NORTHWESTERN MUTUAL SERIES FUND INC, 485APOS, 1997-02-27

NORTHWESTERN MUTUAL SERIES FUND INC
485APOS, 1997-02-27

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REGISTRATION NO. 2-89971
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
PRE-EFFECTIVE AMENDMENT NO.
POST-EFFECTIVE AMENDMENT NO. 14 X
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AND/OR
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940
AMENDMENT NO. 15 X
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NORTHWESTERN MUTUAL SERIES FUND, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
720 EAST WISCONSIN AVENUE
MILWAUKEE, WISCONSIN 53202
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)

(414) 271-1444
(REGISTRANT'S TELEPHONE NUMBER)

MERRILL C. LUNDBERG, SECRETARY
720 EAST WISCONSIN AVENUE
MILWAUKEE, WISCONSIN 53202
(NAME AND ADDRESS OF AGENT FOR SERVICE)

REGISTRANT HAS REGISTERED AN INDEFINITE NUMBER OF SECURITIES UNDER THE
SECURITIES ACT OF 1933 PURSUANT TO RULE 24F-2 UNDER THE INVESTMENT COMPANY ACT
OF 1940. THE RULE 24f-2 NOTICE FOR THE ISSUER'S MOST RECENT FISCAL YEAR WAS
FILED ON FEBRUARY 18, 1997.

IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE (CHECK APPROPRIATE BOX)

[ ] IMMEDIATELY UPON FILING PURSUANT TO PARAGRAPH (b)
[ ] ON (DATE) PURSUANT TO PARAGRAPH (b)
[ ] 60 DAYS AFTER FILING PURSUANT TO PARAGRAPH (a)(1)
[X ] ON April 30, 1997 PURSUANT TO PARAGRAPH (a)(1)
[ ] 75 DAYS AFTER FILING PURSUANT TO PARAGRAPH (a)(2)
[ ] ON (DATE) PURSUANT TO PARAGRAPH (a)(2) OF RULE 485
[ ] THIS POST-EFFECTIVE AMENDMENT DESIGNATES A NEW EFFECTIVE DATE FOR A
PREVIOUSLY FILED POST-EFFECTIVE AMENDMENT.

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NORTHWESTERN MUTUAL
SERIES FUND, INC.

-------------------

CROSS REFERENCE SHEET

Cross reference sheet showing location in Prospectus of information
required by the Items in Part A of Form N-1A.

ITEM NUMBER HEADING IN PROSPECTUS
----------- ---------------------

1 Cover Page

2 Synopsis

3 Condensed Financial
Information

4 Investment Objectives
and Policies,
Capital Stock

5 Management of the Fund

5A *

6 Capital Stock, Taxes
and Dividends

7 Offering and Redemption of
Shares

8 Offering and Redemption of
Shares

9 *

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* Indicates inapplicable or negative

<PAGE>

NORTHWESTERN
MUTUAL LIFE -Registered Trademark-

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NORTHWESTERN MUTUAL SERIES FUND, INC.
(Formerly Northwestern Mutual Variable Life Series Fund, Inc.)

A Series Fund Offering Nine Portfolios

INDEX 500 STOCK PORTFOLIO GROWTH AND INCOME STOCK PORTFOLIO
SELECT BOND PORTFOLIO GROWTH STOCK PORTFOLIO
MONEY MARKET PORTFOLIO AGGRESSIVE GROWTH STOCK PORTFOLIO
BALANCED PORTFOLIO HIGH YIELD BOND PORTFOLIO
INTERNATIONAL EQUITY PORTFOLIO

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THIS PROSPECTUS SETS FORTH CONCISELY THE INFORMATION ABOUT THE FUND THAT A
PROSPECTIVE INVESTOR OUGHT TO KNOW BEFORE INVESTING. ADDITIONAL INFORMATION
ABOUT THE FUND HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IN A
STATEMENT OF ADDITIONAL INFORMATION WHICH IS INCORPORATED HEREIN BY REFERENCE.
THE STATEMENT OF ADDITIONAL INFORMATION IS AVAILABLE UPON REQUEST AND WITHOUT
CHARGE FROM THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY, 720 EAST WISCONSIN
AVENUE, MILWAUKEE, WISCONSIN 53202, TELEPHONE NUMBER (414) 271-1444.

SHARES OF THE FUND ARE OFFERED WITHOUT FEES OR CHARGES FOR SALES EXPENSES,
BUT THE SHARES ARE AVAILABLE ONLY FOR PURCHASE BY VARIABLE ANNUITY AND VARIABLE
LIFE INSURANCE SEPARATE ACCOUNTS OF THE NORTHWESTERN MUTUAL LIFE INSURANCE
COMPANY. ALL FEES AND CHARGES ASSOCIATED WITH THE VARIABLE ANNUITY CONTRACTS OR
VARIABLE LIFE INSURANCE POLICIES, INCLUDING CHARGES FOR SALES EXPENSES, ARE
DESCRIBED IN THE ATTACHED SEPARATE ACCOUNT PROSPECTUS.

AN INVESTMENT IN THE MONEY MARKET PORTFOLIO IS NEITHER INSURED NOR
GUARANTEED BY THE U.S. GOVERNMENT AND THERE CAN BE NO ASSURANCE THAT THE
PORTFOLIO WILL BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE.

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THIS PROSPECTUS SHOULD BE READ AND RETAINED FOR FUTURE REFERENCE.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

The Date of this Prospectus is April 30, 1997
The Date of the Statement of Additional Information is April 30, 1997

<PAGE>

THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT LAWFULLY BE MADE. NO PERSON IS AUTHORIZED TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS AND IN THE STATEMENT OF ADDITIONAL INFORMATION.

