<PAGE>
December 31, 1996
NORTHWESTERN
MUTUAL LIFE -Registered Trademark-
The Quiet Company -Registered Trademark-
Northwestern Mutual Variable Life Account
[Photo]
NORTHWESTERN MUTUAL
SERIES FUND, INC.
The Northwestern Mutual
Life Insurance Company
720 East Wisconsin Avenue
Milwaukee, WI 53202
ANNUAL REPORT
<PAGE>
CONTENTS
POLICYOWNER PRIVILEGES
FREE TRANSFERS AMONG PORTFOLIOS
A limited number of free transfers per year are available with your policy. Same
day transfers are also permitted among our investment portfolios by FAX
414-299-4268. The appropriate form (form number 18-1425) can also be used. A
blank form is included at the end of this report. Additional forms are available
form your Northwestern Mutual Life Agent.
POLICYOWNER COMMUNICATIONS
You receive confirmation statements with transactions that affect your
portfolio(s).
NORTHWESTERN MUTUAL LIFE'S VARIABLE POLICIES ARE PARTICIPATING
Policies are expected to pay dividends, based on the company's recent mortality
and expense experience. Dividends are based on actual experience and are not
guaranteed.
Some of the popular additional benefits which may be available to policyowners
include the following (subject to underwriting and payment of appropriate
premium).
OPTIONAL WAIVER OF PREMIUM
The Waiver of Premium Benefit waives the premiums during total disability.
Available at ages 0-59.
OPTIONAL ACCIDENTAL DEATH BENEFIT
The Accidental Death Benefit provides an additional death benefit when death
results from accidental bodily injury. Available at ages 0-65.
OPTIONAL ADDITIONAL PURCHASE BENEFIT
When the Additional Purchase Benefit is purchased, the company agrees to issue
additional policies on several specified purchase dates without requiring
evidence of insurability. Available at ages 0-38.
Contact your Northwestern Mutual Life Agent if you wish to learn more about your
policy or any of the policyowner privileges described above.
<TABLE>
<S> <C>
HOW TO GET MORE INFORMATION
NML Express provides 24 hour telephone access to
your account information by dialing
1-800-519-4NML
Policyowners must provide a policy number plus a
Personal Identification Number (PIN) to utilize
this service. Call toll free to review policy
values and portfolio performance. If a signed
authorization has been returned to the Home
Office, policyowners may also transfer among
portfolios by phone.
For more information about Northwestern Mutual
Life, visit us on our Website at
WWW.NORTHWESTERNMUTUAL.COM
</TABLE>
CONTENTS
Letter to Policyowners 1
Performance Summary for Separate Accounts 2
Economic Overview and Outlook 3
Growth Stock Portfolio 4
Aggressive Growth Stock Portfolio 7
International Equity Portfolio 10
Growth and Income Stock Portfolio 14
Index 500 Stock Portfolio 17
Money Market Portfolio 25
Balanced Portfolio 27
Select Bond Portfolio 39
High Yield Bond Portfolio 43
Accountants' Letter 46
Variable Life Financial Statements 47
Notes to Financial Statements 51
Series Fund Financial Statements 53
Accountants' Letter 80
Notes to Financial Statements 81
Board of Directors 89
<PAGE>
LETTER TO POLICYOWNERS
LETTER TO POLICYOWNERS
January 31, 1997
<TABLE>
<S> <C>
This year's annual report represents The variable life insurance policies
something of a departure from our on which we are reporting have an
traditional communications. We hope important place in the financial
that our new format will make our portfolios of many people. We ask you
report on the variable insurance to take a little time to make sure you
products you own more interesting and understand the products you own, to
easier to understand than in prior understand the risks inherent in
years. Following this letter, you will investing and to appreciate the
find a brief summary of our views on long-term benefits. As you do so,
the economy and the stock and bond please draw on the valuable resources
markets as well as reports on the of Northwestern Mutual, as represented
performance of each of the portfolios by your agent. A regular review of
offered to policyowners. your financial circumstances and your
personal goals with your Northwestern
For this year, as for the last few Mutual agent is an excellent way to
years, the performance news is very remain focused, to determine what
good. We are delighted to report changes may be appropriate from time
excellent returns from most portfolios to time in your mix of investments,
for 1996, but we caution you against and to consider additional
projecting such returns into the Northwestern Mutual products
future. These are unique times, with that may be appropriate for
stock values at unprecedented levels you.
and new records reached and then
broken at a dizzying pace. It is easy [PHOTO]
to be euphoric when markets are as
strong as they have been in recent As a Variable Life
years. There is a temptation to policyowner, you have
believe that this bull stock market taken responsibility for
can continue forever. But experience your own future and the
tells us otherwise. An economic future of the people who
slowdown or market slump will occur depend on you. We are
sometime, but for long-term investors proud that you have chosen
there is little value in attempting to Northwestern Mutual as
predict when it will occur. We will your partner as you
continue to invest prudently in implement your plan to
accordance with the objectives and accomplish your financial
policies of the portfolios. goals. We appreciate the
confidence you have shown
As you compare the returns of the in our organization, and
various portfolios, we urge you to we take very seriously our
take a long-term view and avoid being responsibility to provide
influenced by short-term market you with the highest
fluctuations. Do not make the mistake quality insurance
of switching from one portfolio to policies, backed by
another based just on performance for prudently managed invest-
one year or even five years. Instead, ment portfolios. We pledge
we suggest that you consider adjusting to continue providing our
your investments among portfolios as policyowners with innovative products
your circumstances, needs and goals to meet a variety of needs, now and in
evolve. Keep in mind that your the future.
variable life insurance policy offers
dual and complementary benefits: The Northwestern Mutual Life Insurance
valuable insurance protection and the Company
potential for favorable cash value
growth. [SIG]
James D. Ericson, President and
Chief Executive Officer
</TABLE>
--
1
<PAGE>
PERFORMANCE SUMMARY
PERFORMANCE SUMMARY as of December 31, 1996
VARIABLE LIFE--POLICIES ISSUED BEFORE OCTOBER 11, 1995
<TABLE>
<CAPTION>
Aggressive Growth &
Net Investment Growth Growth International Income Index 500 Money Select High Yield
Rates of Return Stock Stock Equity Stock Stock Market Balanced Bond Bond
(as of 12/31/96) Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 year........... 20.06% 16.87% 20.16% 19.13% 21.89% 4.54% 12.66% 2.59% 18.93%
5 years.......... - - - - 89.16% 19.22% 60.97% 38.60% -
Annualized..... - - - - 13.60% 3.58% 9.99% 6.75% -
10 years......... - - - - 215.95% 65.20% 160.44% 107.31% -
Annualized..... - - - - 12.19% 5.15% 10.05% 7.56% -
Since
inception........ 57.66%* 68.10%* 36.23%* 54.91%* - - - - 41.42%*
Annualized..... 18.64% 21.54% 12.31% 17.86% - - - - 13.90%
</TABLE>
VARIABLE COMPLIFE--POLICIES ISSUED ON OR AFTER OCTOBER 11, 1995**
<TABLE>
<CAPTION>
Aggressive Growth &
Net Investment Growth Growth International Income Index 500 Money Select High Yield
Rates of Return Stock Stock Equity Stock Stock Market Balanced Bond Bond
(as of 12/31/96) Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 year........... 20.18% 16.99% 20.29% 19.25% 22.01% 4.65% 12.77% 2.69% 19.05%
5 years.......... - - - - 90.13% 19.83% 61.79% 39.31% -
Annualized..... - - - - 13.71% 3.69% 10.10% 6.86% -
10 years......... - - - - 219.21% 66.90% 163.13% 109.46% -
Annualized..... - - - - 12.31% 5.26% 10.16% 7.67% -
Since
inception........ 58.09%* 68.56%* 36.60%* 55.34%* - - - - 41.81%*
Annualized..... 18.76% 21.66% 12.43% 17.98% - - - - 14.02%
</TABLE>
The net investment rates of return shown above should not be considered a
representation of investment results which may be anticipated in the future. The
net investment rates of return include investment income, capital gains and all
common fees of the divisions of the Variable Life Account, but not the
additional charges that are unique to your policy. See the prospectus for a
description of the effect of investment performance on policy benefits. Policy
benefits reflect the investment rates of return of the divisions in which the
policy is invested, and will vary depending on the fees and expenses associated
with your policy.
* Inception date of 5/3/94.
** Product inception date of 10/11/95. Returns prior to 10/11/95 were reflected
using the actual investment experience of each division, adjusted for the
expenses of the product. These returns are not a guarantee of future
performance.
Note: "Standard and Poor's 500" and "S&P 500" are trademarks of The McGraw-Hill
Companies, Inc. and have been licensed for use by The Northwestern Mutual
Life Insurance Company. The Series Fund and its Portfolios are not
sponsored, endorsed, sold or promoted by Standard & Poor's, and Standard
& Poor's makes no representation regarding the advisability of investing
in them.
IMPORTANT NOTE:
The average annual total returns shown with the graphs on the following pages
are not an estimate or a guarantee of future performance. These average annual
total returns reflect reinvestment of investment income and capital gain
distributions, and deduction of investment management fees and fund expenses,
but not product charges. See the prospectus for a description of the effect of
investment performance on policy benefits. Policy benefits reflect the
investment rates of return of the divisions in which the policy is invested, and
will vary depending on the insurance and administrative charges, applicable
sales charges, and the mortality and expense risk charge associated with the
product. These product charges effectively reduce the dollar amount of any net
gains and increase the dollar amount of any net losses. The net investment rates
of return shown above reflect the product charges borne by each division of the
Variable Life Account, but not the additional charges that are unique to your
policy. Your Northwestern Mutual Life agent/registered representative of
Northwestern Mutual Investment Service ("NMIS") can provide you with actual
rates of return for your variable life insurance policy, showing the effect of
all of the applicable charges.
--
2
<PAGE>
OVERVIEW AND OUTLOOK
- --------------------------------------------------------------------------------
THE ECONOMY
The economy -- of the United States and, increasingly, of the entire world --
provides the basic framework for all investments. The continuing strength of the
economy, though somewhat surprising when compared with recent business cycle
history, has some very solid bases that give reason for optimism about the
future. Productivity is rising, exports are growing, and inflation is at the
lowest level in 30 years. Among the major secular trends fueling continued
economic strength are globalization and the positive impact of technological
advances on business productivity.
Surely the business cycle is not dead, but the peaks and troughs familiar in the
past seem to have moderated to a rolling recovery, with minor corrections from
time to time. The most likely scenario for the immediate future seems to be a
comfortable economy, with continued moderation in all major indicators.
Economic Growth
and Inflation
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
REAL ECONOMIC GROWTH INFLATION
<S> <C> <C>
1976 5.60% 4.90%
1977 4.90% 6.70%
1978 5.00% 9.00%
1979 2.90% 13.30%
1980 -3.00% 12.50%
1981 2.50% 8.90%
1982 -2.10% 3.80%
1983 4.00% 3.80%
1984 6.80% 3.90%
1985 3.70% 3.80%
1986 3.00% 1.10%
1987 2.90% 4.40%
1988 3.80% 4.40%
1989 3.40% 4.60%
1990 1.30% 6.10%
1991 -1.00% 3.10%
1992 2.70% 2.90%
1993 2.30% 2.70%
1994 3.50% 2.70%
1995 2.00% 2.50%
1996 2.20% 3.30%
</TABLE>
Source: U.S. Department of Commerce. Year-to-year percentage change in
Real Gross Domestic Product is used for real economic growth.
December-to-December percentage change in the Consumer Price Index --
Urban is used for the inflation rate.
- --------------------------------------------------------------------------------
THE EQUITY MARKET
The equity market was surprisingly strong in 1996, almost matching its
spectacular gain in 1995. Across market sectors, energy, banks and
semiconductors were among the top performing groups in 1996, as they were in the
prior year. In general, larger capitalization stocks outperformed the stocks of
smaller companies.
The strength in the stock market can be attributed to favorable trends in the
economy and interest rates, as well as continued strength in corporate earnings.
In addition to these underlying elements, demographics and enthusiasm for
equities are fueling continuing inflows of money into stock mutual funds from
retirement-oriented vehicles such as 401(k)s. And, given a relatively stable
economic environment in the United States, plus increasing strength in many
economies abroad, there seems to be little reason to anticipate major changes in
stock market trends in the months ahead.
Annual Total Returns
from S&P 500 Index
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
1976 23.84%
1977 -7.18%
1978 6.56%
1979 18.44%
1980 32.42%
1981 -4.91%
1982 21.41%
1983 22.51%
1984 6.27%
1985 32.16%
1986 18.47%
1987 5.23%
1988 16.81%
1989 31.49%
1990 -3.17%
1991 30.55%
1992 7.67%
1993 9.99%
1994 1.31%
1995 37.43%
1996 23.07%
</TABLE>
Source: @ Computed using data FROM STOCKS, BONDS, BILLS, & INFLATION 1996
YEARBOOK-TM-, Ibbotson Associates, Chicago (annually updated work by Roger
G. Ibbotson and Rex Sinquefield). Used with permission.
- --------------------------------------------------------------------------------
THE BOND MARKET
Returns from investments in bonds have two components: the income received over
the period the bond is held and capital appreciation. Total returns are often
less than the coupon or stated interest rate -- which is the income actually
received by a bond holder -- because the prices of bonds fall when interest
rates rise. That is what happened during 1996: yields on long-term bonds
increased by approximately 75 basis points (three-quarters of a percentage
point) during the year, and bond prices fell accordingly.
Overall, 1996 was a disappointing year for bond investors, especially in
comparison with the high returns of the prior year.
Annual Total Returns
from Long-Term Government Bonds
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
1976 16.75%
1977 -0.69%
1978 -1.18%
1979 -1.23%
1980 -3.95%
1981 1.86%
1982 40.36%
1983 0.65%
1984 15.48%
1985 30.97%
1986 24.53%
1987 -2.71%
1988 9.67%
1989 18.11%
1990 6.18%
1991 19.30%
1992 8.05%
1993 18.24%
1994 -7.77%
1995 31.67%
1996 -0.93%
</TABLE>
Source: @ Computed using data FROM STOCKS, BONDS, BILLS, & INFLATION 1996
YEARBOOK-TM-, Ibbotson Associates, Chicago (annually updated work by Roger
G. Ibbotson and Rex Sinquefield). Used with permission.
--
3
<PAGE>
GROWTH STOCK PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Objective: Portfolio Strategy: Net Assets:
Long-term appreciation of Hold a diversified mix of high quality growth $170,481,467
capital with moderate risk stocks of medium and large companies with
above-average potential for earnings growth
</TABLE>
GROWTH STOCK PORTFOLIO
The Growth Stock Portfolio is invested in high quality companies of large to
medium capitalization with strong financial characteristics and the ability to
generate internal growth. A key factor in stock selection is the choice of
industries with good earnings potential, based on analysis of economic trends to
determine their impact on various sectors of the economy. Stock selection is
made through "top down" analysis: first industry and market sector choices made
based on the economic environment, and then the most promising companies within
each sector are selected as holdings. Diversification across 70 to 90 stocks in
a wide range of industry groups reduces the Portfolio's risk profile.
In the current environment of economic strength, moderate inflation and high
employment levels, consumer spending is strong; therefore, consumer cyclicals
are overweighted. Performance benefited from opportunistic increases in
technology holdings during the year, as some stocks retreated from previous
highs, and from reduced exposure in utilities and local telephone companies. A
market weight was maintained in energy, in recognition of the positive impact of
recovering oil prices. Late in the year, as the economy remained strong,
additional investments were made in capital goods. As cash flowed into the
Portfolio, a moderate cash position was maintained during most of the year in
order to maintain liquidity.
Sector Allocation
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Consumer Cyclicals 21%
Consumer Staples/Health Care 18%
Basic Materials/Capital Goods 16%
Energy 8%
Technology 14%
Finance 12%
Other 11%
</TABLE>
Top 10 Holdings
12/31/96
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
COMPANY % OF NET ASSETS
<S> <C>
General Electric Company 2.00%
International Business Machines Corp. 2.00%
Intel Corporation 1.80%
AlliedSignal 1.70%
Canadian National Railway 1.70%
Chase Manhattan Corporation 1.70%
United HealthCare Corporation 1.70%
Merck & Co., Inc. 1.70%
Boeing Company 1.60%
Emerson Electric Co. 1.60%
</TABLE>
Performance Relative to S&P 500 Index
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
GROWTH STOCK PORTFOLIO S&P 500 INDEX
<S> <C> <C> <C>
05-94 10,000 10,000
12-94 10,155 10,320
12-95 13,285 14,180
12-96 16,063 17,413
Average Annual Total Return
For Periods Ended December 31, 1996
One Year Since Inception
Growth Stock Portfolio 20.91% 19.48%
S&P 500 Index 22.80% 23.15%
</TABLE>
The Standard & Poor's 500 Composite Stock Price Index is an unmanaged index of
500 selected common stocks, most of which are listed on the New York Stock
Exchange. The index is heavily weighted toward stocks with large market
capitalizations and represents approximately two-thirds of the total market
value of all domestic common stocks.
This chart assumes an initial investment of $10,000 made on 5/3/94
(commencement of operations). Returns shown include deductions for management
and other fund expenses, and reinvestment of all dividends. Returns exclude
deductions for separate account sales loads and account fees. Past performance
is not predictive of future performance. Investment return and principal value
will fluctuate, so that your shares, when redeemed, may be worth more or less
than their original cost. The net investment rates of return shown on page 2
reflect mortality and expense risk charges deducted from the assets of the
separate account. The cost of insurance protection, which is not reflected in
the returns shown on this chart, would make the return significantly lower.
Investors are urged to obtain a personalized illustration of historical
performance which reflects the cost of insurance protection.
--
4
<PAGE>
GROWTH STOCK PORTFOLIO
NORTHWESTERN MUTUAL SERIES FUND, INC.
Schedule of Investments
DECEMBER 31, 1996
<TABLE>
<CAPTION>
MARKET
VALUE
COMMON STOCK (88.9%) SHARES (000'S)
<S> <C> <C>
- --------------------------------------------------------------
AEROSPACE (4.4%)
Boeing Company 24,200 $ 2,574
General Motors Class H 30,000 1,687
Gulfstream Aerospace 75,000 1,819
Raytheon Company 28,000 1,347
-----------
TOTAL 7,427
-----------
AIRLINES (2.0%)
*AMR Corporation 16,000 1,410
*Midwest Express Holdings, Inc. 54,000 1,944
-----------
TOTAL 3,354
-----------
AUTO & TRUCKS (2.7%)
Chrysler Corporation 21,600 713
Ford Motor Company 48,000 1,530
Harley Davidson, Inc. 48,200 2,265
-----------
TOTAL 4,508
-----------
AUTO RELATED (1.8%)
Borg Warner Automotive 51,400 1,979
Echlin Inc. 34,300 1,085
-----------
TOTAL 3,064
-----------
BANKS (5.3%)
BankAmerica Corporation 23,500 2,344
Chase Manhattan Corporation 29,940 2,672
Citicorp 18,600 1,916
First Union Corporation 27,500 2,035
-----------
TOTAL 8,967
-----------
BEVERAGES (0.7%)
Pepsico Inc. 40,000 1,170
-----------
CHEMICALS (2.1%)
E.I. du Pont de Nemours & Co. 10,150 958
PPG Industries Inc. 23,900 1,341
Union Carbide Corporation 30,000 1,226
-----------
TOTAL 3,525
-----------
CHEMICALS-SPECIALITY (1.5%)
Avery Dennison Corp. 44,200 1,563
Ecolab, Inc. 26,000 978
-----------
TOTAL 2,541
-----------
COMPUTER RELATED (4.1%)
*Cisco Systems Incorporated 22,800 1,451
Hewlett-Packard Company 36,800 1,849
International Business Machines 20,600 3,111
3COM Corporation 7,100 521
-----------
TOTAL 6,932
-----------
COMPUTER SOFTWARE (5.2%)
*DST Systems, Inc. 54,400 1,707
Electronic Data Systems Corporation 27,300 1,181
First Data Corporation 41,600 1,518
Fiserv 67,100 2,466
<CAPTION>
MARKET
VALUE
COMMON STOCK (88.9%) SHARES (000'S)
<S> <C> <C>
- --------------------------------------------------------------
COMPUTER SOFTWARE (CONTINUED)
*Microsoft Corporation 24,200 $ 2,000
-----------
TOTAL 8,872
-----------
CONTAINERS (0.9%)
Tupperware 30,000 1,609
-----------
DIVERSIFIED (2.3%)
Allied Signal Inc. 40,200 2,693
Dial Corp. 78,000 1,151
-----------
TOTAL 3,844
-----------
DRUGS (4.0%)
Eli Lilly & Company 28,700 2,095
Merck & Co., Inc. 33,300 2,639
Pfizer Inc. 25,100 2,080
-----------
TOTAL 6,814
-----------
ELECTRICAL EQUIPMENT (4.3%)
Emerson Electric Co. 25,800 2,496
General Electric Company 31,900 3,154
W.W. Grainger, Inc. 20,200 1,621
-----------
TOTAL 7,271
-----------
FINANCIAL SERVICES (2.9%)
Associates First Capital Corporation 45,000 1,986
Dean Witter, Discover & Co. 8,000 530
Franklin Resources 19,600 1,340
Merrill Lynch & Co. 14,000 1,141
-----------
TOTAL 4,997
-----------
FOOD SERVICE/LODGING (1.7%)
McDonald's Corporation 34,400 1,557
Promus Hotels 45,000 1,333
-----------
TOTAL 2,890
-----------
FOODS (3.1%)
CPC International Corp. 21,900 1,697
Campbell Soup Company 21,000 1,685
General Mills, Inc. 28,800 1,825
-----------
TOTAL 5,207
-----------
HOSPITAL SUPPLIES (1.4%)
Guidant Corp. 4,600 262
Johnson & Johnson 43,500 2,164
-----------
TOTAL 2,426
-----------
HOUSEHOLD PRODUCTS (2.4%)
First Brands Corporation 71,200 2,020
Newell Co. 64,400 2,029
-----------
TOTAL 4,049
-----------
INSURANCE (2.1%)
CIGNA Corporation 11,300 1,544
Everest Reinsurance Holdings Inc. 68,200 1,961
-----------
TOTAL 3,505
-----------
</TABLE>
--
5
<PAGE>
NORTHWESTERN MUTUAL SERIES FUND, INC.
Schedule of Investments
DECEMBER 31, 1996
<TABLE>
<CAPTION>
MARKET
VALUE
COMMON STOCK (88.9%) SHARES (000'S)
- --------------------------------------------------------------
<S> <C> <C>
LEISURE RELATED (2.0%)
Walt Disney Company 22,600 $ 1,574
Mattel, Inc. 63,281 1,756
-----------
TOTAL 3,330
-----------
MEDICAL SERVICES (2.2%)
Columbia/HCA Healthcare Corp. 26,850 1,094
United Healthcare Corp. 59,000 2,655
-----------
TOTAL 3,749
-----------
MACHINERY (1.1%)
Deere & Company 39,700 1,613
Ingersoll-Rand Company 7,400 329
-----------
TOTAL 1,942
-----------
METALS & MINING (1.0%)
AK Steel Holding Corporation 41,000 1,625
-----------
NATURAL GAS (1.2%)
Sonat Inc. 39,900 2,055
-----------
OIL & GAS-DOMESTIC (1.6%)
Ashland, Inc. 9,100 399
Tosco Corporation 5,000 396
Unocal Corp. 48,600 1,974
-----------
TOTAL 2,769
-----------
OIL & GAS-INTERNATIONAL (5.5%)
Amoco Company 28,300 2,278
British Petroleum Co. Ltd. 16,600 2,347
Exxon Corporation 13,200 1,294
Mobil Corporation 15,000 1,834
Texaco Inc. 17,000 1,668
-----------
TOTAL 9,421
-----------
PRINTING & PUBLISHING (2.5%)
McGraw-Hill Companies Inc. 26,200 1,208
*Scholastic Corp. 30,300 2,038
Tribune Company 13,800 1,088
-----------
TOTAL 4,334
-----------
RAILROADS (2.3%)
Burlington Northern Santa Fe Co. 15,000 1,296
Canadian National Railway Co. 70,500 2,679
-----------
TOTAL 3,975
-----------
RETAIL-FOOD (0.8%)
Albertson's, Inc. 36,700 1,307
-----------
RETAIL-GENERAL (5.1%)
*Federated Department Stores, Inc. 39,500 1,348
Home Depot, Inc. 27,200 1,363
*Kohls Department Stores 49,500 1,943
J.C. Penney Company, Inc. 13,100 639
OfficeMax, Inc. 60,400 642
Walgreen Company 47,300 1,892
Wal-Mart Stores, Inc. 42,400 970
-----------
TOTAL 8,797
-----------
<CAPTION>
MARKET
VALUE
COMMON STOCK (88.9%) SHARES (000'S)
<S> <C> <C>
- --------------------------------------------------------------
SEMICONDUCTORS (2.7%)
Atmel Corp. 52,100 $ 1,726
Intel Corp. 22,300 2,920
-----------
TOTAL 4,646
-----------
SOAPS & TOILETRIES (2.3%)
Gillette Company 19,500 1,516
Procter & Gamble Company 22,900 2,462
-----------
TOTAL 3,978
-----------
TELECOMMUNICATIONS-EQUIPMENT (0.2%)
Lucent Technologies, Inc. 5,671 262
-----------
TELECOMMUNICATIONS-LONG DISTANCE (1.8%)
MCI Communications Corporation 34,200 1,118
*WorldCom Inc. 73,200 1,908
-----------
TOTAL 107,400 3,026
-----------
TOBACCO (0.9%)
Philip Morris Companies 14,200 1,599
-----------
UTILITY-TELEPHONE (0.8%)
GTE Corporation 29,600 1,347
-----------
TOTAL COMMON STOCK 151,134
-----------
<CAPTION>
MARKET
VALUE
MONEY MARKET INVESTMENTS (11.1%) PAR (000'S)
<S> <C> <C>
- --------------------------------------------------------------
AEROSPACE (1.7%)
+Raytheon Company, 5.36%, 1/17/97 $3,000,000 $ 2,993
-----------
CMO & LOAN BACKED CERTIFICATES (2.9%)
+Federal National Mortgage Assoc.,
5.5%, 1/30/97 5,000,000 4,978
-----------
FEDERAL GOVERNMENT & AGENCIES (0.3%)
+U.S. Treasury, 4.98%, 5/1/97 500,000 491
-----------
FINANCIAL SERVICES (1.8%)
+IBM Credit Corporation, 5.5%,
1/23/97 3,000,000 2,990
-----------
PRINTING & PUBLISHING (1.8%)
+Gannet Company Inc., 5.35%, 1/8/97 3,000,000 2,997
-----------
TOBACCO (2.6%)
Philip Morris Companies, 6.5%, 1/2/97 4,500,000 4,499
-----------
TOTAL MONEY MARKET
INVESTMENTS 18,948
-----------
TOTAL GROWTH STOCK PORTFOLIO $ 170,082
-----------
</TABLE>
* Non-Income Producing
+Partially held by the custodian in a segregated account as collateral for open
futures positions. Information regarding open futures contracts as of December
31, 1996 is summarized below:
<TABLE>
<CAPTION>
NUMBER OF EXPIRATION APPRECIATION
ISSUER CONTRACTS DATE (000'S)
- -------------------- ---------- ------------ -------------
<S> <C> <C> <C>
S&P 500 Stock Index 20 March 1997 157
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements
--
6
<PAGE>
AGGRESSIVE GROWTH STOCK PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Objective: Portfolio Strategy: Net Assets:
Maximum long-term Strive for the highest possible rate of $871,926,094
appreciation of capital capital appreciation by investing in
companies with potential for rapid growth
</TABLE>
AGGRESSIVE GROWTH STOCK PORTFOLIO
The Aggressive Growth Stock Portfolio owns the stocks of emerging growth
companies, generally with market capitalizations of less than $3 billion. Since
growth stock portfolios tend to react strongly to changes in financial and
economic markets, as well as to changes in the prospects for individual
companies, returns of this Portfolio can vary considerably from time to time. A
higher level of risk (with risk defined as variability of returns over time) is
accepted for the potential of greater long-term returns. The focus in stock
selection is on the individual companies' ability to generate revenue, expanding
profit margins and solid balance sheets; industry sector selection is of
secondary importance.
The Portfolio is heavily weighted toward three sectors in which there are
companies with particularly promising prospects for growth: technology; consumer
cyclicals and health care. Among technology issues, the Portfolio benefited from
its investments in software, computer services, telecommunication equipment and
semiconductors. A major area of focus within the broad consumer cyclical
category is specialty retailers; in this category, office supply and catalog
companies continue to perform well. Health care issues underperformed in 1996,
but the evolution in the health care industry in the United States, plus
demographic trends, make selected companies in this industry attractive for the
long term. Holdings of small transportation companies contributed to the
Portfolio's performance, as they rebounded from a weak environment in 1995. The
business services sector, another area of emphasis, performed well in 1996, as
companies increasingly turned to strategic outsourcing.
Sector Allocation
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Consumer Related 19%
Technology 27%
Health Care 13%
Business Services 7%
Transportation 8%
Energy 6%
Financial Services 5%
Industrial 6%
Cash Equivalents 9%
</TABLE>
Performance Relative
to Relevant Indicies
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AGGRESSIVE GROWTH WILSHIRE SMALL WILSHIRE NEXT
STOCK PORTFOLIO CAP INDEX 1750 INDEX
<S> <C> <C> <C>
11-90 10,000 10,000 10,000
12-90 10,189 10,459 10,459
12-91 15,894 15,873 15,325
12-92 16,839 18,188 18,186
12-93 20,057 21,464 21,357
12-94 21,141 20,801 21,065
12-95 29,488 26,330 27,439
12-96 34,661 31,588 31,801
Average Annual
Total Return
For Periods Ended
December 31, 1996
One Year Five Years Since Inception
Aggressive Growth Stock Portfolio 17.70% 16.87% 22.66%
Wilshire Small Cap Index 19.97% 14.76% 20.81%
Wilshire Next 1750 Index 15.90% 15.72% 20.94%
</TABLE>
Since the portfolio invests primarily in small capitalization issues, the
indices that best reflect the portfolio's performance are the Wilshire Next 1750
Index and Wilshire Small Cap Index.
The Wilshire Next 1750 is an unmanaged, equally weighted index. Included in
this index are those stocks which are ranked 750 to 2500 by market
capitalization in the Wilshire 5000. The largest sectors represented in this
index are financial services, consumer services and basic industry. Its average
market capitalization is approximately $491.0 million as of December 31, 1996.
The Wilshire Small Cap Index is a subset of the Wilshire Next 1750 and
includes 250 stocks chosen based upon their size, sector and liquidity
characteristics. Each stock is equally weighted in this unmanaged index. The
average market capitalization is approximately $609.4 million as of December 31,
1996. The largest sector weightings include financial services, consumer
services and technology.
On May 3, 1994, the Northwestern Mutual Aggressive Growth Stock Fund, Inc.
(the "Fund") merged into the Northwestern Mutual Series Fund, Inc. Aggressive
Growth Stock Portfolio (the "Portfolio"). The Portfolio had no assets prior to
the merger. After the merger, the assets of the Portfolio were those of the
Fund. The investment objectives, policies, management and expenses of the
Portfolio are identical to those of the Fund. Accordingly, the performance of
the Fund prior to the merge is included with the performance of the Portfolio in
the graph and total return figures above.
This chart assumes an initial investment of $10,000 made on 11/30/90
(commencement of the Fund's operations). Returns shown include deductions for
management and other fund expenses, and reinvestment of all dividends. Returns
exclude deductions for separate account sales loads and account fees. Past
performance is not predictive of future performance. Investment return and
principal value will fluctuate, so that your shares, when redeemed, may be worth
more or less than their original cost. The net investment rates of return shown
on page 2 reflect mortality and expense risk charges deducted from the assets of
the separate account. The cost of insurance protection, which is not reflected
in the returns shown on this chart, would make the return significantly lower.
Investors are urged to obtain a personalized illustration of historical
performance which reflects the cost of insurance protection.
--
7
<PAGE>
AGGRESSIVE GROWTH STOCK PORTFOLIO
NORTHWESTERN MUTUAL SERIES FUND, INC.
Schedule of Investments
DECEMBER 31, 1996
<TABLE>
<CAPTION>
MARKET
VALUE
COMMON STOCK (90.8%) SHARES (000'S)
<S> <C> <C>
- --------------------------------------------------------------
AIRLINES (2.1%)
Atlas Air, Inc. 170,800 $ 8,156
Eagle USA Airfreight, Inc. 390,200 10,243
-----------
TOTAL 18,399
-----------
APPAREL / TEXTILES (0.1%)
Oakley, Inc. 85,000 924
-----------
AUTO PARTS MANUFACTURERS (1.9%)
Dura Automotive Systems, Inc. 105,600 2,376
*O'Reilly Automotive, Inc. 189,900 6,077
*Tower Automotive, Inc. 252,300 7,884
-----------
TOTAL 16,337
-----------
BANKS (0.6%)
*Texas Regional Bankshares Inc. 150,000 5,100
-----------
BEVERAGES (1.1%)
*Robert Mondavi Corporation 272,100 9,932
-----------
BUILDING SUPPLIES (1.0%)
*NCI Building Systems 258,200 8,908
-----------
CHEMICALS (0.8%)
A. Schulman Inc. 274,950 6,736
-----------
CHEMICALS - SPECIALITY (0.8%)
Cambrex Corporation 215,200 7,048
-----------
COMPUTER SERVICES (2.3%)
*Ecsoft 61,300 589
National Data Corporation 195,000 8,483
Paychex, Inc. 221,337 11,385
-----------
TOTAL 20,457
-----------
COMPUTER SOFTWARE (11.9%)
American Management Systems, Inc. 410,175 10,049
Computer Horizons Corp. 130,000 5,005
*DST Systems 234,100 7,345
First Data Corporation 235,590 8,599
HBO & Co. 150,000 8,906
HCIA Inc. 166,400 5,741
*Hyperion Sofware 225,000 4,781
Infinity Financial Technology 37,000 638
Information Management Resources 13,800 292
*Peoplesoft, Inc. 170,400 8,169
Saville Systems PLC-ADR 225,100 9,145
*Sterling Commerce, Inc. 366,263 12,911
Sterling Software, Inc. 181,100 5,727
*Transaction Systems Architects 333,200 11,079
*USCS International, Inc. 296,300 5,000
-----------
TOTAL 103,387
-----------
COMPUTER RELATED (2.4%)
*Cambridge Technology Partners 397,400 13,338
*Medic Computer Systems, Inc. 184,600 7,442
-----------
TOTAL 20,780
-----------
COSMETICS / TOILETRIES (1.3%)
*Inbrand Corporation 528,375 11,096
-----------
ELECTRONICS (6.2%)
*ADC Telecommunication 300,600 9,356
AVX Corp. 212,500 4,569
CBT Group, ADR 92,000 4,991
*Computer Products, Inc. 350,000 6,825
Methode Electronics Inc. 469,500 9,507
<CAPTION>
MARKET
VALUE
COMMON STOCK (90.8%) SHARES (000'S)
<S> <C> <C>
- --------------------------------------------------------------
ELECTRONICS (CONTINUED)
*Microchip Technology Inc. 149,000 $ 7,580
Molex Inc. 184,782 6,583
Trident International, Inc. 300,000 4,875
-----------
TOTAL 54,286
-----------
ENVIRONMENTAL (2.1%)
Cuno, Inc. 94,100 1,400
Kaydon Corporation 172,500 8,129
*Tetra Tech Inc. 464,737 9,179
-----------
TOTAL 18,708
-----------
EXPLORATION / DRILLING (3.4%)
BJ Services Company 135,000 6,885
Pride Petroleum Services 348,000 8,091
Production Operators Corp. 151,800 7,059
Titan Exploration Inc. 160,000 1,920
Transocean Offshore, Inc. 90,900 5,693
-----------
TOTAL 29,648
-----------
FINANCIAL SERVICES (2.4%)
BA Merchant Services, Inc. 50,500 903
Investors Financial Services C 200,000 5,550
Money Store, Inc. 320,150 8,844
*WFS Financial Corporation 282,160 5,608
-----------
TOTAL 20,905
-----------
FURNITURE / APPLIANCES (1.8%)
*Blythe Industries, Inc. 224,400 10,238
Chicago Miniature Lamp 136,900 5,681
-----------
TOTAL 15,919
-----------
INSURANCE COMPANIES (2.0%)
Capmac Holdings Inc. 250,000 8,281
CMAC Investment Corp. 243,200 8,938
-----------
TOTAL 17,219
-----------
MACHINERY / EQUIPMENT (0.4%)
*ABC Rail Products 193,000 3,836
-----------
MEDIA (1.4%)
*Clear Channel Communications 150,000 5,419
Gartner Group, Inc. 142,000 5,529
Universal Outdoor Holdings Inc. 53,000 1,245
-----------
TOTAL 12,193
-----------
MEDICAL PRODUCTS/SUPPLIES (6.3%)
Cardinal Health, Inc. 243,920 14,208
*Gulf South Medical Supply, Inc. 334,700 8,577
*Patterson Dental Co. 234,650 6,629
*Physician Sales & Service, Inc. 212,100 3,049
*Steris Corp. 299,500 13,028
*Sybron, Inc. 285,100 9,408
-----------
TOTAL 54,899
-----------
MEDICAL SERVICES (6.9%)
Capstone Pharmacy Services, Inc. 400,000 4,550
Compdent Corporation 187,000 6,592
CRA Managed Care Inc. 134,900 6,070
*Interim Service 141,500 5,023
*Medcath Incorporated 216,800 3,469
*Occusystems Inc. 205,900 5,559
*Orthodontic Centers of America 392,800 6,285
*PhyCor, Inc. 245,200 6,958
</TABLE>
--
8
<PAGE>
NORTHWESTERN MUTUAL SERIES FUND, INC.
