolios that are incurred by the Manager or by the Portfolio in connection with the management of the investment and reinvestment of the assets of the Portfolios and the administration of the affairs of the Portfolios.
Balanced, Select Bond and Money Market Portfolios
Each of the Balanced, Select Bond and Money Market Portfolios assumes and shall pay all interest charges and expenses; broker'sbroker’s commissions and issue and transfer taxes chargeable to the Portfolio in connection with securities transactions to which the Portfolio is a party; all taxes payable by the Portfolio to federal, state or other governmental agencies, and any extraordinary or non-recurring expenses incurred in connection with the operation of the Portfolio.
All Portfolios except the Balanced, Select Bond and Money Market Portfolios
Each Portfolio (except the Balanced, Select Bond and Money Market Portfolios) assumes and shall pay charges and expenses of any custodian or depository appointed by the Portfolio for the safekeeping of its cash, securities and other property; charges and expenses of independent auditors; charges and expenses of any transfer agents and registrars appointed by the Portfolio; the cost of stock certificates representing shares of the Portfolio; fees and expenses involved in registering and maintaining registration of the Portfolio and of its shares with the Securities and Exchange Commission (including the preparation and printing of prospectuses for filing with the Commission); all expenses of shareholders' and directors' meetings and of preparing and printing reports to shareholders; charges and expenses of legal counsel in connection with the Portfolio's corporate existence, corporate and financial structure and relations with its shareholders; broker's commissions and issue and transfer taxes, chargeable to the Portfolio in connection with securities transactions to which the Portfolio is a party; and all taxes payable by the Portfolio to federal, state or other governmental agencies, including foreign taxes.
All Portfolios
In connection with purchases or sales of portfolio securities for the account of each Portfolio, neither the Manager nor any of its directors, officers or employees will act as a principal or receive any commission as agent.
45
The services of the Manager to the Portfolios hereunder are not to be deemed exclusive, and the Manager shall be free to render similar services to others so long as its services hereunder are not impaired thereby.
C-2
3. For the services to be rendered and the charges and expenses assumed and to be paid by the Manager as provided in paragraph 2 hereof, each Portfolio shall pay to the Manager compensation at the annual rate of the percentage of the current value of the net assets of the Portfolio as set forth in the Investment Advisory Fee Schedule which is part of this Agreement.
Such compensation shall be payable monthly. Such compensation shall be calculated on the basis of the aggregate of the averages of all the valuations of the net assets of the Portfolio made as of the close of business on each valuation day during the period for which such compensation is paid.
Such compensation shall be charged to each Portfolio on each valuation day. The amount of the compensation will be deducted on each valuation day from the value of the Portfolio prior to determining the Portfolio's net asset value for the day and shall be transmitted or credited to the Manager.
4. The Portfolios shall cooperate with the Manager in the registration or qualification of its shares with the Securities and Exchange Commission. Each Portfolio shall use its best efforts to maintain such registration and qualifications.
5. NMSF shall cause the books and accounts of each Portfolio to be audited at least once each year by a reputable independent public accountant or organization of public accountants who shall render a report to NMSF.
6. Subject to the Articles of Incorporation of NMSF and of the Manager respectively, it is understood that directors, officers, employees, agents and stockholders of NMSF are or may be interested in the Manager (or any successor thereof) as directors, officers, employees, agents, or stockholders, or otherwise, that directors, officers, agents and stockholders of the Manager are or may be interested in NMSF as directors officers, employees, agents or stockholders or otherwise, and that the Manager (or any successor) is or may be interested in NMSF as a stockholder or otherwise.
7. In the absence of willful misfeasance, bad faith, gross negligence, or reckless disregard of obligations or duties hereunder on the part of the Manager or its corporate affiliates, the Manager and its corporate affiliates shall not be subject to liability to NMSF for any act or omission in the course of, or connected with, rendering services hereunder or for any losses that may be sustained in the purchase, holding, or sale of any security. No provision of this Agreement shall be construed to protect the Manager and its corporate affiliates from liability in violation of section 17(i) of the Investment Company Act of 1940.
46
8. This Agreement shall continue in effect so long as its continuance is specifically approved at least annually by the vote of a majority of those directors of NMSF who are not parties to the Agreement or interested persons of any such party cast in person at a meeting called for the purpose of voting on such approval and by either a majority of the Board of Directors of NMSF or a majority of the outstanding C-3
This Agreement may at any time be terminated without the payment of any penalty either by vote of the Board of Directors of NMSF or by vote of the majority of the voting securities of any Portfolio, on sixty days'days’ written notice to the Manager. This Agreement may also be terminated by the Manager on ninety days'days’ written notice to NMSF. This Agreement shall immediately terminate in the event of its assignment (as defined in the Investment Company Act of 1940). Any notice under this Agreement shall be given in writing, addressed and delivered, or mailed postpaid, to the other party at any office of such party.
9. Notwithstanding any other provision of this Agreement NMSF hereby authorizes the ManagertheManager to employ one or more investment sub-advisers for the purpose of providing investment management services for any or each of the Portfolios pursuant to this Agreement,provided, however, that (1) the compensation to be paid to such investment sub-advisers shall be the sole responsibility of the Manager, (2) the duties and responsibilities of the investment sub-advisers shall be as set forth in sub-advisory agreements including MSA and the investment sub-adviser as parties, (3) such sub-advisory agreements shall be adopted and approved in conformity with the applicable laws,and regulationsand regulations,any exemptive orders issued to NMSF, and (4) such sub-advisory agreements may be terminated at any time by MSA, the Board of Directors of NMSF, or by a majority vote of the relevant Portfolio's outstanding voting securities on not more than 60 days' written notice to the sub-adviser.