TABLE OF CONTENTS

PAGE
----

Synopsis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Condensed Financial Information. . . . . . . . . . . . . . . . . . . . . 3
Financial Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Investment Objectives and Policies . . . . . . . . . . . . . . . . . . . 5
Index 500 Stock Portfolio. . . . . . . . . . . . . . . . . . . . . . . . 5
Select Bond Portfolio. . . . . . . . . . . . . . . . . . . . . . . . . . 5
Money Market Portfolio . . . . . . . . . . . . . . . . . . . . . . . . . 6
Balanced Portfolio . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Growth and Income Stock Portfolio. . . . . . . . . . . . . . . . . . . . 8
Growth Stock Portfolio . . . . . . . . . . . . . . . . . . . . . . . . . 9
Aggressive Growth Stock Portfolio. . . . . . . . . . . . . . . . . . . . 9
High Yield Bond Portfolio. . . . . . . . . . . . . . . . . . . . . . . . 10
International Equity Portfolio . . . . . . . . . . . . . . . . . . . . . 11
Financial Futures Contracts. . . . . . . . . . . . . . . . . . . . . . . 12
Eurodollar Certificates of Deposit . . . . . . . . . . . . . . . . . . . 12
Repurchase Agreements and Warrants . . . . . . . . . . . . . . . . . . . 12
Investment Restrictions. . . . . . . . . . . . . . . . . . . . . . . . . 12
Management of the Fund . . . . . . . . . . . . . . . . . . . . . . . . . 13
Portfolio Managers . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Investment Advisory Fees and Other Expenses. . . . . . . . . . . . . . . 14
Portfolio Transactions . . . . . . . . . . . . . . . . . . . . . . . . . 15
Capital Stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Taxes and Dividends. . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Offering and Redemption of Shares. . . . . . . . . . . . . . . . . . . . 16

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SYNOPSIS

Northwestern Mutual Series Fund, Inc. ("Fund") is an open-end diversified
management investment company. The Fund is composed of nine separate portfolios
which operate as separate mutual funds. The portfolios are the Index 500 Stock
Portfolio, the Select Bond Portfolio, the Money Market Portfolio, the Balanced
Portfolio, the Growth and Income Stock Portfolio, the Growth Stock Portfolio,
the Aggressive Growth Stock Portfolio, the High Yield Bond Portfolio and the
International Equity Portfolio ("Portfolios").

The investment objective of the Index 500 Stock Portfolio is to achieve
investment results that approximate the performance of the Standard & Poor's 500
Composite Stock Price Index ("S&P 500 Index"). The Portfolio will attempt to
meet this objective by investing in stocks included in the S&P 500 Index.

The primary investment objective of the Select Bond Portfolio is to provide
as high a level of long-term total rate of return as is consistent with prudent
investment risk. Total rate of return consists of current income, including
interest and discount accruals, and capital appreciation. A secondary objective
is to seek preservation of shareholders' capital. The Select Bond Portfolio's
assets will be invested primarily in bonds and other debt securities with
maturities generally exceeding one year.

The investment objective of the Money Market Portfolio is to realize
maximum current income consistent with liquidity and stability of capital. The
assets of the Money Market Portfolio will be invested in money market
instruments and other debt securities with maturities generally not exceeding
one year.

The investment objective of the Balanced Portfolio is to realize as high a
level of long-term total rate of return as is consistent with prudent investment
risk. Total rate of return consists of current income, including dividends,
interest and discount accruals, and capital appreciation. The assets of the
Balanced Portfolio will be invested in the stock, bond and money market sectors
as described above for the other Portfolios and the mix of investments among the
three market sectors will be adjusted continuously.

The investment objectives of the Growth and Income Stock Portfolio are
long-term growth of capital and income. Ordinarily the Portfolio pursues its
investment objectives by investing primarily in dividend-paying common stock.

The investment objective of the Growth Stock Portfolio is long-term growth
of capital; current income is secondary. The Portfolio will seek to achieve
this objective by selecting investments in companies which have above average
earnings growth potential.

2
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The investment objective of the Aggressive Growth Stock Portfolio is to
achieve long-term appreciation of capital primarily by investing in the common
stocks of companies which can reasonably be expected to increase their sales and
earnings at a pace which will exceed the growth rate of the nation's economy
over an extended period.

The investment objective of the High Yield Bond Portfolio is to achieve
high current income and capital appreciation by investing primarily in fixed
income securities that are rated below investment grade by the major rating
agencies. High yield fixed income securities are commonly known as "junk
bonds".

The investment objective of the International Equity Portfolio is long-term
capital growth. It pursues its objective through a flexible policy of investing
in stocks and debt securities of companies and governments outside the United
States.

There can be no assurance that the investment objectives of any of the
Portfolios will be realized. See "Investment Objectives and Policies", p. 5.

The Fund issues a separate class of common stock for each Portfolio. Shares
of the Fund are presently offered only to The Northwestern Mutual Life Insurance
Company ("Northwestern Mutual Life") and its separate investment accounts
created (or to be created in the future) pursuant to Wisconsin insurance laws.
Shares of each Portfolio are both offered and redeemed at their net asset value
without the addition of any sales load or redemption charge. See "Offering and
Redemption of Shares", p. 16.

The investment adviser to the Fund is Northwestern Mutual Investment
Services, Inc. ("NMIS"), a wholly-owned subsidiary of Northwestern Mutual Life.
Northwestern Mutual Life provides personnel and facilities utilized by NMIS in
performing its investment advisory functions, and is a party to the investment
advisory agreement between NMIS and the Fund. NMIS is paid a monthly investment
advisory fee based on the average daily net asset value of each Portfolio. The
Fund also pays all interest charges, brokerage commissions, taxes, and
extraordinary expenses incurred in connection with the operation of the Fund.
Six of the Portfolios bear their own expenses for audit and custodial services.
See "Management of the Fund", p. 13.

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CONDENSED FINANCIAL INFORMATION

The following information on financial highlights as it relates to each of
the years in the five-year period ended December 31, 1996 has been audited by
Price Waterhouse LLP, independent accountants. This information should be read
in conjunction with the financial statements and notes thereto which appear in
the Statement of Additional Information. Further information about the
performance of the Fund is contained in the Fund's annual report to shareholders
which may be obtained without charge.

FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT THE YEAR)

NET REALIZED
NET AND DISTRIBUTIONS NET
ASSET UNREALIZED TOTAL DIVIDENDS FROM NET ASSET
VALUE, NET GAIN FROM FROM NET REALIZED VALUE,
BEGINNING INVESTMENT (LOSS) ON INVESTMENT INVESTMENT GAIN ON END
OF YEAR INCOME INVESTMENTS OPERATIONS INCOME INVESTMENTS OF YEAR
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<S> <C> <C> <C> <C> <C> <C> <C>

Index 500 Stock Portfolio
*1987 . . . 1.31 .04 .08 .12 (.08) (.35) 1.00
*1988 . . . 1.00 .04 .05 .09 (.04) - 1.05
*1989 . . . 1.05 .04 .14 .18 (.04) (.07) 1.12
*1990 . . . 1.12 .04 (.08) (.04) (.04) - 1.04
*1991 . . . 1.04 .03 .27 .30 (.03) - 1.31
1992 . . . 1.31 .03 .03 .06 (.03) (.01) 1.33
1993 . . . 1.33 .04 .09 .13 (.03) (.14) 1.29
1994 . . . 1.29 .03 (.01) .02 (.03) (.01) 1.27
1995 . . . 1.27 .04 .42 .46 (.01) - 1.72
1996 . . . 1.72 .04 .35 .39 (.02) (.03) 2.06

RATIO
OF NET
RATIO OF INVESTMENT
EXPENSES INCOME NET
TO (LOSS) TO PORTFOLIO ASSETS, AVERAGE
TOTAL AVERAGE AVERAGE TURNOVER END OF YEAR COMMISSION
RETURN+ NET ASSETS NET ASSETS RATE (THOUSANDS) RATE
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<S> <C> <C> <C> <C> <C> <C>

Index 500 Stock Portfolio
*1987 . . . 8.21 0.30 3.24 99.72 9,712 $ -
*1988 . . . 8.83 0.30 3.76 106.31 11,414 -
*1989 . . . 18.39 0.30 3.34 152.13 9,833 -
*1990 . . . (4.32) 0.30 3.70 80.07 9,516 -
*1991 . . . 29.78 0.30 2.88 40.16 14,115 -
1992 . . . 4.54 0.30 2.61 39.93 17,288 -
1993 . . . 9.90 0.30 2.55 62.69 25,479 -
1994 . . . 1.21 0.24 3.10 5.59 316,123 -
1995 . . . 37.25 0.21 2.51 3.19 495,133 -
1996 . . . 22.75 0.21 2.27 3.45 740,066 .0306

</TABLE>

*Not covered by current report of independent accountants.
+Total Return includes deductions for management and other fund expenses;
excludes deductions for sales loads and account fees.

3
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FINANCIAL HIGHLIGHTS . . . CONTINUED
(FOR A SHARE OUTSTANDING THROUGHOUT THE YEAR)

Select Bond Portfolio
*1987 . . . 1.32 .10 (.10) - (.20) (.05) 1.07
*1988 . . . 1.07 .09 - .09 (.09) - 1.07
*1989 . . . 1.07 .10 .05 .15 (.09) (.02) 1.11
*1990 . . . 1.11 .09 (.01) .08 (.09) (.01) 1.09
*1991 . . . 1.09 .09 .09 .18 (.09) - 1.18
1992 . . . 1.18 .09 - .09 (.09) (.04) 1.14
1993 . . . 1.14 .08 .05 .13 (.08) (.04) 1.15
1994 . . . 1.15 .06 (.09) (.03) (.06) - 1.06
1995 . . . 1.06 .07 .13 .20 (.03) - 1.23
1996 . . . 1.23 .07 (.04) .03 (.04) - 1.22

Select Bond Portfolio
*1987 . . . (1.05) 0.30 8.66 91.92 8,205 $ -
*1988 . . . 8.22 0.30 8.35 113.31 9,208 -
*1989 . . . 14.16 0.30 8.51 131.41 11,203 -
*1990 . . . 8.10 0.30 8.50 33.14 12,124 -
*1991 . . . 17.32 0.30 8.11 60.88 14,703 -
1992 . . . 7.74 0.30 7.52 63.29 15,851 -
1993 . . . 10.81 0.30 6.40 67.69 17,485 -
1994 . . . (2.28) 0.30 7.02 108.00 158,508 -
1995 . . . 19.10 0.30 6.61 69.06 198,142 -
1996 . . . 3.31 0.30 6.48 195.98 214,333 -

Money Market Portfolio
*1987 . . . 1.00 .06 - .06 (.06) - 1.00
*1988 . . . 1.00 .07 - .07 (.07) - 1.00
*1989 . . . 1.00 .09 - .09 (.09) - 1.00
*1990 . . . 1.00 .08 - .08 (.08) - 1.00
*1991 . . . 1.00 .06 - .06 (.06) - 1.00
1992 . . . 1.00 .03 - .03 (.03) - 1.00
1993 . . . 1.00 .03 - .03 (.03) - 1.00
1994 . . . 1.00 .05 - .05 (.05) - 1.00
1995 . . . 1.00 .06 - .06 (.06) - 1.00
1996 . . . 1.00 .05 - .05 (.05) - 1.00

Money Market Portfolio
*1987 . . . 6.64 0.30 6.46 - 11,800 $ -
*1988 . . . 7.47 0.30 7.24 - 12,958 -
*1989 . . . 9.18 0.30 8.82 - 12,888 -
*1990 . . . 8.23 0.30 7.93 - 13,362 -
*1991 . . . 5.85 0.30 5.71 - 12,787 -
1992 . . . 3.49 0.30 3.40 - 14,091 -
1993 . . . 2.88 0.30 2.87 - 12,657 -
1994 . . . 4.06 0.30 4.64 - 104,217 -
1995 . . . 5.82 0.30 5.61 - 132,572 -
1996 . . . 5.29 0.30 5.13 - 176,298 -