Schedule of Investments
DECEMBER 31, 1996
<TABLE>
<CAPTION>
MARKET
VALUE
COMMON STOCK (90.8%) SHARES (000'S)
- --------------------------------------------------------------
<S> <C> <C>
MEDICAL SERVICES (CONTINUED)
*Quorum Health Group, Inc. 237,700 $ 7,072
*Vivra Inc. 310,900 8,589
-----------
TOTAL 60,167
-----------
OIL-DOMESTIC (1.9%)
Parker and Parsley Petroleum Co. 249,500 9,169
Tosco Corporation 95,900 7,588
-----------
TOTAL 16,757
-----------
OIL-SERVICES (0.8%)
*Global Industries Ltd 374,800 6,981
-----------
OFFICE EQUIPMENT (0.9%)
Danka Business Systems 212,800 7,528
-----------
PAPER / FOREST PRODUCTS (0.2%)
Wausau Paper Mills Company 103,618 1,917
-----------
PRINTING / PUBLISHING (1.6%)
Getty Communication ADR 216,200 3,243
*Catalina Marketing Corporation 201,900 11,130
-----------
TOTAL 14,373
-----------
PROFESSIONAL SERVICES (7.2%)
Access Health, Inc. 163,500 7,317
Apac Teleservices, Inc. 172,500 6,620
Billing Information Concepts 190,000 5,462
Cintas Corp. 173,000 10,164
*Corrections Corp. of America 262,400 8,036
Learning Tree International, Inc. 138,750 4,093
Nu Skin Asia Pacific, Inc. 163,900 5,060
*Robert Half International, Inc. 372,300 12,798
Teletech 134,600 3,499
-----------
TOTAL 63,049
-----------
RAILROADS (1.1%)
*Wisconsin Central Transportation 232,300 9,205
-----------
RECREATIONAL (1.8%)
*Regal Cinemas 288,750 8,879
*Scientific Games Holding Corp. 239,300 6,401
-----------
TOTAL 15,280
-----------
RETAIL-GENERAL (1.6%)
*Kohls Department Stores 229,800 9,020
*Tractor Supply Co. 221,200 4,562
-----------
TOTAL 13,582
-----------
RETAIL-SPECIALTY (5.3%)
Coporate Express, Inc. 228,600 6,729
*CUC International, Inc. 417,675 9,920
Fastenal Co. 195,600 8,949
*Global Direct Mail Corp. 221,000 9,641
*K & G Mens' Center, Inc. 218,000 5,668
Mark's Bros. Jewelers, Inc. 60,000 697
Viking Office Products, Inc. 184,500 4,924
-----------
TOTAL 46,528
-----------
<CAPTION>
MARKET
VALUE
COMMON STOCK (90.8%) SHARES (000'S)
<S> <C> <C>
- --------------------------------------------------------------
RESTAURANT / LODGING (0.9%)
HFS Incorporated 126,000 $ 7,527
-----------
SEMICONDUCTORS (1.0%)
Altera Corporation 116,000 8,432
-----------
TELECOMMUNICATIONS (2.5%)
Premiere Technologies, Inc. 112,300 2,807
Tellabs Inc. 280,000 10,535
Tesco Technologies, Inc. 152,600 5,608
West Teleservices Corporation 127,700 2,905
-----------
TOTAL 21,855
-----------
TRANSPORTATION-MISC. (0.9%)
Coach USA, Inc. 265,000 7,685
-----------
TRUCKING-SHIPPING (3.2%)
*Heartland Express Incorporated 380,193 9,267
Knight Transportation, Inc. 316,400 6,012
*Landstar System, Inc. 278,800 6,482
Swift Transportation Co., Inc. 264,000 6,204
-----------
TOTAL 27,965
-----------
UTILITY-TELEPHONE (0.7%)
LCI International 248,700 5,347
Midcom Communication 86,900 739
-----------
TOTAL 6,086
-----------
TOTAL COMMON STOCK $ 791,634
-----------
<CAPTION>
MARKET
VALUE
MONEY MARKET INVESTMENTS (9.2%) PAR (000'S)
<S> <C> <C>
- --------------------------------------------------------------
AEROSPACE (0.9%)
Raytheon Company, 5.36%, 1/17/97 $ 7,900,000 $ 7,881
-----------
CMO & LOAN BACKED CERTIFICATES (1.4%)
Federal National Mortgage Assoc.,
5.5%, 1/30/97 12,000,000 11,947
-----------
FINANCIAL SERVICES (6.0%)
CIT Group, 7%, 1/3/97 20,000,000 19,992
General Electric Capital Corp.,
5.4%, 1/8/97 8,000,000 7,992
IBM Credit Corporation, 5.5%,
1/23/97 8,000,000 7,973
Paccar Financial Corporation, 6.75%,
1/2/97 16,000,000 15,997
-----------
TOTAL 51,954
-----------
TOBACCO (0.9%)
Philip Morris Companies, 5.57%,
1/22/97 8,000,000 7,974
-----------
TOTAL MONEY MARKET
INVESTMENTS 79,756
-----------
TOTAL AGGRESSIVE GROWTH STOCK
PORTFOLIO $ 871,390
-----------
</TABLE>
*Non-Income Producing
The Accompanying Notes are an Integral Part of the Financial Statements
--
9
<PAGE>
INTERNATIONAL EQUITY PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Objective: Portfolio Strategy: Net Assets:
Long-term appreciation of Participate in the growth of foreign $505,190,404
capital through economies by investing in securities with
diversification into markets high long-term earnings potential relative
outside the United States to current market values
</TABLE>
INTERNATIONAL EQUITY PORTFOLIO
The International Equity Portfolio offers contract owners the opportunity to
participate in the growth of companies in countries throughout the world,
particularly those with expanding economies. The Portfolio continues to buy the
shares of undervalued companies internationally, using a disciplined focus on
long-term value. During 1996, the Portfolio significantly outperformed the EAFE
("Europe-Australia-Far East") Index, a composite of approximately 1100 companies
in 20 countries in Europe and the Pacific Basin.
International markets were generally strong in 1996, with Japan and Korea, in
which the Portfolio has relatively modest holdings, the notable exceptions among
major markets. In Asia, the Portfolio's performance benefited from its
investments in Hong Kong and an underweighting in Japan. Japan's stock market
posted lackluster performance, reflecting a mix of relief that economic growth
resumed after a five-year slump and concern that Japan's government could
staunch that growth by reducing stimulus. In Hong Kong, the market surged, amid
expectations of robust economic growth after the country reverts to Chinese
control in 1997. In Europe, low inflation, low interest rates, moderate economic
growth and strong bond markets fueled solid gains in the stock markets. Spain,
Sweden and France were among the strongest European markets.
During the year, the percentage of the Portfolio invested in Europe was
increased, particularly in the United Kingdom; the percentage of holdings in
Asia was decreased, with a major reduction in Japanese investments. At year end
1996, the Portfolio's largest positions by country were United Kingdom (11%),
France (9%), Spain (8%), Sweden (8%) and Hong Kong (8%).
The International Equity Portfolio is managed for Northwestern Mutual by
Templeton Investment Counsel, Inc.
Asset Allocation
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Europe 63%
Asia 11%
Australia/New Zealand 7%
Latin America 6%
Canada 3%
Non-equity holdings 10%
</TABLE>
Perfomance Relative
to the EAFE Index
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
INTERNATIONAL EQUITY
PORTFOLIO EAFE INDEX
<S> <C> <C> <C>
04-93 10,000 10,000
12-93 12,464 10,970
12-94 12,451 11,859
12-95 14,266 13,228
12-96 17,264 14,068
Average Annual Total Return
For Periods Ended December 31, 1996
One Year Since Inception
International Equity
Portfolio 21.01% 16.04%
EAFE Index 6.35% 9.74%
</TABLE>
As depicted in the graph, the International Equity Portfolio is compared against
the Morgan Stanley Capital International EAFE ("Europe-Australia-Far East")
Index. The index is composed of approximately 1100 companies in 20 countries in
Europe and the Pacific Basin. The objective of the index is to reflect the
movements of stock markets in these countries by representing an unmanaged
(indexed) portfolio within each country. The indices are constructed so that
companies chosen represent about 60% of market capitalization in each market;
industry composition of the market is reflected; and a cross section of large,
medium, and small capitalization stocks is included, taking into account
liquidity concerns. The index is calculated in U. S. dollars.
On May 3, 1994, the Northwestern Mutual International Equity Fund, Inc. (the
"Fund") merged into the Northwestern Mutual Series Fund, Inc., International
Equity Portfolio (the "Portfolio"). The Portfolio had no assets prior to the
merger. After the merger, the assets of the Portfolio were those of the Fund.
The investment objectives, policies, management and expenses of the Portfolio
are identical to those of the Fund. Accordingly, the performance of the Fund
prior to the merger is included with the performance of the Portfolio in the
graph and total return figures above.
This chart assumes an initial investment of $10,000 made on 4/30/93
(commencement of the Fund's operations). Returns shown include deductions for
management and other fund expenses, and reinvestment of all dividends. Returns
exclude deductions for separate account sales loads and account fees. Past
performance is not predictive of future performance. Investment return and
principal value will fluctuate, so that your shares, when redeemed, may be worth
more or less than their original cost. The net investment rates of return shown
on page 2 reflect mortality and expense risk charges deducted from the assets of
the separate account. The cost of insurance protection, which is not reflected
in the returns shown on this chart, would make the return significantly lower.
Investors are urged to obtain a personalized illustration of historical
performance which reflects the cost of insurance protection.
--
10
<PAGE>
INTERNATIONAL EQUITY PORTFOLIO
NORTHWESTERN MUTUAL SERIES FUND, INC.
Schedule of Investments
DECEMBER 31, 1996
<TABLE>
<CAPTION>
MARKET
VALUE
COMMON STOCK (89.1%) COUNTRY SHARES (000'S)
<S> <C> <C> <C>
- ----------------------------------------------------------------
AIRLINES (0.9%)
Quantas Airways ( 144A ) Austrl. 165,000 $ 2,754
Singapore Airlines Ltd. Sing. 205,000 1,860
-----------
TOTAL 4,614
-----------
APPLIANCES & HOUSEHOLD DURABLES (0.9%)
Electrolux AB B Free Swe. 48,200 2,799
Sony Corporation Jpn. 23,800 1,560
-----------
TOTAL 4,359
-----------
AUTOMOBILES (3.9%)
Fiat SPA Ord. Italy 680,000 2,058
Renault SA Fr. 365,180 7,848
Volvo Aktiebogelegt, B Free Swe. 433,000 9,556
-----------
TOTAL 19,462
-----------
BANKING & CREDIT (17.7%)
Australia & New Zealand Bank
Group Austrl. 926,097 5,837
Banco de Andulucia Sp. 30,000 4,393
**Bancaria de Espania Corp.,
ADR Sp. 195,000 4,387
**Banque National de Paris,
ADR(144A) Fr. 146,500 5,670
Barclay's Bank, PLC U.K. 311,016 5,339
BCO Bilboa Vizcaya Sp. 162,500 8,781
BPI SGPS SA Port. 146,350 1,822
BPI-SGPS SPA "E" Port. 55,613 692
Canadian Imperial Bank of
Commerce Can. 177,000 7,814
Suisse Group Credit Aus. 55,725 5,724
Deutsche Bank AG Ger. 193,600 9,046
HSBC Holdings H.K. 308,237 6,595
Komercni Bank (144A) Chez. 30,000 813
Komercni Bank "A" Chez. 15,000 1,250
Merita Limited "A" Fin. 1,800,000 5,599
National Bank of Canada
Montreal Can. 360,000 3,641
Panin Bank Indo. 1,782,000 2,037
Stadshypotek AB "A"(144A) Swe. 120,000 3,291
Svenska Hanelsbanken S.A. Swe. 230,000 6,611
-----------
TOTAL 89,342
-----------
BEVERAGES & TOBACCO (0.2%)
Swedish Match AB Fuerer Swe. 240,000 845
-----------
BROADCAST ADVERTISING PUBLISHING (0.2%)
Marieberg Tidings "A" Free Swe. 35,000 857
-----------
BUILDING MATERIALS AND COMPONENTS (1.9%)
Pioneer International Ltd. Austrl. 3,197,946 9,532
-----------
BUSINESS & PUBLIC SERVICE (3.0%)
Esselte AB, Series "A" Free Swe. 269,900 6,135
Hyder PLC U.K. 371,666 4,750
Hyder PLC Cum. Red. Pfd. U.K. 401,400 706
<CAPTION>
MARKET
VALUE
COMMON STOCK (89.1%) COUNTRY SHARES (000'S)
<S> <C> <C> <C>
- ----------------------------------------------------------------
BUSINESS & PUBLIC SERVICE (CONTINUED)
Societe Generale de Surv
Holdings Swtz. 885 $ 2,175
* **Waste Management PLC,
ADR U.K. 168,000 1,323
-----------
TOTAL 15,089
-----------
CHEMICALS (4.7%)
Bayer AG Ger. 157,000 6,407
European Vinyls Corp. EVC
International Neth. 68,985 2,187
Rhone Poulenc SA, Series A Fr. 314,508 10,724
Solvay Et Cie A NPV Bel. 7,300 4,473
-----------
TOTAL 23,791
-----------
CONSTRUCTION AND HOUSING (0.8%)
Kyudendo Corp. Jpn. 33,000 342
Sirti SPA Italy 643,000 3,900
-----------
TOTAL 4,242
-----------
ELECTRICAL & ELECTRONICS (2.9%)
ABB AG Baden Bearer Swtz. 4,730 5,884
Alcatel Alsthom DG Fr. 58,519 4,701
Hitachi Ltd. Jpn. 113,000 1,054
Philips Electronic Neth. 78,000 3,159
-----------
TOTAL 14,798
-----------
ELECTRICAL COMPONENTS, INSTRUMENTS (1.1%)
BICC PLC U.K. 1,199,545 5,651
-----------
ENERGY SOURCES (3.2%)
Hafslund Nycomed "A" Norw. 170,000 1,255
Repsol SA Sp. 122,000 4,683
Saga Petrolium Norw. 260,000 4,369
Societe Nationale Elf
Aquitane Fr. 66,801 6,081
-----------
TOTAL 16,388
-----------
FINANCIAL SERVICES (2.4%)
AXA SA Fr. 47,813 3,041
*Capital Portugal Fund Port. 14,500 1,674
Chile Fund U.S. 35,000 731
India Fund, Series "B" U.K. 1,256,515 1,851
*JF Indonesia Fund, Inc. H.K. 456,600 531
Korea International Trust Kor. 52 1,625
Thai Fund Inc. Thai. 71,516 1,180
*Thailand International Fund Thai. 70 1,610
-----------
TOTAL 12,243
-----------
FOOD & HOUSEHOLD PRODUCTS (3.1%)
Albert Fisher Group PLC U.K. 6,734,995 4,904
CP Pokphand Co. H.K. 2,609,900 1,029
Cafe de Coral Holdings, Ltd. H.K. 7,672,000 2,058
Hillsdown Holdings U.K. 1,800,892 6,170
</TABLE>
--
11
<PAGE>
NORTHWESTERN MUTUAL SERIES FUND, INC.
Schedule of Investments
DECEMBER 31, 1996
<TABLE>
<CAPTION>
MARKET
VALUE
COMMON STOCK (89.1%) COUNTRY SHARES (000'S)
- ----------------------------------------------------------------
<S> <C> <C> <C>
FOOD & HOUSEHOLD PRODUCTS (CONTINUED)
Vitro SA NPV Mex. 768,400 $ 1,396
-----------
TOTAL 15,557
-----------
FOREST PRODUCTS & PAPER (2.7%)
Barito Pacific Timber Indo. 937,000 575
Carter Holt Harvey Ltd. N.Z. 2,734,957 6,206
Metsa Serla OY "B" Fin. 277,500 2,083
Stora Kapparbergs, Series
"B" Swe. 350,000 4,773
-----------
TOTAL 13,637
-----------
HEALTH & PERSONAL CARE (2.5%)
Astra AB Series "A" Free Swe. 140,000 6,919
Nycomed ASA Series "A" Norw. 227,000 3,476
Nycomed ASA Series "B" Norw. 128,200 1,973
-----------
TOTAL 12,368
-----------
INSURANCE (3.7%)
Aegon NV Neth. 121,792 7,757
ING Groep NV Neth. 190,000 6,836
London Insurance Group Can. 325,200 4,323
-----------
TOTAL 18,916
-----------
MACHINERY & ENGINEERING (0.9%)
VA Technologies AG
Bearer(144A) Austrl. 30,000 4,709
-----------
MERCHANDISING (1.1%)
Koninklijke Bijenkorf Beheer Neth. 44,098 3,176
Kwik Save Group U.K. 465,057 2,573
-----------
TOTAL 5,749
-----------
METALS & MINING (2.2%)
Elkem A S Oslo ord "A" Norw. 192,000 3,166
*Inmet Mining Ltd. Can. 192,500 935
**Pechiney, ADR "A" Fr. 48,183 952
Pechiney SA "A" Fr. 19,000 796
Union Minerie, NPV Bel. 65,171 4,420
Grupo Mexico "B" Mex. 256,000 793
-----------
TOTAL 11,062
-----------
MULTI-INDUSTRY (8.4%)
Amer Group "A" Fin. 175,000 3,616
BTR Nylex, Ltd. Austrl. 1,341,100 6,548
BTR, PLC "A" Austrl. 249,000 1,144
Comp Gen de Industrieset de
Partec Fr. 4,500 1,241
Harrisons & Crossfield U.K. 539,800 1,221
Hutchinson Whampoa H.K. 798,000 6,268
Jardine Matheson Holdings H.K. 1,035,501 6,834
Jardine Strategic Holdings H.K. 1,019,055 3,689
Marine Wendel SA Fr. 11,490 1,054
Nokia Corp., "A" Fin. 71,000 4,124
Swire Pacific Class "A" H.K. 472,500 4,521
<CAPTION>
MARKET
VALUE
COMMON STOCK (89.1%) COUNTRY SHARES (000'S)
<S> <C> <C> <C>
- ----------------------------------------------------------------
MULTI-INDUSTRY (CONTINUED)
Swire Pacific Limited B H.K. 1,314,200 $ 1,988
-----------
TOTAL 42,248
-----------
RAILROAD (0.7%)
Brambles Ind. Ltd. Austrl. 183,500 3,581
-----------
TELECOMMUNICATIONS (9.7%)
British Telecom U.K. 608,000 4,114
**CIA de Telefons Chile, ADR Chile 36,500 3,691
Cointel CONV Pfd. Arg. 73,150 3,822
Nacional Financiera CNV
PRIDES Mex. 117,802 3,976
**Phillipine Long Distance
Telephone, ADR Phil. 63,500 3,239
SPT Telecom AS Chez. 36,000 4,482
Stet Di Risp Non-Conv. Italy 2,490,000 8,413
**Telebras ADR Braz. 103,500 7,918
Telefonica de Espania Sp. 315,000 7,321
Telefonica del Peru SA "B"
ADR Peru 115,300 2,176
-----------
TOTAL 49,152
-----------
TEXTILES-APPAREL (0.2%)
Yizheng Chemical Fibre
Company China 3,725,200 901
-----------
UTILITIES-ELECTRIC & GAS (9.1%)
British Gas U.K. 1,913,200 7,342
CEZ Ceske Energeticke Zavody Chez 101,990 3,671
Consolidated Electric Power,
Asia H.K. 219,000 514
Electricidad de Caracas Venz. 3,986,308 4,043
Endesa National de Electric Sp. 63,000 4,487
EVN Energie Versorgung Aus. 38,400 5,781
Hong Kong Electric H.K. 990,000 3,290
Iberdrola SA Sp. 587,500 8,333
National Power U.K. 493,764 4,128
Thames Water U.K. 251,023 2,627
Veba Warrants Ger. 6,000 1,922
-----------
TOTAL 46,138
-----------
WHOLESALE & INTERNATIONAL TRADE (1.0%)
Brierley Investments Ltd. N.Z. 5,716,091 5,294
-----------
TOTAL COMMON STOCK 450,525
-----------
</TABLE>
<TABLE>
<CAPTION>
MARKET
VALUE
BONDS (3.0%) COUNTRY PAR (000'S)
<S> <C> <C> <C>
- ----------------------------------------------------------------
CMO AND LOAN BACKED CERTIFICATES (2.0%)
Federal National Mortgage
Assoc. 1/30/97 U.S. $10,000,000 $ 9,956
-----------
</TABLE>
--
12
<PAGE>
NORTHWESTERN MUTUAL SERIES FUND, INC.
Schedule of Investments
DECEMBER 31, 1996
<TABLE>
<CAPTION>
MARKET
VALUE
BONDS (3.0%) COUNTRY PAR (000'S)
- ----------------------------------------------------------------
<S> <C> <C> <C>
FEDERAL GOVERNMENT & AGENCIES (0.5%)
U.S. Treasury, 5 1/8%,
4/30/98, U.S. 2,757,000 2,736
-----------
FINANCIAL SERVICES (0.5%)
PIV Financial Inv., Cayman H.K. 2,750,000 $ 2,433
-----------
TOTAL BONDS 15,125
-----------
</TABLE>
<TABLE>
<CAPTION>
MARKET
MONEY MARKET VALUE
INVESTMENTS (7.5%) COUNTRY PAR (000'S)
<S> <C> <C> <C>
- ----------------------------------------------------------------
AEROSPACE-DEFENSE (2.0%)
Raytheon Co. 01/17/97 U.S. $10,000,000 $ 9,977
-----------
COMPUTERS-RELATED (1.9%)
IBM Corp. 01/23/97 U.S. 10,000,000 9,966
-----------
FINANCIAL (1.6%)
PACCAR Financial 1/2/97 U.S. 8,100,000 8,098
-----------
<CAPTION>
MARKET
MONEY MARKET VALUE
INVESTMENTS (7.5%) COUNTRY PAR (000'S)
<S> <C> <C> <C>
- ----------------------------------------------------------------
UTILITIES-ELECTRIC (2.0%)
General Electric Co. 1/8/97 U.S. $10,000,000 $ 9,990
-----------
TOTAL MONEY MARKET
INVESTMENTS 38,031
-----------
TOTAL INTERNATIONAL
EQUITY PORTFOLIO $ 503,681
-----------
</TABLE>
* Non-Income Producing
** ADR-American Depository Receipts
The Accompanying Notes are an Integral Part of the Financial Statements
--
13
<PAGE>
GROWTH AND INCOME STOCK PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Objective: Portfolio Strategy: Net Assets:
Long-term growth of capital Actively manage a portfolio of equity $234,183,366
and income, consistent with securities
moderate investment risk with a goal of exceeding the total return
of the
S&P 500 Index
</TABLE>
GROWTH AND INCOME PORTFOLIO
The Growth and Income Portfolio invests mainly in large-capitalization stocks,
with a focus on seeking the best values in the market based on long-term
earnings forecasts. A sector balance very close to that of the S&P 500 Index is
normally maintained, with the emphasis on undervalued stocks within each sector;
a valuation discipline mandates the sale of stocks regarded as overvalued. More
focus is placed on capital appreciation and dividend growth than on current
dividends. The Portfolio is normally fully invested in equity securities.
In 1996, the Portfolio's total return was slightly less than the S&P 500 Index.
During most of the year, investors focused on large, high quality companies with
good near-term earnings momentum rather than on fundamental value; consequently
the Portfolio's value-oriented management style underperformed the market as a
whole. Near the end of the year, the Portfolio benefited from a broadening of
market strength, as investors moved away from the safety of the highest quality
companies and embraced more undervalued issues. At year end, the Portfolio was
slightly overweighted in the retail, energy, health care, basic industry and
cable television industries. Finance and technology stocks were neutrally
weighted; utilities were underweighted.
The Growth and Income Stock Portfolio is managed for Northwestern Mutual by J.
P. Morgan Investment Management Inc.
Sector Allocation
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Consumer 36%
Interest-Sensitive 23%
Industry 20%
Technology 11%
Energy 10%
</TABLE>
Top 10 Holdings
12/31/96
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
COMPANY % OF NET ASSETS
<S> <C>
Exxon Corp. 3.90%
Philip Morris Cos. Inc. 3.30%
Procter & Gamble Co. 3.00%
Boeing Company 3.00%
Wal-Mart Stores, Inc. 2.40%
Tele-Communications Inc. 2.10%
Nations Bank Corporation 2.00%
Warner-Lambert Company 1.90%
General Motors Corp. 1.90%
E.I. du Pont de Nemours & Co. 1.80%
</TABLE>
Performance Relative
to S&P 500 Index
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
GROWTH & INCOME STOCK PORTFOLIO S&P 500 INDEX
<S> <C> <C> <C>
05-94 10,000 10,000
12-94 10,034 10,320
12-95 13,156 14,180
12-96 15,783 17,413
Average Annual Total Return
For Periods Ended December 31, 1996
One Year Since Inception
Growth & Income Stock Portfolio 19.97% 18.69%
S&P 500 Index 22.80% 23.15%
</TABLE>
The Standard & Poor's 500 Composite Stock Price Index is an unmanaged index of
500 selected common stocks, most of which are listed on the New York Stock
Exchange. The index is heavily weighted toward stocks with large market
capitalizations and represents approximately two-thirds of the total market
value of all domestic common stocks.
This chart assumes an initial investment of $10,000 made on 5/3/94
(commencement of operations). Returns shown include deductions for management
and other fund expenses, and reinvestment of all dividends. Returns exclude
deductions for separate account sales loads and account fees. Past performance
is not predictive of future performance. Investment return and principal value
will fluctuate, so that your shares, when redeemed, may be worth more or less
than their original cost. The net investment rates of return shown on page 2
reflect mortality and expense risk charges deducted from the assets of the
separate account. The cost of insurance protection, which is not reflected in
the returns shown on this chart, would make the return significantly lower.
Investors are urged to obtain a personalized illustration of historical
performance which reflects the cost of insurance protection.
--
14
<PAGE>
GROWTH AND INCOME STOCK PORTFOLIO
NORTHWESTERN MUTUAL SERIES FUND, INC.
Schedule of Investments
DECEMBER 31, 1996
<TABLE>
<CAPTION>
MARKET
VALUE
COMMON STOCK (97.3%) SHARES (000'S)
<S> <C> <C>
- --------------------------------------------------------------
AEROSPACE (3.0%)
Boeing Company 65,800 $ 6,999
-----------
AUTO & TRUCKS (1.9%)
General Motors Corporation 79,000 4,404
-----------
BANKS (8.3%)
Corestates Financial Corp. 37,500 1,945
Crestar Financial Corp. 21,400 1,592
First Chicago NBD Corporation 70,200 3,773
First Tennessee National Corp. 34,700 1,301
*First USA Inc. 68,800 2,382
Firstar Corporation 41,300 2,168
Fleet Financial Group Inc. 35,000 1,746
NationsBank Corp. 47,100 4,604
-----------
TOTAL 19,511
-----------
BEVERAGES (1.7%)
Pepsico Inc. 134,000 3,919
-----------
BUILDING & CONSTRUCTION (0.5%)
*USG Corporation 34,700 1,175
-----------
CHEMICALS (4.4%)
Albemarle Corporation 118,600 2,150
E.I. Du Pont De Nemours & Co. 43,500 4,105
Union Carbide Corporation 98,000 4,006
-----------
TOTAL 10,261
-----------
COAL (1.4%)
Anadarko Petroleum Corp. 16,600 1,075
Enron Corp. 53,000 2,286
-----------
TOTAL 3,361
-----------
COMPUTERS RELATED (5.6%)
*EMC Corporation 77,800 2,577
Cisco Systems Incorporated 42,500 2,704
*Compaq Computer Corporation 13,800 1,025
International Business Machines Corp. 20,500 3,095
Quantum Corp. 84,600 2,422
Read-Rite Corporation 53,400 1,348
-----------
TOTAL 13,171
-----------
COMPUTER SOFTWARE (1.6%)
Autodesk, Inc. 30,300 848
Bay Networks 33,100 691
First Data Corporation 28,900 1,055
Oracle Corporation 28,600 1,194
-----------
TOTAL 3,788
-----------
DIVERSIFIED (2.0%)
Allied Signal Inc. 50,800 3,404
*Coltec Industries. Inc. 64,000 1,208
-----------
TOTAL 4,612
-----------
<CAPTION>
MARKET
VALUE
COMMON STOCK (97.3%) SHARES (000'S)
<S> <C> <C>
- --------------------------------------------------------------
DRUGS (7.7%)
*Alza Corp. 32,700 $ 846
American Home Products Corporation 50,000 2,931
Bristol-Myers Squibb Company 24,400 2,653
*Forest Laboratories Inc. 92,200 3,020
Pfizer Inc. 22,700 1,881
Schering-Plough Corporation 17,600 1,140
SmithKline Beecham Corp., PLC 18,100 1,231
Warner-Lambert Company 59,200 4,440
-----------
TOTAL 18,142
-----------
ELECTRICAL EQUIPMENT (3.1%)
General Instrument Corp. 154,300 3,337
W.W. Grainger, Inc. 47,700 3,828
-----------
TOTAL 7,165
-----------
ELECTRONICS (2.2%)
Intel Corp. 16,600 2,174
Perkin-Elmer Corporation 20,600 1,213
Sensormatic Electronics Corp. 106,900 1,791
-----------
TOTAL 5,178
-----------
ENVIRONMENTAL CONTROL (2.7%)
Johnson Controls Inc. 29,100 2,412
WMX Technologies, Inc. 122,000 3,980
-----------
TOTAL 6,392
-----------
FINANCIAL SERVICES (1.8%)
Dean Witter, Discover & Co. 47,000 3,114
Great Western Financial Corporation 17,800 516
Salomon Inc. 10,300 485
-----------
TOTAL 4,115
-----------
FOODS (2.6%)
Kellogg Company 17,300 1,135
Ralston Purina Group 32,100 2,355
Unilever, N.V. 14,900 2,611
-----------
TOTAL 6,101
-----------
INSURANCE (3.9%)
Ambac, Inc. 24,400 1,620
ITT Hartford Group, Inc. 44,300 2,990
MBIA Incorporated 5,800 587
Providian Corporation 75,700 3,889
-----------
TOTAL 9,086
-----------
LEISURE RELATED (0.4%)
*Viacom Incorporated 26,500 924
-----------
MACHINERY (1.0%)
*Cooper Cameron Corp. 16,760 1,282
Cooper Industries, Inc. 26,700 1,125
-----------
TOTAL 2,407
-----------
</TABLE>
--
15
<PAGE>
NORTHWESTERN MUTUAL SERIES FUND, INC.
Schedule of Investments
DECEMBER 31, 1996
<TABLE>
<CAPTION>
MARKET
VALUE
COMMON STOCK (97.3%) SHARES (000'S)
- --------------------------------------------------------------
<S> <C> <C>
MEDIA (3.8%)
Time Warner Inc. 103,400 $ 3,878
*Tele Communications, Inc. 382,800 5,000
-----------
TOTALS 8,878
-----------
MEDICAL PRODUCTS / SUPPLIES (0.4%)
Bausch & Lomb Inc. 23,800 833
-----------
MEDICAL SERVICES (3.5%)
Columbia/Hca Healthcare Corp. 79,100 $ 3,223
*Humana, Inc. 57,200 1,094
United Healthcare Corp. 84,700 3,812
-----------
TOTAL 8,129
-----------
METALS & MINING (0.8%)
Aluminum Co. of America 31,000 1,976
-----------
OFFICE EQUIPMENT - SERVICES (0.9%)
Learning Inc. 79,700 1,146
Paging Network 68,300 1,042
-----------
TOTAL 2,188
-----------
OIL & GAS - DOMESTIC (0.9%)
Ashland Inc. 49,100 2,154
-----------
OIL & GAS - INTERNATIONAL (6.9%)
British Petroleum Co. Ltd. 23,563 3,331
Exxon Corporation 93,300 9,143
Royal Dutch Petroleum Co. 22,100 3,774
-----------
TOTAL 16,248
-----------
PAPER (0.7%)
Temple-Inland Inc. 29,700 1,608
-----------
RAILROADS (1.3%)
Union Pacific Corporation 50,700 3,048
-----------
RETAIL - GENERAL (4.9%)
Circuit City Stores, Inc. 76,200 2,296
*Federated Department Stores, Inc. 51,100 1,744
*Toys R Us 62,300 1,869
Walmart Stores Inc. 247,200 5,655
-----------
TOTAL 11,564
-----------
SOAPS & TOILETRIES (3.0%)
Procter & Gamble Company 65,900 7,084
-----------
STEEL (1.2%)
Allegheny Teledyne Inc. 118,930 2,735
-----------
TELECOMMUNICATIONS (1.5%)
TCI Satellite Entertainment Inc. 103,300 1,020
World Communications Inc. 94,700 2,468
-----------
TOTAL 3,488
-----------
TOBACCO (3.3%)
Philip Morris Companies 67,600 7,613
-----------
<CAPTION>
MARKET
VALUE
COMMON STOCK (97.3%) SHARES (000'S)
<S> <C> <C>
- --------------------------------------------------------------
TRUCKING - SHIPPING (1.2%)
Consolidated Freightways Corp. 50,800 $ 451
Consolidated Freightways, Inc. 101,600 2,261
-----------
TOTAL 2,712
-----------
UTILITY - ELECTRIC (2.7%)
Allegheny Power System Inc 46,000 1,397
Dominion Resources Inc. 35,400 1,363
Duke Power Company 24,600 1,138
Edison International 58,500 1,163
Pacific Gas & Electric Co. 58,700 1,233
-----------
TOTAL 6,294
-----------
UTILITY - TELEPHONE (4.5%)
Bell Atlantic Corporation 45,200 2,927
GTE Corporation 25,800 1,174
MCI Communications Corporation 98,100 3,207
SBC Communications Incorporated 30,400 1,573
U S West Inc. 48,200 1,554
-----------
TOTAL 10,435
-----------
TOTAL COMMON STOCK 227,698
-----------
<CAPTION>
MARKET
VALUE
BONDS (0.4%) PAR (000'S)
<S> <C> <C>
- --------------------------------------------------------------
FINANCIAL SERVICES (0.4%)
Berkshire Hathaway, 1%, 12/3/01 $1,000,000 $ 913
-----------
TOTAL BONDS 913
-----------
<CAPTION>
MARKET
VALUE
MONEY MARKET INVESTMENTS (2.3%) PAR (000'S)
<S> <C> <C>
- --------------------------------------------------------------
AEROSPACE (0.3%)
Raytheon Company, 5.36%, 1/17/97 $ 600,000 $ 599
-----------
CMO & LOAN BACKED CERTIFICATES (0.4%)
Federal National Mortgage
Assoc., 5.5%, 1/30/97 1,000,000 995
-----------
FINANCIAL SERVICES (1.2%)
Paccar Financial Corporation, 6.75%,
1/2/97 2,800,000 2,799
-----------
TOBACCO (0.4%)
Philip Morris Companies, 5.57%,
1/22/97 1,000,000 997
-----------
TOTAL MONEY MARKET
INVESTMENTS 5,390
-----------
TOTAL GROWTH AND INCOME STOCK
PORTFOLIO $ 234,001
-----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements
--
16
<PAGE>
INDEX 500 STOCK PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Objective: Portfolio Strategy: Net Assets:
Long-term capital appreciation Invest in a portfolio designed to approximate $740,066,437
through cost-effective the composition and returns of the S&P 500
participation in broad market Index.
performance
</TABLE>
INDEX 500 STOCK PORTFOLIO
The Index 500 Stock Portfolio is designed to achieve results that approximate
the performance of the Standard & Poor's 500 Composite Stock Price Index. This
composite of 500 stocks of large U.S.-based companies, compiled by Standard &
Poor's, is generally regarded as a good proxy for the overall U.S. equity
market; the Portfolio therefore enables contract owners to participate in
overall performance of the U.S. equity market. The Portfolio continues to
achieve the objective of matching the results of the S&P 500 before expenses,
outperforming the majority of active stock managers in 1996.