10. For each Portfolio where the Manager elects to employ a sub-advisor or sub-advisorsfor the purpose of providing investment management services to the Portfolio, the Manager shall (1) evaluate potential sub-advisors and present to the Board of Directors its recommendation regarding a sub-advisor or sub-advisors the Manager believes is or are well-suited to manage the Portfolio’s assets, (2) determine the portion of the Portfolio’s assets to be managed by each sub-advisor when it deems appropriate, (3) supervise and oversee the activities of the sub-advisors, including monitoring and evaluating the investment performance of the sub-advisor or sub-advisors, and (4) recommend the termination or replacement of a sub-advisor or sub-advisors when deemed appropriate by Manager.
47
11. This Agreement may be amended at any time by mutual consent of the parties, provided that such consent on the part of NMSF shall have been approved, with respect to any Portfolio, by vote of a majority of the outstanding voting securities of the Portfolio (as defined in the Investment Company Act of 1940) as provided in paragraph 8, if such vote is required by the Investment Company Act of 1940.
IN WITNESS WHEREOF, the parties hereto have executed thisAmendedAgreement on the day and year first above written.
Attest: NORTHWESTERN MUTUAL
SERIES FUND, INC.
_________________________________ By ____________________________________
Merrill C. Lundberg, Secretary Mark G. Doll, President
Attest: MASON STREET ADVISORS, LLC
_________________________________ By ____________________________________
Robert J. Berdan, Secretary Mark G. Doll, President
C-4
NORTHWESTERN MUTUAL SERIES | |
| FUND, INC. | |
| By | |
| MASON STREET ADVISORS, LLC | |
| By | |
48
INVESTMENT ADVISORY FEE SCHEDULE
Each Portfolio shall pay to the Manager compensation at the annual rate of the percentage of the current value of the net assets of the Portfolio as set forth below:
Index 500 Stock Portfolio ...................................... .20%
Index 400 Stock Portfolio ...................................... .25%
Select Bond, Money Market and Balanced Portfolios .............. .30%
T. Rowe Price Small Cap Value Portfolio ........................ .85%
AllianceBernstein Mid Cap Value Portfolio ...................... .85%
First $50 Next $50 Excess over
Portfolio Million Million $100 Million
- --------- --------- -------- ------------
Large Cap Core Stock ..................... .60% .50% .40%
Growth Stock ............................. .60% .50% .40%
Small Cap Growth Stock ................... .80% .65% .50%
Aggressive Growth Stock .................. .80% .65% .50%
High Yield Bond .......................... .60% .50% .40%
Franklin Templeton International
Equity ................................. .85% .65% .65%
First $100 Next $150 Excess over
Portfolio Million Million $250 Million
- --------- ---------- --------- ------------
Capital Guardian Domestic Equity ......... .65% .55% .50%
International Growth ..................... .75% .65% .55%
Asset Allocation ......................... .60% .50% .40%
First $500 Excess over
Portfolio Million $500 Million
- --------- ---------- ------------
T. Rowe Price Equity Income Portfolio .... .40% .35%
First $100 Next $400 Excess over
Portfolio Million Million $500 Million
- --------- ---------- --------- ------------
Janus Capital Appreciation Portfolio ..... .55% .50% .45%
| Index500Stock Portfolio | 0.20% |
| Index400Stock Portfolio | 0.25% |
| Select Bond, Money Market and Balanced Portfolios | 0.30% |
| T. Rowe Price Small Cap Value Portfolio | 0.85% |
| AllianceBernstein Mid Cap Value Portfolio | 0.85% |
| First $50 | Next $50 | Excess over | |||||||
| Portfolio | Million | Million | $100 Million | ||||||
| Large Cap Core Stock | 0.60% | 0.50% | 0.40% | ||||||
| Growth Stock | 0.60% | 0.50% | 0.40% | ||||||
| Small Cap Growth Stock | 0.80% | 0.65% | 0.50% | ||||||
| Aggressive Growth Stock | 0.80% | 0.65% | 0.50% | ||||||
| High Yield Bond | 0.60% | 0.50% | 0.40% | ||||||
| Franklin Templeton | |||||||||
| International Equity | 0.85% | 0.65% | 0.65% | ||||||
| First $100 | Next $150 | Excess over | |||||||
| Portfolio | Million | Million | $250 Million | ||||||
| Capital Guardian | |||||||||
| Domestic Equity | 0.65% | 0.55% | 0.50% | ||||||
| International Growth | 0.75% | 0.65% | 0.55% | ||||||
| Asset Allocation | 0.60% | 0.50% | 0.40% | ||||||
| First $500 | Excess over | ||||||||
| Portfolio | Million | $500 Million | |||||||
| T. Rowe Price Equity | 0.65% | 0.60% | |||||||
| Income Portfolio | |||||||||
| First $100 | Next $400 | Excess over | |||||||
| Portfolio | Million | Million | $500 Million | ||||||
| Janus Capital | 0.80% | 0.75% | 0.70% | ||||||
| Appreciation Portfolio | |||||||||
49
NORTHWESTERN MUTUAL SERIES
CHOOSE YOUR METHODFUND, INC.VOTING
VOTE BY INTERNET
* Go to www.proxyweb.com
* Follow the simple instructions.
* Enter the control number at left.
OR
VOTE BY MAIL
* Complete your proxy ballot.
* Sign and date your card.
* Mail in the envelope provided.