Balanced Portfolio
*1987 . . . 1.35 .07 .03 .10 (.11) (.19) 1.15
*1988 . . . 1.15 .07 .02 .09 (.07) - 1.17
*1989 . . . 1.17 .07 .12 .19 (.08) (.04) 1.24
*1990 . . . 1.24 .07 (.05) .02 (.07) - 1.19
*1991 . . . 1.19 .07 .21 .28 (.07) - 1.40
1992 . . . 1.40 .06 .01 .07 (.06) (.02) 1.39
1993 . . . 1.39 .06 .09 .15 (.07) (.14) 1.33
1994 . . . 1.33 .04 (.05) (.01) - (.01) 1.31
1995 . . . 1.31 .07 .27 .34 (.04) (.01) 1.60
1996 . . . 1.60 .06 .15 .21 (.06) (.03) 1.72

Balanced Portfolio
*1987 . . . 7.15 0.30 5.06 77.97 32,880 $ -
*1988 . . . 8.08 0.30 5.80 74.51 39,156 -
*1989 . . . 15.66 0.30 5.87 140.55 41,226 -
*1990 . . . 1.53 0.30 6.07 72.89 42,839 -
*1991 . . . 23.33 0.30 5.11 55.46 57,269 -
1992 . . . 5.61 0.30 4.45 43.28 66,006 -
1993 . . . 9.91 0.30 4.24 70.91 68,910 -
1994 . . . 0.16 0.30 4.78 42.35 1,727,127 -
1995 . . . 26.39 0.30 4.40 37.28 2,083,289 -
1996 . . . 13.45 0.30 3.95 67.66 2,326,234 .0320

Growth and Income Stock Portfolio
**1994 . . . $1.00 $.01 $(.01) $ - $(.01) $(.01) $0.98
1995 . . . 0.98 .02 .29 .31 (.02) (.06) 1.21
1996 . . . 1.21 .02 .23 .25 (.02) (.12) 1.32

Growth and Income Stock Portfolio
**1994 . . . 0.34%++ 0.78%# 1.93%# 54.18% 64,700 $ -
1995 . . . 31.12 0.69 1.68 80.00 136,923 -
1996 . . . 19.97 0.62 1.44 93.92 234,184 .0515

Growth Stock Portfolio
**1994 . . . $1.00 $.01 $ - $.01 $(.01) $ - $1.00
1995 . . . 1.00 .02 .28 .30 (.02) (.02) 1.26
1996 . . . 1.26 .02 .25 .27 (.02) (.05) 1.46

Growth Stock Portfolio
**1994 . . . 1.55%++ 0.71%# 2.30%# 16.51% 41,868 $ -
1995 . . . 30.82 0.61 1.77 46.83 85,557 -
1996 . . . 20.91 0.57 1.41 37.61 170,482 .0629

Aggressive Growth Stock Portfolio
*1990 . . . $1.00 $.01 $.01 $.02 $(.01) $ - $1.01
*1991 . . . 1.01 .01 .56 .57 (.01) (.02) 1.55
*1992 . . . 1.55 .01 .09 .10 (.01) - 1.64
*1993 . . . 1.64 - .31 .31 - (.03) 1.92
**1994 . . . 1.91 - .09 .09 - - 2.00
1995 . . . 2.00 - .78 .78 - (.01) 2.77
1996 . . . 2.77 - .49 .49 - (.11) 3.15

Aggressive Growth Stock Portfolio
*1990 . . . 1.89%++ 0.07% 0.50% - % 10,516 $ -
*1991 . . . 56.00 0.84 0.69 44.28 53,828 -
*1992 . . . 5.95 0.75 0.39 81.96 127,964 -
*1993 . . . 19.11 0.66 0.05 63.63 195,810 -
**1994 . . . 4.47++ 0.58# 0.29# 21.54 327,096 -
1995 . . . 39.29 0.56 0.13 37.84 577,014 -
1996 . . . 17.70 0.54 (0.03) 47.25 871,926 .0513

High Yield Bond Portfolio
**1994 . . . $1.00 $.06 $(.03) $.03 $(.06) $ - $0.97
1995 . . . 0.97 .10 .07 .17 (.10) (.01) 1.03
1996 . . . 1.03 .09 .10 .19 (.09) (.03) 1.10

High Yield Bond Portfolio
**1994 . . . 3.02%++ 0.73%# 9.40%# 119.48% 35,537 $ -
1995 . . . 16.78 0.65 9.90 116.57 55,974 -
1996 . . . 19.77 0.60 9.54 143.92 93,878 -

International Equity Portfolio
*1993 . . . $1.00 $.01 $.23 $.24 $(.01) $ - $1.23
**1994 . . . 1.22 .02 (.02) - (.02) (.01) 1.19
1995 . . . 1.19 .04 .13 .17 - (.01) 1.35
1996 . . . 1.35 .04 .24 .28 (.03) (.04) 1.56

International Equity Portfolio
*1993 . . . 24.64%++ 0.70% 1.14% 3.62% 140,410 $ -
**1994 . . . 0.11++ 0.87# 2.28# 10.97 292,533 -
1995 . . . 14.57 0.85 2.68 26.71 342,127 -
1996 . . . 21.01 0.81 3.02 17.07 505,189 .0515

</TABLE>

* Not covered by current report of independent accountants.
** For the period of May 3, 1994 (commencement of operations) through
December 31, 1994.
+ Total Return includes deductions for management and other fund expenses;
excludes deductions for sales loads and account fees.
++ Reflects total return for the period; not annualized.
# Computed on an annualized basis

4
<PAGE>

For the seven-day period ended on January 31, 1997, the Money Market
Portfolio's yield was 5.15% and was equivalent to a compound effective yield of
5.28%. This yield does not reflect charges imposed by Northwestern Mutual Life
under variable annuity contracts and variable life insurance policies and,
therefore, may be of limited comparative value. An explanation of the
calculation of the yield is included in the Statement of Additional Information.