Performance Relative
to S&P 500 Index
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
INDEX 500 PORTFOLIO S&P 500 INDEX
<S> <C> <C> <C>
12-86 10,000 10,000
12-87 10,821 10,510
12-88 11,776 12,255
12-89 13,942 16,139
12-90 13,340 15,639
12-91 17,313 20,409
12-92 18,099 21,960
12-93 19,891 24,178
12-94 20,132 24,468
12-95 27,632 33,619
12-96 33,917 41,284
Average Annual Total Return
For Periods Ended December 31, 1996
One Year Five Years Ten Years
Index 500 Stock
Portfolio 22.75% 14.40% 12.99%
S&P 500 Index 22.80% 15.13% 15.23%
</TABLE>
On April 30, 1993, the portfolio was indexed to approximate the performance of
the Standard & Poor's 500 Composite Stock Price Index. Before that date, the
portfolio was actively managed.
The Standard & Poor's 500 Composite Stock Price Index is an unmanaged index
of 500 selected common stocks, most of which are listed on the New York Stock
Exchange. The index is heavily weighted toward stocks with large market
capitalizations and represents approximately two-thirds of the total market
value of all domestic common stocks.
This chart assumes an initial investment of $10,000 made on 12/31/86.
Returns shown include deductions for management and other fund expenses, and
reinvestment of all dividends. Returns exclude deductions for separate account
sales loads and account fees. Past performance is not predictive of future
performance. Investment return and principal value will fluctuate, so that your
shares, when redeemed, may be worth more or less than their original cost. The
net investment rates of return shown on page 2 reflect mortality and expense
risk charges deducted from the assets of the separate account. The cost of
insurance protection, which is not reflected in the returns shown on this chart,
would make the return significantly lower. Investors are urged to obtain a
personalized illustration of historical performance which reflects the cost of
insurance protection.
--
17
<PAGE>
INDEX 500 STOCK PORTFOLIO
NORTHWESTERN MUTUAL SERIES FUND, INC.
Schedule of Investments
DECEMBER 31, 1996
<TABLE>
<CAPTION>
MARKET
VALUE
COMMON STOCK (94.6%) SHARES (000'S)
<S> <C> <C>
- --------------------------------------------------------------
AEROSPACE (2.1%)
Boeing Company 44,483 $ 4,732
EG&G, Inc. 5,900 119
General Dynamics Corporation 7,800 550
Lockheed Martin Corporation 23,954 2,192
McDonnell Douglas Corporation 26,300 1,683
Northrop Grumman Corporation 7,200 596
Raytheon Company 29,300 1,410
Rockwell International Corporation 27,100 1,650
TRW, Inc. 15,800 782
United Technologies Corp. 29,800 1,967
-----------
TOTAL 15,681
-----------
AIRLINES (0.3%)
*AMR Corporation 11,300 996
Delta Air Lines Inc. 9,300 659
Southwest Airlines Co. 18,000 398
*USAir Group, Inc. 8,000 187
-----------
TOTAL 2,240
-----------
APPAREL TEXTILE (0.5%)
*Fruit of the Loom, Incorporated 9,500 360
Liz Claiborne, Inc. 8,900 344
Nike, Inc. 35,700 2,133
Reebok International Ltd. 6,900 290
Russell Corp. 4,700 140
Springs Industries, Inc. 2,500 107
Stride Rite Corp. 6,200 62
VF Corporation 7,900 533
-----------
TOTAL 3,969
-----------
AUTO & TRUCKS (1.8%)
Chrysler Corporation 90,400 2,983
Ford Motor Company 147,100 4,689
General Motors Corp. 93,800 5,229
ITT Industries Inc. 14,700 360
*Navistar International Corp. 9,100 83
Paccar Incorporated 4,835 329
-----------
TOTAL 13,673
-----------
AUTO PARTS MANUFACTURERS (0.5%)
Cooper Tire & Rubber Company 10,200 201
Dana Corporation 12,600 411
Eaton Corporation 9,600 670
Echlin Inc. 7,700 244
Genuine Parts Company 14,900 663
Goodyear Tire & Rubber Company 19,300 992
Snap-On Incorporated 7,550 269
-----------
TOTAL 3,450
-----------
BANKS (7.3%)
Banc One Corporation 53,045 2,281
Bank of Boston Corporation 19,000 1,221
Bank of New York Company Inc. 48,700 1,644
BankAmerica Corporation 44,500 4,439
<CAPTION>
MARKET
VALUE
COMMON STOCK (94.6%) SHARES (000'S)
<S> <C> <C>
- --------------------------------------------------------------
BANKS (CONTINUED)
Bankers Trust New York Corporation 10,100 $ 871
Barnett Banks Inc. 24,200 995
Boatmans Bancshares, Inc. 19,200 1,238
Chase Manhattan Corporation 54,456 4,860
Citicorp 58,400 6,015
Comerica, Inc. 13,300 697
Corestates Financial Corp. 27,600 1,432
Fifth Third Bancorp 13,100 823
First Bank System Inc. 16,700 1,140
First Chicago NBD Corporation 39,528 2,125
First Union Corporation 35,235 2,607
Fleet Financial Group Inc. 32,530 1,622
KeyCorp 28,000 1,414
Mellon Bank Corporation 16,050 1,140
J.P. Morgan & Company, Inc. 23,100 2,255
National City Corp. 27,500 1,234
NationsBank Corp. 35,700 3,490
Norwest Corporation 46,000 2,001
PNC Bank Corp. 42,300 1,592
Republic New York Corporation 6,900 563
Suntrust Banks Inc. 27,700 1,364
US Bancorp of Oregon 18,800 845
Wachovia Corporation 20,500 1,158
Wells Fargo & Company 11,433 3,084
-----------
TOTAL 54,150
-----------
BEVERAGES (3.6%)
Anheuser-Busch Companies, Inc. 62,000 2,480
Brown-Forman Corp. 8,600 393
The Coca-Cola Company 308,800 16,251
Adolph Coors Co. 4,700 89
Pepsico Inc. 192,800 5,639
Seagram Company Ltd. 46,300 1,794
-----------
TOTAL 26,646
-----------
BUILDING & CONSTRUCTION (0.4%)
Case Corporation 9,100 496
Centex Corporation 3,500 132
Crane Co. 5,750 167
Fluor Corporation 10,400 653
Kaufman & Broad Home Corp. 4,800 62
Masco Corporation 19,900 716
Owens Corning Fiberglas Corp. 6,400 273
Pulte Corporation 2,900 89
Sherwin-Williams Company 10,700 599
-----------
TOTAL 3,187
-----------
CHEMICALS (2.6%)
Air Products & Chemicals, Inc. 13,800 954
B.F. Goodrich Company 6,700 271
Dow Chemical Company 30,200 2,367
E.I. du Pont de Nemours & Co. 69,900 6,597
Eastman Chemical Company 9,625 532
</TABLE>
--
18
<PAGE>
NORTHWESTERN MUTUAL SERIES FUND, INC.
Schedule of Investments
DECEMBER 31, 1996
<TABLE>
<CAPTION>
MARKET
VALUE
COMMON STOCK (94.6%) SHARES (000'S)
- --------------------------------------------------------------
<S> <C> <C>
CHEMICALS (CONTINUED)
Ecolab, Inc. 8,000 $ 301
*FMC Corporation 4,600 323
Hercules Incorporated 12,700 549
Mallinckrodt, Inc. 9,200 406
Monsanto Company 73,000 2,838
Nalco Chemical Company 8,400 303
PPG Industries Inc. 22,800 1,280
Praxair 19,400 895
Rohm & Haas Company 7,900 645
Union Carbide Corporation 15,800 646
-----------
TOTAL 18,907
-----------
CHEMICALS-SPECIALITY (0.4%)
Avery Dennison Corp. 13,000 460
Engelhard Corp. 17,900 342
W.R. Grace & Co. 11,100 574
Great Lakes Chemical 7,900 369
Morton International, Inc. 17,700 721
Sigma-Aldrich Corp. 6,200 387
-----------
TOTAL 2,853
-----------
CMO & LOAN BACKED CERTIFICATES (1.0%)
Federal Home Loan Mortgage Corp. 22,200 2,445
Federal National Mortgage Assoc. 135,500 5,047
-----------
TOTAL 7,492
-----------
COAL (0.4%)
Coastal Corp. 13,100 640
Eastern Enterprises 2,500 88
Enron Corp 31,600 1,363
ENSERCH Corporation 8,600 198
Panenergy Corp. 18,700 841
-----------
TOTAL 3,130
-----------
COMPUTERS AND RELATED SERVICES (4.3%)
3COM Corporation 21,600 1,585
*Amdahl Corporation 15,100 183
*Apple Computer, Inc. 15,400 321
*Ceridian Corp. 8,600 348
Cisco Systems Incorporated 80,600 5,128
*Compaq Computer Corporation 33,600 2,495
*Data General Corporation 4,900 71
*Dell Computer Corp. 22,400 1,190
*Digital Equipment Corporation 19,200 698
*EMC Corporation 28,900 957
Hewlett-Packard Company 126,200 6,342
International Business Machines Corp. 64,200 9,694
*Seagate Technology Inc. 26,600 1,051
*Silicon Graphics 21,700 553
*Sun Microsystems Inc 45,600 1,171
*Tandem Computers Inc. 14,700 202
<CAPTION>
MARKET
VALUE
COMMON STOCK (94.6%) SHARES (000'S)
<S> <C> <C>
- --------------------------------------------------------------
COMPUTERS AND RELATED SERVICES (CONTINUED)
*Unisys Corporation 21,700 $ 146
-----------
TOTAL 32,135
-----------
COMPUTER SOFTWARE (0.9%)
Autodesk, Inc. 5,700 160
Bay Networks 24,100 503
Cabletron Systems Inc. 19,400 645
First Data Corporation 55,500 2,026
Oracle Corporation 81,600 3,407
Shared Medical Systems Corp. 2,900 143
-----------
TOTAL 6,884
-----------
CONTAINERS (0.2%)
Ball Corporation 3,800 99
Bemis Company, Inc. 6,500 240
*Crown Cork & Seal Company, Inc. 15,900 865
*Tupperware 7,700 413
-----------
TOTAL 1,617
-----------
DIVERSIFIED (1.8%)
Alco Standard Corporation 16,200 836
Allied Signal Inc. 35,100 2,352
Cognizant Corp. 21,200 700
Corning Inc. 28,600 1,323
Loews Corp. 14,300 1,348
Minnesota Mining & Manufacturing Co. 51,900 4,301
Tenneco Inc. 21,200 957
Textron Inc. 10,300 971
Whitman Education Group Inc. 12,900 295
-----------
TOTAL 13,083
-----------
DRUGS (6.1%)
Alza Corp. 10,500 272
American Home Products
Corporation 79,300 4,649
*Amgen Inc. 32,800 1,784
Bristol-Myers Squibb Company 62,200 6,764
Eli Lilly & Company 68,500 5,000
Merck & Co., Inc. 149,600 11,856
Pfizer Inc. 80,000 6,630
Pharmacia & Upjohn Inc. 63,105 2,501
Schering-Plough Corporation 45,800 2,966
*Warner-Lambert Company 33,700 2,528
-----------
TOTAL 44,950
-----------
ELECTRICAL EQUIPMENT (3.6%)
Emerson Electric Co. 27,800 2,690
General Electric Company 204,300 20,200
General Instrument Corp. 17,000 368
W.W. Grainger, Inc. 6,600 530
Honeywell Inc. 15,700 1,032
Raychem Corp. 5,500 441
Thomas & Betts Corporation 6,600 293
</TABLE>
--
19
<PAGE>
NORTHWESTERN MUTUAL SERIES FUND, INC.
Schedule of Investments
DECEMBER 31, 1996
<TABLE>
<CAPTION>
MARKET
VALUE
COMMON STOCK (94.6%) SHARES (000'S)
- --------------------------------------------------------------
<S> <C> <C>
ELECTRICAL EQUIPMENT (CONTINUED)
Westinghouse Electric Corp. 52,300 $ 1,039
-----------
TOTAL 26,593
-----------
ELECTRONICS (0.5%)
AMP Incorporated 27,272 1,047
*Applied Materials Inc. 22,300 801
Harris Corporation 4,800 329
Intergraph Corp. 5,900 60
*LSI Logic Corp. 16,000 428
*National Semiconductor
Corporation 17,200 419
Perkin-Elmer Corporation 5,400 318
Tektronix, Inc. 4,100 210
-----------
TOTAL 3,612
-----------
ENVIRONMENTAL CONTROL (0.7%)
Browning-Ferris Industries Inc. 26,400 693
Johnson Controls Inc. 5,100 423
Laidlaw Transporation Limited, Class
B 39,000 448
Millipore Corp. 5,400 223
Safety-Kleen Corp. 7,200 118
Tyco International Ltd. 19,400 1,026
WMX Technology 60,200 1,964
-----------
TOTAL 4,895
-----------
FINANCIAL SERVICES (2.6%)
H.F. Ahmanson & Company 13,100 426
American Express Company 58,800 3,322
American General Corporation 25,200 1,030
Beneficial Corporation 6,700 425
Dean Witter, Discover & Co. 20,000 1,325
Golden West Financial Corporation 7,100 448
Great Western Financial Corporation 17,100 496
Green Tree Financial Corporation 17,100 660
Household International Inc. 12,000 1,107
MBNA Corp. 27,600 1,145
Marsh & McLennan Companies Inc. 8,900 926
Merrill Lynch & Co. 20,400 1,663
Morgan Stanley Group Inc. 18,900 1,080
Salomon Inc. 13,500 636
Transamerica Corporation 8,200 648
Travelers Group Inc. 79,465 3,606
-----------
TOTAL 18,943
-----------
FOOD SERVICE/LODGING (1.1%)
Darden Restaurant Inc. 19,600 171
HFS Incorporated 16,000 956
Hilton Hotels Corporation 29,100 760
*ITT Corp. 14,400 625
Luby's Cafeterias, Inc. 3,000 60
Marriott International 15,900 878
Mc Donald's Corporation 86,600 3,919
*Ryan's Family Steak Houses, Inc. 6,300 43
<CAPTION>
MARKET
VALUE
COMMON STOCK (94.6%) SHARES (000'S)
<S> <C> <C>
- --------------------------------------------------------------
FOOD SERVICE/LODGING (CONTINUED)
*Shoney's Inc. 6,000 $ 42
Wendy's International, Inc. 16,100 330
-----------
TOTAL 7,784
-----------
FOODS (2.8%)
Archer Daniels Midland Company 67,570 1,487
CPC International Corp. 17,800 1,380
Campbell Soup Company 29,000 2,327
Conagra Inc. 29,900 1,488
General Mills, Inc. 19,400 1,229
H.J. Heinz Company 45,650 1,632
Hershey Foods Corp. 19,100 836
Kellogg Company 26,200 1,719
Pioneer Hi-Bred International 10,200 714
Quaker Oats Company 16,900 644
Ralston Purina Group 13,100 961
Sara Lee Corporation 60,000 2,235
Unilever, N.V. 19,900 3,487
Wm. Wrigley Jr. Company 14,400 810
-----------
TOTAL 20,949
-----------
HOUSEHOLD FURNITURE (0.4%)
Armstrong World Industries Inc. 5,100 354
Black & Decker Corporation 10,900 328
Maytag Corporation 12,400 245
Newell Co. 19,700 621
Rubbermaid, Inc. 18,600 423
The Stanley Works 11,000 297
Whirlpool Corporation 9,200 429
-----------
TOTAL 2,697
-----------
INSURANCE (3.1%)
Aetna Inc. 18,663 1,493
Alexander & Alexander Services 5,600 97
Allstate Corporation 55,214 3,196
American International Group, Inc. 58,250 6,306
Aon Corporation 13,400 832
CIGNA Corporation 9,300 1,271
The Chubb Corporation 21,600 1,161
General Re Corporation 10,300 1,625
ITT Hartford Group 14,600 985
Jefferson-Pilot Corp. 8,800 498
Lincoln National Corporation 12,900 677
MBIA Incorporated 5,400 547
MGIC Investment Corp. 7,300 555
Providian Corporation 11,600 596
SAFECO Inc. 15,600 615
St. Paul Companies, Inc. 10,300 604
Torchmark Corporation 8,700 439
UNUM Corporation 9,100 657
USF&G Corp. 14,400 301
USLIFE Corporation 4,250 141
-----------
TOTAL 22,596
-----------
</TABLE>
--
20
<PAGE>
NORTHWESTERN MUTUAL SERIES FUND, INC.
Schedule of Investments
DECEMBER 31, 1996
<TABLE>
<CAPTION>
MARKET
VALUE
COMMON STOCK (94.6%) SHARES (000'S)
- --------------------------------------------------------------
<S> <C> <C>
LEISURE RELATED (1.3%)
Brunswick Corporation 12,200 $ 293
Walt Disney Company 84,169 5,860
Fleetwood Enterprises, Inc. 4,400 121
Harrahs Entertainment 12,800 254
Hasbro Inc. 10,700 416
*King World Productions, Inc. 4,600 170
Mattel, Inc. 33,688 935
*Viacom Incorporated 43,956 1,533
-----------
TOTAL 9,582
-----------
MACHINERY/EQUIPMENT (1.2%)
Briggs & Stratton Corporation 3,600 158
Caterpillar Inc. 23,800 1,791
Cincinnati Milacron Inc. 4,900 107
Cooper Industries, Inc. 13,400 564
Cummins Engine Company, Inc. 4,900 225
Deere & Company 32,100 1,304
Dover Corporation 14,000 704
Foster Wheeler Corporation 5,000 186
General Signal Corporation 6,200 265
Giddings & Lewis Company 4,100 53
Harnischfeger Industries, Inc. 6,100 294
Illinois Tool Works Inc. 15,400 1,230
Ingersoll-Rand Company 13,600 605
NACCO Industries, Inc. 1,000 54
Pall Corporation 14,300 365
Parker-Hannifin Corporation 9,250 358
Timken Company 3,900 179
TRINOVA Corp. 3500 127
-----------
TOTAL 8,569
-----------
MEDIA (0.8%)
Comcast Corp. 40,550 722
Tele Communications, Inc. 82,400 1,076
Time Warner Inc. 70,600 2,648
*U S West Media Group 77,500 1,434
-----------
TOTAL 5,880
-----------
MEDICAL PRODUCTS/SUPPLIES (2.8%)
Abbott Laboratories Inc. 96,400 4,892
Allergan Incorporated 8,100 289
Allergan Incorporated - Rights 183 0
C.R. Bard, Inc. 7,100 199
Bausch & Lomb Inc. 6,900 241
Baxter International Inc. 33,900 1,390
Becton, Dickinson & Company 15,500 672
*Biomet, Inc. 14,400 218
*Boston Scientific Corp. 22,100 1,326
*Guidant Corp. 9,200 524
Johnson & Johnson 165,300 8,224
Medtronic, Incorporated 29,700 2,020
*St. Jude Medical, Inc. 10,200 435
<CAPTION>
MARKET
VALUE
COMMON STOCK (94.6%) SHARES (000'S)
<S> <C> <C>
- --------------------------------------------------------------
MEDICAL PRODUCTS/SUPPLIES (CONTINUED)
U.S. Surgical Corporation 7,800 $ 307
-----------
TOTAL 20,737
-----------
MEDICAL SERVICES (0.8%)
*Beverly Enterprises, Inc. 12,300 157
Columbia/HCA Healthcare
Corporation 83,300 3,394
Humana, Inc. 20,200 386
Manor Care, Inc. 7,800 211
*Tenet Healthcare Corp. 26,900 588
United Healthcare Corp. 22,800 1,026
-----------
TOTAL 5,762
-----------
METALS & MINING (1.1%)
Alcan Aluminum Limited 28,100 945
Aluminum Co. of America 21,500 1,371
ASARCO, Inc. 5,300 132
Barrick Gold Corporation 44,300 1,274
Battle Mountain Gold Company 27,900 192
Cyprus Minerals Co. 11,550 270
Echo Bay Mines Limited Co. 17,300 115
Freeport-McMoRan Copper & Gold Inc. 24,000 717
Homestake Mining Company 18,200 259
Inco Limited 20,900 666
Newmont Mining Corporation 12,388 554
Phelps Dodge Corporation 8,000 540
Placer Dome Incorporated 29,700 646
Reynolds Metals Company 7,900 445
Santa Fe Pacific Gold Corporation 16,360 252
-----------
TOTAL 8,378
-----------
OFFICE EQUIPMENT-SERVICES (2.8%)
Automatic Data Processing, Inc. 36,000 1,544
Computer Associates International
Inc. 45,275 2,252
*Computer Sciences Corp. 9,400 772
*Microsoft Corporation 148,300 12,253
Moore Corporation Ltd. 12,400 253
*Novell, Inc. 42,700 404
Pitney Bowes Inc. 18,400 1,003
Xerox Corporation 40,300 2,121
-----------
TOTAL 20,602
-----------
OIL & GAS-DOMESTIC (1.9%)
Amerada Hess Corporation 11,600 671
Amoco Company 61,700 4,967
Ashland, Inc. 8,000 351
Atlantic Richfield Company 20,000 2,650
Kerr-McGee Corporation 6,000 432
Louisiana Land & Exploration Co. 4,200 225
Occidental Petroleum Corporation 40,800 954
*ORYX Energy Company 13,000 322
Pennzoil Company 5,800 328
</TABLE>
--
21
<PAGE>
NORTHWESTERN MUTUAL SERIES FUND, INC.
Schedule of Investments
DECEMBER 31, 1996
<TABLE>
<CAPTION>
MARKET
VALUE
COMMON STOCK (94.6%) SHARES (000'S)
- --------------------------------------------------------------
<S> <C> <C>
OIL & GAS-DOMESTIC (CONTINUED)
Phillips Petroleum Company 32,700 $ 1,447
*Santa Fe Energy Resources, Inc. 11,300 157
Sun Company, Inc. 9,100 222
USX - U S Steel Group Inc. 10,500 329
Unocal Corp. 31,100 1,263
-----------
TOTAL 14,318
-----------
OIL & GAS-INTERNATIONAL (5.5%)
Chevron Corp. 81,000 5,265
Exxon Corporation 154,100 15,102
Mobil Corporation 48,900 5,978
Royal Dutch Petroleum Co., ADR 66,500 11,355
Texaco Inc. 32,800 3,219
-----------
TOTAL 40,919
-----------
OIL & GAS-PROGRAMS (0.1%)
Union Pacific Resource Group 30,992 907
-----------
OIL FIELD SERVICES (0.9%)
Baker Hughes Inc. 17,900 618
Burlington Resource Inc. 15,500 781
Dresser Industries, Inc. 21,800 677
Halliburton Company 15,500 934
Helmerich & Payne, Inc. 3,100 162
McDermott International, Inc. 6,800 113
*Rowan Companies, Inc. 10,600 240
Schlumberger Limited 30,600 3,056
*Western Atlas International Inc. 6,700 475
-----------
TOTAL 7,056
-----------
PAPER/FOREST PRODUCTS (1.4%)
Boise Cascade Corporation 6,000 190
Champion International 11,900 515
Georgia-Pacific Corp. 11,300 814
International Paper Company 37,300 1,506
James River Corp. of Virginia 10,700 354
Kimberly-Clark Corporation 35,022 3,336
Louisiana Pacific Corporation 13,500 285
Mead Corp. 6,500 378
Potlatch Corporation 3,600 155
Stone Container Corporation 12,300 183
Temple-Inland Inc. 6,900 373
Union Camp Corporation 8,600 411
Westvaco Corporation 12,650 364
Weyerhaeuser Company 24,600 1,165
Willamette Industries Inc. 6,900 485
-----------
TOTAL 10,514
-----------
PHOTO & OPTICAL (0.5%)
Eastman Kodak Company 41,400 3,322
Polaroid Corporation 5,600 244
-----------
TOTAL 3,566
-----------
<CAPTION>
MARKET
VALUE
COMMON STOCK (94.6%) SHARES (000'S)
<S> <C> <C>
- --------------------------------------------------------------
PRINTING & PUBLISHING (0.9%)
American Greetings Corp. 9,300 $ 264
Deluxe Corp. 10,200 334
R.R. Donnelley & Sons Company 18,700 587
Dow Jones & Company, Inc. 12,000 406
Dun & Bradstreet Corporation 21,100 501
Gannet Company Inc. 17,500 1,310
Harcourt General 8,800 406
John H. Harland Company 3,800 125
Jostens, Inc. 4,800 101
Knight-Ridder Inc. 11,600 444
McGraw-Hill Companies Inc. 12,300 567
Meredith Corporation 3,300 174
New York Times Company 12,000 456
Times Mirror Company 12,300 612
Tribune Company 7,600 599
-----------
TOTAL 6,886
-----------
PROFESSIONAL SERVICES (0.2%)
H & R Block, Inc. 12,900 374
Interpublic Group of Cos. Inc. 10,100 480
National Service Industries, Inc. 5,900 221
Service Corporation International 29,300 820
-----------
TOTAL 1,895
-----------
RAILROADS (0.9%)
Burlington Northern Santa Fe 19,007 1,642
CSX Corporation 26,900 1,137
Conrail Incorporated 9,919 988
Norfolk Southern Corporation 15,500 1,356
Union Pacific Corporation 30,400 1,828
-----------
TOTAL 6,951
-----------
RETAIL-FOOD (0.6%)
Albertson's, Inc. 31,300 1,115
American Stores Co. 18,100 740
Fleming Companies, Inc. 4,700 81
Giant Food Inc. 7,400 255
Great Atlantic & Pacific Tea Co.,
Inc. 4,700 150
*The Kroger Company 15,700 730
Supervalue Inc. 8,400 238
Sysco Corporation 22,200 724
Winn-Dixie Stores, Inc. 18,800 595
-----------
TOTAL 4,628
-----------
RETAIL-GENERAL (3.9%)
CUC International Inc. 48,825 1,160
CVS Corporation 38,100 1,576
*Charming Shoppes Incorporated 13,000 66
Circuit City Stores, Inc. 12,200 368
Dayton Hudson Corporation 26,900 1,056
Dillard Department Stores, Inc. 14,100 435
*Federated Department Stores, Inc. 25,800 880
The Gap, Inc. 35,200 1,060
Home Depot, Inc. 59,599 2,987
</TABLE>
--
22
<PAGE>
NORTHWESTERN MUTUAL SERIES FUND, INC.
Schedule of Investments
DECEMBER 31, 1996
<TABLE>
<CAPTION>
MARKET
VALUE
COMMON STOCK (94.6%) SHARES (000'S)
- --------------------------------------------------------------
<S> <C> <C>
RETAIL-GENERAL (CONTINUED)
K Mart Corporation 60,100 $ 624
The Limited Inc. 33,600 617
Longs Drug Stores Corp. 2,400 118
Lowe's Companies, Inc. 21,400 760
May Department Stores Company 31,300 1,463
Mercantile Stores Company 4,600 227
Nordstrom, Inc. 10,100 358
J.C. Penney Company Inc. 28,600 1,394
Pep Boys - Manny, Moe & Jack 7,800 240
*Price/Costco, Inc. 24,407 613
Rite Aid Corporation 15,200 604
Sears, Roebuck & Company 48,600 2,242
TJX Companies, Inc. 9,600 455
Tandy Corporation 7,200 317
*Toys "R" Us 34,000 1,020
Wal-Mart Stores Inc. 284,700 6,513
Walgreen Company 30,500 1,220
*Woolworth Corp. 16,600 363
-----------
TOTAL 28,736
-----------
SOAPS & TOILETRIES (2.4%)
Alberto-Culver Company 3,500 168
Avon Products, Inc. 16,500 943
Clorox Company 6,400 642
Colgate-Palmolive Co. 18,200 1,679
Gillette Company 55,400 4,307
International Flavors & Fragrances,
Inc. 13,700 617
Procter & Gamble Company 84,600 9,093
-----------
TOTAL 17,449
-----------
STEEL (0.3%)
Allegheny Teledyne Inc. 21,635 498
*Armco Inc. 13,200 54
*Bethlehem Steel Corporation 13,900 125
Inland Steel Industries, Inc. 6,100 122
Nucor Corp. 10,900 556
USX-Marathon Group 35,700 852
Worthington Industries 11,250 204
-----------
TOTAL 2,411
-----------
TECHNOLOGY (2.2%)
*Advanced Micro Devices, Inc. 16,900 435
Intel Corp. 101,800 13,329
Micron Technology 25,900 754
Texas Instruments Incorporated 23,600 1,505
-----------
TOTAL 16,023
-----------
TELECOMMUNICATIONS (1.8%)
*Andrew Corporation 7,525 399
DSC Communications Corp. 14,600 261
Lucent Technologies Inc. 79,040 3,656
Motorola, Inc. 73,600 4,517
Northern Telecom Limited 32,100 1,986
<CAPTION>
MARKET
VALUE
COMMON STOCK (94.6%) SHARES (000'S)
<S> <C> <C>
- --------------------------------------------------------------
TELECOMMUNICATIONS (CONTINUED)
Scientific-Atlanta, Inc. 9,600 $ 144
*Tellabs Inc. 22,200 835
*WorldCom Inc. 50,800 1,324
-----------
TOTAL 13,122
-----------
TOBACCO (1.8%)
American Brands Inc. 21,100 1,047
Philip Morris Companies, Inc. 101,100 11,386
UST Incorporated 23,100 748
-----------
TOTAL 13,181
-----------
TRUCKING-SHIPPING (0.1%)
Caliber System, Inc. 4,900 94
*Federal Express Corp. 14,100 627
Ryder System, Inc. 10,200 287
-----------
TOTAL 1,008
-----------
UTILITY-ELECTRIC (2.9%)
American Electric Power Co. Inc. 23,300 958
Baltimore Gas & Electric Co. 18,300 490
Carolina Power & Light Company 18,800 686
Central & South West Corporation 26,200 671
Cinergy Corporation 19,617 655
Consolidated Edison Co. of New York 29,200 854
DTE Energy Company 18,000 583
Dominion Resources Inc. 22,400 862
Duke Power Company 25,000 1,156
Edison International 53,800 1,069
Entergy Corporation 28,700 796
FPL Group, Inc. 22,700 1,044
GPU, Inc. 43,500 1,463
Houston Industries Incorporated 29,100 658
*Niagara Mohawk Power
Corporation 17,900 177
Northern States Power Company 8,600 395
Ohio Edison Company 18,900 430
PECO Energy Company 27,600 697
P P & L Resources, Inc. 20,100 462
Pacific Enterprises 10,600 322
Pacific Gas & Electric Company 51,200 1,075
PacifiCorp 36,600 750
Public Service Entrprise Group, Inc. 29,600 807
Southern Company 83,600 1,891
Texas Utilities Company 27,900 1,137
UNICOM Corp. 26,800 727
Union Electric Company 12,700 489
-----------
TOTAL 21,304
-----------
UTILITY-GAS (0.4%)
Columbia Gas System Inc. 6,900 439
Consolidated Natural Gas Company 11,800 652
Nicor Inc. 6,200 222
Noram Energy Corporation 17,000 261
</TABLE>
--
23
<PAGE>
NORTHWESTERN MUTUAL SERIES FUND, INC.
Schedule of Investments
DECEMBER 31, 1996
<TABLE>
<CAPTION>
MARKET
VALUE
COMMON STOCK (94.6%) SHARES (000'S)
- --------------------------------------------------------------
<S> <C> <C>
UTILITY-GAS (CONTINUED)
ONEOK, Inc. 3,400 $ 102
Peoples Energy Corporation 4,300 146
Sonat Inc. 10,700 551
Williams Companies Inc. 19,500 731
-----------
TOTAL 3,104
-----------
UTILITY-TELEPHONE (6.0%)
ALLTEL Corporation 23,500 737
AT&T Corporation 201,100 8,748
Airtouch Communications Inc. 62,200 1,571
Ameritech Corporation 68,200 4,135
Bell Atlantic Corporation 54,300 3,516
Bellsouth Corporation 123,300 4,978
GTE Corporation 119,400 5,433
MCI Communications Corporation 85,000 2,778
NYNEX Corp. 54,600 2,628
Pacific Telesis Group 53,200 1,955
SBC Communications Incorporated 74,900 3,876
Sprint Corporation 53,400 2,129
U S West Inc. 59,300 1,912
-----------
TOTAL 44,396
-----------
TOTAL COMMON STOCK 700,000
-----------
</TABLE>
<TABLE>
<CAPTION>
MARKET
VALUE
PREFERRED STOCK (0.0%) SHARES (000'S)
<S> <C> <C>
- --------------------------------------------------------------
DRUGS (0.00%)
Fresenius National Medical Car 11,600 $ 2
-----------
INSURANCE (0.0%)
Aetna Incorporated 1,288 102
-----------
TOTAL PREFERRED STOCK 104
-----------
</TABLE>
<TABLE>
<CAPTION>
MARKET
VALUE
MONEY MARKET INVESTMENTS (5.4%) PAR (000'S)
<S> <C> <C>
- --------------------------------------------------------------
AEROSPACE (1.1%)
+ Raytheon Company, 5.36%, 1/17/97 $8,000,000 $ 7,981
-----------
CMO & LOAN BACKED CERTIFICATES (0.9%)
+ Federal National Mortgage Assoc.,
5.5%, 1/30/97 7,000,000 6,969
-----------
FEDERAL GOVERNMENT & AGENCIES (0.7%)
+ U.S. Treasury, 4.98%, 5/1/97 5,000,000 4,913
-----------
FINANCIAL SERVICES (2.7%)
+ IBM Credit Corporation, 5.5%,
1/23/97 8,000,000 7,973
+ Paccar Financial Corporation, 5.5%,
1/23/97 8,300,000 8,272
+ Paccar Financial Corporation,
6.75%, 1/2/97 3,550,000 3,549
-----------
TOTAL 19,794
-----------
TOTAL MONEY MARKET INVESTMENTS 39,657
-----------
TOTAL INDEX 500 STOCK PORTFOLIO $ 739,761
-----------
</TABLE>
* Non-Income Producing
+Partially held by the custodian in a segregated account as collateral for open
futures positions. Information regarding open futures contracts as of December
31, 1996 is summarized below:
<TABLE>
<CAPTION>
UNREALIZED
APPRECIATION/
NUMBER OF EXPIRATION (DEPRECIATION)
ISSUER CONTRACTS DATE (000'S)
- -------------------- ---------- ------------ --------------
<S> <C> <C> <C>
S&P 500 Stock Index 93 March 1997 $793
S&P 500 Stock Index 9 June 1997 $(64)
--------------
Total $729
--------------
--------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements
--
24
<PAGE>
MONEY MARKET PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Objective: Portfolio Strategy: Net Assets:
Maximum current income Achieve stability of capital by investing in $176,298,542
consistent with liquidity and short- term debt securities
stability of capital
</TABLE>
MONEY MARKET PORTFOLIO
The Money Market Portfolio, which invests only in high quality commercial paper
and other short-term debt securities with maturities generally not exceeding one
year, is the least risky of the Portfolios.
During 1996, money market rates were relatively stable, with an overall decrease
of about 25 basis points (a quarter of a percentage point). The Money Market
Portfolio extended maturities during the year but maintained an average maturity
shorter than the broad universe of money market funds. This strategy is
appropriate at this time, since no dramatic movement in short-term interest
rates is anticipated.
AN INVESTMENT IN THE MONEY MARKET PORTFOLIO IS NEITHER INSURED NOR GUARANTED
BY THE U.S. GOVERNMENT AND THERE CAN BE NO ASSURANCE THAT THE PORTFOLIO WILL
BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE.
--
25
<PAGE>
MONEY MARKET PORTFOLIO
NORTHWESTERN MUTUAL SERIES FUND, INC.