*** CONTROL NUMBER: 999 999 999 999 99 ***
VOTING INSTRUCTION FORM
SHAREHOLDERS
| PORTFOLIO NAME PRINTS HERE | PROXY CARD |
| PORTFOLIO NAME PRINTS HERE | |
| The undersigned, revoking previous proxies, hereby appoint(s) Mark G. Doll, Kate M. Fleming, Michael W. Zielinski and Randy M. Pavlick, or any one of them, attorneys, with full power of substitution, to vote all shares of the Portfolio of the Northwestern Mutual Series Fund, Inc. (“NMSF”), as indicated above, which the undersigned is entitled to vote at a Special Meeting of Shareholders of NMSF to be held at 720 East Wisconsin Avenue, Milwaukee, Wisconsin 53202, on Tuesday, February 20, 2007, at 10:00 a.m., Central Time, and at any adjournments thereof. All powers may be exercised by two or more of said proxy holders or substitutes voting or acting or, if only one votes and acts, then by that one. This proxy shall be voted on the proposals described in the Statement to Contract and Policy Owners and Payees as specified on the reverse side. PLEASE NOTE: Before completing, read the Statement to Contract and Policy Owners and Payees carefully for an explanation of each proposal.If no choice is indicated, your properly completed and returned Proxy Card will be voted FOR each proposal and each of the director nominees referred in the statement.Your instructions will count only for portfolios actually considering specific proposals. | |
| i | ||
| PLEASE VOTE, DATE AND SIGN BELOW AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. | ||
| Dated | , 2007 | |
| Signature(s) (and Title(s), if applicable) | (Please sign inbox) | |
| NOTE: Please sign exactly as your name appears on this proxy card. When signing in a fiduciary capacity (e.g., trustee, etc.), please so state. Signers for corporate and partnership accounts should be authorized persons and indicate their title. | ||
| i | i | NMSF-PC-07 - lp |
| i | Please fill in box(es) as shown using black or blue ink or number 2 pencil. PLEASE DO NOT USE FINE POINT PENS. | x | i |
| Please refer to the Statement to Contract and Policy Owners and Payees for a discussion of these matters. | |||||||||
| IF NO SPECIFICATION IS MADE, THE PROXY SHALL BE VOTEDFOR THE DIRECTOR NOMINEES NAMED IN THE STATEMENT ANDFOR EACH OF THE OTHER PROPOSALS. As to any other matter, said proxies shall vote in accordance with their best judgment. | |||||||||
| THE BOARD OF DIRECTORS RECOMMENDS A VOTEFOR EACH OF THE FOLLOWING: | |||||||||
| 1. | ELECT THE FOLLOWING NOMINEES AS DIRECTORS: | FOR ALL | WITHHOLD ALL | FOR ALL EXCEPT* | |||||
| (01) Miriam M. Allison (02) William A. McIntosh (03) Michael G. Smith | (04) Robert H. Huffman III (05) Michael M. Knetter (06) Edward J. Zore | o | o | o | |||||
| **To withhold authority to vote for any individual Nominee(s), write the number(s) on the line below. | |||||||||
| FOR | AGAINST | ABSTAIN | |||||||
| 2. | To approve a proposal that will permit Mason Street Advisors, LLC, in its capacity as the investment advisor for the Northwestern Mutual Series Fund, subject to the approval of the Northwestern Mutual Series Fund Board of Directors, to enter into and materially amend agreements with unaffiliated sub-advisors without obtaining shareholder approval. | o | o | o | |||||
| 3. | To approve an amendment to the Investment Advisory Agreement with Mason Street Advisors, LLC. | o | o | o | |||||
| 4. | To approve an amendment to a component of the investment objective of the Balanced Portfolio(Balanced Portfolio only). | o | o | o | |||||
| PLEASE SIGN AND DATE ON THE REVERSE SIDE. | ||
| i | NMSF-PC-07 - lp | i |
| YOUR VOTE IS IMPORTANT. PLEASE VOTE TODAY! | ||
| VOTING ON THE INTERNET | VOTING BY PHONE | |
|
| |
| If you vote by Telephone or Internet, pleasedo notmail your card. | ||
| 999999999999 99 | ! | ||
THESE INSTRUCTIONS ARE SOLICITED BY THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY AS CO-DEPOSITOR OF NML VARIABLE ANNUITY ACCOUNT A, NML VARIABLE ANNUITY ACCOUNT B, NML VARIABLE ANNUITY ACCOUNT C AND NORTHWESTERN MUTUAL VARIABLE LIFE ACCOUNT FOR THE SPECIAL MEETING OF SHAREHOLDERS TO BE HELD FEBRUARY 20, 2007. | |||
PORTFOLIO NAME PRINTS HERE
PORTFOLIO NAME PRINTS HERE
| By signing this Voting Instruction Form, I instruct The Northwestern Mutual Life Insurance Company to vote as indicated on the reverse side of this Form.If no choice is indicated, return of the signed form shall be considered as an instruction to vote to elect the nominees named on the reverse side and in favor of each of the other proposals. The Northwestern Mutual Life Insurance Company is instructed to vote in its discretion upon such other matters as may properly come before the meeting. | |
| PLEASE NOTE: Before completing, read the Statement to Contract and Policy Owners and Payees carefully for an explanation of each proposal. Your instructions will count only for portfolios actually considering specific proposals. We recommend an instruction to vote FOR all proposals and nominees. |
| i | ||
| Dated | , 2007 |
| Signature(s) (and Title(s), if applicable) | (Please sign inbox) | |