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INVESTMENT OBJECTIVES AND POLICIES

The investment objectives and policies of each Portfolio are described
below. The investment objective of a Portfolio may be changed only with the
approval of the majority of the Portfolio's shares outstanding. The details of
the investment policies of a Portfolio may be changed by the Fund's Board of
Directors without a vote of the shareholders. For example, such details include
investments in new types of debt instruments which may be devised in the future
or which are presently in disuse but may become more prominent in the future and
minor changes in investment policies which may be made in response to changes in
regulatory requirements which are reflected in the Portfolio's present policies.

There can be no assurance that the objectives of the Portfolios will be
realized. Investment in equity securities inherently involves the risks
associated with the affairs of each issuer of the securities as well as general
market risks. The same is true of investment in debt securities. Debt securities
tend to decline in value when interest rates rise; this effect is greater for
longer term bonds and relatively minor for short term cash instruments which are
about to mature. Investment in the Balanced Portfolio necessarily involves the
risks inherent in stocks and debt securities of varying maturities, including
the risk that the Balanced Portfolio may invest too much or too little of its
assets in each type of security at any particular time. Investment in the
International Portfolio involves an array of special risk considerations. Some
of these are briefly described below. A longer description is included in the
Statement of Additional Information.

INDEX 500 STOCK PORTFOLIO

The S&P 500 Index is composed of 500 common stocks representing more
than 70% of the total market value of all publicly-traded common stocks.
"Standard & Poor's-Registered Trademark-", "S&P-Registered Trademark-", "S&P
500-Registered Trademark-", "Standard & Poor's 500", and "500" are trademarks
of The McGraw-Hill Companies, Inc. and have been licensed for use by
Northwestern Mutual Life. The Fund is not sponsored, endorsed, sold or
promoted by Standard & Poor's and Standard & Poor's makes no representation
regarding the advisability of investing in the Fund.

The Index 500 Stock Portfolio will not be managed in the traditional sense
using economic, financial and market analysis. A computer program will be used
to determine which stocks are to be purchased or sold to achieve the Portfolio's
objective. The Portfolio will, to the extent feasible, remain fully invested
and will normally hold at least 450 of the 500 issues that comprise the S&P 500
Index.

The Index 500 Stock Portfolio's ability to match the performance of the S&P
500 Index will be affected to some extent by the size and timing of cash flows
into and out of the Index 500 Stock Portfolio. The Portfolio will be managed
with a view to reducing such effects. A portion of the assets may at times be
invested in investment grade debt securities, short term commercial paper and
United States Treasury obligations, as well as option contracts, stock index
futures contracts, and repurchase agreements. See "Financial Futures
Contracts", p. 12 and "Repurchase Agreements and Warrants", p. 12.

SELECT BOND PORTFOLIO

The Select Bond Portfolio's assets will be invested in the following types
of securities:

5
<PAGE>

1. publicly offered straight debt securities having a rating within the
four highest grades as determined by Moody's Investors Service, Inc.
(Aaa, Aa, A or Baa) or Standard & Poor's (AAA, AA, A or BBB);

2. obligations of or guaranteed by the United States Government or its
agencies;

3. obligations (payable in U.S. dollars) of or guaranteed by the
Government of Canada or of a Province of Canada or any instrumentality
or political subdivision thereof, provided such obligations have a
rating within the three highest grades as determined by Moody's
Investors Service, Inc. or Standard & Poor's and do not exceed 10% of
the Portfolio's total assets;

4. publicly offered straight debt securities issued or guaranteed by a
national or state bank or bank holding company (as defined in the
Federal Bank Holding Company Act, as amended) having a rating within
the two highest grades as determined by Fitch's Investor's Service,
Inc. (AAA or AA), and certificates of deposit of such banks or bank
holding companies;

5. commercial paper having a rating within the two highest investment
grades, as determined by Moody's Investors Service, Inc. (P-1 or P-2)
or Standard & Poor's (A-1 or A-2);

6. straight debt securities acquired directly from the issuers in private
placement transactions, which securities, in the judgment of the
Fund's Board of Directors, are of investment quality comparable to
publicly offered straight debt securities rated Baa by Moody's
Investors Service, Inc. or BBB by Standard & Poor's, or better;

7. cash or cash equivalents; and

8. preferred stocks and obligations not described above, including
convertible securities, securities carrying warrants to purchase
equity securities and securities acquired directly from the issuers in
private placement transactions other than those securities described
above.

A description of the ratings provided by Moody's Investors Service, Inc.,
Standard & Poor's and Fitch's Investor's Service, Inc. is included in the
Statement of Additional Information.

The Select Bond Portfolio will not invest in common stocks directly, but
may retain up to 10% of its total assets in common stocks acquired upon
conversion of debt securities or upon exercise of warrants acquired with debt
securities.

At least 70% of the Select Bond Portfolio's total assets will normally be
invested in bonds and debentures which have maturities of at least one year.
However, during periods of particular volatility or when an unusual decline in
the value of long-term obligations is anticipated, for temporary defensive
purposes the Select Bond Portfolio may place a larger portion of its assets in
cash and short-term obligations. During such periods the Select Bond Portfolio's
holdings of short-term obligations and equity securities may temporarily exceed
an aggregate total of 30% of the Select Bond Portfolio's total assets.

The Select Bond Portfolio invests in obligations of a number of U.S.
Government agencies. Obligations of some agencies are supported by the full
faith and credit of the U.S. Treasury, others are supported only by the credit
of the agency. No assurance can be given that the U.S. Government would provide
financial support to any agency if it is not obligated to do so by law. The
Select Bond Portfolio will invest in the securities of a particular agency only
when the investment adviser is satisfied that the credit risk with respect to
such agency is minimal.