Schedule of Investments
DECEMBER 31, 1996
<TABLE>
<CAPTION>
MARKET
VALUE
MONEY MARKET INVESTMENTS (92.8%) PAR (000'S)
<S> <C> <C>
- --------------------------------------------------------------
AUTO RELATED (9.8%)
General Motors Acceptance Corp.,
5.39%, 4/16/97 $8,500,000 $ 8,366
Paccar Financial Corporation, 5.5%,
1/23/97 3,700,000 3,688
Paccar Financial Corporation, 5.5%,
1/27/97 5,000,000 4,980
-----------
TOTAL 17,034
-----------
BUILDING-FOREST PRODUCTS (4.6%)
Weyerhaeuser Company, 5.3%, 2/21/97 8,090,000 8,029
-----------
CHEMICALS (4.6%)
Monsanto Company, 5.3%, 1/30/97 8,000,000 7,966
-----------
DRUGS (4.0%)
American Home Products Corporation,
5.95%, 1/27/97 7,000,000 6,970
-----------
FINANCE COMPANIES (13.7%)
Ford Motor Credit Company, 5.55%,
1/9/97 7,450,000 7,441
Household Finance Corporation, 5.32%,
1/24/97 7,900,000 7,873
Sears Roebuck Acceptance Corp.,
5.31%, 2/12/97 8,700,000 8,645
-----------
TOTAL 23,959
-----------
FINANCIAL SERVICES (15.9%)
American Express Credit Corp., 5.3%,
1/15/97 8,000,000 7,984
Cit Group, 7.0%, 1/3/97 3,298,000 3,297
General Electric Capital Corp., 5.3%,
1/17/97 8,000,000 7,981
Transamerica Financial Corp., 5.38%,
3/27/97 8,600,000 8,491
-----------
TOTAL 27,753
-----------
FOODS (4.4%)
H.J. Heinz Company, 5.37%, 1/16/97 2,500,000 2,494
H.J. Heinz Company, 5.39%, 1/17/97 3,159,000 3,151
H.J. Heinz Company, 3.45%, 1/27/97 2,000,000 1,992
-----------
TOTAL 7,637
-----------
OFFICE EQUIPMENT (10.7%)
International Business Machines,
5.31%, 1/28/97 7,900,000 7,869
<CAPTION>
MARKET
VALUE
MONEY MARKET INVESTMENTS (92.8%) PAR (000'S)
<S> <C> <C>
- --------------------------------------------------------------
OFFICE EQUIPMENT (CONTINUED)
Xerox Credit Corporation, 6.85%,
1/2/97 $2,888,000 $ 2,887
Xerox Corporation, 5.29%, 2/4/97 7,900,000 7,861
-----------
TOTAL 18,617
-----------
PRINTING & PUBLISHING (4.6%)
Dow Jones & Co. Inc., 5.35%, 2/5/97 8,100,000 8,058
-----------
PROFESSIONAL SERVICES (4.0%)
PHH Corp., 5.47%, 1/23/97 7,000,000 6,977
-----------
RETAIL-GENERAL (4.5%)
J.C. Penney Funding Corporation,
5.32%, 1/23/97 1,700,000 1,694
J.C. Penney Funding Corporation,
5.33%, 3/7/97 6,200,000 6,140
-----------
TOTAL 7,834
-----------
TELECOMMUNICATIONS (2.6%)
Bellsouth Telecommunications, 5.37%,
3/4/97 4,520,000 4,478
-----------
TOBACCO (4.8%)
BAT Capital Corporation, 5.42%,
2/14/97 8,500,000 8,444
-----------
UTILITY-ELECTRIC (4.6%)
National Rural Utility Coop Finance,
5.3%, 2/11/97 8,000,000 7,952
-----------
TOTAL COMMERCIAL PAPER 161,708
-----------
<CAPTION>
MARKET
VALUE
ASSET-BACKED SECURITIES (7.2%) PAR (000'S)
<S> <C> <C>
- --------------------------------------------------------------
AUTO RELATED (2.6%)
Carco Auto Loan Master Trust, 5.655%,
1/15/97 (Variable rate; puttable;
coupon indexed to one month
Commercial Paper rate plus 7.5 basis
points; reset monthly) $4,550,000 $ 4,550
-----------
FINANCIAL SERVICES (4.6%)
Reig Commercial Mortgage Funding,
5.667%, 1/25/97 8,000,000 8,000
-----------
TOTAL ASSET-BACKED SECURITIES 12,550
-----------
TOTAL MONEY MARKET PORTFOLIO $ 174,258
-----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements
--
26
<PAGE>
BALANCED PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Objective: Portfolio Strategy: Net Assets:
A high level of current income Achieve consistent returns and low volatility $2,326,233,275
and capital growth with a low by diversifying among assets
risk profile
</TABLE>
BALANCED PORTFOLIO
In order to capitalize on changing financial market and economic conditions, the
Balanced Portfolio's asset allocation is adjusted as appropriate among three
investment classes: stocks, bonds and money market instruments. The equity
portion of the Portfolio is indexed, meaning that the portfolio is designed to
achieve results that approximate the performance of the Standard & Poor's 500
Composite Stock Price Index, which is generally regarded as a good proxy for the
overall U.S. equity market. The bond portion of the Portfolio is actively
managed, with investments in high quality bonds adjusted frequently as to
maturity, market sectors and duration. During the year, the asset mix of the
bond component was shifted moderately from government toward corporate
securities. Liquidity is maintained by holding a portion of the Portfolio in
money market investments, which are high quality short-term debt securities.
With a relatively fully invested position and an emphasis on equities over
fixed-income securities, the Balanced Portfolio benefited from the strength of
the stock market in 1996. Over the course of the year, the stock and cash
segments of the Portfolio were increased slightly, while bond exposure was
reduced. This strategy proved successful, as rising interest rates pushed bond
returns lower.
Percentage Holdings
12/31/96
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Equities 55%
Bonds 32%
Money Market Investments 13%
</TABLE>
Performance Relative
to Relevant Indices
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
BALANCED PORTFOLIO MERRILL LYNCH DOMESTIC MASTER INDEX 91-DAY T-BILL S&P 500 INDEX
<S> <C> <C> <C> <C>
12-86 10,000 10,000 10,000 10,000
12-87 10,715 10,240 10,673 10,510
12-88 11,581 11,063 11,412 12,255
12-89 13,394 12,632 12,438 16,139
12-90 13,598 13,782 13,185 15,639
12-91 16,771 15,967 14,346 20,409
12-92 17,712 17,177 14,909 21,960
12-93 19,467 18,899 15,385 24,178
12-94 19,498 18,365 16,029 24,468
12-95 24,644 21,767 16,996 33,619
12-96 27,959 22,548 17,898 41,284
Average Annual Total Return
For Periods Ended December 31, 1996
One Year Five Years Ten Years
Balanced Portfolio 13.45% 10.76% 10.83%
S&P 500 Index 22.80% 15.13% 15.23%
MLDM Index 3.59% 7.15% 8.47%
ML 91-Day T-Bill 5.31% 4.52% 5.99%
</TABLE>
In the graph, the Portfolio is compared against three indices representing the
three major components of the Portfolio: equities, fixed income and cash
equivalent investments.
The Merrill Lynch Domestic Master Index is an unmanaged market value
weighted index comprised of U.S. Government, mortgage and investment-grade
corporate bonds. The index measures the income provided by, and the price
changes of, the underlying securities.
The Standard & Poor's 500 Composite Stock Price Index is an unmanaged index
of 500 selected common stocks, most of which are listed on the New York Stock
Exchange. The index is heavily weighted toward stocks with large market
capitalizations and represents approximately two-thirds of the total market
value of all domestic common stocks.
This chart assumes an initial investment of $10,000 made on 12/31/86.
Returns shown include deductions for management and other fund expenses, and
reinvestment of all dividends. Returns exclude deductions for separate account
sales loads and account fees. Past performance is not predictive of future
performance. Investment return and principal value will fluctuate, so that your
shares, when redeemed, may be worth more or less than their original cost. The
net investment rates of return shown on page 2 reflect mortality and expense
risk charges deducted from the assets of the separate account. The cost of
insurance protection, which is not reflected in the returns shown on this chart,
would make the return significantly lower. Investors are urged to obtain a
personalized illustration of historical performance which reflects the cost of
insurance protection.
--
27
<PAGE>
BALANCED PORTFOLIO
NORTHWESTERN MUTUAL SERIES FUND, INC.
Schedule of Investments
DECEMBER 31, 1996
<TABLE>
<CAPTION>
MARKET VALUE
COMMON STOCK (54.1%) SHARES (000'S)
<S> <C> <C>
- -------------------------------------------------------------
AEROSPACE (1.2%)
Boeing Company 79,849 $ 8,494
EG&G, Inc. 10,500 211
General Dynamics Corporation 14,100 994
Lockheed Martin Corporation 42,961 3,931
McDonnell Douglas Corporation 47,300 3,027
Northrop Grumman Corporation 12,900 1,067
Raytheon Company 52,600 2,531
Rockwell International Corporation 48,700 2,965
TRW Inc. 28,300 1,401
United Technologies Corp. 53,600 3,538
------------
TOTAL 28,159
------------
AIRLINES (0.2%)
*AMR Corporation 20,300 1,788
Delta Air Lines Inc. 16,600 1,177
Southwest Airlines Co. 32,300 715
*USAir Group, Inc. 14,300 334
------------
TOTAL 4,014
------------
APPAREL-TEXTILE (0.3%)
*Fruit Of The Loom Incorporated 17,100 648
Liz Claiborne, Inc. 15,900 614
Nike, Inc. 64,200 3,836
Reebok International Ltd. 12,400 521
Russell Corp. 8,500 253
Springs Industries, Inc. 4,500 194
Stride Rite Corp. 11,100 111
VF Corporation 14,200 959
------------
TOTAL 7,136
------------
AUTO & TRUCKS (1.1%)
Chrysler Corporation 162,400 5,359
Ford Motor Company 264,200 8,421
General Motors Corporation 168,400 9,388
ITT Industries Inc. 26,300 644
*Navistar International Corp. 16,370 149
PACCAR Incorporated 8,695 591
------------
TOTAL 24,552
------------
AUTO PARTS MANUFACTURES (0.3%)
Cooper Tire & Rubber Company 18,300 361
Dana Corporation 22,700 741
Eaton Corporation 17,200 1,200
Echlin Inc. 13,800 436
Genuine Parts Company 26,850 1,195
Goodyear Tire & Rubber Company 34,600 1,778
Snap-On Incorporated 13,550 483
------------
TOTAL 6,194
------------
BANKS (4.2%)
Banc One Corporation 95,210 4,094
Bank of Boston Corporation 34,100 2,191
Bank of New York Company Inc. 87,400 2,950
BankAmerica Corporation 80,000 7,980
<CAPTION>
MARKET VALUE
COMMON STOCK (54.1%) SHARES (000'S)
<S> <C> <C>
- -------------------------------------------------------------
BANKS (CONTINUED)
Bankers Trust New York Corporation 18,200 $ 1,570
Barnett Banks Inc. 43,500 1,789
Boatmans Bancshares, Inc. 34,500 2,225
Chase Manhattan Corporation 97,824 8,731
Citicorp 104,800 10,794
Comerica, Inc. 23,900 1,252
Corestates Financial Corp. 49,600 2,573
Fifth Third Bancorp 23,600 1,482
First Bank System Inc. 30,000 2,048
First Chicago NBD Corporation 71,005 3,817
First Union Corporation 63,205 4,677
Fleet Financial Group Inc. 58,419 2,914
KeyCorp 50,200 2,535
Mellon Bank Corporation 28,850 2,048
J.P. Morgan & Company, Inc. 41,500 4,051
National City Corp. 49,400 2,217
NationsBank Corp. 64,000 6,256
Norwest Corporation 82,500 3,589
PNC Bank Corp. 76,000 2,859
Republic New York Corporation 12,300 1,004
Suntrust Banks Inc. 49,700 2,448
U.S. Bancorp of Oregon 33,700 1,514
Wachovia Corporation 36,800 2,079
Wells Fargo & Company 20,566 5,548
------------
TOTAL 97,235
------------
BEVERAGES (2.1%)
Anheuser-Busch Companies Inc. 111,300 4,452
Brown-Forman Corp. 15,400 705
The Coca-Cola Company 554,400 29,175
Adolph Coors Co. 8,400 160
Pepsico Inc. 346,200 10,126
Seagram Company Ltd. 83,100 3,220
------------
TOTAL 47,838
------------
BUILDING & CONSTRUCTION (0.3%)
Case Corporation 16,400 894
Centex Corporation 6,300 237
Crane Co. 10,250 297
Fluor Corporation 18,600 1,167
Kaufman & Broad Home Corp. 8,700 112
Masco Corporation 35,800 1,289
Owens-Corning Fiberglas Corp. 11,500 490
Pulte Corporation 5,200 160
Sherwin-Williams Company 19,100 1,070
------------
TOTAL 5,716
------------
CHEMICALS (1.5%)
Air Products & Chemicals, Inc. 24,900 1,721
Dow Chemical Company 54,100 4,240
E.I. du Pont de Nemours & Company 125,400 11,835
</TABLE>
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28
<PAGE>
NORTHWESTERN MUTUAL SERIES FUND, INC.
Schedule of Investments
DECEMBER 31, 1996
<TABLE>
<CAPTION>
MARKET VALUE
COMMON STOCK (54.1%) SHARES (000'S)
- -------------------------------------------------------------
<S> <C> <C>
CHEMICALS (CONTINUED)
Eastman Chemical Company 17,275 $ 954
Ecolab, Inc. 14,400 542
*FMC Corporation 8,300 582
B.F. Goodrich Company 12,000 486
Hercules Incorporated 22,800 986
Mallinckrodt Group 16,500 728
Monsanto Company 131,000 5,093
Nalco Chemical Company 15,000 542
PPG Industries Inc. 40,900 2,296
Praxair 34,900 1,610
Rohm & Haas Company 14,300 1,167
Union Carbide Corporation 28,400 1,161
------------
TOTAL 33,943
------------
CHEMICALS-SPECIALITY (0.2%)
Avery Dennison Corp. 23,200 821
Engelhard Corp. 32,100 614
W.R. Grace & Co. 19,800 1,025
Great Lakes Chemical 14,100 659
Morton International, Inc. 31,800 1,296
Sigma-Aldrich Corp. 11,100 693
------------
TOTAL 5,108
------------
CMO & LOAN BACKED CERTIFICATES (0.6%)
Federal Home Loan Mortgage Corp. 39,800 4,383
Federal National Mortgage Assoc. 243,300 9,063
------------
TOTAL 13,446
------------
COAL (0.3%)
Coastal Corp. 23,500 1,149
Eastern Enterprises 4,500 159
Enron Corp. 56,700 2,445
ENSERCH Corporation 15,500 357
Panenergy Corp. 33,700 1,517
------------
TOTAL 5,627
------------
COMPUTERS & RELATED SERVICES (2.5%)
3COM Corporation 38,700 2,840
*Amdahl Corporation 27,000 327
*Apple Computer, Inc. 27,700 578
*Ceridian Corp. 15,400 624
Cisco Systems Incorporated 144,700 9,207
*Compaq Computer Corporation 60,300 4,477
*Data General Corporation 8,700 126
Dell Computer Corp. 40,100 2,130
*Digital Equipment Corporation 34,500 1,255
*EMC Corporation 51,800 1,716
Hewlett-Packard Company 226,600 11,387
International Business Machines
Corp. 115,300 17,410
*Seagate Technology Inc. 47,700 1,884
*Silicon Graphics 39,000 995
*Sun Microsystems Inc. 81,800 2,101
<CAPTION>
MARKET VALUE
COMMON STOCK (54.1%) SHARES (000'S)
<S> <C> <C>
- -------------------------------------------------------------
COMPUTERS & RELATED SERVICES (CONTINUED)
*Tandem Computers Inc. 26,300 $ 362
*Unisys Corporation 39,000 263
------------
TOTAL 57,682
------------
COMPUTER SOFTWARE (0.5%)
Autodesk, Inc. 10,200 286
Bay Networks 43,200 902
Cabletron Systems Inc. 34,800 1,157
First Data Corporation 99,700 3,639
Oracle Corporation 146,500 6,116
Shared Medical Systems Corp. 5,200 256
------------
TOTAL 12,356
------------
CONTAINERS (0.1%)
Ball Corporation 6,800 177
Bemis Company, Inc. 11,700 431
*Crown Cork & Seal Company, Inc. 28,600 1,555
*Tupperware Corporation 13,900 745
------------
TOTAL 2,908
------------
DIVERSIFIED (1.0%)
Alco Standard Corporation 29,000 1,497
Allied Signal Inc. 63,000 4,221
Cognizant Corp. 38,100 1,257
Corning Inc. 51,300 2,373
Loews Corp. 25,600 2,413
Minnesota Mining & Manufacturing
Co. 93,100 7,716
Tenneco Inc. 38,000 1,715
Textron Inc. 18,400 1,734
Whitman Education Group Inc. 23,100 528
------------
TOTAL 23,454
------------
DRUGS (3.5%)
Alza Corp. 18,800 486
American Home Products Corporation 142,300 8,342
*Amgen Inc. 58,900 3,203
Bristol-Myers Squibb Company 111,600 12,136
Eli Lilly & Company 123,000 8,979
Merck & Co., Inc. 268,600 21,287
Pfizer Inc. 143,600 11,901
Pharmacia & Upjohn Inc. 113,230 4,487
Schering-Plough Corporation 82,300 5,329
*Warner-Lambert Company 60,400 4,530
------------
TOTAL 80,680
------------
ELECTRICAL EQUIPMENT (2.1%)
Emerson Electric Co. 50,000 4,837
General Electric Company 366,900 36,277
General Instrument Corp. 30,500 659
W.W. Grainger, Inc. 11,800 947
Honeywell Inc. 28,200 1,854
Raychem Corp. 10,000 801
</TABLE>
--
29
<PAGE>
NORTHWESTERN MUTUAL SERIES FUND, INC.
Schedule of Investments
DECEMBER 31, 1996
<TABLE>
<CAPTION>
MARKET VALUE
COMMON STOCK (54.1%) SHARES (000'S)
- -------------------------------------------------------------
<S> <C> <C>
ELECTRICAL EQUIPMENT (CONTINUED)
Thomas & Betts Corporation 11,800 $ 523
Westinghouse Electric Corporation 93,900 1,866
------------
TOTAL 47,764
------------
ELECTRONICS (0.3%)
AMP Incorporated 48,936 1,878
*Applied Materials Inc. 40,100 1,441
Harris Corporation 8,700 597
Intergraph Corp. 10,600 109
*LSI Logic Corp. 28,700 768
*National Semiconductor Corporation 30,900 753
Perkin-Elmer Corporation 9,600 565
Tektronix, Inc. 7,300 374
------------
TOTAL 6,485
------------
ENVIRONMENTAL CONTROL (0.4%)
Browning-Ferris Industries Inc. 47,400 1,244
Johnson Controls Inc. 9,200 762
Laidlaw Transportation Limited,
Class B 69,900 804
Millipore Corp. 9,600 397
Safety-Kleen Corp. 13,000 213
Tyco International Ltd. 34,900 1,845
WMX Technologies, Inc. 108,100 3,527
------------
TOTAL 8,792
------------
FINANCIAL SERVICES (1.5%)
H.F. Ahmanson & Company 23,500 764
American Express Company 105,600 5,966
American General Corporation 45,300 1,852
Beneficial Corporation 12,000 761
Dean Witter, Discover & Co. 35,850 2,375
Golden West Financial Corporation 12,800 808
Great Western Financial Corporation 30,700 890
Green Tree Financial Corp. 30,600 1,182
Household International Inc. 21,600 1,993
MBNA Corp. 49,625 2,059
Marsh & McLennan Companies Inc. 16,000 1,664
Merrill Lynch & Co. 36,700 2,991
Morgan Stanley Group Inc. 34,000 1,942
Salomon Inc. 24,300 1,145
Transamerica Corporation 14,800 1,169
Travelers Group Inc. 142,726 6,476
------------
TOTAL 34,037
------------
FOOD SERVICE/LODGING (0.6%)
Darden Restaurant Inc. 35,100 307
HFS Incorporated 28,700 1,715
Hilton Hotels Corporation 55,000 1,437
*ITT Corp. 25,900 1,123
Luby's Cafeterias, Inc. 5,400 107
<CAPTION>
MARKET VALUE
COMMON STOCK (54.1%) SHARES (000'S)
<S> <C> <C>
- -------------------------------------------------------------
FOOD SERVICE/LODGING (CONTINUED)
Marriott International 28,500 $ 1,575
Mc Donald's Corporation 155,500 7,036
*Ryan's Family Steak Houses, Inc. 11,300 78
*Shoney's Inc. 10,800 76
Wendy's International, Inc. 28,800 590
------------
TOTAL 14,044
------------
FOODS (1.6%)
Archer Daniels Midland Company 121,218 2,667
CPC International Corp. 32,000 2,480
Campbell Soup Company 52,100 4,181
Conagra Inc. 53,600 2,667
General Mills, Inc. 34,900 2,212
H.J. Heinz Company 81,950 2,930
Hershey Foods Corp. 34,200 1,496
Kellogg Company 47,000 3,084
Pioneer Hi-Bred International 18,400 1,288
Quaker Oats Company 30,300 1,155
Ralston Purina Group 23,600 1,732
Sara Lee Corporation 107,800 4,016
Unilever, N.V. 35,700 6,256
Wm. Wrigley Jr. Company 25,900 1,457
------------
TOTAL 37,621
------------
HOUSEHOLD FURNITURE (0.2%)
Armstrong World Industries Inc. 9,200 639
Black & Decker Corporation 19,600 590
Maytag Corporation 22,300 440
Newell Co. 35,400 1,115
Rubbermaid, Inc. 33,400 760
The Stanley Works 19,800 535
Whirlpool Corporation 16,600 774
------------
TOTAL 156,300 4,853
------------
INSURANCE (1.8%)
Aetna Inc. 33,593 2,687
Alexander & Alexander Services 10,100 175
Allstate Corporation 99,047 5,732
American International Group, Inc. 104,650 11,328
Aon Corporation 24,100 1,497
CIGNA Corporation 16,800 2,295
The Chubb Corporation 38,800 2,086
General Re Corporation 18,400 2,903
ITT Hartford Group 26,200 1,768
Jefferson-Pilot Corp. 15,850 898
Lincoln National Corporation 23,200 1,218
MBIA Incorporated 9,600 972
MGIC Investment Corp. 13,100 996
Providian Corporation 20,900 1,074
SAFECO Inc. 28,100 1,108
St. Paul Companies, Inc. 18,500 1,085
Torchmark Corporation 15,700 793
UNUM Corporation 16,300 1,178
</TABLE>
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30
<PAGE>
NORTHWESTERN MUTUAL SERIES FUND, INC.
Schedule of Investments
DECEMBER 31, 1996
<TABLE>
<CAPTION>
MARKET VALUE
COMMON STOCK (54.1%) SHARES (000'S)
- -------------------------------------------------------------
<S> <C> <C>
INSURANCE (CONTINUED)
USF&G Corp. 25,800 $ 538
USLIFE Corporation 7,650 254
------------
TOTAL 40,585
------------
LEISURE RELATED (0.7%)
Brunswick Corporation 21,900 526
Walt Disney Company 151,136 10,523
Fleetwood Enterprises, Inc. 7,900 217
Harrahs Entertainment 22,900 455
Hasbro Inc. 19,200 746
*King World Productions, Inc. 8,300 306
Mattel, Inc. 60,560 1,681
*Viacom Incorporated 78,856 2,750
------------
TOTAL 17,204
------------
MACHINERY/EQUIPMENT (0.7%)
Briggs & Stratton Corporation 6,400 282
Caterpillar Inc. 42,700 3,213
Cincinnati Milacron Inc. 8,900 195
Cooper Industries, Inc. 24,100 1,015
Cummins Engine Company, Inc. 8,800 405
Deere & Company 57,600 2,340
Dover Corporation 25,100 1,261
Foster Wheeler Corporation 9,100 338
General Signal Corporation 11,100 475
Giddings & Lewis Company 7,400 95
Harnischfeger Industries, Inc. 10,900 525
Illinois Tool Works Inc. 27,600 2,205
Ingersoll-Rand Company 24,400 1,086
NACCO Industries, Inc. 1,800 96
Pall Corporation 25,666 654
Parker-Hannifin Corporation 16,600 643
Timken Company 7,000 321
TRINOVA Corp. 6,200 226
------------
TOTAL 15,375
------------
MEDIA (0.4%)
Comcast Corp. 72,750 1,296
Tele-Communications, Inc. 148,000 1,933
Time Warner Inc. 126,700 4,751
*U.S. West Media Group 139,200 2,575
------------
TOTAL 10,555
------------
MEDICAL PRODUCTS/SUPPLIES (1.6%)
Abbott Laboratories Inc. 173,100 8,785
Allergan Incorporated 14,600 520
Allergan Incorporated-Warrants 463 0
C.R. Bard, Inc. 12,700 356
Bausch & Lomb Inc. 12,400 434
Baxter International Inc. 60,800 2,493
Becton, Dickinson & Company 27,700 1,201
*Biomet, Inc. 25,800 390
*Boston Scientific Corp. 39,600 2,376
*Guidant Corp. 16,500 941
<CAPTION>
MARKET VALUE
COMMON STOCK (54.1%) SHARES (000'S)
<S> <C> <C>
- -------------------------------------------------------------
MEDICAL PRODUCTS/SUPPLIES (CONTINUED)
Johnson & Johnson 296,700 $ 14,761
Medtronic, Incorporated 53,400 3,631
*St. Jude Medical, Inc. 18,050 769
U.S. Surgical Corporation 14,000 551
------------
TOTAL 37,208
------------
MEDICAL SERVICES (0.4%)
*Beverly Enterprises, Inc. 22,100 282
Columbia/HCA Healthcare Corporation 149,550 6,094
Humana, Inc. 36,200 692
Manor Care, Inc. 14,000 378
*Tenet Healthcare Corp. 48,400 1,059
United Healthcare Corp. 41,000 1,845
------------
TOTAL 10,350
------------
METALS & MINING (0.6%)
Alcan Aluminum Limited 50,400 1,694
Aluminum Co. of America 38,600 2,461
ASARCO, Inc. 9,500 236
Barrick Gold Corporation 79,600 2,288
Battle Mountain Gold Company 50,100 344
Cyprus Minerals Co. 20,800 486
Echo Bay Mines Limited Co. 31,100 206
Freeport-McMoRan Copper & Gold Inc. 43,100 1,288
Homestake Mining Company 32,700 466
Inco Limited 37,500 1,195
Newmont Mining Corporation 22,189 993
Phelps Dodge Corporation 14,400 972
Placer Dome Incorporated 53,400 1,161
Reynolds Metals Company 14,200 801
Santa Fe Pacific Gold Corporation 29,340 451
------------
TOTAL 15,042
------------
OFFICE EQUIPMENT-SERVICES (1.6%)
Automatic Data Processing, Inc. 64,700 2,774
Computer Associates International
Inc. 81,275 4,043
*Computer Sciences Corp. 16,900 1,388
*Microsoft Corporation 266,300 22,003
Moore Corporation Ltd. 22,300 454
*Novell, Inc. 76,600 725
Pitney Bowes Inc. 33,100 1,804
Xerox Corporation 72,300 3,805
------------
TOTAL 36,996
------------
OIL & GAS-DOMESTIC (1.1%)
Amerada Hess Corporation 20,800 1,204
Amoco Company 110,800 8,919
Ashland, Inc. 14,400 632
Atlantic Richfield Company 35,800 4,743
Kerr-McGee Corporation 10,800 778
Louisiana Land & Exploration Co. 7,600 408
</TABLE>
--
31
<PAGE>
NORTHWESTERN MUTUAL SERIES FUND, INC.
Schedule of Investments
DECEMBER 31, 1996
<TABLE>
<CAPTION>
MARKET VALUE
COMMON STOCK (54.1%) SHARES (000'S)
- -------------------------------------------------------------
<S> <C> <C>
OIL & GAS-DOMESTIC (CONTINUED)
Occidental Petroleum Corporation 73,300 $ 1,713
*ORYX Energy Company 23,400 579
Pennzoil Company 10,400 588
Phillips Petroleum Company 58,600 2,593
*Santa Fe Energy Resources, Inc. 20,200 280
Sun Company, Inc. 16,300 397
USX-U S Steel Group Inc. 18,800 590
Unocal Corp. 55,800 2,267
------------
TOTAL 25,691
------------
OIL & GAS-INTERNATIONAL (3.2%)
Chevron Corp. 145,400 9,451
Exxon Corporation 276,700 27,117
Mobil Corporation 87,800 10,734
Royal Dutch Petroleum Co., ADR 119,500 20,405
Texaco Inc. 58,900 5,780
------------
TOTAL 688,300 73,487
------------
OIL & GAS-PROGRAMS (0.1%)
Union Pacific Resource Group 55,658 1,628
------------
OIL FIELD SERVICES (0.5%)
Baker Hughes Inc. 32,200 1,111
Burlington Resource Inc. 27,800 1,400
Dresser Industries, Inc. 39,200 1,215
Halliburton Company 27,900 1,681
Helmerich & Payne, Inc. 5,500 287
McDermott International, Inc. 12,200 203
*Rowan Companies, Inc. 19,100 432
Schlumberger Limited 54,900 5,483
*Western Atlas International Inc. 12,000 851
------------
TOTAL 12,663
------------
PAPER/FOREST PRODUCTS(0.8%)
Boise Cascade Corporation 10,800 343
Champion International 21,300 921
Georgia-Pacific Corp. 20,400 1,469
International Paper Company 66,900 2,701
James River Corp of Virginia 19,200 636
Kimberly-Clark Corporation 62,966 5,998
Louisiana-Pacific Corporation 24,200 511
Mead Corp. 11,600 674
Potlatch Corporation 6,400 275
Stone Container Corporation 22,100 329
Temple-Inland Inc. 12,300 666
Union Camp Corporation 15,500 740
Westvaco Corporation 22,650 651
Weyerhaeuser Company 44,200 2,094
Willamette Industries Inc. 12,300 864
------------
TOTAL 18,872
------------
<CAPTION>
MARKET VALUE
COMMON STOCK (54.1%) SHARES (000'S)
<S> <C> <C>
- -------------------------------------------------------------
PHOTO & OPTICAL (0.3%)
Eastman Kodak Company 74,300 $ 5,963
Polaroid Corporation 10,100 439
------------
TOTAL 6,402
------------
PRINTING & PUBLISHING (0.5%)
American Greetings Corp. 16,700 474
Deluxe Corp. 18,400 603
R.R. Donnelley & Sons Company 33,500 1,051
Dow Jones & Company, Inc. 21,500 728
Dun & Bradstreet Corporation 37,900 900
Gannet Company Inc. 31,400 2,351
Harcourt General 15,800 729
John H. Harland Company 6,900 228
Jostens, Inc. 8,600 182
Knight-Ridder Inc. 20,900 799
McGraw-Hill Companies Inc. 22,200 1,024
Meredith Corporation 6,000 317
New York Times Company 21,600 821
Times Mirror Company 22,000 1,095
Tribune Company 13,700 1,081
------------
TOTAL 12,383
------------
PROFESSIONAL SERVICES (0.1%)
H & R Block, Inc. 23,200 673
Interpublic Group of Cos. Inc. 18,100 860
National Service Industry, Inc. 10,600 396
Service Corporation International 52,500 1,470
------------
TOTAL 3,399
------------
RAILROADS (0.5%)
Burlington Northern Santa Fe Co. 34,033 2,940
CSX Corporation 48,300 2,041
Conrail Incorporated 17,896 1,783
Norfolk Southern Corporation 27,900 2,441
Union Pacific Corporation 54,500 3,277
------------
TOTAL 12,482
------------
RETAIL-FOOD (0.4%)
Albertson's, Inc. 56,200 2,002
American Stores Co. 32,500 1,328
Fleming Companies, Inc. 8,400 145
Giant Food Inc. 13,300 459
Great Atlantic & Pacific Tea Co.,
Inc. 8,500 271
*The Kroger Company 28,100 1,307
Supervalue Inc. 15,000 426
Sysco Corporation 39,900 1,302
Winn-Dixie Stores, Inc. 33,700 1,066
------------
TOTAL 8,306
------------
RETAIL-GENERAL (2.2%)
*CUC International Inc. 87,675 2,082
CVS Corporation 70,700 2,925
*Charming Shoppes Incorporated 23,400 118
</TABLE>
--
32
<PAGE>
NORTHWESTERN MUTUAL SERIES FUND, INC.
Schedule of Investments
DECEMBER 31, 1996
<TABLE>
<CAPTION>
MARKET VALUE
COMMON STOCK (54.1%) SHARES (000'S)
- -------------------------------------------------------------
<S> <C> <C>
RETAIL-GENERAL (CONTINUED)
Circuit City Stores, Inc. 21,800 $ 657
Dayton Hudson Corporation 48,300 1,896
Dillard Department Stores, Inc. 25,300 781
*Federated Department Stores, Inc. 46,300 1,580
The Gap, Inc. 63,200 1,904
Home Depot, Inc. 107,067 5,367
K Mart Corporation 107,800 1,118
The Limited Inc. 60,400 1,110
Longs Drug Stores Corp. 4,300 211
Lowe's Companies, Inc. 38,500 1,367
May Department Stores Company 56,100 2,623
Mercantile Stores Company 8,200 405
Nordstrom, Inc. 18,100 641
J.C. Penney Company Inc. 51,400 2,506
Pep Boys - Manny, Moe & Jack 13,900 427
*Price/Costco, Inc. 43,851 1,102
Rite Aid Corporation 27,300 1,085
Sears, Roebuck & Company 87,200 4,022
TJX Companies, Inc. 17,300 820
Tandy Corporation 13,000 572
*Toys 'R' Us 61,100 1,833
Wal-mart Stores Inc. 511,100 11,691
Walgreen Company 54,800 2,192
Woolworth Corp. 29,700 650
------------
TOTAL 51,685
------------
SOAPS & TOILETRIES (1.3%)
Alberto-Culver Company 6,200 298
Avon Products, Inc. 29,600 1,691
Clorox Company 11,500 1,154
Colgate-Palmolive Co. 32,700 3,016
Gillette Company 99,400 7,728
International Flavors & Fragrances,
Inc. 24,700 1,112
Procter & Gamble Company 152,000 16,340
------------
TOTAL 31,339
------------
STEEL (0.2%)
Allegheny Teledyne Inc. 38,862 894
*Armco Inc. 23,800 98
*Bethlehem Steel Corporation 24,800 223
Inland Steel Industries, Inc. 10,900 218
Nucor Corp. 19,500 995
USX-Marathon Group 64,100 1,530
Worthington Industries 20,200 366
------------
TOTAL 4,324
------------
TECHNOLOGY (1.2%)
Advanced Micro Devices, Inc. 30,400 783
Intel Corp. 182,800 23,935
Micron Technology 46,500 1,354
Texas Instruments Incorporated 42,300 2,697
------------
TOTAL 28,769
------------
<CAPTION>
MARKET VALUE
COMMON STOCK (54.1%) SHARES (000'S)
<S> <C> <C>
- -------------------------------------------------------------
TELECOMMUNICATIONS (1.0%)
*Andrew Corporation 13,475 $ 715
*DSC Communications Corp. 26,100 467
Lucent Technologies Inc. 141,843 6,560
Motorola, Inc. 132,100 8,108
Northern Telecom Limited 57,600 3,564
Scientific-Atlanta, Inc. 17,200 258
*Tellabs Inc. 39,900 1,501
*WorldCom Inc. 91,200 2,377
------------
TOTAL 23,550
------------
TOBACCO (1.0%)
American Brands Inc. 37,900 1,881
Philip Morris Companies, Inc. 181,500 20,441
UST Incorporated 41,500 1,344
------------
TOTAL 23,666
------------
TRUCKING-SHIPPING (0.1%)
Caliber System, Inc. 8,700 167
*Federal Express Corp. 25,400 1,130
Ryder System, Inc. 18,200 512
------------
TOTAL 1,809
------------
UTILITY-ELECTRIC (1.6%)
American Electric Power Co. Inc. 41,800 1,719
Baltimore Gas & Electric Co. 32,900 880
Carolina Power & Light Company 33,700 1,230
Central & South West Corporation 47,000 1,204
Cinergy Corporation 35,105 1,172
Consolidated Edison Co. of New York 52,400 1,533
DTE Energy Company 32,300 1,046
Dominion Resources Inc. 40,100 1,544
Duke Power Company 44,900 2,077
Edison International 96,500 1,918
Entergy Corporation 51,500 1,429
FPL Group, Inc. 40,800 1,877
GPU, Inc. 80,700 2,714
Houston Industries Incorporated 52,200 1,181
*Niagara Mohawk Power Corporation 32,200 318
Northern States Power Company 15,400 706
Ohio Edison Company 34,000 774
PECO Energy Company 49,600 1,252
P P & L Resources, Inc. 36,200 833
Pacific Enterprises 19,000 577
Pacific Gas & Electric Co. 91,900 1,930
PacifiCorp 65,700 1,347
Public Service Enterprise Group,
Inc. 53,100 1,447
Southern Company 150,100 3,396
Texas Utilities Company 50,000 2,037
UNICOM Corp. 48,100 1,305
</TABLE>
--
33
<PAGE>
NORTHWESTERN MUTUAL SERIES FUND, INC.