| NOTE: All required contract and policy owners and payees should sign exactly as their names appear on this form. When signing in a fiduciary capacity (e.g., trustee, etc.), please so state. Signers for corporate and partnership accounts should be authorized persons and indicate their title. | ||
| i | i | NMSF 07 - lp |
| i | Please fill in box(es) as shown using black or blue ink or number 2 pencil. PLEASE DO NOT USE FINE POINT PENS. | x | i |
| Please refer to the Statement to Contract and Policy Owners and Payees for a discussion of these matters. | ||||||||||
| IF NO SPECIFICATION IS MADE, THE PROXY SHALL BE VOTEDFOR THE DIRECTOR NOMINEES ANDFOR EACH OF THE OTHER PROPOSALS. As to any other matter, said proxies shall vote in accordance with their best judgment. | ||||||||||
| THE BOARD OF DIRECTORS RECOMMENDS A VOTEFOR EACH OF THE FOLLOWING: | ||||||||||
| i | ||||||||||
| 1. | ELECT THE FOLLOWING NOMINEES AS DIRECTORS: | FOR ALL | WITHHOLD ALL | FOR ALL EXCEPT* | ||||||
(01) Miriam M. Allison (02) William A. McIntosh (03) Michael G. Smith | (04) Robert H. Huffman III (05) Michael M. Knetter (06) Edward J. Zore | o | o | o | ||||||
| **To withhold authority to vote for any individual Nominee(s), write the number(s) on the line below. | ||||||||||
| FOR | AGAINST | ABSTAIN | ||||||||
| 2. | To approve a proposal that will permit Mason Street Advisors, LLC, in its capacity as the investment advisor for the Northwestern Mutual Series Fund, subject to the approval of the Northwestern Mutual Series Fund Board of Directors, to enter into and materially amend agreements with unaffiliated sub-advisors without obtaining shareholder approval. | o | o | o | ||||||
| 3. | To approve an amendment to the Investment Advisory Agreement with Mason Street Advisors, LLC. | o | o | o | ||||||
| 4. | To approve an amendment to a component of the investment objective of the Balanced Portfolio(Balanced Portfolio only). | o | o | o | ||||||
| PLEASE COMPLETE, SIGN, DATE, AND RETURN THIS FORM PROMPTLY USING THE ENCLOSED ENVELOPE. | ||
| i | NMSF 07 - lp | i |
| 999999999999 99 | ! |
 |
| This EzVote Consolidated Voting Instruction Form covers all of your accounts registered to the same policy number at this address. By voting and signing this consolidated voting instruction form, you are voting all of the affected accounts in the same manner. If you desire to vote each of your accounts separately, use the individual forms on the reverse side of this card. |
THESE INSTRUCTIONS ARE SOLICITED BY THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
AS CO-DEPOSITOR OF NML VARIABLE ANNUITY ACCOUNT A, NML VARIABLE ANNUITY ACCOUNT B, NML VARIABLE ANNUITY ACCOUNT C
AND NORTHWESTERN MUTUAL VARIABLE LIFE ACCOUNT FOR THE SPECIAL MEETING OF SHAREHOLDERS TO BE HELD FEBRUARY 20, 2007.
By signing this Voting Instruction Form, I instruct The Northwestern Mutual Life Insurance Company to vote as indicated on the reverse. reverse side of this Form.If no choice is indicated, return of the signed form shall be considered as an instruction to vote to elect the directorsnominees named on the reverse side and in favor of each of the other proposals. The Northwestern Mutual Life Insurance Company is instructed to vote in its discretion upon such other matters as may properly come before the meeting.
THESE INSTRUCTIONS ARE SOLICITED BY THE NORTHWESTERN MUTUAL LIFE INSURANCE
COMPANY AS CO-DEPOSITOR OF NML VARIABLE ANNUITY ACCOUNT B AND NORTHWESTERN
MUTUAL VARIABLE LIFE ACCOUNT.
PLEASE NOTE: Before completing, read the Statement to Contract and Policy Owners and Payees carefully for an explanation of each proposal. Your Voting
Instruction Form will be voted FOR each proposal and each of the director
nominees unless you specify otherwise. Your instructions will count only for portfolios actually considering specific proposals. We recommend an instruction to vote FOR all proposals and nominees.
Dated: , 2003
PLEASE VOTE, DATE AND SIGN BELOW AND RETURN PROMPTLY IN
| i | ||
| Dated | , 2007 |
| Signature(s) (and Title(s), if applicable) | (Please sign inbox) | |
| NOTE: All required contract and policy owners and payees should sign exactly as their names appear on this form. When signing in a fiduciary capacity (e.g., trustee, etc.), please so state. Signers for corporate and partnership accounts should be authorized persons and indicate their title. | ||
| i | i | NMSF 07 - EZ- Ip |
‚ IF VOTING THE ENCLOSED ENVELOPE.
Signature(s)(Title(s), if applicable)
(Sign in the Box)
NOTE: All required contract and policy owners and payees should sign exactly as
their names appear on this ballot. When signing in a fiduciary capacity (e.g.,
trustee, etc.), please so state. Signers for corporate and partnership accounts
should be authorized persons and indicate their title.
NWSF
Please fill in box(es) as shown using black or blue ink or number 2 pencil.
PLEASE DO NOT USE FINE POINT PENS.
PROPOSALS:
1. ELECT THE FOLLOWING NOMINEES AS DIRECTORS:
FOR ALL
WITHHOLD ALL
FOR ALL EXCEPT**
(01) Louis A. Holland, (02) Elizabeth L. Majers, (03) William A. McIntosh,
(04) Michael G. Smith, (05) Edward J. Zore.