The Select Bond Portfolio may invest up to 10% of its total assets in high
yield/high risk securities and up to 10% of its total assets in foreign
securities, consistent with its investment objectives. See the description of
the High Yield Bond Portfolio, p. 10, for a discussion of high yield/high risk
securities. Some of the risks associated with investments in foreign securities
are briefly set forth in the description of the International Equity Portfolio,
p. 11.

The Select Bond Portfolio may also invest in interest rate futures
contracts and repurchase agreements. See "Financial Futures Contracts", p. 12
and "Repurchase Agreements and Warrants", p. 12.

MONEY MARKET PORTFOLIO

The investment objective of the Money Market Portfolio is to realize
maximum current income to the extent consistent with liquidity and stability of
capital.

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<PAGE>

The assets of the Money Market Portfolio will be invested in money market
instruments and other debt securities with maturities generally not exceeding
one year. Such instruments may include the following:

1. U.S. Treasury Bills and other obligations of or guaranteed by the U.S.
Government or its agencies;

2. obligations of or guaranteed by the Government of Canada or of a
Province of Canada or any instrumentality or political subdivision
thereof, provided such obligations do not exceed 10% of the Money
Market Portfolio's total assets;

3. obligations (including certificates of deposit, time deposits, or
bankers' acceptances) of U.S. or Canadian chartered banks having total
assets in excess of $1,000,000,000, U.S. branches of foreign banks
where said foreign banks have total assets in excess of
$10,000,000,000, and U.S. savings and loan associations having total
assets in excess of $1,000,000,000, and Eurodollar certificates of
deposit issued by foreign branches of U.S. banks where said banks have
total assets in excess of $1,000,000,000 (see "Eurodollar Certificates
of Deposit");

4. commercial paper, including variable amount master notes, having a
rating at the time of purchase within the two highest grades as
determined by Moody's Investors Service, Inc. (P-1 or P-2) or Standard
& Poor's (A-1 or A-2), or commercial paper or notes issued by
companies with an unsecured debt issue outstanding having a rating at
the time of purchase within the three highest grades as determined by
Moody's Investors Service, Inc. (Aaa, Aa, or A) or Standard & Poor's
(AAA, AA or A); and

5. publicly traded bonds, debentures and notes having a rating within the
four highest grades as determined by Moody's Investors Service, Inc.
(Aaa, Aa, A or Baa) or Standard & Poor's (AAA, AA, A or BBB).

A glossary of the following terms is included in the Statement of
Additional Information: certificates of deposit, Eurodollar certificates of
deposit, time deposits, bankers' acceptances, variable amount master notes and
commercial paper. A description of the ratings provided by Moody's Investors
Service, Inc. and Standard & Poor's is also included in the Statement of
Additional Information.

The Money Market Portfolio will attempt to maximize its return by trading
to take advantage of changing money market conditions and trends. The Money
Market Portfolio will also trade to take advantage of what are believed to be
disparities in yield relationships between different money market instruments.
This procedure may increase or decrease the Portfolio's yield depending upon
management's ability to correctly time and execute such transactions. The Money
Market Portfolio intends to purchase only securities that mature within a year
except for securities which are subject to repurchase agreements. Accordingly,
the level of purchases will be relatively high. However, as transaction costs on
Money Market Portfolio investments are generally not substantial, the high level
of purchases will not adversely affect the Portfolio's net asset value or net
income.

U.S. Government and agency obligations held by the Money Market Portfolio
consist primarily of discounted or interest-bearing notes with average
maturities of ninety days or less. The Money Market Portfolio invests most
frequently in obligations of the following agencies of the U.S. Government: Farm
Credit System, Federal Home Loan Banks, Federal Home Loan Mortgage Corporation
and Federal National Mortgage Association. Obligations of some agencies are
supported by the full faith and credit of the U.S. Treasury, others are
supported by the right of the issuer to borrow from the Treasury, others, such
as those of the Federal National Mortgage Association, a private corporation,
are supported by the discretionary authority of the U.S. Government to purchase
the agency's obligations and others are supported only by the credit of the
agency. No assurance can be given that the U.S. Government would provide
financial support to any agency if it is not obligated to do so by law. The
Money Market Portfolio will invest in the securities of a particular agency only
when the investment adviser is satisfied that the credit risk with respect to
such agency is minimal.

The Money Market Portfolio may also invest in repurchase agreements. See
"Repurchase Agreements and Warrants", p. 12.

BALANCED PORTFOLIO

The assets of the Balanced Portfolio will be invested in the following
three market sectors:

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<PAGE>

1. Common stock and other equity securities including the securities in
which the Index 500 Stock Portfolio invests.

2. Bonds and other debt securities with maturities generally exceeding
one year including the securities in which the Select Bond Portfolio
invests.

3. Money market instruments and other debt securities with maturities
generally not exceeding one year including the securities in which the
Money Market Portfolio invests.

The Balanced Portfolio will continuously adjust the mix of investments
among the three market sectors to capitalize on perceived variations in return
potential produced by the interaction of changing financial markets and economic
conditions. Not more than 75% of the Balanced Portfolio's net assets may be
invested in either the stock sector or the bond sector. Up to 100% of the
Balanced Portfolio's net assets may be invested in money market instruments. No
minimum percentage has been established for any of the sectors. Major changes in
investment mix may occur several times within a year or over several years
depending upon market and economic conditions. The Balanced Portfolio's
investment objective is supplemented by investment objectives and policies for
the stock, bond and money market sectors. These are presently substantially
identical to those which have been established for the Index 500 Stock, Select
Bond and Money Market Portfolios.

GROWTH AND INCOME STOCK PORTFOLIO

The investment objectives of the Growth and Income Stock Portfolio are
long-term growth of capital and income. The Portfolio seeks to achieve these
objectives consistent with reasonable investment risk. Ordinarily, the
Portfolio pursues its investment objectives by investing primarily in dividend-
paying common stock. The Portfolio may also invest in other equity securities,
consisting of, among other things, nondividend-paying common stock, preferred
stock, and securities convertible into common stock, such as convertible
preferred stock and convertible bonds, and warrants. The Portfolio may also
invest in American Depository Receipts (ADRs).