Schedule of Investments
DECEMBER 31, 1996
<TABLE>
<CAPTION>
MARKET VALUE
COMMON STOCK (54.1%) SHARES (000'S)
- -------------------------------------------------------------
<S> <C> <C>
UTILITY-ELECTRIC (CONTINUED)
Union Electric Company 22,800 $ 878
------------
TOTAL 38,324
------------
UTILITY-GAS (0.2%)
Columbia Gas System Inc. 12,300 783
Consolidated Natural Gas Co. 21,100 1,166
Nicor Inc. 11,100 397
Noram Energy Corporation 30,600 470
ONEOK, Inc. 6,100 183
Peoples Energy Corporation 7,800 264
Sonat Inc. 19,200 989
Williams Companies Inc. 34,950 1,311
------------
TOTAL 5,563
------------
UTILITY-TELEPHONE (3.4%)
AT&T Corporation 361,000 15,703
Airtouch Communications Inc. 111,700 2,820
ALLTEL Corporation 42,200 1,324
Ameritech Corporation 122,400 7,420
Bell Atlantic Corporation 97,500 6,313
Bellsouth Corporation 221,400 8,939
GTE Corporation 214,300 9,751
MCI Communications Corporation 152,600 4,988
NYNEX Corp. 98,000 4,716
Pacific Telesis Group 95,400 3,506
SBC Communications Incorporated 134,500 6,960
Sprint Corporation 95,900 3,824
U S West Inc. 106,400 3,431
------------
TOTAL 79,695
------------
TOTAL COMMON STOCK 1,256,996
------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
VALUE
PREFERRED STOCKS (0.0%) SHARES (000'S)
<S> <C> <C>
- --------------------------------------------------------------
DRUGS (0.0%)
Fresenius National Medical Care 21,900 $ 3
-----------
INSURANCE (0.0%)
Aetna Incorporated 2,599 206
-----------
TOTAL PREFERRED STOCK 209
-----------
<CAPTION>
MARKET
VALUE
BONDS (30.0%) PAR (000'S)
<S> <C> <C>
- --------------------------------------------------------------
AEROSPACE (0.4%)
Lockheed Corporation, 6 3/4%,
3/15/03 $ 5,000,000 $ 4,983
Northrop Grumman Corporation, 7
3/4%, 3/1/16 4,000,000 4,024
-----------
TOTAL 9,007
-----------
<CAPTION>
MARKET
VALUE
BONDS (30.0%) PAR (000'S)
<S> <C> <C>
- --------------------------------------------------------------
AUTO RELATED (1.0%)
Electronic Data Systems Corporation,
8.8%, 3/1/21 $ 6,500,000 $ 7,492
Hertz Corp, 9.04%, 6/14/00 4,100,000 4,417
Team Fleet Financing Corporation,
6.65%, 12/15/02(144A) 11,800,000 11,708
-----------
TOTAL 23,617
-----------
AUTO-TRUCK (0.2%)
Daimler-Benz Vehicle Trust, 5.85%,
7/20/03 4,603,541 4,602
-----------
BANKS (1.8%)
BT Institutional Capital Trust, 7
3/4%, 12/1/26(144A) 12,000,000 11,451
Chase Capital I, 7.67%, 12/1/26 1,500,000 1,474
First Chicago Capital Trust, 7.95%,
12/1/26(144A) 1,500,000 1,470
First Security Corporation, 8.41%,
12/15/26(144A) 4,000,000 4,107
JPM Capital Trust I, 7.54%, 1/15/27 4,000,000 3,912
Natwest Capital Corporation, 12
1/8%, 11/15/02 10,450,000 10,955
Security Capital Industrial Trust,
7.3%, 5/15/01 8,000,000 7,989
-----------
TOTAL 41,358
-----------
BEVERAGES (0.5%)
Coca-Cola Enterprises, Inc., 8%,
1/4/05 10,000,000 10,820
-----------
CHEMICALS (0.5%)
Dow Capital B.V., 8 1/2%, 6/8/10 8,200,000 9,205
Nova Chemicals Ltd, 7 1/4%,
8/15/28(144A) 3,000,000 3,000
-----------
TOTAL 12,205
-----------
CMO & LOAN BACKED CERTIFICATES (7.2%)
CIT RV Owner Trust, 6 1/4%, 1/15/11 4,437,102 4,432
Federal Home Loan Mortgage Corp., 7
1/2%, 6/1/26 1,179,126 1,181
Federal Home Loan Mortgage Corp., 7
1/2%, 8/1/26 833,831 835
Federal Home Loan Mortgage Corp., 7
1/2%, 9/1/26 2,525,026 2,528
Federal Home Loan Mortgage Corp., 7
1/2%, 9/1/26 2,513,834 2,517
Federal Home Loan Mortgage Corp., 7
1/2%, 9/1/26 6,885,532 6,894
Federal Home Loan Mortgage Corp., 7
1/2%, 10/1/26 1,278,565 1,280
Federal Home Loan Mortgage Corp., 7
1/2%, 9/1/26 3,023,856 3,028
Federal Home Loan Mortgage Corp., 7
1/2%, 9/1/26 15,650,947 15,671
</TABLE>
--
34
<PAGE>
NORTHWESTERN MUTUAL SERIES FUND, INC.
Schedule of Investments
DECEMBER 31, 1996
<TABLE>
<CAPTION>
MARKET
VALUE
BONDS (30.0%) PAR (000'S)
- --------------------------------------------------------------
<S> <C> <C>
CMO & LOAN BACKED CERTIFICATES (CONTINUED)
Federal Home Loan Mortgage Corp., 7
1/2%, 9/1/26 $ 577,387 $ 578
Federal Home Loan Mortgage Corp., 6
1/2%, 2/1/11 5,565,073 5,468
Federal Home Loan Mortgage Corp., 6
1/2%, 4/1/11 5,318,155 5,225
Federal Home Loan Mortgage Corp., 7
1/4%, 4/15/18 8,748,196 8,815
Federal Home Loan Mortgage Corp.,
7%, 3/15/07 7,250,000 7,235
Federal Home Loan Mortgage Corp., 6
1/2%, 4/1/11 12,463,803 12,246
Federal Home Loan Mortgage Corp.,
6%, 7/15/07 19,250,000 18,692
Federal Home Loan Mortgage Corp., 7
1/2%, 5/1/26 496,254 497
Federal National Mortgage Assoc., 6
3/4%, 12/25/23 6,500,000 6,147
Federal National Mortgage Assoc.,
8.4%, 2/25/09 10,910,000 11,489
Federal National Mortgage Assoc.,
7%, 4/1/26 27,659,036 27,063
Federal National Mortgage Assoc.,
7%, 6/1/03 8,011,091 7,838
Federal National Mortgage Assoc.,
7%, 6/1/03 6,859,997 6,712
Premier Auto Trust, 6.65%, 4/2/98 4,395,790 4,409
Rural Housing Trust 1987-1, 6.33%,
4/1/26 8,360,448 8,194
-----------
TOTAL 168,974
-----------
FEDERAL GOVERNMENT & AGENCIES (11.0%)
Goverment National Mortgage Assoc.,
7%, 12/15/26 7,187,896 7,064
Goverment National Mortgage Assoc.,
7%, 9/15/23 105,187 103
Goverment National Mortgage Assoc.,
7%,10/15/23 194,801 191
Goverment National Mortgage Assoc.,
7 1/2%, 8/15/24 884,096 887
Goverment National Mortgage Assoc.,
7%, 9/15/23 22,503 22
Goverment National Mortgage Assoc.,
7%, 7/15/23 729,789 717
Goverment National Mortgage Assoc.,
7%, 5/15/23 8,666,586 8,518
Goverment National Mortgage Assoc.,
7%, 5/15/23 6,185,618 6,079
Goverment National Mortgage Assoc.,
7%, 6/15/23 291,685 287
Goverment National Mortgage Assoc.,
7%,10/15/23 28,515 28
<CAPTION>
MARKET
VALUE
BONDS (30.0%) PAR (000'S)
<S> <C> <C>
- --------------------------------------------------------------
FEDERAL GOVERNMENT & AGENCIES (CONTINUED)
Goverment National Mortgage Assoc.,
7%, 5/15/23 $ 203,959 $ 200
Goverment National Mortgage Assoc.,
7 1/2%, 1/15/24 202,019 203
Goverment National Mortgage Assoc.,
7%, 7/15/23 723,852 711
Goverment National Mortgage Assoc.,
8 1/2%, 2/15/25 98,671 103
Goverment National Mortgage Assoc.,
7%, 8/15/23 28,989 28
Goverment National Mortgage Assoc.,
8 1/2%, 7/15/24 184,028 192
Goverment National Mortgage Assoc.,
7%, 6/15/23 686,360 675
Goverment National Mortgage Assoc.,
7%, 7/15/23 58,075 57
Goverment National Mortgage Assoc.,
7%,10/15/23 139,685 137
Goverment National Mortgage Assoc.,
7%, 9/15/23 635,325 624
Goverment National Mortgage Assoc.,
7 1/2%, 5/15/24 925,312 929
Goverment National Mortgage Assoc.,
7%,10/15/23 104,293 102
Goverment National Mortgage Assoc.,
7 1/2%, 1/15/24 1,030,704 1,035
Goverment National Mortgage Assoc.,
7%, 11/15/23 706,058 694
Goverment National Mortgage Assoc.,
7%, 11/15/23 745,487 733
Goverment National Mortgage Assoc.,
8 1/2%, 2/15/25 16,334 17
Goverment National Mortgage Assoc.,
7%, 11/15/23 520,301 511
Goverment National Mortgage Assoc.,
7%, 9/15/23 34,562 34
Goverment National Mortgage Assoc.,
8 1/2%, 7/15/24 198,576 207
Goverment National Mortgage Assoc.,
8 1/2%, 4/15/26 850,992 888
Goverment National Mortgage Assoc.,
7%, 10/15/23 98,922 97
Goverment National Mortgage Assoc.,
8 1/2%, 11/15/24 183,555 191
Goverment National Mortgage Assoc.,
8 1/2%, 1/15/25 18,647 19
Goverment National Mortgage Assoc.,
7 1/2%, 11/15/24 988,390 992
Goverment National Mortgage Assoc.,
7 1/2%, 2/15/24 1,541,156 1,547
Goverment National Mortgage Assoc.,
7 1/2%, 3/15/24 1,414,953 1,420
</TABLE>
--
35
<PAGE>
NORTHWESTERN MUTUAL SERIES FUND, INC.
Schedule of Investments
DECEMBER 31, 1996
<TABLE>
<CAPTION>
MARKET
VALUE
BONDS (30.0%) PAR (000'S)
- --------------------------------------------------------------
<S> <C> <C>
FEDERAL GOVERNMENT & AGENCIES (CONTINUED)
Goverment National Mortgage Assoc.,
7 1/2%, 8/15/24 $ 971,015 $ 975
Goverment National Mortgage Assoc.,
8 1/2%, 3/15/26 15,156 16
Goverment National Mortgage Assoc.,
8 1/2%, 1/15/26 843,469 880
Goverment National Mortgage Assoc.,
7 1/2%, 5/15/24 1,308,075 1,313
Goverment National Mortgage Assoc.,
7 1/2%, 4/15/24 879,325 883
Goverment National Mortgage Assoc.,
7 1/2%, 5/15/24 1,268,637 1,273
Goverment National Mortgage Assoc.,
8 1/2%, 6/15/24 21,557 22
Goverment National Mortgage Assoc.,
8 1/2%, 1/15/25 50,949 53
Goverment National Mortgage Assoc.,
7 1/2%, 6/15/24 1,325,694 1,331
Goverment National Mortgage Assoc.,
7 1/2%, 8/15/24 978,520 982
Goverment National Mortgage Assoc.,
8 1/2%, 1/15/25 118,658 124
Goverment National Mortgage Assoc.,
7 1/2%, 8/15/24 1,049,997 1,054
Goverment National Mortgage Assoc.,
8 1/2%, 8/15/24 178,771 187
Goverment National Mortgage Assoc.,
7 1/2%, 6/15/24 35,611 36
Goverment National Mortgage Assoc.,
8 1/2%, 5/15/26 923,441 963
Goverment National Mortgage Assoc.,
8 1/2%, 5/15/26 806,647 842
Goverment National Mortgage Assoc.,
8 1/2%, 5/15/26 682,625 712
Goverment National Mortgage Assoc.,
8 1/2%, 9/15/24 302,700 316
Goverment National Mortgage Assoc.,
8%, 4/15/26 33,318,097 33,984
Goverment National Mortgage Assoc.,
8 1/2%, 4/15/26 140,756 147
Goverment National Mortgage Assoc.,
8 1/2%, 2/15/25 41,364 43
Goverment National Mortgage Assoc.,
8 1/2%,12/15/24 25,266 26
Goverment National Mortgage Assoc.,
8 1/2%, 2/15/25 42,427 44
Goverment National Mortgage Assoc.,
8 1/2%, 1/15/26 27,014 28
Goverment National Mortgage Assoc.,
8 1/2%, 3/15/26 25,291 26
Goverment National Mortgage Assoc.,
8 1/2%, 1/15/26 62,449 65
<CAPTION>
MARKET
VALUE
BONDS (30.0%) PAR (000'S)
<S> <C> <C>
- --------------------------------------------------------------
FEDERAL GOVERNMENT & AGENCIES (CONTINUED)
Goverment National Mortgage Assoc.,
8 1/2%, 2/15/26 $ 45,636 $ 48
Goverment National Mortgage Assoc.,
8 1/2%, 5/15/26 462,390 482
Goverment National Mortgage Assoc.,
8 1/2%, 4/15/26 926,761 967
Goverment National Mortgage Assoc.,
8 1/2%, 4/15/26 78,886 82
Goverment National Mortgage Assoc.,
8 1/2%, 4/15/26 890,665 929
Goverment National Mortgage Assoc.,
8 1/2%, 4/15/26 91,390 95
Goverment National Mortgage Assoc.,
8 1/2%, 5/15/26 37,168 39
Goverment National Mortgage Assoc.,
8 1/2%, 5/15/26 855,776 893
Goverment National Mortgage Assoc.,
8 1/2%, 9/15/22 15,555 16
Goverment National Mortgage Assoc.,
8 1/2%,10/15/22 210,285 219
Goverment National Mortgage Assoc.,
7%, 5/15/23 449,340 442
Goverment National Mortgage Assoc.,
8 1/2%, 9/15/21 184,067 192
Goverment National Mortgage Assoc.,
8 1/2%, 7/15/21 157,482 164
Goverment National Mortgage Assoc.,
8 1/2%, 5/15/22 8,580 9
Goverment National Mortgage Assoc.,
8 1/2%, 10/15/22 11,955 12
Goverment National Mortgage Assoc.,
8 1/2%, 9/15/22 183,944 192
Goverment National Mortgage Assoc.,
8 1/2%, 10/15/22 45,824 48
Goverment National Mortgage Assoc.,
8 1/2%,12/15/22 51,407 54
Goverment National Mortgage Assoc.,
8 1/2%,11/15/22 24,480 26
U.S. Treasury, 6 3/4%, 8/15/26 13,100,000 13,190
U.S. Treasury, 6 1/2%, 11/15/26 12,000,000 11,775
U.S. Treasury, 6 3/8%, 5/15/99 110,700,000 111,669
U.S. Treasury, 7%, 7/15/06 28,050,000 29,146
-----------
TOTAL 253,256
-----------
FINANCE COMPANIES (0.3%)
Associates Corp. of North America,
7.95%, 2/15/10 5,550,000 6,056
-----------
FINANCIAL SERVICES (0.7%)
Eaglemark Trust, 6 3/4%,
11/15/02(144A) 8,184,312 8,266
Union Planters Capital Trust A,
8.2%, 12/15/26(144A) 4,000,000 3,964
</TABLE>
--
36
<PAGE>
NORTHWESTERN MUTUAL SERIES FUND, INC.
Schedule of Investments
DECEMBER 31, 1996
<TABLE>
<CAPTION>
MARKET
VALUE
BONDS (30.0%) PAR (000'S)
- --------------------------------------------------------------
<S> <C> <C>
FINANCIAL SERVICES (CONTINUED)
General Motors Acceptance Corp., 6
5/8%, 10/1/02 $ 5,000,000 $ 4,952
-----------
TOTAL 17,182
-----------
FOREIGN GOVERNMENT BONDS (0.4%)
Goverment Trust Certificates -
Greece, 8%, 5/15/98 1,470,411 1,488
Province of Quebec, 6 1/2%, 1/17/06 7,500,000 7,238
-----------
TOTAL 8,726
-----------
MEDIA (1.2%)
News America Holdings Inc., 7 1/2%,
3/1/00 6,500,000 6,633
News America Holdings Inc., 8.45%,
8/1/34 10,000,000 10,896
Tele Communications, Inc., 7 3/8%,
2/15/00 8,000,000 8,030
Time Warner Entertainment Inc., 8
5/8%, 10/1/12 1,500,000 1,648
Time Warner Entertainment Inc., 7
1/4%, 9/1/08 1,500,000 1,458
-----------
TOTAL 28,665
-----------
PAPER/FOREST PRODUCTS (0.3%)
Crown Cork & Seal Finance Plc, 6
3/4%, 12/15/03 8,000,000 7,939
-----------
RETAIL-GENERAL (0.2%)
May Department Stores Company,
7.45%, 10/15/16 4,000,000 4,024
-----------
TOBACCO (0.6%)
Nabisco Inc., 8%, 1/15/00 3,500,000 3,630
RJR Nabisco Inc., 8 5/8%, 12/1/02 4,000,000 4,034
Philip Morris Companies, 9 1/4%,
2/15/00 1,000,000 1,074
Philip Morris Companies, 7 1/4%,
1/15/03 5,000,000 5,062
-----------
TOTAL 13,800
-----------
UTILITY-ELECTRIC (3.4%)
Atlantic City Electric Company, 6
5/8%, 8/1/13 4,000,000 3,728
Beaver Valley Funding Corp., 8
1/4%, 6/1/03 5,500,000 5,528
Cleveland Electric Illum Co., 7
3/8%, 6/1/03 2,000,000 1,964
UNICOM Corp., 6 1/2%, 4/15/00 4,000,000 3,982
Dayton Power & Light Company, 8.15%,
1/15/26 5,750,000 6,046
Long Island Lighting Co., 9 5/8%,
7/1/24 1,500,000 1,544
Long Island Lighting Co., 8 5/8%,
4/15/04 2,700,000 2,798
<CAPTION>
MARKET
VALUE
BONDS (30.0%) PAR (000'S)
<S> <C> <C>
- --------------------------------------------------------------
UTILITY-ELECTRIC (CONTINUED)
Ohio Edison Company, 7 3/8%, 9/15/02 $ 3,665,000 $ 3,703
Pacific Gas & Electric Co., 7 1/4%,
3/1/26 9,050,000 8,722
Pacific Gas & Electric Co., 5 3/8%,
8/1/98 5,000,000 4,945
PECO Energy Company, 7 1/2%, 1/15/99 4,250,000 4,343
PECO Energy Company, 7 3/4%, 3/1/23 8,850,000 8,620
Public Service Electric & Gas, 6
7/8%, 1/1/03 9,000,000 8,991
Southern California Edison Co., 7
1/4%, 3/1/26 10,000,000 9,541
Texas Utilities Electric Co., 7
7/8%, 3/1/23 4,000,000 3,984
-----------
TOTAL 78,439
-----------
UTILITY-GAS (0.3%)
Columbia Gas System Inc., 7.32%,
11/28/10 7,571,000 7,440
-----------
TOTAL BONDS 696,110
-----------
</TABLE>
<TABLE>
<CAPTION>
MARKET
VALUE
MONEY MARKET INVESTMENTS (15.9%) PAR (000'S)
<S> <C> <C>
- -------------------------------------------------------------
CHEMICALS (0.7%)
E.I. du Pont de Nemours & Co.,
5.27%, 1/22/97 $16,800,000 $ 16,747
-------------
DRUGS (1.1%)
+ Pfizer Inc., 5.3%, 3/12/97 25,000,000 24,734
-------------
FEDERAL GOVERNMENT & AGENCIES (0.1%)
+ U.S. Treasury, 4.98%, 5/1/97 2,000,000 1,965
-------------
FINANCE COMPANIES (3.1%)
Associates Corp. of North
America, 6 7/8%, 1/15/97 7,800,000 7,803
Avco Financial Services Inc., 5
7/8%, 10/15/97 6,800,000 6,802
Ford Motor Credit Company, 5.33%,
1/17/97 25,000,000 24,941
Ford Motor Credit Company, 5
5/8%, 3/3/97 9,000,000 9,000
Sears Roebuck Acceptance Corp.,
5.31%, 2/12/97 25,000,000 24,841
-------------
TOTAL 73,387
-------------
FINANCIAL SERVICES (7.4%)
BAT Capital Corporation, 5.42%,
2/14/97 25,000,000 24,834
Beneficial Corporation 6.86%,
11/19/97 7,800,000 7,867
Beneficial Corporation 9 3/8%,
7/28/97 5,000,000 5,104
</TABLE>
--
37
<PAGE>
NORTHWESTERN MUTUAL SERIES FUND, INC.
Schedule of Investments
DECEMBER 31, 1996
<TABLE>
<CAPTION>
MARKET
VALUE
MONEY MARKET INVESTMENTS (15.9%) PAR (000'S)
- -------------------------------------------------------------
<S> <C> <C>
FINANCIAL SERVICES (CONTINUED)
CIT Group, 5.39%, 1/10/97 $25,000,000 $ 24,966
General Electric Capital Corp.
5.34%, 1/31/97 25,000,000 24,889
+ General Motors Acceptance Corp.
5.34%, 1/27/97 25,000,000 24,903
General Motors Acceptance Corp.,
8 3/8%, 5/1/97 3,000,000 3,025
Household Finance Corporation,
5.54%, 1/3/97 25,000,000 24,992
Paccar Financial Corporation,
6.75%, 1/2/97 6,700,000 6,699
Xerox Credit Corporation, 5.28%,
3/5/97 25,000,000 24,760
-------------
TOTAL 172,039
-------------
FOODS (1.0%)
H.J. Heinz Company, 5.4%, 1/13/97 24,000,000 23,957
-------------
OFFICE EQUIPMENT (1.4%)
International Business Machines,
5.3%, 1/13/97 25,000,000 24,955
International Business Machines,
6 3/8%, 11/1/97 7,000,000 7,028
-------------
TOTAL 31,983
-------------
RETAIL-GENERAL (1.1%)
J.C. Penney Funding Corporation,
5.31%, 1/8/97 25,000,000 24,974
-------------
TOTAL MONEY MARKET
INVESTMENTS 369,786
-------------
TOTAL BALANCED PORTFOLIO $ 2,323,101
-------------
*Non-Income Producing
<CAPTION>
MARKET
VALUE
MONEY MARKET INVESTMENTS (15.9%) PAR (000'S)
<S> <C> <C>
- -------------------------------------------------------------
RETAIL-GENERAL (CONTINUED)
+Partially held by the custodian in a segregated account as
collateral for open futures positions. Information regarding
open futures contracts as of December 31, 1996 is summarized
below:
</TABLE>
<TABLE>
<CAPTION>
UNREALIZED
NUMBER OF EXPIRATION APPRECIATION
ISSUER CONTRACTS DATE (000'S)
- -------------------- ---------- ------------ -------------
<S> <C> <C> <C>
S&P 500 Stock Index 51 March 1997 1
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements
--
38
<PAGE>
SELECT BOND PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Objective: Portfolio Strategy: Net Assets:
A stable and relatively high Invest in high grade corporate bonds, $214,333,586
level of long-term total return U.S. government bonds and bonds of
and preservation of capital government agencies
</TABLE>
SELECT BOND PORTFOLIO
The Select Bond Portfolio invests in high quality debt securities, primarily
corporate bonds and mortgage-backed securities. Exposure to market sectors is
adjusted as yield spreads change among the various classes of securities.
Duration is altered with frequent, moderate adjustments in recognition or
anticipation of interest rate changes.
Many bond managers viewed the Federal Reserve Board's quarter point reduction in
the federal funds rate in January 1996 as a harbinger of a volatile year with
frequent interest rate adjustments by the central bank. The year proved volatile
for bonds, but not because of Federal Reserve actions: the January reduction was
the Fed's only change during the year. As the economy remained relatively
strong, interest rates rose at mid-year and ended the year approximately 75
basis points higher than a year ago, pushing bond prices in general lower for
the year.
In 1996, the Portfolio's asset mix was shifted from government toward corporate
securities, including bonds backed by mortgages and other assets. Late in the
year, taking advantage of many high quality new corporate issues, available cash
was used to further increase the position in corporate bonds. At year end, the
Portfolio was essentially fully invested, with a cash position of 4%,
significantly less than at mid-year.
At the end of 1996, the Portfolio was positioned neutrally with regard to
interest rates, on the assumption that neither Federal Reserve actions nor a
major shift in the economy will produce significant changes in interest rates
over the next few months.
Percentage Holdings
12/31/96
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Corporate Bonds 40%
Asset-Backed Securities 35%
Federal Government 21%
Money Market Investments 4%
</TABLE>
Performance Relative
to Merrill Lynch Domestic Master Index
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
SELECT BOND PORTFOLIO MLDM INDEX
<S> <C> <C> <C> <C>
12-86 10,000 10,000
12-87 9,895 10,240
12-88 10,709 11,063
12-89 12,225 12,632
12-90 13,214 13,782
12-91 15,504 15,967
12-92 16,704 17,177
12-93 18,510 18,899
12-94 18,087 18,365
12-95 21,541 21,767
12-96 22,255 22,548
Average Annual Total Return
For Periods Ended December 31, 1996
One Year Five Years Ten Years
Select Bond Portfolio 3.31% 7.50% 8.33%
MLDM Index 3.59% 7.15% 8.47%
</TABLE>
Since the Portfolio invests broadly in U.S. Government, mortgage and corporate
bonds, the graph depicts an appropriate comparison to the Merrill Lynch Domestic
Master Index. The index is an unmanaged market value weighted index comprised of
U.S. Government, mortgage and investment-grade corporate bonds. The index
measures the income provided by, and the price changes of, the underlying
securities.
This chart assumes an initial investment of $10,000 made on 12/31/86.
Returns shown include deductions for management and other fund expenses, and
reinvestment of all dividends. Returns exclude deductions for separate account
sales loads and account fees. Past performance is not predictive of future
performance. Investment return and principal value will fluctuate, so that your
shares, when redeemed, may be worth more or less than their original cost. The
net investment rates of return shown on page 2 reflect mortality and expense
risk charges deducted from the assets of the separate account. The cost of
insurance protection, which is not reflected in the returns shown on this chart,
would make the return significantly lower. Investors are urged to obtain a
personalized illustration of historical performance which reflects the cost of
insurance protection.
--
39
<PAGE>
SELECT BOND PORTFOLIO
NORTHWESTERN MUTUAL SERIES FUND, INC.
Schedule of Investments
DECEMBER 31, 1996
<TABLE>
<CAPTION>
MARKET
VALUE
BONDS (89.4%) PAR (000'S)
<S> <C> <C>
- --------------------------------------------------------------
AEROSPACE (0.9%)
Lockheed Corporation, 6 3/4%, 3/15/03 $1,000,000 $ 997
Northrop Grumman Corporation, 7 3/4%,
3/1/16 1,000,000 1,006
-----------
TOTAL 2,003
-----------
AUTO RELATED (0.5%)
Hertz Corp., 9.04%, 6/14/00 900,000 970
-----------
AUTO & TRUCK (1.6%)
Daimler-Benz Vehicle Trust, 5.85%,
7/20/03 1,918,142 1,918
Electronic Data Systems Corporation,
8.8%, 3/1/21 1,250,000 1,441
-----------
TOTAL 3,359
-----------
BANKS (4.5%)
BT Institutional Capital Trust, 7
3/4%, 12/1/26(144A) 3,000,000 2,863
Chase Capital I, 7.67%, 12/1/26 500,000 491
First Chicago Capital Trust, 7.95%,
12/1/26(144A) 500,000 490
First Security Corporation, 8.41%,
12/15/26(144A) 1,000,000 1,027
JPM Capital Trust, 7.54%, 1/15/27 1,000,000 978
Natwest Capital Corporation, 12 1/8%,
11/15/02 1,700,000 1,782
Security Capital Industrial Trust,
7.3%, 5/15/01 2,000,000 1,997
-----------
TOTAL 9,628
-----------
BEVERAGES (2.6%)
Coca-Cola Enterprises Inc., 8%,
1/4/05 5,000,000 5,410
-----------
CHEMICALS (1.4%)
Dow Capital B.V., 8 1/2%, 6/8/10 1,800,000 2,021
Nova Chemicals Ltd, 7 1/4%,
8/15/28(144A) 1,000,000 1,000
-----------
TOTAL 3,021
-----------
CMO & LOAN BACKED CERTIFICATES (20.8%)
Federal Home Loan Mortgage Corp., 7%,
6/1/25 5,869,610 5,763
Federal Home Loan Mortgage Corp., 7
1/2%, 6/1/26 2,526,692 2,530
Federal Home Loan Mortgage Corp., 7
1/2%, 7/1/26 566,000 567
Federal Home Loan Mortgage Corp., 7
1/2%, 8/1/26 167,116 167
Federal Home Laon Mortgage Corp., 7
1/2%, 8/1/26 552,131 553
Federal Home Loan Mortgage Corp., 7
1/2%, 8/1/26 413,265 414
<CAPTION>
MARKET
VALUE
BONDS (89.4%) PAR (000'S)
<S> <C> <C>
- --------------------------------------------------------------
CMO & LOAN BACKED CERTIFICATES (CONTINUED)
Federal Home Loan Mortgage Corp., 7
1/2%, 8/1/26 $ 156,990 $ 157
Federal Home Loan Mortgage Corp., 7
1/2%, 8/1/26 353,900 354
Federal Home Loan Mortgage Corp., 7
1/2%, 8/1/26 205,060 205
Federal Home Loan Mortgage Corp., 7
1/2%, 9/1/26 2,993,171 2,997
Federal Home Loan Mortgage Corp., 7
1/2%, 10/1/26 887,068 888
Federal Home Loan Mortgage Corp., 7
1/2%, 9/1/26 408,450 409
Federal Home Loan Mortgage Corp., 7
1/4%, 4/15/18 2,054,661 2,070
Federal Home Loan Mortgage Corp., 7%,
3/15/07 1,875,000 1,871
Federal Home Loan Mortgage Corp., 7
1/2%, 1/1/26 243,110 243
Federal Home Loan Mortgage Corp., 7
1/2%, 8/1/26 100,378 100
Federal Home Loan Mortgage Corp., 6
1/2%, 4/1/11 6,409,666 6,297
Federal Home Loan Mortgage Corp., 6%,
7/15/07 3,900,000 3,787
Federal Home Loan Mortgage Corp., 7
1/2%, 8/1/26 412,918 413
Federal National Mortgage Assoc., 6
3/4%, 12/25/23 3,500,000 3,310
Federal National Mortgage Assoc.,
8.4%, 2/25/09 2,500,000 2,633
Federal National Mortgage Assoc., 7%,
6/1/03 4,003,321 4,013
Premier Auto Trust, 6.65%, 4/2/98 2,093,233 2,100
Rural Housing Trust, 6.33%, 4/1/26 2,255,994 2,211
-----------
TOTAL 44,052
-----------
FEDERAL GOVERNMENT AND AGENCIES (32.4%)
Government National Mortgage Assoc.,
8 1/2%, 3/15/23 10,829 11
Government National Mortgage Assoc.,
7%, 5/15/23 461,199 454
Government National Mortgage Assoc.,
7 1/2%, 2/15/24 1,776,622 1,783
Government National Mortgage Assoc.,
7%, 5/15/23 2,897,022 2,847
Government National Mortgage Assoc.,
8 1/2%, 9/15/24 15,373 16
Government National Mortgage Assoc.,
8 1/2/%, 6/15/23 18,051 19
Government National Mortgage Assoc.,
8 1/2%, 6/15/24 349,657 365
Government National Mortgage Assoc.,
8 1/2%, 7/15/24 84,851 88
</TABLE>
--
40
<PAGE>
NORTHWESTERN MUTUAL SERIES FUND, INC.
Schedule of Investments
DECEMBER 31, 1996
<TABLE>
<CAPTION>
MARKET
VALUE
BONDS (89.4%) PAR (000'S)
- --------------------------------------------------------------
<S> <C> <C>
FEDERAL GOVERNMENT AND AGENCIES (CONTINUED)
Government National Mortgage Assoc.,
8 1/2%, 2/15/25 $ 115,319 $ 120
Government National Mortgage Assoc.,
7 1/2%, 1/15/24 878,867 882
Government National Mortgage Assoc.,
7 1/2%, 1/15/24 828,733 832
Government National Mortgage Assoc.,
8 1/2%, 2/15/25 16,462 17
Government National Mortgage Assoc.,
8 1/2%, 11/15/24 311,088 325
Government National Mortgage Assoc.,
8 1/2%, 5/15/26 226,272 236
Government National Mortgage Assoc.,
7 1/2%, 6/15/24 1,625,306 1,631
Government National Mortgage Assoc.,
8 1/2%, 11/15/24 300,760 314
Government National Mortgage Assoc.,
8 1/2%, 4/15/26 371,731 388
Government National Mortgage Assoc.,
8 1/2%, 11/15/24 460,181 480
Government National Mortgage Assoc.,
8 1/2%, 4/15/26 374,448 391
Government National Mortgage Assoc.,
8 1/2%, 5/15/26 734,194 766
Government National Mortgage Assoc.,
8%, 8/15/26 9,872,306 10,070
Government National Mortgage Assoc.,
8 1/2%, 9/15/21 175,912 184
Government National Mortgage Assoc.,
7%, 6/15/23 2,649,822 2,604
U.S. Treasury, 6 3/4%, 8/15/26 8,035,000 8,090
U.S. Treasury, 6 1/2%, 11/15/26 3,000,000 2,944
U.S. Treasury, 6 3/8%, 5/15/99 19,100,000 19,267
U.S. Treasury, 7%, 7/15/06 12,900,000 13,404
-----------
TOTAL 68,528
-----------
FOREIGN GOVERNMENT BONDS (1.1%)
Province of Quebec, 6 1/2%, 1/17/06 2,500,000 2,413
-----------
FINANCE COMPANIES (0.8%)
Associates Corp. of North America,
7.95%, 2/15/10 1,500,000 1,637
-----------
FINANCIAL SERVICES (2.8%)
Eaglemark Trust, 6 3/4%,
11/15/02(144A) 1,636,862 1,653
Team Fleet Financing Corporation,
6.65%, 12/15/02(144A) 3,200,000 3,175
Union Planters Capital Trust A, 8.2%,
12/15/26(144A) 1,000,000 991
-----------
TOTAL 5,819
-----------
FOOD (0.7%)
Nabisco Inc., 8%, 1/15/00 1,500,000 1,556
-----------
<CAPTION>
MARKET
VALUE
BONDS (89.4%) PAR (000'S)
<S> <C> <C>
- --------------------------------------------------------------
MEDIA (4.1%)
News America Holdings Inc., 7 1/2%,
3/1/00 $3,500,000 $ 3,572
News America Holdings Inc., 8 1/4%,
8/10/18 1,000,000 1,011
Tele Communications, Inc., 7 3/8%,
2/15/00 2,000,000 2,007
Time Warner Entertainment Inc., 8
7/8%, 10/1/12 2,000,000 2,198
-----------
TOTAL 8,788
-----------
PAPER / FOREST PRODUCTS (0.9%)
Crown Cork & Seal Finance PLC 6 3/4%,
12/15/03 2,000,000 1,985
-----------
RECREATIONAL VEHICLES (0.7%)
CIT RV Owner Trust, 6 1/4%, 1/15/11 1,479,034 1,478
-----------
RETAIL-GENERAL (0.5%)
May Department Stores Company, 7.45%,
10/15/16 1,000,000 1,006
-----------
TOBACCO (2.1%)
Philip Morris Companies, 9%, 5/15/98 1,750,000 1,811
Philip Morris Companies, 9 1/4%,
2/15/00 500,000 537
Philip Morris Companies, 7 1/4%,
1/15/03 1,000,000 1,012
RJR Nabisco Inc., 8 5/8%, 12/1/02 1,000,000 1,008
-----------
TOTAL 4,368
-----------
UTILITY-ELECTRIC (10.1%)
Beaver Valley Funding Corp., 8 1/4%,
6/1/03 1,500,000 1,507
Cleveland Electric Illum Co., 7 3/8%,
6/1/03 500,000 491
Unicom Corp., 6 1/2%, 4/15/00 1,000,000 996
Long Island Lighting Co., 9 5/8%,
7/1/24 1,500,000 1,544
Long Island Lighting Co., 8 5/8%,
4/15/04 1,000,000 1,036
Ohio Edison Company, 7 3/8%, 9/15/02 1,000,000 1,010
Pacific Gas & Electric Co., 7 1/4%,
3/1/26 3,500,000 3,373
Pacific Gas & Electric Co, 5 3/8%,
8/1/98 2,600,000 2,572
Pennsylvania Power & Light, 5 1/2%,
4/1/98 3,000,000 2,976
Peco Energy Company, 7 1/2%, 1/15/99 1,500,000 1,533
Peco Energy Company, 7 3/4%, 3/1/23 1,150,000 1,120
</TABLE>
--
41
<PAGE>
NORTHWESTERN MUTUAL SERIES FUND, INC.