**To withhold authority to vote for any individual Nominee(s), write the
number(s) on the line below.
2. To approve an Investment Advisory Agreement with Mason Street Advisors LLC.
FOR AGAINST ABSTAIN
3. To amend the Portfolios' investment restriction on:
FOR ALL(Except as Marked at left)
AGAINST ALL
ABSTAIN ALL
3(a)(i). industry concentration
3(b). borrowing/issuing senior securities
3(c). lending
3(d). underwriting
3(e). commodities
If you wish to vote against or abstain from a particular sub-proposal applicable
to your Portfolio, please write the number and letter(s) of the sub-proposal on
the line below and indicate a "Vote Against" or Vote an "Abstention."
5. To eliminate the following investment restrictions:
FOR ALL(Except as Marked at left)
AGAINST ALL
ABSTAIN ALL
5(a). diversification
5(b). limiting the percentage of securities of any one issuer that may be
acquired
5(c). short sales
5(d). margin purchases
5(e). loans for non-business purposes or to unseasoned issuers
5(f). investment in other investment companies
5(g). regarding liquidity
5(h). investing for control or influence
If you wish to vote against or abstain from a particular sub-proposal applicable
to your Portfolio, please write the number and letter(s) of the sub-proposal on
the line below and indicate a "Vote Against" or Vote an "Abstention."
NWSF - A
PLEASE SIGN ON REVERSE SIDE
CHOOSE YOUR METHOD OF VOTING
VOTE BY INTERNET
* Go to www.proxyweb.com
* Follow the simple instructions.
* Enter the control number at left.
OR
VOTE BY MAIL
* Complete your proxy ballot.
* Sign and date your card.
* Mail in the envelope provided.
*** CONTROL NUMBER: 999 999 999 999 99 ***CONSOLIDATED VOTING INSTRUCTION FORM PORTFOLIO NAME PRINTS HERE
PORTFOLIO NAME PRINTS HERE
By signing this Voting Instruction Form, I instruct The Northwestern Mutual Life
Insurance CompanyDO NOT SIGN, DATE OR RETURN THE INDIVIDUAL FORMS
YOU MAY PROVIDE VOTING INSTRUCTIONS IN ANY ONE OF THREE WAYS:
(1) VIA THE INTERNET (2) BY TELEPHONE (3) BY MAIL USING THIS FORM
We encourage you to vote as indicated on the reverse. If no choice is
indicated, returnby Internet or telephone. Regardless of the signed form shall be considered as an instructionmethod you choose, however, please take the time to vote to electread the directors and in favorfull text of each of the other proposals. The
Northwestern Mutual Life Insurance Company is instructed to vote in its
discretion upon such other matters as may properly come before the meeting.
THESE INSTRUCTIONS ARE SOLICITED BY THE NORTHWESTERN MUTUAL LIFE INSURANCE
COMPANY AS CO-DEPOSITOR OF NML VARIABLE ANNUITY ACCOUNT B AND NORTHWESTERN
MUTUAL VARIABLE LIFE ACCOUNT.
PLEASE NOTE: Before completing, read the Statement to Contract and Policy Owners and Payees carefully for an explanation of each proposal. Your Voting
Instruction Form will be voted FOR each proposal and each of the director
nominees unless you specify otherwise. Your instructions will count only for
portfolios actually considering specific proposals. We recommend an instruction
to vote FOR all proposals and nominees.
Dated: , 2003
PLEASE VOTE, DATE AND SIGN BELOW AND RETURN PROMPTLY INbefore voting.
| YOUR VOTE IS IMPORTANT. PLEASE VOTE TODAY! | ||
| VOTING ON THE INTERNET | VOTING BY PHONE | |
|
| |
| If you vote by Internet or Telephone, pleasedo notmail your card. | ||
| INDIVIDUAL FORMS |
| On the reverse side (and on accompanying pages, if necessary) you will find individual forms, one for each of your accounts. If you wish to vote each of these accounts separately, sign in the signature box below, mark each individual form to indicate your vote, detach at the perforation above and return the individual forms portion only. |
| NOTE: | If you choose to vote each Individual Form separately, do not return the Consolidated Voting Instruction Form above. |
| Dated | , 2007 |
| Signature(s) (and Title(s), if applicable) | (Please sign inbox) | |
| NOTE: All required contract and policy owners and payees should sign exactly as their names appear on this form. When signing in a fiduciary capacity (e.g., trustee, etc.), please so state. Signers for corporate and partnership accounts should be authorized persons and indicate their title. | ||
| NMSF 07 - IND - Ip | ||
 | ||||
| i | Please fill in box(es) as shown using black or blue ink or number 2 pencil. PLEASE DO NOT USE FINE POINT PENS. | x | i | |
| Please refer to the Statement to Contract and Policy Owners and Payees for a discussion of these matters. | ||||||||||
| IF NO SPECIFICATION IS MADE, THE PROXY SHALL BE VOTEDFOR THE DIRECTOR NOMINEES ANDFOR EACH OF THE OTHER PROPOSALS. As to any other matter, said proxies shall vote in accordance with their best judgment. | ||||||||||