The Portfolio is not subject to any limit on the size of companies in which
it may invest, but intends, under normal circumstances, to be fully invested to
the extent practicable in the large- and medium-sized companies primarily
included in the S&P 500 Index. The Portfolio is designed for investors who want
an actively managed equity portfolio of selected equity securities that seeks to
outperform the total return of the S&P 500 Index. In managing the Portfolio,
the potential for appreciation and dividend growth is given more weight than
current dividends. Nonetheless, the manager of the Portfolio will normally
strive for gross income for the Portfolio at a level not less than 75% of the
dividend income generated on the stocks included in the S&P 500 Index, although
this income level is merely a guideline and there can be no certainty that this
income level will be achieved.

The Portfolio does not seek to achieve its objective with any individual
investment security, but rather it aims to manage all of its assets in such a
way as to achieve its objective. The Portfolio attempts to reduce risk by
investing in many different economic sectors, industries and companies. The
manager of the Portfolio may under- or over-weight selected economic sectors
against the sector weightings of the S&P 500 Index to seek to enhance the
Portfolio's total return or reduce fluctuations in market value relative to the
S&P 500 Index. In selecting securities, the manager may emphasize securities
that it believes to be undervalued. Securities of a company may be undervalued
for a variety of reasons such as an overreaction by investors to unfavorable
news about a company, an industry or the stock markets in general; or as a
result of a market decline, poor economic conditions, tax-loss selling, or
actual or anticipated unfavorable developments affecting a company.

During ordinary market conditions, the Portfolio will be as fully invested
as practicable in the equity securities described above. The Portfolio may
enter into firm commitment agreements, purchase securities on a "when-issued"
basis, and invest in various foreign securities if U.S. exchange-listed. The
Portfolio may also invest in money market instruments, including U.S. Government
securities, short term bank obligations that are rated in the highest two rating
categories by Moody's Investors Service, Inc. or Standard & Poor's, or, if
unrated, are determined to be of equal quality by the manager of the Portfolio,
certificates of deposit, time deposits and banker's acceptances issued by U.S.
and foreign banks and savings and loan institutions with assets of at least $500
million as of the end of their most recent fiscal year; and commercial paper and
corporate obligations, including variable rate demand notes, that are issued by
U.S. and foreign issuers and that are rated in the highest two rating categories
by Moody's Investors Service, Inc. or Standard & Poor's, or if unrated, are
determined to be of equal quality by the manager of the Portfolio. A
description of these ratings is included in the Statement of Additional
Information. Under normal circumstances, the Portfolio will invest in such
money market instruments to invest temporary cash balances or to maintain
liquidity to meet redemptions or expenses. The Portfolio may

8
<PAGE>

also, however, invest in these instruments, without limitation, as a temporary
defensive measure taken during, or in anticipation of, adverse market
conditions.

Convertible bonds and other fixed income securities (other than money
market instruments) in which the Portfolio may invest will, at the time of
investment, be rated Baa or better by Moody's Investors Service, Inc. or BBB or
better by Standard & Poor's or, if not so rated, will be of comparable quality
as determined by the manager of the Portfolio. A description of these ratings
is included in the Statement of Additional Information. In the event that an
existing holding is downgraded below these ratings, the Portfolio may
nonetheless retain the security.

In pursuing its investment objective, the Portfolio may engage in the
purchase and writing of put and call options on securities and stock indexes and
may purchase or sell stock index futures contracts and options thereon. These
investment techniques may involve a greater degree of risk than those inherent
in more conservative investment approaches. See "Financial Futures Contracts",
p. 12 and the Statement of Additional Information for a description of these
techniques and their attendant risks.

GROWTH STOCK PORTFOLIO

The Growth Stock Portfolio invests primarily in common stocks of well-
established companies, with emphasis placed on high quality companies with
strong financial characteristics. The investment process is initiated with a
fundamental economic outlook. Further study of economic sectors leads to the
identification of growth-oriented industries, and to detailed studies of
individual companies. In evaluating individual companies, factors such as the
company management team, product outlook, global exposure, industry leadership
position, and financial characteristics are important variables used in the
analysis.

The market capitalization of companies the Portfolio may invest in is not
limited by size, but the Portfolio will generally invest in large- and medium-
sized companies. The aim of the Portfolio is to seek to reduce overall risk by
diversifying its assets in an appropriate manner. This diversification will
span economic sectors, industry groups, and companies, while emphasizing high
quality investments.

The Portfolio may invest in any of the securities in which the Growth and
Income Stock Portfolio or the Aggressive Growth Stock Portfolio may invest,
including, but not limited to, preferred stock, convertible bonds, short-term
commercial paper, and covered call options.

Portfolios emphasizing growth-oriented investments may experience above
average price volatility. An investment in the Growth Stock Portfolio can
present more risk than an investment in the Index 500 Stock Portfolio. The
Growth Stock Portfolio is designed for long-term investors seeking capital
appreciation.

AGGRESSIVE GROWTH STOCK PORTFOLIO

The assets of the Aggressive Growth Stock Portfolio will be invested
primarily in common stocks and other equity securities such as preferred stocks
and debt securities with conversion privileges or warrants. From time to time
assets may be invested in investment grade debt securities, short-term
commercial paper and United States Treasury obligations, or temporarily held in
cash uninvested for periods when the manager determines that economic conditions
call for such action. The Aggressive Growth Stock Portfolio may also invest in
covered call option contracts, stock index futures contracts, including indexes
on specific industries, repurchase agreements and warrants. See "Financial
Futures Contracts", p. 12 and "Repurchase Agreements and Warrants", p. 12. A
description of covered call options is included in the Statement of Additional
Information. Because the Aggressive Growth Stock Portfolio will, for the most
part, be investing in stocks which possess substantial price volatility, an
investment in the Aggressive Growth Stock Portfolio will present more risk than
an investment in the Growth Stock Portfolio.