Schedule of Investments
DECEMBER 31, 1996
<TABLE>
<CAPTION>
MARKET
VALUE
BONDS (89.4%) PAR (000'S)
- --------------------------------------------------------------
<S> <C> <C>
UTILITY-ELECTRIC (CONTINUED)
Public Service Electric & Gas Co., 6
7/8%, 1/1/03 $2,250,000 $ 2,248
Texas Utilities Electric Co., 7 7/8%,
3/1/23 1,000,000 996
-----------
TOTAL 21,402
-----------
UTILITY-GAS (0.9%)
Columbia Gas System Inc., 7.32%,
11/28/10 2,000,000 1,965
-----------
TOTAL BONDS 189,388
-----------
<CAPTION>
MARKET
VALUE
MONEY MARKET INVESTMENTS (10.6%) PAR (000'S)
<S> <C> <C>
- --------------------------------------------------------------
AEROSPACE (1.6%)
Raytheon Company, 5.36%, 1/17/97 $3,400,000 $ 3,392
-----------
COMPUTER RELATED (1.4%)
International Business Machines
Corp., 6 3/8%, 11/1/97 3,000,000 3,012
-----------
FINANCE COMPANIES (2.1%)
Associates Corp. of North America, 6
7/8%, 1/15/97 2,200,000 2,200
<CAPTION>
MARKET
VALUE
MONEY MARKET INVESTMENTS (10.6%) PAR (000'S)
<S> <C> <C>
- --------------------------------------------------------------
FINANCE COMPANIES (CONTINUED)
Avco Financial Services Inc., 5 7/8%,
10/15/97 $2,200,000 $ 2,201
-----------
TOTAL 4,401
-----------
FINANCIAL SERVICES (3.4%)
Beneficial Corp., 6.86%, 11/19/97 2,200,000 2,219
General Electric Capital Corp., 5.4%,
1/8/97 5,000,000 4,995
-----------
TOTAL 7,214
-----------
UTILITY-ELECTRIC (2.1%)
DTE Energy Company, 5.41%, 5/1/97 4,000,000 3,997
Duke Power Company, 6.85%, 1/2/97 400,000 400
-----------
TOTAL 4,397
-----------
TOTAL MONEY MARKET
INVESTMENTS 22,416
-----------
TOTAL SELECT BOND PORTFOLIO $ 211,804
-----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements
--
42
<PAGE>
HIGH YIELD BOND PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Objective: Portfolio Strategy: Net Assets:
High current income and capital Generate superior performance by investing in a $93,879,092
appreciation with moderate risk diversified mix of fixed income securities
rated below investment grade
</TABLE>
HIGH YIELD BOND PORTFOLIO
Investing in a portfolio of high yield bonds provides investors who can accept a
moderate level of risk with a high level of current income, coupled with the
opportunity for capital gains. The investment approach is credit-driven, with
rigorous industry and credit analysis utilized to identify investment
opportunities in issuers with stable or improving credit fundamentals whose
bonds are rated below investment grade. Securities are actively traded in order
to maximize returns within appropriate parameters of risk, quality, seniority
and duration. In many ways, investing in high yield bonds is akin to equity
investing, since an issuer's financial situation and operational performance are
the key determinants of continued ability to meet obligations to pay interest
and principal. Of particular interest are solid investments in companies that
have the possibility of a positive event, such as a significant improvement in
credit rating or earnings or a change in ownership. When financial performance
falls short of expectations, exposure is normally reduced. In a high-yield
portfolio, some defaults over time are inevitable; diversification across many
holdings mitigates the impact of defaults on the total portfolio.
Because of their high coupon rates, high yield bonds are less sensitive to
fluctuations in interest rates than investment grade bonds with lower coupons.
The high yield market outperformed investment grade bonds during 1996, as
interest rates moved somewhat higher. The strong economic environment also
contributed to good returns from high yield bonds during the year, as issuers'
businesses remained solid and there were few defaults. The Portfolio achieved
particularly good returns from investments in dollar-denominated bonds of
companies in foreign emerging markets. The Portfolio was fully invested
throughout the year, with cash positions of 3% to 5%. A portfolio duration of
4.5 to 4.75 years was maintained. The Portfolio is broadly diversified by
industry sector, with the highest percentages invested in the Leisure related
and Cable Television industries. During the year, the investment mix was refined
to reduce cyclical exposure and increase participation in stable or defensive
industry sectors.
Percentage Holdings
by Industry Sector
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Consumer Staples 26%
Technology 25%
Basic Materials 11%
Financial 9%
Consumer Cyclicals 8%
Energy/Utilities 8%
Other 7%
Cash Equivalents 6%
</TABLE>
Performance Relative
to Lehman Brothers High Yield Index
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
HIGH YIELD BOND PORTFOLIO LEHMAN BROTHERS INDEX
<S> <C> <C> <C>
05-94 10,000 10,000
12-94 10,302 10,188
12-95 12,030 11,952
12-96 14,409 13,409
Average Annual Total Return
For Periods Ended December 31, 1996
One Year Since Inception
High Yield Bond Portfolio 19.77% 14.70%
Lehman Brothers Index 12.19% 11.65%
</TABLE>
The total return performance for the High Yield Bond Portfolio is shown in
comparison with the Lehman Brothers High Yield Intermediate Market Index. The
Lehman Brothers index is thought to be a better measure of portfolio performance
since it has a quality and maturity profile that more closely resembles the High
Yield Bond Portfolio.
The Lehman Brothers High Yield Intermediate Market Index is made up of
dollar-denominated, nonconvertible, SEC publicly registered fixed rate
noninvestment grade issues. The bonds will have remaining maturities of between
one and ten years and have an outstanding par value of at least $100 million.
Yankee and global bonds (SEC registered) of issuers in G-7 countries are
included. Original issue zero coupon bonds and step-up coupon structures are
also included; however, the index excludes pay-in-kind (PIK) bonds. Each bond
must be rated Ba1 or lower by Moody's Investor Service. If a Moody's rating is
unavailable, the bonds must be rated BB+ or lower by Standard & Poor's, or by
Fitch if an S&P rating is unavailable. A few unrated bonds are included in the
index; to be eligible they must have previously held a high yield rating or have
been associated with a high yield issuer. The index is an unmanaged market value
weighted index and measures the income provided by, and the price changes of,
the underlying securities.
This chart assumes an initial investment of $10,000 made on 5/3/94
(commencement of operations). Returns shown include deductions for management
and other fund expenses, and reinvestment of all dividends. Returns exclude
deductions for separate account sales loads and account fees. Past performance
is not predictive of future performance. Investment return and principal value
will fluctuate, so that your shares, when redeemed, may be worth more or less
than their original cost. The net investment rates of return shown on page 2
reflect mortality and expense risk charges deducted from the assets of the
separate account. The cost of insurance protection, which is not reflected in
the returns shown on this chart, would make the return significantly lower.
Investors are urged to obtain a personalized illustration of historical
performance which reflects the cost of insurance protection.
--
43
<PAGE>
HIGH YIELD BOND PORTFOLIO
NORTHWESTERN MUTUAL SERIES FUND, INC.
Schedule of Investments
DECEMBER 31, 1996
<TABLE>
<CAPTION>
MARKET
VALUE
BONDS (87.0%) PAR (000'S)
<S> <C> <C>
- --------------------------------------------------------------
APPAREL-TEXTILES (2.3%)
Polysindo International Finance, 11
3/8%, 6/15/06 $2,000,000 $ 2,153
----------
AUTO RELATED (2.2%)
++Exide Corporation, 12 1/4%, 12/15/04 1,100,000 1,001
Speedy Muffler King Inc., 10 7/8%,
10/1/06 1,000,000 1,072
----------
TOTAL 2,073
----------
BROADCASTING (4.4%)
Gray Communications, 10 5/8%, 10/1/06 2,000,000 2,115
Katz Media Corp., 10 1/2%,
1/15/07(144A) 1,000,000 1,025
Lamar Advertising Company, 9 5/8%,
12/1/06 1,000,000 1,035
----------
TOTAL 4,175
----------
BUILDING & CONSTRUCTION (0.8%)
Primeco Inc., 12 3/4%, 3/1/05 666,000 759
----------
CABLE TELEVISION (9.3%)
Adelphia Communications, 12 1/2%,
5/15/02 1,500,000 1,537
Adelphia Communications, 9 1/2%,
2/15/04 PIK 1,000,000 865
Cablevision Systems Corp., 9 7/8%,
5/15/06 1,000,000 1,026
Lenfest Communications, Inc., 10 1/2%,
6/15/06 2,500,000 2,637
++Marcus Cable Operating, 13 1/2%,
8/1/04 3,250,000 2,657
----------
TOTAL 8,722
----------
CHEMICALS (6.0%)
++NL Industries, Inc., 13%, 10/15/05 3,500,000 3,019
Tri Polyta Finance BV, 11 3/8%,
12/1/03 2,500,000 2,600
----------
TOTAL 5,619
----------
ENVIRONMENTAL CONTROL (1.1%)
Allied Waste North American, 10 1/4%,
12/1/06(144A) 1,000,000 1,049
----------
FINANCIAL INSTITUTION (7.0%)
First Nationwide Holdings, 12 1/2%,
4/15/03 2,000,000 2,200
First Nationwide Holdings, 10 5/8%,
10/1/03(144A) 2,000,000 2,160
Homeside Inc., 11 1/4%, 5/15/03 2,000,000 2,230
----------
TOTAL 6,590
----------
FINANCIAL SERVICES (2.2%)
Outsourcing Solutions, 11%,
11/1/06(144A) 2,000,000 2,095
----------
<CAPTION>
MARKET
VALUE
BONDS (87.0%) PAR (000'S)
<S> <C> <C>
- --------------------------------------------------------------
FOREIGN/GOVERMENT BONDS (2.2%)
Republic Of Argentina, 11%, 10/9/06 $2,000,000 $ 2,095
----------
HEALTHCARE (4.5%)
Dade International, Inc., 11 1/8%,
5/1/06 1,000,000 1,080
Prime Succession Acq. Co., 10 3/4%,
8/15/04(144A) 1,000,000 1,082
Quest Diagnostic, 10 3/4%, 12/15/06 2,000,000 2,100
----------
TOTAL 4,262
----------
LEISURE RELATED (11.7%)
Alliance Gaming, 12 7/8%, 6/30/03 1,500,000 1,590
Casino America, 12 1/2%, 8/1/03 2,000,000 1,897
Cobb Theatres/Fin Corp., 10 5/8%,
3/1/03 1,000,000 1,052
Cobblestone Holdings, Inc., 0%, 6/1/04 2,875,000 1,251
Station Casinos, Inc., 10 1/8%,
3/15/06 500,000 501
Trump Atlantic City, 11 1/4%, 5/1/06 3,000,000 2,970
Trump Hotels & Casino Resort, 15 1/2%,
6/15/05 1,500,000 1,716
----------
TOTAL 10,977
----------
MISCELLANEOUS BASIC MATERIALS (2.4%)
Cemex SA, 12 3/4%, 7/15/06 2,000,000 2,235
----------
OFFICE EQUIPMENT (1.2%)
United Stationer Supply Co., 12 3/4%,
5/1/05 1,000,000 1,105
----------
OIL & GAS INDEPENDENT (3.9%)
Bridas Corporation, 12 1/2%,
6/10/03(144A) 1,500,000 1,541
Transtexas Gas, 11 1/2%, 6/15/02 2,000,000 2,162
----------
TOTAL 3,703
----------
PAPER (2.3%)
Grupo Industrial Durango, 12 5/8%,
8/1/03 2,000,000 2,175
----------
REFINING (0.9%)
++Transamerican Refining, 18 1/2%,
2/15/02 1,000,000 820
----------
RETAIL-FOOD (8.7%)
Fleming Companies, Inc., 10 5/8%,
12/15/01 1,500,000 1,523
Grand Union Company, 12%, 9/1/04 2,000,000 2,120
Jitney-Jungle Stores, 12%, 3/1/06 2,500,000 2,650
P & C Food Markets, Inc., 11 1/2%,
10/15/01 375,000 332
Pathmark Stores, 11 5/8%, 6/15/02 1,500,000 1,530
----------
TOTAL 8,155
----------
TELECOMMUNICATIONS (8.1%)
Comtel Brasileira Ltda., 10 3/4%,
9/26/04(144A) 2,000,000 2,058
</TABLE>
--
44
<PAGE>
NORTHWESTERN MUTUAL SERIES FUND, INC.
Schedule of Investments
DECEMBER 31, 1996
<TABLE>
<CAPTION>
MARKET
VALUE
BONDS (87.0%) PAR (000'S)
- --------------------------------------------------------------
<S> <C> <C>
TELECOMMUNICATIONS (CONTINUED)
++Mobilemedia Communications, 10 1/2%,
12/1/03 $2,000,000 $ 410
Paging Network, 10%, 10/15/08(144A) 2,000,000 2,028
Sprint Spectrum L.P./Fin., 11%,
8/15/06 1,000,000 1,083
++Sprint Spectrum L.P./Fin., 12 1/2%,
8/15/06 1,000,000 673
++Telewest PLC, 11%, 10/1/07 2,000,000 1,390
----------
TOTAL 7,642
----------
TRUCKING-SHIPPING (2.3%)
Ryder System Incorporated, 10%,
12/1/06(144A) 1,000,000 1,038
Stena AB, 10 1/2%, 12/15/05 1,000,000 1,080
----------
TOTAL 2,118
----------
UTILITY-PROJECT (3.4%)
CE Casecan Water & Energy, 11.95%,
11/15/10 1,000,000 1,113
Calpine Corp., 10 1/2%, 5/15/06 2,000,000 2,118
----------
TOTAL 3,231
----------
TOTAL BONDS 81,753
----------
<CAPTION>
MARKET
VALUE
COMMON STOCK (1.5%) SHARES (000'S)
<S> <C> <C>
- --------------------------------------------------------------
APPAREL-TEXTILES (1.2%)
Ithaca Industries 136,000 $ 1,088
----------
ELECTRONICS (0.1%)
Exide Electronics Group-Warrants
(144A) 2,000 60
----------
LEISURE RELATED (0.1%)
Cobblestone Holdings, Inc. 2,875 43
----------
PAPER (0.1%)
*SDW Holdings Corporation-Warrants 20,000 80
----------
TOTAL COMMON STOCK 1,271
----------
<CAPTION>
MARKET
VALUE
PREFERRED STOCK (5.1%) SHARES (000'S)
<S> <C> <C>
- --------------------------------------------------------------
CABLE (2.0%)
Cablevision Systems Corp. PIK 10,000 $ 898
Cablevision Systems Corp. 10,293 962
----------
TOTAL 1,860
----------
LEISURE RELATED (2.1%)
Alliance Gaming PIK 15,636 1,483
Station Casinos 10,000 479
----------
TOTAL 1,962
----------
PRINTING & PUBLISHING (1.0%)
K-III Communications 10,000 980
Time Warner, Inc. 260 28
----------
TOTAL 1,008
----------
TOTAL PREFERRED STOCK 4,830
----------
<CAPTION>
MARKET
VALUE
MONEY MARKET INVESTMENTS (6.4%) PAR (000'S)
<S> <C> <C>
- --------------------------------------------------------------
FINANCIAL SERVICES (0.7%)
IBM Credit Corporation, 5.5%, 1/23/97 $ 700,000 $ 698
----------
TOBACCO (5.7%)
Philip Morris Companies, 6.5%, 1/2/97 5,400,000 5,399
----------
TOTAL MONEY MARKET
INVESTMENTS 6,097
----------
TOTAL HIGH YIELD BOND PORTFOLIO $ 93,951
----------
</TABLE>
*Non-Income Producing.
++Denotes deferred interest security that receives no coupon payments until a
predetermined date at which the stated coupon rate becomes effective.
The Accompanying Notes are an Integral Part of the Financial Statements
--
45
<PAGE>
ACCOUNTANTS' LETTER
[LOGO]
[LOGO]
REPORT OF INDEPENDENT ACCOUNTANTS
To The Northwestern Mutual Life Insurance Company and
Policyowners of Northwestern Mutual Variable Life Account
In our opinion, the accompanying combined statement of assets and liabilities
and the related combined and separate statements of operations and changes in
equity present fairly, in all material respects, the financial position of
Northwestern Mutual Variable Life Account and the Index 500 Stock Division,
Growth Stock Division, Growth and Income Stock Division, Aggressive Growth Stock
Division, International Equity Division, Select Bond Division, High Yield Bond
Division, Money Market Division and the Balanced Division thereof at December
31, 1996, the results of their operations and the changes in their equity for
the year then ended and for each of the other periods presented, in conformity
with generally accepted accounting principles. These financial statements are
the responsibility of The Northwestern Mutual Life Insurance Company's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
direct confirmation of the number of shares owned at December 31, 1996 with
Northwestern Mutual Series Fund, Inc., provide a reasonable basis for the
opinion expressed above.
[SIGNATURE]
Milwaukee, Wisconsin
January 22, 1997
--
46
<PAGE>
VARIABLE LIFE FINANCIAL STATEMENTS
NORTHWESTERN MUTUAL VARIABLE LIFE ACCOUNT
Financial Statements
DECEMBER 31, 1996
STATEMENT OF ASSETS AND LIABILITIES
(IN THOUSANDS)
<TABLE>
<S> <C> <C>
ASSETS
Investments at Market Value:
Northwestern Mutual Series Fund, Inc.
Growth Stock
9,868 shares (cost $12,373)................ $ 14,446
Aggressive Growth Stock
13,266 shares (cost $34,933)............... 41,721
International Equity
18,828 shares (cost $25,015)............... 29,335
Growth and Income Stock
12,617 shares (cost $14,934)............... 16,629
Index 500 Stock
28,578 shares (cost $43,159)............... 58,729
Money Market
14,751 shares (cost $14,751)............... 14,751
Balanced
58,687 shares (cost $80,512)............... 100,825
Select Bond
5,100 shares (cost $5,931)................. 6,243
High Yield Bond
3,542 shares (cost $3,821)................. 3,892 $ 286,571
---------
Due from Sale of Fund Shares.................................. 38
Due from Northwestern Mutual Life Insurance Company........... 170
---------
Total Assets............................................ $ 286,779
---------
---------
LIABILITIES
Due to Northwestern Mutual Life Insurance Company........... $ 38
Due on Purchase of Fund Shares.............................. 170
---------
Total Liabilities....................................... 208
---------
EQUITY (NOTE 8)
Policies Issued Before October 11, 1995..................... 240,097
Policies Issued On or After October 11, 1995................ 46,474
---------
Total Equity............................................ 286,571
---------
Total Liabilities and Equity............................ $ 286,779
---------
---------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements
--
47
<PAGE>
VARIABLE LIFE FINANCIAL STATEMENTS
NORTHWESTERN MUTUAL VARIABLE LIFE ACCOUNT
Statement of Operations and Changes in Equity
(IN THOUSANDS)
<TABLE>
<CAPTION>
AGGRESSIVE GROWTH
COMBINED GROWTH STOCK DIVISION STOCK DIVISION
----------------------------- ----------------------------- -----------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1995 1996 1995 1996 1995
------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividend Income............. $ 11,085 $ 4,153 $ 564 $ 188 $ 892 $ 54
Mortality and Expense
Risks..................... 1,102 736 46 21 139 57
Taxes....................... 461 314 19 9 57 24
------------- ------------- ------------- ------------- ------------- -------------
Net Investment Income
(Loss).................... 9,522 3,103 499 158 696 (27)
------------- ------------- ------------- ------------- ------------- -------------
REALIZED AND UNREALIZED GAIN
ON INVESTMENTS
Realized Gain on
Investments............... 2,405 1,300 88 16 301 58
Unrealized Appreciation of
Investments During the
Year...................... 21,398 30,929 1,191 906 2,690 3,798
------------- ------------- ------------- ------------- ------------- -------------
Net Gain on Investments..... 23,803 32,229 1,279 922 2,991 3,856
------------- ------------- ------------- ------------- ------------- -------------
Increase in Equity Derived
from Investment
Activity.................. 33,325 35,332 1,778 1,080 3,687 3,829
------------- ------------- ------------- ------------- ------------- -------------
EQUITY TRANSACTIONS
Policyowners' Net
Payments.................. 101,055 51,813 3,397 2,327 11,065 6,744
Policy Loans, Surrenders,
and Death Benefits........ (16,316) (10,909) (436) (251) (2,117) (830)
Mortality and Other (net)... (16,382) (9,537) (665) (427) (1,943) (1,184)
Transfers from Other
Divisions................. 45,652 12,075 4,758 1,048 14,807 3,476
Transfers to Other
Divisions................. (45,652) (12,075) (447) (186) (1,660) (368)
------------- ------------- ------------- ------------- ------------- -------------
Increase in Equity Derived
from Equity Transactions.... 68,357 31,367 6,607 2,511 20,152 7,838
------------- ------------- ------------- ------------- ------------- -------------
Net Increase in Equity........ 101,682 66,699 8,385 3,591 23,839 11,667
EQUITY
Beginning of Period......... 184,889 118,190 6,061 2,470 17,885 6,218
------------- ------------- ------------- ------------- ------------- -------------
End of Period............... $286,571 $184,889 $14,446 $6,061 $41,724 $17,885
------------- ------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- ------------- -------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements
---
48
<PAGE>
NORTHWESTERN MUTUAL VARIABLE LIFE ACCOUNT
Statement of Operations and Changes in Equity
(IN THOUSANDS)
<TABLE>
<CAPTION>
INTERNATIONAL EQUITY GROWTH & INCOME
DIVISION STOCK DIVISION
-------------------------------- -------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1995 1996 1995
-------------- -------------- -------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Dividend Income............. $ 924 $ 67 $ 1,458 $ 496
Mortality and Expense
Risks..................... 100 52 58 30
Taxes....................... 42 22 24 13
-------------- -------------- -------------- -------------
Net Investment Income
(Loss).................... 782 (7) 1,376 453
-------------- -------------- -------------- -------------
REALIZED AND UNREALIZED GAIN
ON INVESTMENTS
Realized Gain on
Investments............... 49 2 117 25
Unrealized Appreciation of
Investments During the
Year...................... 3,197 1,389 728 1,057
-------------- -------------- -------------- -------------
Net Gain on Investments..... 3,246 1,391 845 1,082
-------------- -------------- -------------- -------------
Increase in Equity Derived
from Investment
Activity.................. 4,028 1,384 2,221 1,535
-------------- -------------- -------------- -------------
EQUITY TRANSACTIONS
Policyowners' Net
Payments.................. 8,006 6,472 4,523 3,211
Policy Loans, Surrenders,
and Death Benefits........ (1,566) (634) (692) (388)
Mortality and Other (net)... (1,529) (1,156) (867) (611)
Transfers from Other
Divisions................. 6,728 2,112 3,950 1,329
Transfers to Other
Divisions................. (827) (750) (974) (312)
-------------- -------------- -------------- -------------
Increase in Equity Derived
from Equity Transactions.... 10,812 6,044 5,940 3,229
-------------- -------------- -------------- -------------
Net Increase in Equity........ 14,840 7,428 8,161 4,764
EQUITY
Beginning of Period......... 14,493 7,065 8,467 3,703
-------------- -------------- -------------- -------------
End of Period............... $ 29,333 $ 14,493 $ 16,628 $ 8,467
-------------- -------------- -------------- -------------
-------------- -------------- -------------- -------------
<CAPTION>
STOCK DIVISION MONEY MARKET DIVISION
----------------------------- -----------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1995 1996 1995
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Dividend Income............. $ 1,153 $ 282 $ 508 $ 252
Mortality and Expense
Risks..................... 221 141 47 22
Taxes....................... 93 60 17 9
------------- ------------- ------------- -------------
Net Investment Income
(Loss).................... 839 81 444 221
------------- ------------- ------------- -------------
REALIZED AND UNREALIZED GAIN
ON INVESTMENTS
Realized Gain on
Investments............... 359 339 -- --
Unrealized Appreciation of
Investments During the
Year...................... 8,074 8,323 -- --
------------- ------------- ------------- -------------
Net Gain on Investments..... 8,433 8,662 0 0
------------- ------------- ------------- -------------
Increase in Equity Derived
from Investment
Activity.................. 9,272 8,743 444 221
------------- ------------- ------------- -------------
EQUITY TRANSACTIONS
Policyowners' Net
Payments.................. 12,626 11,096 43,564 4,335
Policy Loans, Surrenders,
and Death Benefits........ (3,465) (2,239) (576) (285)
Mortality and Other (net)... (2,351) (2,021) (5,552) (645)
Transfers from Other
Divisions................. 8,372 1,623 2,573 1,210
Transfers to Other
Divisions................. (2,211) (2,683) (32,622) (1,738)
------------- ------------- ------------- -------------
Increase in Equity Derived
from Equity Transactions.... 12,971 5,776 7,387 2,877
------------- ------------- ------------- -------------
Net Increase in Equity........ 22,243 14,519 7,831 3,098
EQUITY
Beginning of Period......... 36,486 21,967 6,919 3,821
------------- ------------- ------------- -------------
End of Period............... $ 58,729 $ 36,486 $ 14,750 $ 6,919
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements
---
49
<PAGE>
VARIABLE LIFE FINANCIAL STATEMENTS
NORTHWESTERN MUTUAL VARIABLE LIFE ACCOUNT
Statement of Operations and Changes in Equity
(IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCED DIVISION SELECT BOND DIVISION HIGH YIELD BOND DIVISION
----------------------------- ----------------------------- -----------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1995 1996 1995 1996 1995
------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividend Income............. $ 5,010 $ 2,521 $ 176 $ 110 $ 400 $ 183
Mortality and Expense
Risks..................... 452 385 26 20 13 8
Taxes....................... 193 165 11 9 5 3
------------- ------------- ------------- ------------- ------------- -------------
Net Investment Income....... 4,365 1,971 139 81 382 172
------------- ------------- ------------- ------------- ------------- -------------
REALIZED AND UNREALIZED GAIN
ON INVESTMENTS
Realized Gain on
Investments............... 1,462 839 8 13 21 8
Unrealized Appreciation of
Investments During the
Year...................... 5,413 14,831 22 596 83 29
------------- ------------- ------------- ------------- ------------- -------------
Net Gain on Investments..... 6,875 15,670 30 609 104 37
------------- ------------- ------------- ------------- ------------- -------------
Increase in Equity Derived
from Investment
Activity.................. 11,240 17,641 169 690 486 209
------------- ------------- ------------- ------------- ------------- -------------
EQUITY TRANSACTIONS
Policyowners' Net
Payments.................. 15,417 15,637 1,356 1,230 1,101 761
Policy Loans, Surrenders,
and Death Benefits........ (7,030) (5,858) (191) (311) (243) (113)
Mortality and Other (net)... (3,034) (3,110) (248) (234) (193) (149)
Transfers from Other
Divisions................. 2,467 255 954 335 1,043 687
Transfers to Other
Divisions................. (5,909) (5,344) (553) (513) (449) (181)
------------- ------------- ------------- ------------- ------------- -------------
Increase in Equity Derived
from Equity Transactions.... 1,911 1,580 1,318 507 1,259 1,005
------------- ------------- ------------- ------------- ------------- -------------
Net Increase in Equity........ 13,151 19,221 1,487 1,197 1,745 1,214
EQUITY
Beginning of Period......... 87,675 68,454 4,756 3,559 2,147 933
------------- ------------- ------------- ------------- ------------- -------------
End of Period............... $100,826 $ 87,675 $ 6,243 $ 4,756 $ 3,892 $ 2,147
------------- ------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- ------------- -------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements
---
50
<PAGE>
NOTES TO FINANCIAL STATEMENTS
NORTHWESTERN MUTUAL VARIABLE LIFE ACCOUNT
Notes to Financial Statements
DECEMBER 31, 1996
NOTE 1 -- Northwestern Mutual Variable Life Account (the "Account") is
registered as a unit investment trust under the Investment Company Act of 1940
and is a segregated asset account of The Northwestern Mutual Life Insurance
Company ("Northwestern Mutual Life") used to fund variable life insurance
policies.
NOTE 2 -- The preparation of the financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. Principal
accounting policies are summarized below.
NOTE 3 -- All assets of each Division of the Account are invested in shares of
the corresponding Portfolio of Northwestern Mutual Series Fund, Inc. (the
"Fund"). The shares are valued at the Fund's offering and redemption price per
share. The Northwestern Mutual Series Fund, Inc. is a diversified open-end
investment company registered under the Investment Company Act of 1940.
NOTE 4 -- Dividend income from the Fund is recorded on the record date of the
dividends. Transactions in Fund shares are accounted for on the trade date. The
basis for determining cost on sale of Fund shares is identified cost. Purchases
and sales of Fund shares for the year ended December 31, 1996 by each Division
are shown below:
<TABLE>
<CAPTION>
PURCHASES SALES
--------------- ---------------
<S> <C> <C>
Growth Stock Division........... $ 7,412,020 $ 305,733
Aggressive Growth Division...... 21,639,501 793,842
International Equity Division... 11,936,199 340,985
Growth & Income Stock
Division........................ 7,873,227 556,889
Index 500 Stock Division........ 14,876,042 1,066,298
Money Market Division........... 19,565,721 11,733,323
Balanced Division............... 11,918,678 5,643,557
Select Bond Division............ 1,881,306 424,108
High Yield Bond Division........ 2,085,969 444,972
</TABLE>
NOTE 5 -- A deduction for mortality and expense risks is determined daily and
paid to Northwestern Mutual Life. Generally, for policies issued before October
11, 1995, and policies issued on or after October 11, 1995 the deduction is at
an annual rate of .50% and .60%, respectively, of the net assets of the Account.
The mortality risk is that insureds may not live as long as estimated. The
expense risk is that expenses of issuing and administering the policies may
exceed the estimated costs.
Certain deductions are also made from the annual or single premiums before
amounts are allocated to the Account. These deductions are for (1) sales load,
(2) administrative expenses, (3) taxes and (4) a risk charge for the guaranteed
minimum death benefit.
Additional mortality costs are deducted from the policy annually and are paid to
Northwestern Mutual Life to cover the cost of providing insurance protection.
This cost is actuarially calculated based upon the insured's age, the 1980
Commissioners Standard Ordinary Mortality Table and the amount of insurance
provided under the policy.
NOTE 6 -- Northwestern Mutual Life is taxed as a "life insurance company" under
the Internal Revenue Code. The variable life insurance policies which are funded
in the Account are taxed as part of the operations of Northwestern Mutual Life.
Policies provide that a charge for taxes may be made against the assets of the
Account. Generally, for policies issued before October 11, 1995, Northwestern
Mutual Life charges the Account at an annual rate of .20% of the Account's net
assets and reserves the right to increase, decrease or eliminate the charge for
taxes in the future. Generally, for policies issued on or after October 11,
1995, there is no charge being made against the assets of the Account for
federal income taxes, but Northwestern Mutual Life reserves the right to charge
for taxes in the future.
NOTE 7 -- The Account is credited for the policyowners' net annual premiums at
the respective policy anniversary dates regardless of when policyowners actually
pay their premiums. Northwestern Mutual Life's equity represents any unpaid
portion of net annual premiums.
--
51
<PAGE>
NORTHWESTERN MUTUAL VARIABLE LIFE ACCOUNT
Notes to Financial Statements
DECEMBER 31, 1996
NOTE 8 -- Equity Values by Division are shown below
<TABLE>
<CAPTION>
POLICIES ISSUED ON OR
AFTER OCTOBER 11, 1995
EQUITY OF
------------------------
POLICYOWNERS NML
------------- ---------
<S> <C> <C> <C>
Growth Stock Division................................................................... $ 1,990 $ 1,816 $ 3,806
Aggressive Growth Stock Division........................................................ 6,342 5,826 12,168
International Equity Division........................................................... 3,185 2,607 5,792
Growth and Income Stock Division........................................................ 2,036 1,679 3,715
Index 500 Stock Division................................................................ 4,353 3,689 8,042
Money Market Division................................................................... 2,762 6,390 9,152
Balanced Division....................................................................... 1,378 1,037 2,415
Select Bond Division.................................................................... 329 241 570
High Yield Bond Division................................................................ 462 352 814
------------- --------- ---------
$ 22,837 $ 23,637 $ 46,474
------------- --------- ---------
------------- --------- ---------
</TABLE>
<TABLE>
<CAPTION>
POLICIES ISSUED
BEFORE OCTOBER 11, 1995
EQUITY OF
------------------------
POLICYOWNERS NML
------------- ---------
<S> <C> <C> <C>
Growth Stock Division.................................................................. $ 9,235 $ 1,405 $ 10,640
Aggressive Growth Stock Division....................................................... 25,388 4,165 29,553
International Equity Division.......................................................... 20,256 3,287 23,543
Growth and Income Stock Division....................................................... 11,145 1,768 12,913
Index 500 Stock Division............................................................... 45,632 5,055 50,687
Money Market Division.................................................................. 5,263 336 5,599
Balanced Division...................................................................... 92,454 5,956 98,410
Select Bond Division................................................................... 5,184 489 5,673
High Yield Bond Division............................................................... 2,670 409 3,079
------------- --------- ----------
$ 217,227 $ 22,870 $ 240,097
------------- --------- ----------
------------- --------- ----------
</TABLE>
--
52
<PAGE>
GROWTH STOCK PORTFOLIO
NORTHWESTERN MUTUAL SERIES FUND, INC.
Growth Stock Portfolio
Financial Statements
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1996
<TABLE>
<S> <C>
ASSETS
Common Stocks (cost $121,295)......... $151,134
Money Market Investments (cost
$18,948)............................. 18,948
---------
170,082
Cash.................................. 145
Due from Sale of Fund Shares.......... 173
Due from Sale of Securities........... 165
Dividends and Interest Receivable..... 158
---------
Total Assets........................ 170,723
---------
LIABILITIES
Futures Variation Margin.............. 146
Due to Investment Advisor............. 72
Accrued Expenses...................... 23
---------
Total Liabilities................... 241
---------
NET ASSETS.............................. $170,482
---------
---------
REPRESENTED BY:
Aggregate Paid in Capital (400,000
shares authorized, $.01 par value;
116,463 shares outstanding).......... $139,825
Undistributed Net Investment Income... 32
Undistributed Accumulated Net Realized
Gain on Investments.................. 629
Net Unrealized Appreciation of:
Investment Securities............... 29,839
Index Futures Contracts............. 157
---------
Net Assets for 116,463 Shares
Outstanding.......................... $170,482
---------
---------
Net Asset Value, Offering and
Redemption Price per Share........... $ 1.46
---------
---------
</TABLE>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<S> <C>
INVESTMENT INCOME
Income
Dividends (less foreign dividend tax
of $15)............................ $ 1,903
Interest............................ 578
--------
Total Income...................... 2,481
--------
Expenses
Management Fees..................... 653
Custodian Fees...................... 17
Other Expenses...................... 61
--------
Total Expenses.................... 731
--------
Less Custodian Fees:
Paid by Affiliate............... (14)
Paid Indirectly................. (3)
--------
Total Net Expenses................ 714
--------
Net Investment Income................. 1,767
--------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FOREIGN CURRENCIES
Net Realized Gain (Loss) on
Investments:
Investment Securities............... 4,929
Index Futures Contracts............. 123
Foreign Currency Transactions....... (13)
--------
Net Realized Gain on Investments
for the Year..................... 5,039
--------
Net Change in Unrealized Appreciation
of:
Investments Securities.............. 16,856
Index Futures Contracts............. 157
--------
Net Change in Unrealized
Appreciation of Investments for
the Year......................... 17,013
--------
Net Gain on Investments............... 22,052
--------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS........................ $23,819
--------
--------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements
---
53
<PAGE>
NORTHWESTERN MUTUAL SERIES FUND, INC.