| THE BOARD OF DIRECTORS RECOMMENDS A VOTEFOR EACH OF THE FOLLOWING: | ||||||||||
| i | ||||||||||
| 1. | ELECT THE FOLLOWING NOMINEES AS DIRECTORS: | FOR ALL | WITHHOLD ALL | FOR ALL EXCEPT* | ||||||
| (01) Miriam M. Allison (02) William A. McIntosh (03) Michael G. Smith | (04) Robert H. Huffman III (05) Michael M. Knetter (06) Edward J. Zore | o | o | o | ||||||
| **To withhold authority to vote for any individual Nominee(s), write the number(s) on the line below. | ||||||||||
| FOR | AGAINST | ABSTAIN | ||||||||
| 2. | To approve a proposal that will permit Mason Street Advisors, LLC, in its capacity as the investment advisor for the Northwestern Mutual Series Fund, subject to the approval of the Northwestern Mutual Series Fund Board of Directors, to enter into and materially amend agreements with unaffiliated sub-advisors without obtaining shareholder approval. | o | o | o | ||||||
| 3. | To approve an amendment to the Investment Advisory Agreement with Mason Street Advisors, LLC. | o | o | o | ||||||
| 4. | To approve an amendment to a component of the investment objective of the Balanced Portfolio(Balanced Portfolio only). | o | o | o | ||||||
| PLEASE COMPLETE, SIGN, DATE, AND RETURN THIS FORM PROMPTLY USING THE ENCLOSED ENVELOPE. | ||
| i | NMSF 07 - EZ - Ip | i |
‚IF VOTING THE CONSOLIDATED VOTING INSTRUCTION FORM DO NOT SIGN, DATE OR RETURN THE INDIVIDUAL FORMS‚ INDIVIDUAL FORMS NOTE: IF YOU HAVE USED THE CONSOLIDATED VOTING INSTRUCTION FORM ABOVE, DO NOT VOTE THE INDIVIDUAL FORMS BELOW. | ||
| 000 0000000000 000 0 | ||||||||
| JOHN Q. PUBLIC | ||||||||
| 123 MAIN STREET | ||||||||
| ANYTOWN, MA 02030 | 999 999 999 999 99 | f | ||||||
| PORTFOLIO NAME PRINTS HERE | ||||||||
| PORTFOLIO NAME PRINTS HERE | ||||||||
| FOR ALL | WITHHOLD ALL | FOR ALL EXCEPT* | ||||||
| 1. | ELECT THE FOLLOWING NOMINEES AS DIRECTORS: (See Instructions and Nominee list on consolidated ballot.) | o | o | o | ||||
| * EXCEPT | FOR | AGAINST | ABSTAIN | |||||
| 2. | To approve a proposal that will permit Mason Street Advisors, LLC, in its capacity as the investment advisor for the Northwestern Mutual Series Fund, subject to the approval of the Northwestern Mutual Series Fund Board of Directors, to enter into and materially amend agreements with unaffiliated sub-advisors without obtaining shareholder approval. | o | o | o | ||||
| 3. | To approve an amendment to the Investment Advisory Agreement with Mason Street Advisors, LLC. | o | o | o | ||||
| 4. | To approve an amendment to a component of the investment objective of the Balanced Portfolio(Balanced Portfolio only). | o | o | o | ||||
| 000 0000000000 000 0 | ||||||||
| JOHN Q. PUBLIC | ||||||||
| 123 MAIN STREET | ||||||||
| ANYTOWN, MA 02030 | 999 999 999 999 99 | f | ||||||
| PORTFOLIO NAME PRINTS HERE | ||||||||
| PORTFOLIO NAME PRINTS HERE | ||||||||
| FOR ALL | WITHHOLD ALL | FOR ALL EXCEPT* | ||||||
| 1. | ELECT THE FOLLOWING NOMINEES AS DIRECTORS: (See Instructions and Nominee list on consolidated ballot.) | o | o | o | ||||
| * EXCEPT | FOR | AGAINST | ABSTAIN | |||||
| o | o | o | ||||||
| o | o | o | ||||||
| o | o | o | ||||||
| NMSF 07 - IND - Ip |
| Please fill in box(es) as shown using black or blue ink or number 2 pencil. PLEASE DO NOT USE FINE POINT PENS. x |
INDIVIDUAL FORMS
NOTE: IF YOU HAVE USED THE ENCLOSED ENVELOPE.
(Sign in the Box)
Signature(s)(Title(s), if applicable)
NOTE: All required contract and policy owners and payees should sign exactly as
their names appear on this ballot. When signing in a fiduciary capacity (e.g.,
trustee, etc.), please so state. Signers for corporate and partnership accounts
should be authorized persons and indicate their title.
NWSF
Please fill in box(es) as shown using black or blue ink or number 2 pencil.
PLEASE DO NOT USE FINE POINT PENS.
PROPOSALS:
1. ELECT THE FOLLOWING NOMINEES AS DIRECTORS:
FOR ALL
WITHHOLD ALL
FOR ALL EXCEPT**
(01) Louis A. Holland, (02) Elizabeth L. Majers, (03) William A. McIntosh,
(04) Michael G. Smith, (05) Edward J. Zore.
**To withhold authority to vote for any individual Nominee(s), write the
number(s) on the line below.
2. To approve an Investment Advisory Agreement with Mason Street Advisors LLC.
FOR AGAINST ABSTAIN
3. To amend the Portfolios' investment restriction on:
FOR ALL(Except as Marked at left)
AGAINST ALL
ABSTAIN ALL
3(a)(ii). industry concentration
3(b). borrowing/issuing senior securities
3(c). lending
3(d). underwriting
3(e). commodities
If you wish to vote against or abstain from a particular sub-proposal applicable
to your Portfolio, please write the number and letter(s) of the sub-proposal on
the line below and indicate a "Vote Against" or Vote an "Abstention."
4. To reclassify the Portfolio as non-diversified and eliminate the
diversification restriction as fundamental.
FOR AGAINST ABSTAIN
5. To eliminate the following investment restrictions:
FOR ALL(Except as Marked at left)
AGAINST ALL
ABSTAIN ALL
5(b). limiting the percentage of securities of any one issuer that may be
acquired
5(c). short sales
5(d). margin purchases
5(e). loans for non-business purposes or to unseasoned issuers
5(f). investment in other investment companies
5(g). regarding liquidity
5(h). investing for control or influence
If you wish to vote against or abstain from a particular sub-proposal applicable
to your Portfolio, please write the number and letter(s) of the sub-proposal on
the line below and indicate a "Vote Against" or Vote an "Abstention."
NWSF - B
PLEASE SIGN ON REVERSE SIDE
CHOOSE YOUR METHOD OF VOTING
VOTE BY INTERNET
* Go to www.proxyweb.com
* Follow the simple instructions.
* Enter the control number at left.
OR
VOTE BY MAIL
* Complete your proxy ballot.
* Sign and date your card.
* Mail in the envelope provided.
*** CONTROL NUMBER: 999 999 999 999 99 ***CONSOLIDATED VOTING INSTRUCTION FORM, PORTFOLIO NAME PRINTS HERE
PORTFOLIO NAME PRINTS HERE
By signing this Voting Instruction Form, I instruct The Northwestern Mutual Life
Insurance Company to vote as indicated on the reverse. If no choice is
indicated, return of the signed form shall be considered as an instruction to
vote to elect the directors and in favor of each of the other proposals. The
Northwestern Mutual Life Insurance Company is instructed to vote in its
discretion upon such other matters as may properly come before the meeting.
THESE INSTRUCTIONS ARE SOLICITED BY THE NORTHWESTERN MUTUAL LIFE INSURANCE
COMPANY AS CO-DEPOSITOR OF NML VARIABLE ANNUITY ACCOUNT B AND NORTHWESTERN
MUTUAL VARIABLE LIFE ACCOUNT.
PLEASE NOTE: Before completing, read the Statement to Contract and Policy Owners
and Payees carefully for an explanation of each proposal. Your Voting
Instruction Form will be voted FOR each proposal and each of the director
nominees unless you specify otherwise. Your instructions will count only for
portfolios actually considering specific proposals. We recommend an instruction
to vote FOR all proposals and nominees.
Dated: , 2003
PLEASE VOTE, DATE AND SIGN BELOW AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
Signature(s)(Title(s), if applicable)
(Sign in the Box)
NOTE: All required contract and policy owners and payees should sign exactly as
their names appear on this ballot. When signing in a fiduciary capacity (e.g.,
trustee, etc.), please so state. Signers for corporate and partnership accounts
should be authorized persons and indicate their title.
NWSF
Please fill in box(es) as shown using black or blue ink or number 2 pencil.
PLEASE DO NOT USE FINE POINT PENS.
PROPOSALS:
1. ELECTVOTE THE FOLLOWING NOMINEES AS DIRECTORS:
FOR ALL
WITHHOLD ALL
FOR ALL EXCEPT**
(01) Louis A. Holland, (02) Elizabeth L. Majers, (03) William A. McIntosh,
(04) Michael G. Smith, (05) Edward J. Zore.
**To withhold authority to vote for any individual Nominee(s), write the
number(s) on the line below.
FOR AGAINST ABSTAIN
2. To approve an Investment Advisory Agreement with Mason Street Advisors LLC.
FOR AGAINST ABSTAIN
3. To amend the Portfolios' investment restriction on:
FOR ALL(Except as Marked at left)
AGAINST ALL
ABSTAIN ALL
3(a)(i). industry concentration
3(b). borrowing/issuing senior securities
3(c). lending
3(d). underwriting
3(e). commodities
If you wish to vote against or abstain from a particular sub-proposal applicable
to your Portfolio, please write the number and letter(s) of the sub-proposal on
the line below and indicate a "Vote Against" or Vote an "Abstention."
5. To eliminate the following investment restrictions:
FOR ALL(Except as Marked at left)
AGAINST ALL
ABSTAIN ALL
5(a). diversification
5(e). loans for non-business purposes or to unseasoned issuers
5(g). regarding liquidity
INDIVIDUAL FORMS BELOW.