Growth Stock Portfolio
Statement of Changes in Net Assets
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEAR
ENDED DECEMBER 31,
--------------------
1996 1995
--------- --------
<S> <C> <C>
INCREASE IN NET ASSETS
Operations
Net Investment Income............... $ 1,767 $ 1,109
Net Realized Gain on Investments.... 5,039 2,321
Net Change in Unrealized
Appreciation of Investments for the
Year............................... 17,013 13,078
--------- --------
Net Increase in Net Assets
Resulting from Operations......... 23,819 16,508
--------- --------
Distributions to Shareholders from:
Net Investment Income............... (1,749) (1,105)
Net Realized Gain on Investments.... (5,031) (1,582)
--------- --------
Net Decrease in Net Assets
Resulting from Distributions to
Shareholders...................... (6,780) (2,687)
--------- --------
Fund Share Transactions
Proceeds from Sale of 45,246 and
24,515 Shares...................... 62,709 28,181
Proceeds from Shares Issued on
Reinvestment of Distributions Paid
(4,630 and 2,177 shares,
respectively)...................... 6,780 2,687
Payments for 1,147 and 866 Shares
Redeemed........................... (1,603) (1,000)
--------- --------
Net Increase in Net Assets Resulting
from Fund Share Transactions
(48,729 and 25,826 shares,
respectively)...................... 67,886 29,868
--------- --------
Total Increase in Net Assets.......... 84,925 43,689
NET ASSETS
Beginning of Year..................... 85,557 41,868
--------- --------
End of Year (includes undistributed
net investment income of $32 and $11,
respectively)........................ $170,482 $85,557
--------- --------
--------- --------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements
---
54
<PAGE>
NORTHWESTERN MUTUAL SERIES FUND, INC.
Growth Stock Portfolio
Financial Highlights
(FOR A SHARE OUTSTANDING THROUGHOUT THE YEAR)
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEAR ENDED MAY 3, 1994*
DECEMBER 31, THROUGH
-------------------- DECEMBER 31,
1996 1995 1994
--------- -------- --------------
<S> <C> <C> <C>
SELECTED PER SHARE DATA
Net Asset Value, Beginning of Year.... $ 1.26 $ 1.00 $ 1.00
Income from Investment Operations:
Net Investment Income............. 0.02 0.02 0.01
Net Realized and Unrealized Gain
on Investments.................... 0.25 0.28 --
--------- -------- --------------
Total from Investment
Operations....................... 0.27 0.30 0.01
--------- -------- --------------
Less Distributions:
Distributions from Net Investment
Income............................ (0.02) (0.02) (0.01)
Distributions from Realized Gains
on Investments.................... (0.05) (0.02) --
--------- -------- --------------
Total Distributions............. (0.07) (0.04) (0.01)
--------- -------- --------------
Net Asset Value, End of Year............ $ 1.46 $ 1.26 $ 1.00
--------- -------- --------------
--------- -------- --------------
Total Return+........................... 20.91% 30.82% 1.55%++
--------- -------- --------------
--------- -------- --------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Year (in
thousands)............................. $170,482 $85,557 $41,868
--------- -------- --------------
--------- -------- --------------
Ratio of Expenses to Average Net
Assets................................. 0.57% 0.61% 0.71%**
--------- -------- --------------
--------- -------- --------------
Ratio of Net Investment Income to
Average Net Assets..................... 1.41% 1.77% 2.30%**
--------- -------- --------------
--------- -------- --------------
Portfolio Turnover Rate................. 37.61% 46.83% 16.51%
--------- -------- --------------
--------- -------- --------------
Average Commission Rate #............... $ 0.0629
---------
---------
</TABLE>
*Commencement of Operations
**Computed on an annualized basis.
+Total Return includes deductions for management and other fund expenses;
excludes deductions for sales loads and account fees.
++Reflects total return for the period; not annualized.
# Disclosure required for fiscal years beginning after September 1, 1995.
The Accompanying Notes are an Integral Part of the Financial Statements
---
55
<PAGE>
AGGRESSIVE GROWTH STOCK PORTFOLIO
NORTHWESTERN MUTUAL SERIES FUND, INC.
Aggressive Growth Stock Portfolio
Financial Statements
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1996
<TABLE>
<S> <C>
ASSETS
Common Stocks (cost $552,974)......... $791,634
Money Market Investments (cost
$79,756)............................. 79,756
---------
871,390
Cash.................................. 129
Due from Sale of Securities........... 5,555
Due from Sale of Fund Shares.......... 441
Dividends and Interest Receivable..... 84
---------
Total Assets........................ 877,599
---------
LIABILITIES
Due on Purchase of Securities......... 3,823
Due on Redemption of Fund Shares...... 1,414
Due to Investment Advisor............. 399
Accrued Expenses...................... 37
---------
Total Liabilities................... 5,673
---------
NET ASSETS.............................. $871,926
---------
---------
REPRESENTED BY:
Aggregate Paid in Capital (700,000
shares authorized, $.01 par value;
277,222 shares outstanding).......... $581,301
Undistributed Net Investment Loss..... (210)
Undistributed Accumulated Net Realized
Gain on Investments.................. 52,175
Net Unrealized Appreciation of
Investments.......................... 238,660
---------
Net Assets for 277,222 Shares
Outstanding.......................... $871,926
---------
---------
Net Asset Value, Offering and
Redemption Price per Share........... $ 3.15
---------
---------
</TABLE>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<S> <C>
INVESTMENT INCOME
Income
Interest............................ $ 2,974
Dividends (less foreign dividend tax
of $6)............................. 832
---------
Total Income...................... 3,806
---------
Expenses
Management Fees..................... 3,987
Custodian Fees...................... 37
Other Expenses...................... 29
---------
Total Expenses.................... 4,053
---------
Less Custodian Fees:
Paid by Affiliate............ (16)
Paid Indirectly.............. (21)
---------
Total Net Expenses................ 4,016
---------
Net Investment Loss................... (210)
---------
REALIZED AND UNREALIZED GAIN ON
INVESTMENTS
Net Realized Gain on Investments...... 52,175
Net Change in Unrealized Appreciation
of Investments for the Year.......... 56,387
---------
Net Gain on Investments............... 108,562
---------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS.............. $108,352
---------
---------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements
---
56
<PAGE>
NORTHWESTERN MUTUAL SERIES FUND, INC.
Aggressive Growth Stock Portfolio
Statement of Changes in Net Assets
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEAR
ENDED DECEMBER 31,
---------------------
1996 1995
--------- ---------
<S> <C> <C>
INCREASE IN NET ASSETS
Operations
Net Investment Income (Loss)........ $ (210) $ 572
Net Realized Gain on Investments.... 52,175 24,986
Net Change in Unrealized
Appreciation of Investments for the
Year............................... 56,387 124,412
--------- ---------
Net Increase in Net Assets
Resulting from Operations......... 108,352 149,970
--------- ---------
Distributions to Shareholders from:
Net Investment Income............... (572) (503)
Net Realized Gain on Investments.... (24,986) (1,836)
--------- ---------
Net Decrease in Net Assets
Resulting from Distributions to
Shareholders...................... (25,558) (2,339)
--------- ---------
Fund Share Transactions
Proceeds from Sale of 64,691 and
50,142 Shares...................... 198,427 115,824
Proceeds from Shares Issued on
Reinvestment of Distributions Paid
(8,276 and 1,097 shares,
respectively)...................... 25,558 2,339
Payments for 3,953 and 6,659 Shares
Redeemed........................... (11,867) (15,876)
--------- ---------
Net Increase in Net Assets
Resulting from Fund Share
Transactions
(69,014 and 44,580 shares,
respectively)..................... 212,118 102,287
--------- ---------
Total Increase in Net Assets.......... 294,912 249,918
NET ASSETS
Beginning of Year..................... 577,014 327,096
--------- ---------
End of Year (includes undistributed
net investment
(loss)/income of ($210) and $572,
respectively)........................ $871,926 $577,014
--------- ---------
--------- ---------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements
---
57
<PAGE>
NORTHWESTERN MUTUAL SERIES FUND, INC.
Aggressive Growth Stock Portfolio
Financial Highlights
(FOR A SHARE OUTSTANDING THROUGHOUT THE YEAR)
<TABLE>
<CAPTION>
FOR THE
PERIOD
MAY 3,
FOR THE YEAR 1994*
ENDED DECEMBER 31, THROUGH
--------------------- DECEMBER 31,
1996 1995 1994
--------- --------- ---------------
<S> <C> <C> <C>
SELECTED PER SHARE DATA
Net Asset Value, Beginning of Year.... $ 2.77 $ 2.00 $ 1.91
Income from Investment Operations:
Net Investment Income............... -- -- --
Net Realized and Unrealized Gain on
Investments........................ 0.49 0.78 0.09
--------- --------- ---------------
Total from Investment
Operations....................... 0.49 0.78 0.09
--------- --------- ---------------
Less Distributions:
Distributions from Net Investment
Income............................. -- -- --
Distributions from Realized Gains on
Investments........................ (0.11) (0.01) --
--------- --------- ---------------
Total Distributions............... (0.11) (0.01) --
--------- --------- ---------------
Net Asset Value, End of Year.......... $ 3.15 $ 2.77 $ 2.00
--------- --------- ---------------
--------- --------- ---------------
Total Return+......................... 17.70% 39.29% 4.47%++
--------- --------- ---------------
--------- --------- ---------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Year (in
thousands)........................... $871,926 $577,014 $327,096
--------- --------- ---------------
--------- --------- ---------------
Ratio of Expenses to Average Net
Assets............................... 0.54% 0.56% 0.58%**
--------- --------- ---------------
--------- --------- ---------------
Ratio of Net Investment Income/(Loss)
to Average Net Assets................ (0.03%) 0.13% 0.29%**
--------- --------- ---------------
--------- --------- ---------------
Portfolio Turnover Rate............... 47.25% 37.84% 21.54%
--------- --------- ---------------
--------- --------- ---------------
Average Commission Rate #............. $ 0.0513
---------
---------
</TABLE>
* Commencement of Operations.
** Computed on an annualized basis.
+ Total Return includes deductions for management and other fund expenses;
excludes deductions for sales loads and account fees.
++ Reflects total return for the period; not annualized.
# Disclosure required for fiscal years beginning after September 1, 1995.
The Accompanying Notes are an Integral Part of the Financial Statements
---
58
<PAGE>
INTERNATIONAL EQUITY PORTFOLIO
NORTHWESTERN MUTUAL SERIES FUND, INC.
International Equity Portfolio
Financial Statements
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1996
<TABLE>
<S> <C>
ASSETS
Common Stocks (cost $362,094)......... $450,525
Money Market Investments (cost
$38,031)............................. 38,031
Bonds (cost $14,986).................. 15,125
---------
503,681
Cash.................................. 16
Dividends and Interest Receivable..... 1,771
Due from Sale of Securities........... 1,082
Due from Purchase of Fund Shares...... 156
---------
Total Assets........................ 506,706
---------
LIABILITIES
Due on Sale of Fund Shares............ 495
Accrued Expenses...................... 376
Due on Purchase of Securities......... 358
Due to Investment Advisor............. 288
---------
Total Liabilities................... 1,517
---------
NET ASSETS.............................. $505,189
---------
---------
REPRESENTED BY:
Aggregate Paid in Capital (700,000
shares authorized, $.01 par value;
324,246 shares outstanding).......... $396,978
Undistributed Net Investment Income... 12,699
Undistributed Accumulated Net Realized
Gain on Investments.................. 6,939
Net Unrealized Appreciation of:
Investment Securities............... 88,570
Foreign Currency Transactions....... 3
---------
Net Assets for 324,246 Shares
Outstanding.......................... $505,189
---------
---------
Net Asset Value, Offering and
Redemption Price per Share........... $ 1.56
---------
---------
</TABLE>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<S> <C>
INVESTMENT INCOME
Income
Dividends (less foreign dividend tax
of $690)........................... $ 13,211
Interest............................ 2,777
Other Income........................ 12
---------
Total Income...................... 16,000
---------
Expenses
Management Fees..................... 2,820
Custodian Fees...................... 439
Other Expenses...................... 127
---------
Total Expenses.................... 3,386
---------
Net Investment Income................. 12,614
---------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FOREIGN CURRENCIES
Net Realized Gain (Loss) on:
Investment Securities............... 7,905
Foreign Currency Transactions....... (514)
---------
Net Realized Gain For the Year.... 7,391
Net Change in Unrealized Appreciation
of:
Investment Securities............... 61,337
Foreign Currency Transactions....... 153
---------
Net Change in Unrealized
Appreciation for the Year........ 61,490
---------
Net Gain on Investments............... 68,881
---------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS........................ $ 81,495
---------
---------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements
---
59
<PAGE>
NORTHWESTERN MUTUAL SERIES FUND, INC.
International Equity Portfolio
Statement of Changes in Net Assets
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEAR
ENDED DECEMBER 31,
---------------------
1996 1995
--------- ---------
<S> <C> <C>
INCREASE IN NET ASSETS
Operations
Net Investment Income............... $ 12,614 $ 8,437
Net Realized Gain on Investments.... 7,391 11,455
Net Unrealized Appreciation of
Investments for the Year........... 61,490 22,907
--------- ---------
Net Increase in Net Assets
Resulting from Operations......... 81,495 42,799
--------- ---------
Distributions to Shareholders from:
Net Investment Income............... (8,311) --
Net Realized Gain on Investments.... (11,653) (2,171)
--------- ---------
Net Decrease in Net Assets
Resulting from Distributions to
Shareholders...................... (19,964) (2,171)
--------- ---------
Fund Share Transactions
Proceeds from Sale of 64,977 and
28,399 Shares...................... 92,514 35,839
Proceeds from Shares Issued on
Reinvestment of Distributions Paid
(14,362 and 1,740 shares,
respectively)...................... 19,964 2,171
Payments for 7,589 and 23,252 Shares
Redeemed........................... (10,947) (29,044)
--------- ---------
Net Increase in Net Assets Resulting
from Fund Share Transactions
(71,750 and 6,887 shares,
respectively)...................... 101,531 8,966
--------- ---------
Total Increase in Net Assets.......... 163,062 49,594
NET ASSETS
Beginning of Year..................... 342,127 292,533
--------- ---------
End of Year (includes undistributed
net investment income of $12,699 and
$8,396 respectively)................. $505,189 $342,127
--------- ---------
--------- ---------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements
---
60
<PAGE>
NORTHWESTERN MUTUAL SERIES FUND, INC.
International Equity Portfolio
Financial Highlights
(FOR A SHARE OUTSTANDING THROUGHOUT THE YEAR)
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEAR MAY 3, 1994*
ENDED DECEMBER 31, THROUGH
--------------------- DECEMBER 31,
1996 1995 1994
--------- --------- ---------------
<S> <C> <C> <C>
SELECTED PER SHARE DATA
Net Asset Value, Beginning of Year.... $ 1.35 $ 1.19 $ 1.22
Income from Investment Operations:
Net Investment Income............. 0.04 0.04 0.02
Net Realized and Unrealized Gain
(Loss) on Investments............ 0.24 0.13 (0.02)
--------- --------- ---------------
Total from Investment
Operations..................... 0.28 0.17 0.00
--------- --------- ---------------
Less Distributions:
Distributions from Net Investment
Income........................... (0.03) -- (0.02)
Distributions from Realized Gains
on Investments................... (0.04) (0.01) (0.01)
--------- --------- ---------------
Total Distributions............. (0.07) (0.01) (0.03)
--------- --------- ---------------
Net Asset Value, End of Year............ $ 1.56 $ 1.35 $ 1.19
--------- --------- ---------------
--------- --------- ---------------
Total Return+........................... 21.01% 14.57% 0.11%++
--------- --------- ---------------
--------- --------- ---------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Year (in
thousands)............................. $505,189 $342,127 $292,533
--------- --------- ---------------
--------- --------- ---------------
Ratio of Expenses to Average Net
Assets................................. 0.81% 0.85% 0.87%**
--------- --------- ---------------
--------- --------- ---------------
Ratio of Net Investment Income to
Average Net Assets..................... 3.02% 2.68% 2.28%**
--------- --------- ---------------
--------- --------- ---------------
Portfolio Turnover Rate................. 17.07% 26.71% 10.97%
--------- --------- ---------------
--------- --------- ---------------
Average Commission Rate #............... $ 0.0151
---------
---------
</TABLE>
*Commencement of Operations
**Computed on an annualized basis.
+Total Return includes deductions for total net expenses; excludes deductions
for sales loads and account fees.
++Reflects total return for the period; not annualized.
# Disclosure required for fiscal years beginning after September 1, 1995.
The Accompanying Notes are an Integral Part of the Financial Statements
---
61
<PAGE>
GROWTH AND INCOME STOCK PORTFOLIO
NORTHWESTERN MUTUAL SERIES FUND, INC.
Growth and Income Stock Portfolio
Financial Statements
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1996
<TABLE>
<S> <C>
ASSETS
Common Stocks (cost $203,377)......... $227,698
Money Market Investments (cost
$5,390).............................. 5,390
Bonds (cost $909)..................... 913
---------
234,001
Cash.................................. 85
Dividends and Interest Receivable..... 358
Due from Sale of Securities........... 119
Due from Sale of Fund Shares.......... 7
---------
Total Assets........................ 234,570
---------
LIABILITIES
Due on Redemption of Fund Shares...... 151
Due to Investment Advisor............. 121
Due on Purchase of Securities......... 81
Accrued Expenses...................... 33
---------
Total Liabilities................... 386
---------
NET ASSETS.............................. $234,184
---------
---------
REPRESENTED BY:
Aggregate Paid in Capital (400,000
shares authorized, $.01 par value;
177,728 shares outstanding).......... $203,771
Undistributed Net Investment Income... 25
Undistributed Accumulated Net Realized
Gain on Investments.................. 6,063
Net Unrealized Appreciation of
Investments.......................... 24,325
---------
Net Assets for 177,728 Shares
Outstanding.......................... $234,184
---------
---------
Net Asset Value, Offering and
Redemption Price per Share........... $ 1.32
---------
---------
</TABLE>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<S> <C>
INVESTMENT INCOME
Income
Dividends (less foreign dividend tax
of $27)............................ $ 3,457
Interest............................ 342
---------
Total Income...................... 3,799
---------
Expenses
Management Fees..................... 1,122
Custodian Fees...................... 24
Other Expenses...................... 23
---------
Total Expenses.................... 1,169
---------
Less Custodian Fees:
Paid by Affiliate............ (20)
Paid Indirectly.............. (4)
---------
Total Net Expenses................ 1,145
---------
Net Investment Income................. 2,654
---------
REALIZED AND UNREALIZED
GAIN ON INVESTMENTS
Net Realized Gain on Investments...... 21,066
Net Change in Unrealized Appreciation
of Investments for the Year.......... 11,131
---------
Net Gain on Investments............... 32,197
---------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS.............. $ 34,851
---------
---------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements
---
62
<PAGE>
NORTHWESTERN MUTUAL SERIES FUND, INC.
Growth and Income Stock Portfolio
Statement of Changes in Net Assets
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEAR
ENDED DECEMBER 31,
---------------------
1996 1995
--------- ---------
<S> <C> <C>
INCREASE IN NET ASSETS
Operations
Net Investment Income............... $ 2,654 $ 1,680
Net Realized Gain on Investments.... 21,066 9,722
Net Change in Unrealized
Appreciation of Investments for the
Year............................... 11,131 14,711
--------- ---------
Net Increase in Net Assets
Resulting from Operations......... 34,851 26,113
--------- ---------
Distributions to Shareholders from:
Net Investment Income............... (2,646) (1,667)
Net Realized Gain on Investments.... (18,392) (6,435)
--------- ---------
Net Decrease in Net Assets
Resulting from Distributions to
Shareholders...................... (21,038) (8,102)
--------- ---------
Fund Share Transactions
Proceeds from Sale of 51,364 and
41,708 Shares...................... 65,912 47,441
Proceeds from Shares Issued on
Reinvestment of Distributions Paid
(15,944 and 6,769 shares,
respectively)...................... 21,038 8,102
Payments for 2,670 and 1,144 Shares
Redeemed........................... (3,502) (1,331)
--------- ---------
Net Increase in Net Assets
Resulting from Fund Share
Transactions
(64,638 and 47,333 shares,
respectively)..................... 83,448 54,212
--------- ---------
Total Increase in Net Assets.......... 97,261 72,223
NET ASSETS
Beginning of Year..................... 136,923 64,700
--------- ---------
End of Year (includes undistributed
net investment income of $25 and $17,
respectively)........................ $234,184 $136,923
--------- ---------
--------- ---------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements
---
63
<PAGE>
NORTHWESTERN MUTUAL SERIES FUND, INC.
Growth and Income Stock Portfolio
Financial Highlights
(FOR A SHARE OUTSTANDING THROUGHOUT THE YEAR)
<TABLE>
<CAPTION>
FOR THE
PERIOD
MAY 3,
FOR THE YEAR 1994*
ENDED DECEMBER 31, THROUGH
--------------------- DECEMBER 31,
1996 1995 1994
--------- --------- ---------------
<S> <C> <C> <C>
SELECTED PER SHARE DATA
Net Asset Value, Beginning of Year.... $ 1.21 $ 0.98 $ 1.00
Income from Investment Operations:
Net Investment Income............... 0.02 0.02 0.01
Net Realized and Unrealized Gain
(Loss) on Investments.............. 0.23 0.29 (0.01)
--------- --------- ---------------
Total from Investment
Operations....................... 0.25 0.31 (0.00)
--------- --------- ---------------
Less Distributions:
Distributions from Net Investment
Income............................. (0.02) (0.02) (0.01)
Distributions from Realized Gains on
Investments........................ (0.12) (0.06) (0.01)
--------- --------- ---------------
Total Distributions............... (0.14) (0.08) (0.02)
--------- --------- ---------------
Net Asset Value, End of Year.......... $ 1.32 $ 1.21 $ 0.98
--------- --------- ---------------
--------- --------- ---------------
Total Return+......................... 19.97% 31.12% 0.34%++
--------- --------- ---------------
--------- --------- ---------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Year (in
thousands)........................... $234,184 $136,923 $ 64,700
--------- --------- ---------------
--------- --------- ---------------
Ratio of Expenses to Average Net
Assets............................... 0.62% 0.69% 0.78%**
--------- --------- ---------------
--------- --------- ---------------
Ratio of Net Investment Income to
Average Net Assets................... 1.44% 1.68% 1.93%**
--------- --------- ---------------
--------- --------- ---------------
Portfolio Turnover Rate............... 93.92% 80.00% 54.18%
--------- --------- ---------------
--------- --------- ---------------
Average Commission Rate #............. $ 0.0515
---------
---------
</TABLE>
* Commencement of Operations.
** Computed on an annualized basis.
+ Total Return includes deductions for management and other fund expenses;
excludes deductions for sales loads and account fees.
++ Reflects total return for the period; not annualized.
# Disclosure required for fiscal years beginning after September 1, 1995.
The Accompanying Notes are an Integral Part of the Financial Statements
---
64
<PAGE>
INDEX 500 STOCK PORTFOLIO
NORTHWESTERN MUTUAL SERIES FUND, INC.
Index 500 Stock Portfolio
Financial Statements
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1996
<TABLE>
<S> <C>
ASSETS
Common Stocks (cost $480,349)......... $700,000
Money Market Investments (cost
$39,662)............................. 39,657
Preferred Stock (cost $40)............ 104
---------
739,761
Cash.................................. 97
Dividends and Interest Receivable..... 1,178
Due from Sale of Fund Shares.......... 259
---------
Total Assets........................ 741,295
---------
LIABILITIES
Futures Variation Margin.............. 745
Due on Redemption of Fund Shares...... 324
Due to Investment Advisor............. 130
Accrued Expenses...................... 30
---------
Total Liabilities................... 1,229
---------
NET ASSETS.............................. $740,066
---------
---------
REPRESENTED BY:
Aggregate Paid in Capital (500,000
shares authorized, $.01 par value;
360,059 shares outstanding).......... $489,109
Undistributed Net Investment Income... 13,866
Undistributed Accumulated Net Realized
Gain on Investments.................. 16,652
Net Unrealized Appreciation of:
Investment Securities............... 219,710
Index Futures Contracts............. 729
---------
Net Assets for 360,059 Shares
Outstanding.......................... $740,066
---------
---------
Net Asset Value, Offering and
Redemption Price per Share........... $ 2.06
---------
---------
</TABLE>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<S> <C>
INVESTMENT INCOME
Income
Dividends (less foreign dividend tax
of $75)............................ $ 12,257
Interest............................ 2,897
---------
Total Income...................... 15,154
---------
Expenses
Management Fees..................... 1,230
Custodian Fees...................... 69
Other Expenses...................... 58
---------
Total Expenses.................... 1,357
---------
Less Custodian Fees:
Paid by Affiliate............ (62)
Paid Indirectly.............. (7)
---------
Total Net Expenses................ 1,288
---------
Net Investment Income................. 13,866
---------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Net Realized Gain on Investments:
Investment Securities............... 8,382
Index Futures Contracts............. 8,632
---------
Net Realized Gain on Investments
for the Year..................... 17,014
---------
Net Change in Unrealized Appreciation
(Depreciation) of:
Investment Securities............... 96,293
Index Futures Contracts............. (19)
---------
Net Change in Unrealized
Appreciation of Investments for
the Year......................... 96,274
---------
Net Gain on Investments............. 113,288
---------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS........................ $127,154
---------
---------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements
---
65
<PAGE>
NORTHWESTERN MUTUAL SERIES FUND, INC.
Index 500 Stock Portfolio
Statement of Changes in Net Assets
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEAR
ENDED DECEMBER 31,
---------------------
1996 1995
--------- ---------
<S> <C> <C>
INCREASE IN NET ASSETS
Operations
Net Investment Income............... $ 13,866 $ 10,021
Net Realized Gain on Investments.... 17,014 8,912
Net Change in Unrealized
Appreciation of Investments for the
Year............................... 96,274 105,468
--------- ---------
Net Increase in Net Assets
Resulting from Operations......... 127,154 124,401
--------- ---------
Disributions to Shareholders from:
Net Investment Income............... (6,192) (3,894)
Net Realized Gain on Investments.... (9,632) --
--------- ---------
Net Decrease in Net Assets
Resulting from Distributions to
Shareholders...................... (15,824) (3,894)
--------- ---------
Fund Share Transactions
Proceeds from Sale of 72,277 and
47,195 Shares...................... 134,034 72,382
Proceeds from Shares Issued on
Reinvestment of Distributions Paid
(9,021 and 2,593 shares,
respectively)...................... 15,824 3,894
Payments for 8,757 and 11,954 Shares
Redeemed........................... (16,255) (17,773)
--------- ---------
Net Increase in Net Assets Resulting
from Fund Share Transactions
(72,541 and 37,834 shares,
respectively)...................... 133,603 58,503
--------- ---------
Total Increase in Net Assets.......... 244,933 179,010
NET ASSETS
Beginning of Year..................... 495,133 316,123
--------- ---------
End of Year (includes undistributed
net investment income of $13,866 and
$6,192 respectively)................. $740,066 $495,133
--------- ---------
--------- ---------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements
---
66
<PAGE>
NORTHWESTERN MUTUAL SERIES FUND, INC.
Index 500 Stock Portfolio
Financial Highlights
(FOR A SHARE OUTSTANDING THROUGHOUT THE YEAR)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
-------------------------------------------------------
1996 1995 1994 1993 1992
--------- --------- --------- -------- --------
<S> <C> <C> <C> <C> <C>
SELECTED PER SHARE DATA
Net Asset Value, Beginning of Year.... $ 1.72 $ 1.27 $ 1.29 $ 1.33 $ 1.31
Income from Investment Operations:
Net Investment Income............. 0.04 0.04 0.03 0.04 0.03
Net Realized and Unrealized Gain
(Loss) on Investments............ 0.35 0.42 (0.01) 0.09 0.03
--------- --------- --------- -------- --------
Total from Investment
Operations..................... 0.39 0.46 0.02 0.13 0.06
--------- --------- --------- -------- --------
Less Distributions:
Distributions from Net Investment
Income........................... (0.02) (0.01) (0.03) (0.03) (0.03)
Distributions from Realized Gains
on Investments................... (0.03) -- (0.01) (0.14) (0.01)
--------- --------- --------- -------- --------
Total Distributions............. (0.05) (0.01) (0.04) (0.17) (0.04)
--------- --------- --------- -------- --------
Net Asset Value, End of Year............ $ 2.06 $ 1.72 $ 1.27 $ 1.29 $ 1.33
--------- --------- --------- -------- --------
Total Return+........................... 22.75% 37.25% 1.21% 9.90% 4.54%
--------- --------- --------- -------- --------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Year (in
thousands)............................. $740,066 $495,133 $316,123 $25,479 $17,288
--------- --------- --------- -------- --------
--------- --------- --------- -------- --------
Ratio of Expenses to Average Net
Assets................................. 0.21% 0.21% 0.24% 0.30% 0.30%
--------- --------- --------- -------- --------
--------- --------- --------- -------- --------
Ratio of Net Investment Income to
Average Net Assets..................... 2.27% 2.51% 3.10% 2.55% 2.61%
--------- --------- --------- -------- --------
--------- --------- --------- -------- --------
Portfolio Turnover Rate................. 3.45% 3.19% 5.59% 62.69% 39.93%
--------- --------- --------- -------- --------
--------- --------- --------- -------- --------
Average Commission Rate #............... $ 0.0306
---------
---------
</TABLE>
+Total Return includes deductions for management and other fund expenses;
excludes deductions for sales loads and account fees.
#Disclosure required for fiscal years beginning after September 1, 1995.
The Accompanying Notes are an Integral Part of the Financial Statements
---
67
<PAGE>
MONEY MARKET PORTFOLIO
NORTHWESTERN MUTUAL SERIES FUND, INC.
Money Market Portfolio
Financial Statements
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1996
<TABLE>
<S> <C>
ASSETS
Money Market Investments
(cost $174,258)...................... $174,258
Cash.................................. 268
Due from Sale of Fund Shares.......... 1,785
Interest Receivable................... 31
---------
Total Assets........................ 176,342
---------
LIABILITIES
Due to Investment Advisor............. 44
---------
Total Liabilities................... 44
---------
NET ASSETS.............................. $176,298
---------
---------
REPRESENTED BY:
Aggregate Paid in Capital (300,000
shares authorized, $.01 par value;
176,314 shares outstanding).......... $176,298
---------
Net Assets for 176,314 Shares
Outstanding.......................... $176,298
---------
---------
Net Asset Value, Offering and
Redemption Price per Share........... $ 1.00
---------
---------
</TABLE>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<S> <C>
INVESTMENT INCOME
Income
Interest............................ $ 8,018
---------
Expenses
Management Fees..................... 442
---------
Net Investment Income................. 7,576
---------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS.............. $ 7,576
---------
---------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements
---
68
<PAGE>
NORTHWESTERN MUTUAL SERIES FUND, INC.
Money Market Portfolio
Statement of Changes in Net Assets
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEAR
ENDED DECEMBER 31,
---------------------
1996 1995
--------- ---------
<S> <C> <C>
INCREASE IN NET ASSETS
Operations
Net Investment Income............... $ 7,576 $ 6,333
--------- ---------
Net Increase in Net Assets
Resulting from Operations......... 7,576 6,333
--------- ---------
Distributions to Shareholders from:
Net Investment Income............... (7,576) (6,333)
--------- ---------
Net Decrease in Net Assets
Resulting from Distributions to
Shareholders...................... (7,576) (6,333)
--------- ---------
Fund Share Transactions
Proceeds from Sale of 122,068 and
74,140 Shares...................... 122,068 74,140
Proceeds from Shares Issued on
Reinvestment of Distributions Paid
(7,576 and 6,333 shares,
respectively)...................... 7,576 6,333
Payments for 85,918 and 52,118
Shares Redeemed.................... (85,918) (52,118)
--------- ---------
Net Increase in Net Assets
Resulting from Fund Share
Transactions
(43,726 and 28,355 shares,
respectively)..................... 43,726 28,355
--------- ---------
Total Increase in Net Assets.......... 43,726 28,355
NET ASSETS
Beginning of Year..................... 132,572 104,217
--------- ---------
End of Year (includes no undistributed
net investment income) $176,298 $132,572
--------- ---------
--------- ---------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements
---
69
<PAGE>
NORTHWESTERN MUTUAL SERIES FUND, INC.
Money Market Portfolio
Financial Highlights
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
FOR THE YEARS
ENDED DECEMBER 31,
---------------------------------------------------------
1996 1995 1994 1993 1992
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
SELECTED PER SHARE DATA
Net Asset Value, Beginning of Year.... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Net Investment Income............... 0.05 0.06 0.05 0.03 0.03
Less Distributions from Net
Investment
Income............................. (0.05) (0.06) (0.05) (0.03) (0.03)
--------- --------- --------- --------- ---------
Net Asset Value, End of Year.......... $ 1.00 $ 1.00 1.00 1.00 1.00
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Total Return+......................... 5.29% 5.82% 4.06% 2.88% 3.49%
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Year (in
thousands)........................... $176,298 $132,572 $104,217 $ 12,657 14,091
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Ratio of Expenses to Average Net
Assets............................... 0.30% 0.30% 0.30% 0.30% 0.30%
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Ratio of Net Investment Income to
Average Net Assets................... 5.13% 5.61% 4.64% 2.87% 3.40%
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
+ Total Return includes deductions for management expenses; excludes deductions
for sales loads and account fees.
The Accompanying Notes are an Integral Part of the Financial Statements
---
70
<PAGE>
BALANCED PORTFOLIO
NORTHWESTERN MUTUAL SERIES FUND, INC.
Balanced Portfolio
Financial Statements
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1996
<TABLE>
<S> <C>
ASSETS
Common Stock (cost $767,743).......... $1,256,996
Bonds (cost $690,469)................. 696,110
Money Market Investments (cost
$369,450)............................ 369,786
Preferred Stock (cost $79)............ 209
-----------
2,323,101
Cash.................................. 86
Dividends and Interest Receivable..... 12,204
Due from Sale of Securities........... 1,820
Due from Sale of Fund Shares.......... 168
-----------
Total Assets........................ 2,337,379
-----------
LIABILITIES
Due on Purchase of Securities......... 7,100
Due on Redemption of Fund Shares...... 3,059
Due to Investment Advisor............. 614
Due on Futures Variation Margin....... 372
-----------
Total Liabilities................... 11,145
-----------
NET ASSETS.............................. $2,326,234
-----------
REPRESENTED BY:
Aggregate Paid in Capital
(2,000,000 shares authorized, $.01
par value; 1,353,952 shares
outstanding)......................... $1,712,739
Undistributed Net Investment Income... 86,699
Undistributed Accumulated Net Realized
Gain on Investments.................. 31,435
Net Unrealized Appreciation of:
Investment Securities............... 495,360
Index Futures Contracts............. 1
-----------
Net Assets for 1,353,952 Shares
Outstanding.......................... $2,326,234
-----------
-----------
Net Asset Value, Offering and
Redemption Price per Share........... $ 1.72
-----------
-----------
</TABLE>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<S> <C>
INVESTMENT INCOME
Income
Interest............................ $ 68,022
Dividends (less foreign dividend tax
of $152)........................... 25,205
---------
Total Income...................... 93,227
---------
Expenses
Management Fees..................... 6,578
---------
Net Investment Income................. 86,649
---------
REALIZED AND UNREALIZED GAIN ON
INVESTMENTS
Net Realized Gain on Investments:
Investment Securities............... 25,151
Index Futures Contracts............. 2,818
---------
Net Realized Gain on Investments
for the Year..................... 27,969
---------
Net Change In Unrealized Appreciation
of:
Investment Securities............... 163,236
Index Futures Contracts............. 1,259
---------
Net Change in Unrealized
Appreciation of Investments for
the Year......................... 164,495
---------
Net Gain on Investments............... 192,464
---------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS........................ $279,113
---------
---------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statement
---
71
<PAGE>
NORTHWESTERN MUTUAL SERIES FUND, INC.
Balanced Portfolio
Statement of Changes in Net Assets
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEAR
ENDED DECEMBER 31,
-------------------------
1996 1995
----------- -----------
<S> <C> <C>
INCREASE IN NET ASSETS
Operations
Net Investment Income............... $ 86,649 $ 83,546
Net Realized Gain on Investments.... 27,969 41,518
Net Change in Unrealized
Appreciation of Investments for the
Year............................... 164,495 318,046
----------- -----------
Net Increase in Net Assets
Resulting from Operations......... 279,113 443,110
----------- -----------
Distributions to Shareholders from:
Net Investment Income............... (83,501) (53,160)
Net Realized Gain on Investments.... (35,154) (8,179)
----------- -----------
Net Decrease in Net Assets
Resulting from Distributions to
Shareholders...................... (118,655) (61,339)
Fund Share Transactions
Proceeds from Sale of 51,923 and
35,282 Shares...................... 84,008 51,862
Proceeds from Shares Issued on
Reinvestment of Distributions Paid
(77,149 and 44,352 shares,
respectively)...................... 118,655 61,339
Payments for 73,638 and 96,890
Shares Redeemed.................... (120,176) (138,810)
----------- -----------
Net Increase (Decrease) in Net
Assets Resulting from Fund Share
Transactions
(55,434 and (17,256) shares,
respectively)...................... 82,487 (25,609)
----------- -----------
Total Increase in Net Assets.......... 242,945 356,162
NET ASSETS
Beginning of Year................... 2,083,289 1,727,127
----------- -----------
End of Year (includes undistributed
net investment income of $86,699
and $83,551 respectively).......... $2,326,234 $2,083,289
----------- -----------
----------- -----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements
---
72
<PAGE>
NORTHWESTERN MUTUAL SERIES FUND, INC.