| 000 0000000000 000 0 | ||||||||
| JOHN Q. PUBLIC | ||||||||
| 123 MAIN STREET | ||||||||
| ANYTOWN, MA 02030 | 999 999 999 999 99 | f | ||||||
| PORTFOLIO NAME PRINTS HERE | ||||||||
| PORTFOLIO NAME PRINTS HERE | ||||||||
| FOR ALL | WITHHOLD ALL | FOR ALL EXCEPT* | ||||||
| 1. | ELECT THE FOLLOWING NOMINEES AS DIRECTORS: (See Instructions and Nominee list on consolidated ballot.) | o | o | o | ||||
| * EXCEPT | FOR | AGAINST | ABSTAIN | |||||
| 2. | To approve a proposal that will permit Mason Street Advisors, LLC, in its capacity as the investment advisor for the Northwestern Mutual Series Fund, subject to the approval of the Northwestern Mutual Series Fund Board of Directors, to enter into and materially amend agreements with unaffiliated sub-advisors without obtaining shareholder approval. | o | o | o | ||||
| 3. | To approve an amendment to the Investment Advisory Agreement with Mason Street Advisors, LLC. | o | o | o | ||||
| 4. | To approve an amendment to a component of the investment objective of the Balanced Portfolio(Balanced Portfolio only). | o | o | o | ||||
| By signing page 1 of this Voting Instruction Form, I instruct The Northwestern Mutual Life Insurance Company to vote as indicated on this Form.If no choice is indicated, return of the signed form shall be considered as an instruction to vote to elect the nominees and in favor of each of the other proposals.The Northwestern Mutual Life Insurance Company is instructed to vote in its discretion upon such other matters as may properly come before the meeting. PLEASE NOTE: Before completing, read the Statement to Contract and Policy Owners and Payees carefully for an explanation of each proposal.Your instructions will count only for portfolios actually considering specific proposals. We recommend an instruction to vote FOR all proposals and nominees. |
| 000 0000000000 000 0 | ||||||||
| JOHN Q. PUBLIC | ||||||||
| 123 MAIN STREET | ||||||||
| ANYTOWN, MA 02030 | 999 999 999 999 99 | f | ||||||
| PORTFOLIO NAME PRINTS HERE | ||||||||
| PORTFOLIO NAME PRINTS HERE | ||||||||
| FOR ALL | WITHHOLD ALL | FOR ALL EXCEPT* | ||||||
| 1. | ELECT THE FOLLOWING NOMINEES AS DIRECTORS: (See Instructions and Nominee list on consolidated ballot.) | o | o | o | ||||
| * EXCEPT | FOR | AGAINST | ABSTAIN | |||||
| 2. | To approve a proposal that will permit Mason Street Advisors, LLC, in its capacity as the investment advisor for the Northwestern Mutual Series Fund, subject to the approval of the Northwestern Mutual Series Fund Board of Directors, to enter into and materially amend agreements with unaffiliated sub-advisors without obtaining shareholder approval. | o | o | o | ||||
| 3. | To approve an amendment to the Investment Advisory Agreement with Mason Street Advisors, LLC. | o | o | o | ||||
| 4. | To approve an amendment to a component of the investment objective of the Balanced Portfolio(Balanced Portfolio only). | o | o | o | ||||
| 000 0000000000 000 0 | ||||||||
| JOHN Q. PUBLIC | ||||||||
| 123 MAIN STREET | ||||||||
| ANYTOWN, MA 02030 | 999 999 999 999 99 | f | ||||||
| PORTFOLIO NAME PRINTS HERE | ||||||||
| PORTFOLIO NAME PRINTS HERE | ||||||||
| FOR ALL | WITHHOLD ALL | FOR ALL EXCEPT* | ||||||
| 1. | ELECT THE FOLLOWING NOMINEES AS DIRECTORS: (See Instructions and Nominee list on consolidated ballot.) | o | o | o | ||||
| * EXCEPT | FOR | AGAINST | ABSTAIN | |||||
| 2. | To approve a proposal that will permit Mason Street Advisors, LLC, in its capacity as the investment advisor for the Northwestern Mutual Series Fund, subject to the approval of the Northwestern Mutual Series Fund Board of Directors, to enter into and materially amend agreements with unaffiliated sub-advisors without obtaining shareholder approval. | o | o | o | ||||
| 3. | To approve an amendment to the Investment Advisory Agreement with Mason Street Advisors, LLC. | o | o | o | ||||
| 4. | To approve an amendment to a component of the investment objective of the Balanced Portfolio(Balanced Portfolio only). | o | o | o | ||||
| Please fill in box(es) as shown using black or blue ink or number 2 pencil. PLEASE DO NOT USE FINE POINT PENS. x |
INDIVIDUAL FORMS
NOTE: IF YOU HAVE USED THE CONSOLIDATED VOTING INSTRUCTION FORM, DO NOT VOTE THE INDIVIDUAL FORMS BELOW.
| 000 0000000000 000 0 | ||||||||
| JOHN Q. PUBLIC | ||||||||
| 123 MAIN STREET | ||||||||
| ANYTOWN, MA 02030 | 999 999 999 999 99 | f | ||||||
| PORTFOLIO NAME PRINTS HERE | ||||||||
| PORTFOLIO NAME PRINTS HERE | ||||||||
| FOR ALL | WITHHOLD ALL | FOR ALL EXCEPT* | ||||||
| 1. | ELECT THE FOLLOWING NOMINEES AS DIRECTORS: (See Instructions and Nominee list on consolidated ballot.) | o | o | o | ||||
| * EXCEPT | FOR | AGAINST | ABSTAIN | |||||
| 2. | To approve a proposal that will permit Mason Street Advisors, LLC, in its capacity as the investment advisor for the Northwestern Mutual Series Fund, subject to the approval of the Northwestern Mutual Series Fund Board of Directors, to enter into and materially amend agreements with unaffiliated sub-advisors without obtaining shareholder approval. | o | o | o | ||||
| 3. | To approve an amendment to the Investment Advisory Agreement with Mason Street Advisors, LLC. | o | o | o | ||||
| 4. | To approve an amendment to a component of the investment objective of the Balanced Portfolio(Balanced Portfolio only). | o | o | o | ||||
| 000 0000000000 000 0 | ||||||||
| JOHN Q. PUBLIC | ||||||||
| 123 MAIN STREET | ||||||||
| ANYTOWN, MA 02030 | 999 999 999 999 99 | f | ||||||
| PORTFOLIO NAME PRINTS HERE | ||||||||
| PORTFOLIO NAME PRINTS HERE | ||||||||
| FOR ALL | WITHHOLD ALL | FOR ALL EXCEPT* | ||||||
| 1. | ELECT THE FOLLOWING NOMINEES AS DIRECTORS: (See Instructions and Nominee list on consolidated ballot.) | o | o | o | ||||
| FOR | AGAINST | ABSTAIN | ||||||
| o | o | o | ||||||
| o | o | o | ||||||
| o | o | o | ||||||