Balanced Portfolio
Financial Highlights
(FOR A SHARE OUTSTANDING THROUGHOUT THE YEAR)
<TABLE>
<CAPTION>
FOR THE YEARS
ENDED DECEMBER 31,
-------------------------------------------------------------
1996 1995 1994 1993 1992
----------- ----------- ----------- -------- --------
<S> <C> <C> <C> <C> <C>
SELECTED PER SHARE DATA
Net Asset Value, Beginning of Year.... $ 1.60 $ 1.31 $ 1.33 $ 1.39 $ 1.40
Income from Investment Operations:
Net Investment Income............. 0.06 0.07 0.04 0.06 0.06
Net Realized and Unrealized
Gain(Loss) on Investments........ 0.15 0.27 (0.05) 0.09 0.01
----------- ----------- ----------- -------- --------
Total from Investment
Operations..................... 0.21 0.34 (0.01) 0.15 0.07
----------- ----------- ----------- -------- --------
Less Distributions:
Distributions from Net Investment
Income............................. (0.06) (0.04) (0.00) (0.07) (0.06)
Distributions from Realized Gains on
Investments........................ (0.03) (0.01) (0.01) (0.14) (0.02)
----------- ----------- ----------- -------- --------
Total Distributions............... (0.09) (0.05) (0.01) (0.21) (0.08)
----------- ----------- ----------- -------- --------
Net Asset Value, End of Year............ $ 1.72 $ 1.60 $ 1.31 $ 1.33 $ 1.39
----------- ----------- ----------- -------- --------
----------- ----------- ----------- -------- --------
Total Return+........................... 13.45% 26.39% 0.16% 9.91% 5.61%
----------- ----------- ----------- -------- --------
----------- ----------- ----------- -------- --------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Year (in
thousands)........................... $2,326,234 $2,083,289 $1,727,127 $68,910 $66,006
----------- ----------- ----------- -------- --------
----------- ----------- ----------- -------- --------
Ratio of Expenses to Average Net
Assets............................... 0.30% 0.30% 0.30% 0.30% 0.30%
----------- ----------- ----------- -------- --------
----------- ----------- ----------- -------- --------
Ratio of Net Investment Income to
Average Net Assets................... 3.95% 4.40% 4.78% 4.24% 4.45%
----------- ----------- ----------- -------- --------
----------- ----------- ----------- -------- --------
Portfolio Turnover Rate............... 67.66% 37.28% 42.35% 70.91% 43.28%
----------- ----------- ----------- -------- --------
----------- ----------- ----------- -------- --------
Average Commission Rate #............. $ 0.0320
-----------
-----------
</TABLE>
+Total Return includes deductions for management expenses; excludes deductions
for sales loads and account fees.
# Disclosure required for fiscal years beginning after September 1, 1995.
The Accompanying Notes are an Integral Part of the Financial Statements
---
73
<PAGE>
SELECT BOND PORTFOLIO
NORTHWESTERN MUTUAL SERIES FUND, INC.
Select Bond Portfolio
Financial Statements
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1996
<TABLE>
<S> <C>
ASSETS
Bonds (cost $187,645)................. $189,388
Money Market Investments (cost
$22,375)............................. 22,416
---------
211,804
Cash.................................. 67
Interest Receivable................... 2,816
Due from Sale of Fund Shares.......... 32
---------
Total Assets........................ 214,719
---------
LIABILITIES
Due on Redemption of Fund Shares...... 329
Due to Investment Advisor............. 57
---------
Total Liabilities................... 386
---------
NET ASSETS.............................. $214,333
---------
---------
REPRESENTED BY:
Aggregate Paid in Capital
(400,000 shares authorized, $.01 par
value; 175,166 shares outstanding)... $200,018
Undistributed Net Investment Income... 13,300
Undistributed Accumulated Net Realized
Loss on Investments.................. (769)
Net Unrealized Appreciation of
Investments.......................... 1,784
---------
Net Assets for 175,166 Shares
Outstanding.......................... $214,333
---------
---------
Net Asset Value, Offering and
Redemption Price per Share........... $ 1.22
---------
---------
</TABLE>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<S> <C>
INVESTMENT INCOME
Income
Interest............................ $13,903
--------
Expenses
Management Fees..................... 615
--------
Net Investment Income................. 13,288
--------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Net Realized Gain on Investments...... 569
Net Unrealized Depreciation of
Investments for the Period........... (6,987)
--------
Net Loss on Investments............... (6,418)
--------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS........................ $ 6,870
--------
--------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements
--
74
<PAGE>
NORTHWESTERN MUTUAL SERIES FUND, INC.
Select Bond Portfolio
Statement of Changes in Net Assets
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEAR
ENDED DECEMBER 31,
---------------------
1996 1995
--------- ---------
<S> <C> <C>
INCREASE IN NET ASSETS
Operations
Net Investment Income............... $ 13,288 $ 11,680
Net Realized Gain on Investments.... 569 1,666
Net Change in Unrealized
Appreciation (Depreciation) of
Investments for the Year........... (6,987) 17,183
--------- ---------
Net Increase in Net Assets
Resulting from Operations......... 6,870 30,529
--------- ---------
Distributions to Shareholders from:
Net Investment Income............... (7,025) (4,709)
Net Realized Gain on Investments.... -- --
--------- ---------
Net Decrease in Net Assets
Resulting from Distributions to
Shareholders...................... (7,025) (4,709)
--------- ---------
Fund Share Transactions
Proceeds from Sale of 23,808 and
20,151 Shares...................... 28,507 23,377
Proceeds from Shares Issued on
Reinvestment of Distributions Paid
(6,130 and 4,071 shares,
respectively)...................... 7,025 4,709
Payments for 16,109 and 12,511
Shares Redeemed.................... (19,186) (14,272)
--------- ---------
Net Increase in Net Assets Resulting
from Fund Share Transactions
(13,829 and 11,711 shares,
respectively)...................... 16,346 13,814
--------- ---------
Total Increase in Net Assets.......... 16,191 39,634
NET ASSETS
Beginning of Year..................... 198,142 158,508
--------- ---------
End of Year (includes undistributed
net investment income of $13,300 and
$7,037 respectively)................. $214,333 $198,142
--------- ---------
--------- ---------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements
--
75
<PAGE>
NORTHWESTERN MUTUAL SERIES FUND, INC.
Select Bond Portfolio
Financial Highlights
(FOR A SHARE OUTSTANDING THROUGHOUT THE YEAR)
<TABLE>
<CAPTION>
FOR THE YEARS
ENDED DECEMBER 31,
-------------------------------------------------------
1996 1995 1994 1993 1992
--------- --------- --------- -------- --------
<S> <C> <C> <C> <C> <C>
SELECTED PER SHARE DATA
Net Asset Value, Beginning of Year.... $ 1.23 $ 1.06 $ 1.15 $ 1.14 $ 1.18
Income from Investment Operations:
Net Investment Income............. 0.07 0.07 0.06 0.08 0.09
Net Realized and Unrealized Gain
(Loss) on Investments............ (0.04) 0.13 (0.09) 0.05 --
--------- --------- --------- -------- --------
Total from Investment
Operations..................... 0.03 0.20 (0.03) 0.13 0.09
--------- --------- --------- -------- --------
Less Distributions:
Dividends from Net Investment
Income........................... (0.04) (0.03) (0.06) (0.08) (0.09)
Distributions from Realized Gains
on Investments................... -- -- -- (0.04) (0.04)
--------- --------- --------- -------- --------
Total Distributions............. (0.04) (0.03) (0.06) (0.12) (0.13)
--------- --------- --------- -------- --------
Net Asset Value, End of Year............ $ 1.22 $ 1.23 $ 1.06 $ 1.15 $ 1.14
--------- --------- --------- -------- --------
--------- --------- --------- -------- --------
Total Return+........................... 3.31% 19.10% (2.28%) 10.81% 7.74%
--------- --------- --------- -------- --------
--------- --------- --------- -------- --------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Year (in
thousands)............................. $214,333 $198,142 $158,508 $17,485 $15,851
--------- --------- --------- -------- --------
--------- --------- --------- -------- --------
Ratio of Expenses to Average Net
Assets................................. 0.30% 0.30% 0.30% 0.30% 0.30%
--------- --------- --------- -------- --------
--------- --------- --------- -------- --------
Ratio of Net Investment Income to
Average Net Assets..................... 6.48% 6.61% 7.02% 6.40% 7.52%
--------- --------- --------- -------- --------
--------- --------- --------- -------- --------
Portfolio Turnover Rate................. 195.98% 69.06% 108.00% 67.69% 63.29%
--------- --------- --------- -------- --------
--------- --------- --------- -------- --------
</TABLE>
+Total Return includes deductions for management expenses; excludes deductions
for sales loads and account fees.
The Accompanying Notes are an Integral Part of the Financial Statements
--
76
<PAGE>
HIGH YIELD BOND PORTFOLIO
NORTHWESTERN MUTUAL SERIES FUND, INC.
High Yield Bond Portfolio
Financial Statements
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1996
<TABLE>
<S> <C>
ASSETS
Bonds (cost $79,187).................. $81,753
Money Market Investments (cost
$6,097).............................. 6,097
Preferred Stock (cost $4,499)......... 4,830
Common Stock (cost $1,139)............ 1,271
--------
93,951
Cash.................................. 50
Dividends and Interest Receivable..... 1,419
Due from Sale of Fund Shares.......... 100
--------
Total Assets........................ 95,520
--------
LIABILITIES
Due on Purchase of Securities......... 1,570
Due to Investment Advisor............. 44
Accrued Expenses...................... 28
--------
Total Liabilities................... 1,642
--------
NET ASSETS.............................. $93,878
--------
--------
REPRESENTED BY:
Aggregate Paid in Capital (400,000
shares authorized, $.01 par value;
85,421 shares outstanding)........... $89,726
Overdistributed Net Investment
Income............................... (297)
Undistributed Accumulated Net Realized
Gain on Investments.................. 1,420
Net Unrealized Appreciation of
Investments.......................... 3,029
--------
Net Assets for 85,421 Shares
Outstanding.......................... $93,878
--------
--------
Net Asset Value, Offering and
Redemption Price per Share........... $ 1.10
--------
--------
</TABLE>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<S> <C>
INVESTMENT INCOME
Income
Interest............................ $ 7,134
Dividends........................... 111
Other Income........................ 55
--------
Total Income...................... 7,300
--------
Expenses
Management Fees..................... 409
Other Expenses...................... 24
Custodian Fees...................... 12
--------
Total Expenses.................... 445
--------
Less Custodian Fees:............
Paid by Affiliate............ (4)
Paid Indirectly.............. (8)
--------
Total Net Expenses................ 433
--------
Net Investment Income................. 6,867
--------
REALIZED AND UNREALIZED GAIN ON
INVESTMENTS
Net Realized Gain on Investments...... 3,638
Net Change in Unrealized Appreciation
of Investments for the Year.......... 2,795
--------
Net Gain on Investments............... 6,433
--------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS........................ $13,300
--------
--------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements
--
77
<PAGE>
NORTHWESTERN MUTUAL SERIES FUND, INC.
High Yield Bond Portfolio
Statement of Changes in Net Assets
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEAR
ENDED DECEMBER 31,
-------------------
1996 1995
-------- --------
<S> <C> <C>
INCREASE IN NET ASSETS
Operations
Net Investment Income............... $ 6,867 $ 4,548
Net Realized Gain on Investments.... 3,638 970
Net Change in Unrealized
Appreciation of Investments for the
Year............................... 2,795 1,206
-------- --------
Net Increase in Net Assets
Resulting from Operations......... 13,300 6,724
-------- --------
Distributions to Shareholders from:
Net Investment Income............... (7,126) (4,604)
Net Realized Gain on Investments.... (2,541) (465)
-------- --------
Net Decrease in Net Assets
Resulting from Distributions to
Shareholders...................... (9,667) (5,069)
-------- --------
Fund Share Transactions
Proceeds from Sale of 23,742 and
14,751 Shares...................... 26,454 15,535
Proceeds from Shares Issued on
Reinvestment of Distributions Paid
(8,840 and 4,919 shares,
respectively)...................... 9,667 5,069
Payments for 1,697 and 1,724 Shares
Redeemed........................... (1,850) (1,822)
-------- --------
Net Increase in Net Assets Resulting
from Fund Share Transactions
(30,885 and 17,946 shares,
respectively)...................... 34,271 18,782
-------- --------
Total Increase in Net Assets.......... 37,904 20,437
NET ASSETS
Beginning of Year..................... 55,974 35,537
-------- --------
End of Year (includes
(over)distributed net investment
income of $(297) and ($38),
respectively)........................ $93,878 $55,974
-------- --------
-------- --------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements
--
78
<PAGE>
NORTHWESTERN MUTUAL SERIES FUND, INC.
High Yield Bond Portfolio
Financial Highlights
(FOR A SHARE OUTSTANDING THROUGHOUT THE YEAR)
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEAR MAY 3, 1994*
ENDED DECEMBER 31, THROUGH
------------------- DECEMBER 31,
1996 1995 1994
-------- -------- ---------------
<S> <C> <C> <C>
SELECTED PER SHARE DATA
Net Asset Value, Beginning of Year.... $ 1.03 $ 0.97 $ 1.00
Income from Investment Operations:
Net Investment Income............. 0.09 0.10 0.06
Net Realized and Unrealized Gain
(Loss) on Investments............. 0.10 0.07 (0.03)
-------- -------- ---------------
Total from Investment
Operations....................... 0.19 0.17 0.03
-------- -------- ---------------
Less Distributions:
Distributions from Net Investment
Income............................ (0.09) (0.10) (0.06)
Distributions from Realized Gains
on Investments.................... (0.03) (0.01) --
-------- -------- ---------------
Total Distributions............. (0.12) (0.11) (0.06)
-------- -------- ---------------
Net Asset Value, End of Year............ $ 1.10 $ 1.03 $ 0.97
-------- -------- ---------------
-------- -------- ---------------
Total Return+........................... 19.77% 16.78% 3.02%++
-------- -------- ---------------
-------- -------- ---------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Year (in
thousands)............................. $93,878 $55,974 $35,537
-------- -------- ---------------
-------- -------- ---------------
Ratio of Expenses to Average Net
Assets................................. 0.60% 0.65% 0.73%**
-------- -------- ---------------
-------- -------- ---------------
Ratio of Net Investment Income to
Average Net Assets..................... 9.54% 9.90% 9.40%**
-------- -------- ---------------
-------- -------- ---------------
Portfolio Turnover Rate................. 143.92% 116.57% 119.48%
-------- -------- ---------------
-------- -------- ---------------
</TABLE>
*Commencement of Operations.
**Computed on an annualized basis.
+Total Return includes deductions for management and other fund expenses;
excludes deductions for sales loads and account fees.
++Reflects total return for the period; not annualized.
The Accompanying Notes are an Integral Part of the Financial Statements
--
79
<PAGE>
ACCOUNTANTS' LETTER
[LOGO]
[LOGO]
Report of Independent Accountants
To The Shareholders and Board of Directors of
Northwestern Mutual Series Fund, Inc.
In our opinion, the accompanying statements of assets and liabilities, including
the schedules of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the Index 500 Stock Portfolio,
Growth Stock Portfolio, Growth and Income Stock Portfolio, Aggressive Growth
Stock Portfolio, International Equity Portfolio, Select Bond Portfolio, High
Yield Bond Portfolio, Money Market Portfolio and Balanced Portfolio
(constituting Northwestern Mutual Series Fund, Inc., hereafter referred to as
the "Fund") at December 31, 1996, the results of each of their operations for
the year then ended, the changes in each of their net assets for the two years
in the period ended December 31, 1996, and the financial highlights for the
periods indicated, in conformity with generally accepted accounting principles.
These financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentations. We believe that our audits, which included confirmations of the
securities at December 31, 1996 by correspondence with the custodian and brokers
and the application of alternative auditing procedues where confirmations from
brokers were not received, provide a reasonable basis for the opinion expressed
above.
[SIGNATURE]
Milwaukee, Wisconsin
January 24, 1997
--
80
<PAGE>
NOTES TO FINANCIAL STATEMENTS
NORTHWESTERN MUTUAL SERIES FUND, INC.
Notes to Financial Statements
DECEMBER 31, 1996
NOTE 1 -- Northwestern Mutual Series Fund, Inc. (the "Series Fund"), is
registered as a diversified open-end investment company under the Investment
Company Act of 1940. The Series Fund consists of the Growth Stock Portfolio,
Aggressive Growth Stock Portfolio, International Equity Portfolio, Growth and
Income Stock Portfolio, Index 500 Stock Portfolio, Money Market Portfolio,
Balanced Portfolio, Select Bond Portfolio and the High Yield Bond Portfolio (the
"Portfolios"). Shares are presently offered only to The Northwestern Mutual Life
Insurance Company ("Northwestern Mutual Life") and its segregated asset
accounts.
NOTE 2 -- The preparation of the financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Principal accounting policies are summarized below.
NOTE 3 -- Bonds are valued on the basis of prices furnished by a service which
determines prices for normal institutional size trading units of bonds, without
regard to exchange or over-the-counter prices. When quotations are not readily
available, bonds are valued at fair market value determined by procedures
approved by the Board of Directors. Stocks listed on a national or foreign stock
exchange are valued at the final sale price, or final bid price in absence of a
sale. Stocks not listed on a national or foreign stock exchange are valued at
the closing bid price on the over-the-counter market. Money market investments,
other than in the Money Market Portfolio, with maturities exceeding sixty days
but generally not exceeding one year are valued by marking to market on the
basis of an average of the most recent bid prices or yields. Money market
investments with maturities of sixty days or less and all securities in the
Money Market Portfolio are valued on an amortized cost basis or, if the current
market value differs substantially from the amortized cost, by marking to
market.
NOTE 4 -- Securities and other assets and liabilities denominated in foreign
currencies are translated into U.S. dollar amounts on the date of valuation.
Purchases and sales of securities and income items denominated in foreign
currencies are translated in U.S. dollar amounts on the respective dates of such
transactions. When the International Equity Portfolio purchases or sells a
foreign security it may enter into a foreign exchange currency contract to
minimize market risk from the trade date to the settlement date of such
transaction. Such foreign exchange currency contracts are marked to market
daily.
The International Equity Portfolio does not separately report the results of
operations due to changes in foreign exchange rates on investments from the
fluctuations arising from changes in market prices of securities held. Such
fluctuations are included with the net realized and unrealized gain or loss from
investments.
Net realized foreign exchange gains or losses arise from sales of foreign
currencies, currency gains or losses realized between the trade date and
settlement date on security transactions, the differences between the amounts of
dividends and foreign withholding taxes recorded on the portfolio's books, and
the U.S. dollar equivalent of the amounts actually received or paid.
NOTE 5 -- The Growth Stock, Index 500 Stock and Balanced Portfolios invest in
futures contracts as an alternative to investing in individual securities. The
Growth Stock, Index 500 Stock and Balanced Portfolios could be exposed to market
risk due to changes in the value of the underlying securities or due to an
illiquid secondary market. Futures contracts are marked to market daily based
upon quoted settlement prices. The Portfolios receive from or pay to brokers an
amount of cash equal to the daily fluctuation in the value of the contracts.
Such receipts or payments, known as the "variation margin," are recorded by the
Portfolios as unrealized gains or losses. When the contract is closed, the
Portfolios record a realized gain or loss equal to the difference between the
value of the contract at the time it was opened and the value at the time it was
closed.
--
81
<PAGE>
NORTHWESTERN MUTUAL SERIES FUND, INC.
Notes to Financial Statements
DECEMBER 31, 1996
NOTE 6 -- Interest income and discounts earned are recorded daily on the accrual
basis and dividend income is recorded on the ex-dividend date or as soon as
information from foreign issuers is available. Where applicable, dividends are
recorded net of foreign dividend tax. Discounts and premiums on securities
purchased are amortized over the life of the respective securities when required
for federal income tax purposes using the effective interest method. Securities
transactions are accounted for on trade date. The basis for determining cost on
sale of securities is identified cost. For the year ended December 31, 1996,
transactions in securities other than money market investments were:
<TABLE>
<CAPTION>
U.S. GOVT TOTAL SECURITY
TOTAL SECURITY SECURITY SALES/
PORTFOLIOS PURCHASES PURCHASES MATURITIES
- -------------------------------------------------------------------- --------------- --------------- ---------------
<S> <C> <C> <C>
Growth Stock........................................................ $ 92,432,695 $ -- $ 43,240,855
Aggressive Growth Stock............................................. 473,091,115 -- 329,288,685
International Equity................................................ 144,514,367 3,350,368 64,158,289
Growth and Income Stock............................................. 232,277,491 -- 167,347,713
Index 500 Stock..................................................... 149,838,996 -- 19,284,417
Balanced............................................................ 1,272,977,928 1,011,352,177 1,249,018,098
Select Bond......................................................... 386,838,980 333,888,847 345,500,480
High Yield Bond..................................................... 125,005,893 -- 98,272,325
<CAPTION>
U.S. GOVT
SECURITY
SALES/
PORTFOLIOS MATURITIES
- -------------------------------------------------------------------- -------------
<S> <C>
Growth Stock........................................................ $ --
Aggressive Growth Stock............................................. --
International Equity................................................ 3,450,000
Growth and Income Stock............................................. --
Index 500 Stock..................................................... --
Balanced............................................................ 939,723,809
Select Bond......................................................... 286,152,657
High Yield Bond..................................................... --
</TABLE>
- --------------------------------------------------------------------------------
NOTE 7 -- The Series Fund and its Portfolios are parties to annually renewable
contracts pursuant to which each Portfolio pays a charge for investment
management and administrative services. Each Portfolio pays a monthly fee for
these investment advisory services at an annual rate based on the average daily
net asset values of each Portfolio. For the Index 500 Stock Portfolio the rate
is .20%, and for the Select Bond, Money Market and Balanced Portfolios the rate
is .30%. For the other Portfolios the rate for the investment advisory fee is
graded by the asset size of the Portfolio according to the following schedule:
<TABLE>
<CAPTION>
FIRST $50 NEXT $50
PORTFOLIOS MILLION MILLION EXCESS
- --------------------------------- ----------- ----------- -------------
<S> <C> <C> <C>
Growth Stock..................... .60% .50% .40%
Aggressive Growth Stock.......... .80% .65% .50%
International Equity............. .85% .65% .65%
Growth and Income Stock.......... .70% .60% .55%
High Yield Bond.................. .60% .50% .40%
</TABLE>
These amounts are paid to Northwestern Mutual Investment Services, Inc. ("NMIS")
a wholly-owned subsidiary of Northwestern Mutual Life, which is the manager and
investment adviser of the Fund. Northwestern Mutual Life is also a party to the
agreement. Other costs for each Portfolio are paid either by the Portfolios,
Northwestern Mutual Life, or NMIS depending upon the applicable agreement in
place.
Certain portfolios pay a portion of their custodian fees indirectly through
expense offset arrangements. Custodian fees are reduced for Portfolios that
maintain compensating balances in non-interest bearing accounts. The portfolios
could have invested the assets used to pay for the custodian fees, had the
assets not been used in the expense offset arrangements. As of December 31,
1996, the amounts paid through expense offset arrangements are $6,935 in the
Index 500 Portfolio, $2,738 in the Growth Stock Portfolio, $4,443 in the Growth
and Income Stock Portfolio, $20,886 in the Aggressive Growth Stock Portfolio and
$7,697 in the High Yield Bond Portfolio.
J.P. Morgan Investment Management, Inc. ("J.P. Morgan") and Templeton Investment
Counsel, Inc. ("Templeton Counsel") have been retained under an investment
sub-advisory agreement to provide investment advice and, in general, to conduct
the management investment program of the Growth and Income Stock Portfolio and
the International Equity Portfolio, respectively. Of the advisory fees received
by NMIS from the Growth and Income Stock Portfolio, .45% on the first $100
million of the Portfolio's net assets, .40% on the next $100 million, .35% on
the next $200 million and .30% on the net assets in excess of $400 million will
be paid by NMIS to J.P. Morgan. Of the advisory fees received by NMIS from the
International Equity Portfolio, .50% on the first $100 million of the
Portfolio's net assets and .40% on net assets in excess of $100 million will be
paid by NMIS to Templeton Counsel.
--
82
<PAGE>
NORTHWESTERN MUTUAL SERIES FUND, INC.
Notes to Financial Statements
DECEMBER 31, 1996
NOTE 8 -- The Series Fund has elected to be taxed as a regulated investment
company meeting certain requirements under the Internal Revenue Code. Since it
expects to distribute all net investment income and net realized capital gains,
the Series Fund anticipates incurring no federal income taxes. A net realized
capital loss of $768,562 in the Select Bond Portfolio carried forward from 1995
and is available to offset future net realized capital gains. The amount expires
in 2002. A capital loss carryforward of $569,291 was utilized in the Select Bond
Portfolio during the year ended December 31, 1996. As of December 31, 1996, the
federal income tax basis of investments is the same as the cost basis in the
financial statements except for the International Equity Portfolio. The federal
income tax basis of investments was $416,950,675 for the International Equity
Portfolio. The net unrealized appreciation (depreciation) and the gross
unrealized appreciation (depreciation) for federal income tax purposes are shown
below:
<TABLE>
<CAPTION>
(IN THOUSANDS)
AGGRESSIVE GROWTH AND
GROWTH GROWTH INTERNATIONAL INCOME
STOCK STOCK EQUITY STOCK
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
----------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
Gross unrealized appreciation.......................................... $ 30,964 $ 250,980 $ 106,810 $ 28,789
Gross unrealized depreciation.......................................... (1,125) (12,320) (20,079) (4,464)
----------- ----------- ------------ -----------
Net unrealized appreciation............................................ $ 29,839 $ 238,660 $ 86,731 $ 24,325
----------- ----------- ------------ -----------
----------- ----------- ------------ -----------
<CAPTION>
INDEX 500 HIGH YIELD
STOCK BALANCED SELECT BOND BOND
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
----------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
Gross unrealized appreciation.......................................... $ 228,673 $ 523,565 $ 3,130 $ 4,431
Gross unrealized depreciation.......................................... (8,963) (28,205) (1,346) (1,402)
----------- ----------- ------------ -----------
Net unrealized appreciation............................................ $ 219,710 $ 495,360 $ 1,784 $ 3,029
----------- ----------- ------------ -----------
----------- ----------- ------------ -----------
</TABLE>
- --------------------------------------------------------------------------------
Taxable distributions from net investment income and realized capital gains in
the Portfolios differ from book amounts earned during the period due to
differences in the timing of capital recognition and due to the reclassification
of certain gains or losses from capital to income.
For Federal income tax purposes, net unrealized appreciation of $157,175,
$729,050 and $900 on open futures contracts for the Growth Stock, Index 500
Stock and Balanced Portfolios, respectively, is required to be treated as
realized gains.
NOTE 9 -- Dividends from net investment income and net realized capital gains
are declared each year for the Index 500 Stock, Growth Stock, Growth and Income
Stock, Aggressive Growth Stock, International Equity, Select Bond, High Yield
Bond and Balanced Portfolios and each business day for the Money Market
Portfolio. Dividend distributions are described below.
A dividend was declared on May 6, 1996, payable to shareholders of record on May
6, 1996. Dividends paid from 1995 net investment income and 1995 net capital
gains were as follows:
<TABLE>
<CAPTION>
NET
INVESTMENT NET CAPITAL
PORTFOLIOS INCOME GAINS
- ------------------------------------- ------------ ------------
<S> <C> <C>
Growth Stock......................... $ 10,843 $ 621,491
Aggressive Growth Stock.............. 571,524 24,985,733
International Equity................. 8,311,009 11,652,962
Growth and Income Stock.............. 17,236 3,387,875
Index 500 Stock...................... 6,191,044 9,631,529
Balanced............................. 83,501,280 35,153,584
Select Bond.......................... 7,024,686 --
High Yield Bond...................... 73,082 322,834
</TABLE>
A dividend was declared on December 27, 1996, payable to shareholders of record
on December 27, 1996. Dividends paid from 1996 net investment income and 1996
net capital gains were as follows:
<TABLE>
<CAPTION>
NET INVESTMENT NET CAPITAL
PORTFOLIOS INCOME GAINS
- -------------------------------- --------------- ---------------
<S> <C> <C>
Growth Stock.................... 1,738,492 4,409,792
Growth and Income Stock......... 2,628,599 15,003,715
High Yield Bond................. 7,052,505 2,218,336
</TABLE>
NOTE 10 -- NML voluntarily reimburses the International Equity Portfolio for the
benefit NML receives from foreign dividend taxes charged against the Portfolio.
The amount reimbursed represents approximately 65% of the foreign dividend tax
withheld from the Portfolio. Reimbursements are recorded when foreign dividend
taxes are accrued. This voluntary reimbursement began April 1, 1996 and totals
$921,388 as of December 31, 1996.
--
83
<PAGE>
NOTES
--
84
<PAGE>
Northwestern
Mutual
Life-Registered Trademark-
720 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
VARIABLE LIFE TRANSFER / ALLOCATION / DOLLAR COST AVERAGING POLICYOWNER
SERVICES
<TABLE>
<S> <C> <C>
Insured Policy Number Date
GA# SA# Business Number:
Home Number:
</TABLE>
A TOTAL OF SIX DIVISIONS MAY BE ELECTED WITH A MINIMUM OF 10% IN EACH DIVISION.
THIS APPLIES TO EXISTING ASSETS, FUTURE ALLOCATIONS AND DOLLAR COST AVERAGING.
<TABLE>
<S><C> <C>
1. REDISTRIBUTION OF EXISTING ASSETS:
Complete this section if you want to redistribute the money already
invested. Future investments will continue to be allocated as they were
prior to the transfer, unless section 2 is completed.
INVESTMENT DIVISIONS CHANGE TO
Select Bond ------------%
International Equity ------------%
Money Market ------------%
Balanced ------------%
Index 500 Stock ------------%
Aggressive Growth Stock ------------%
High Yield Bond ------------%
Growth Stock ------------%
Growth and Income Stock ------------%
Total ----100 ----%
2. ALLOCATION OF FUTURE PREMIUM/DIVIDENDS:
Complete this section to change where your future Premium/ Dividends are
invested. Allocations of future investments will be effective with the next
Premium/Dividend deposit.
ALLOCATION OF
FUTURE
INVESTMENT DIVISIONS PREMIUMS/DIVIDENDS
Select Bond ------------%
International Equity ------------%
Money Market ------------%
Balanced ------------%
Index 500 Stock ------------%
Aggressive Growth Stock ------------%
High Yield Bond ------------%
Growth Stock ------------%
Growth and Income Stock ------------%
Total ----100 ----%
3. DOLLAR COST AVERAGING (DCA): FOR VCL ONLY
Effective date for the first DCA transfer.
/ / The month following the date this form is signed. Must have assets in
Money Market on that date. Choose Money Market in section 1 and Money
Market in section 2
/ / With the next Premium/Dividend deposit, choose Money Market in section
2.
How would you like the fund transferred? Choose one:
/ / Transfer in monthly installments so that at year end, Money Market
valance will be zero.
/ / Specified amount to be transferred monthly of $ ----------------.
Select Bond ------------%
International Equity ------------%
Balanced ------------%
Index 500 Stock ------------%
Aggressive Growth Stock ------------%
High Yield Bond ------------%
Growth Stock ------------%
Growth and Income Stock ------------%
Total ----100 ----%
4. TERMINATION OF DOLLAR COST AVERAGING:
/ / IMMEDIATELY / / NEXT POLICY ANNIVERSARY
Any existing funds will remain in the Money Market Division unless you elect
to transfer assets. Future premium and dividends will be allocated on the
policy anniversary date according to your allocation instructions.
</TABLE>
5. SPECIAL INSTRUCTIONS:
- --------------------------------------------------------------------------------
------------------------------------------------------------------------------
6. EFFECTIVE DATE:
This asset transfer and/or allocaiton of future investments shall be
effective on
------------------------ (insert specific future date if desired). If no date
is specified, or if this form is not received at NML's Home Office (see
address on reverse side) on or prior to 3:00 p.m. Central time on that date,
this transfer shall be effective on the date this form is received (complete
and signed) at NML's Home Office.
7. SIGNATURE OF OWNER(S)/TRUSTEE REQUIRED (TITLE MUST BE INCLUDED):
- -------------------- Date signed
- ------------
- -------------------- Date signed
- ------------
18-1425 (2/96) WORD 6
<PAGE>
ADDITIONAL INFORMATION
1. REDISTRIBUTION OF EXISTING ASSETS: The Owner may transfer the assets invested
for this policy to any of the Divisions, as long as these assets, following
the transfer, are allocated among not more than six Divisions. Transfers may
be made as often as twelve times in a policy year.
2. ALLOCATION OF FUTURE PREMIUM/DIVIDENDS: Allocation of the first net annual
premium will be allocated to the Money Market Division until the Initial
Allocation Date. On the Initial Allocation Date, amounts in the Money Market
Division will be allocated in accordance with the application.
3. DOLLAR COST AVERAGING (DCA): If DCA is chosen, Money Market must be one of
the Divisions elected for future premium/dividend allocation. A total of six
Divisions may be elected between current and future assets and DCA.
4. TERMINATION OF DOLLAR COST AVERAGING (DCA): Any assets still in the Money
Market Division will remain, unless YOU elect to transfer them.
HOW TO SUBMIT THIS FORM
FIRST CLASS MAIL
Please mail form to Northwestern Mutual Life, 720 E. Wisconsin, WI 53202,
ATTENTION POS.
FAX
The properly completed and signed form may be FAXed to the Home Office at the
numbers provided. Fax telephone numbers listed by POS Regions are:
<TABLE>
<S> <C> <C> <C>
East 414-299-4268 Central 414-299-4982
West 414-299-4268 South 414-299-3382
EPS 414-299-5123
</TABLE>
The original form is NOT needed. Please keep it for your records.
LINK
NML Agents only: If timing is critical and FAX equipment is unavailable, this
request may be LINKed to the Home Office. You must have a properly completed and
signed form in your possession. The original signed form MUST be received in the
Home Office within five (5) working days from the date of the LINK. The
transaction will take effect based on the time that the LINK is received in the
Home Office.
SIGNATURE INSTRUCTIONS
SIGNATURE BY OWNER
All Owners must sign their names as they appear in the policy contract. If the
Owner's name has changed since the policy was issued, he/she should add his/her
present surname to his/her name as it appears in the policy contract.
SIGNATURE BY ASSIGNEE
If the policy is assigned, the assignee must sign the form. See rules below if
the assignee is a corporation, partnership or trust.
SIGNATURE ON BEHALF OF CORPORATION
If the policyowner is a corporation, an officer of the corporation must sign on
behalf of the corporation with his/her title. The name of the corporation must
appear above the signature.
SIGNATURE ON BEHALF OF PARTNERSHIP
If the policyowner is a partnership, the name of the partnership must appear
above the signature. A partner other than the Insured must sign.
SIGNATURE ON BEHALF OF TRUST
If the partnership is a trust, the authorized Trustee must sign his/her name,
followed by the word "Trustee." The name of the trust must appear above the
signature.
<PAGE>
NOTES
--
87
<PAGE>
NOTES
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88
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NORTHWESTERN MUTUAL SERIES FUND, INC.
DIRECTORS
James D. Ericson .... President and Chief Executive Officer, Northwestern Mutual
Life,
..................................................................... Milwaukee
Martin F. Stein ................ Chariman of the Board, EyeCare One Corporation,
..................................................................... Milwaukee
John K. MacIver ............ Partner, Michael Best & Friedrich Attorneys at Law,
..................................................................... Milwaukee
Stephen N. Graff ......................... Retired Partner, Arthur Andersen, LLP
..................................................................... Milwaukee
William J. Blake ........................ Chairman, Blake Financial Corporation,
..................................................................... Milwaukee
OFFICERS
James D. Ericson ..................................................... President
Mark G. Doll ........................................ Vice President & Treasurer
Merrill C. Lundberg .................................................. Secretary
Barbara E. Courtney ................................................. Controller
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This report is submitted for the general information of owners of
Northwestern Mutual Variable Life policies. This report
is not authorized for distribution to prospective purchasers of variable
life policies unless it is accompanied by an effective prospectus.
Northwestern Mutual Variable Life policies are sold through individuals who,
in addition to being licensed life insurance agents of Northwestern Mutual
Life, are registered representatives of Northwestern Mutual Investment
Services, Inc., a wholly-owned subsidiary of Northwestern Mutual Life and a
registered broker-dealer under the Securities Exchange Act of 1934 and a member
of the National Association of Securities Dealers, Inc.
90-1899 (12-96)
NORTHWESTERN
MUTUAL LIFE-Registered Trademark-
PO Box 3095
Milwaukee WI 53201-3095
Address Correction Requested