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<PAGE>

HIGH YIELD BOND PORTFOLIO

The investment objective of the High Yield Bond Portfolio is to achieve
high current income and capital appreciation.

The High Yield Bond Portfolio seeks to achieve its objective by investing
primarily in a diversified selection of fixed income securities rated Ba1 or
lower by Moody's Investors Service, Inc. or BB+ or lower by Standard & Poor's.
A description of the ratings provided by the major rating agencies is included
in the Statement of Additional Information. The Portfolio may also invest in
nonrated securities.

The securities in which the High Yield Bond Portfolio will invest are
considered speculative and are sometimes known as "junk bonds". These
securities tend to offer higher yields than higher rated securities of
comparable maturities because the historical financial condition of the issuers
of these securities is usually not so strong as that of other issuers. High
yield fixed income securities usually present greater risk of loss of income and
principal than higher rated securities. Investors in these securities should
carefully consider these risks and should understand that high yield fixed
income securities are not appropriate for short-term investment purposes.

The primary investment strategy of the High Yield Bond Portfolio is to
invest in industries or individual companies which have stable or improving
fundamental financial characteristics. The success of this strategy depends on
the manager's analytical and portfolio management skills. These skills are more
important in the selection of high yield/high risk securities than would be the
case with a portfolio of high quality bonds. In selecting securities for the
High Yield Bond Portfolio the manager will consider the ratings assigned by the
major rating agencies, but primary reliance will be placed on the manager's
evaluation of credit and market risk in relationship to the expected rate of
return.

The risk that the issuer of a fixed income security may fail to pay
principal and interest when due is referred to as "credit risk". Price
volatility caused by such factors as interest rate fluctuation, market
perceptions of an issuer's creditworthiness and general liquidity in the
financial market is "market risk". The value of the securities held by the High
Yield Bond Portfolio will be directly affected by the market perception of the
creditworthiness of the securities' issuers and will fluctuate inversely with
changes in interest rates. Lower rated securities are more likely to react to
developments affecting market and credit risk than are more highly rated
securities, which react primarily to movements in the general level of interest
rates. For example, because investors generally perceive that there are greater
risks associated with investing in medium or lower rated securities, the yields
and prices of such securities may tend to fluctuate more than those of higher
rated securities. Moreover, in the lower quality segments of the fixed income
securities market, changes in perception of the creditworthiness of individual
issuers tend to occur more frequently and in a more pronounced manner than do
changes in higher quality segments of the fixed income securities market. The
yield and price of medium to lower rated securities therefore may experience
greater volatility than is the case with higher rated securities. The manager
of the Portfolio seeks to reduce volatility through careful evaluation of credit
risk and market risk and diversification of the Portfolio's investments.

The secondary market for high yield/high risk securities, which is
concentrated in relatively few market makers, may not be as liquid as the
secondary market for more highly rated securities. Under adverse market or
economic conditions, the secondary market for high yield/high risk securities
could contract further, independent of any specific adverse changes in the
condition of a particular issuer. As a result, the High Yield Bond Portfolio
could find it more difficult to sell such securities or may be able to sell the
securities only at prices lower than if such securities were widely traded.
Prices realized upon the sale of such lower rated securities therefore may be
less than the prices used in calculating the Portfolio's net asset value. In the
absence of readily available market quotations, high yield/high risk securities
will be valued by the Fund's Directors using a method that, in the good faith
belief of the Directors, accurately reflects fair value. Valuing such
securities in an illiquid market is a difficult task. The Directors' judgment
plays a more significant role in valuing such securities than those securities
for which more objective market data are available.

In addition to notes and bonds, the High Yield Bond Portfolio may invest in
preferred stocks and convertible securities, including warrants or other equity
securities issued as part of a fixed income offering. The Portfolio may
purchase put and call options, on individual securities as well as indexes, and
may write covered call and secured put options. A description of put and call
options is included in the Statement of Additional Information. The Portfolio
may invest available temporary cash in short-term obligations, including those
in which the Money Market Portfolio may invest. The Portfolio may invest more

10
<PAGE>

substantially in such short-term obligations or in investment grade securities
(rated Baa3 or higher by Moody's Investors Service, Inc. or BBB- or higher by
Standard & Poor's) when market conditions warrant a more defensive investment
posture.

The High Yield Bond Portfolio may invest in foreign securities consistent
with its investment objective. Some of the risks associated with investments in
foreign securities are briefly set forth in the description of the International
Equity Portfolio below. Such investments may be in United States currency
denominated debt issues or in debt securities in the currency of other nations.
The Portfolio may, but will not necessarily, attempt to hedge its exposures by
engaging in transactions in foreign currency futures contracts. For a
discussion of the risks involved in these contracts see "Financial Futures
Contracts", p. 12.

INTERNATIONAL EQUITY PORTFOLIO

The International Equity Portfolio seeks long-term capital growth through a
flexible policy of investing in stocks and debt obligations of companies and
governments outside the United States. In pursuit of its investment objective,
the Portfolio will invest at least 65% of its assets in securities of issuers in
at least three countries outside the United States. Any income realized will be
incidental. Although the Portfolio generally invests in common stocks, it may
also invest in preferred stocks and certain debt securities such as convertible
bonds which are rated in any category by Moody's Investors Service, Inc. or
Standard & Poor's or which are unrated by any rating agency. See Appendix in
the Statement of Additional Information for a description of the ratings
presented by Moody's Investors Service, Inc. and Standard & Poor's.

For temporary defensive purposes, the Portfolio may invest without limit in
commercial paper, certificates of deposit, bank time deposits in the currency of
any nation, bankers acceptances, U.S. Government securities, corporate debt
obligations, and repurchase agreements with respect to these securities.

The International Equity Portfolio may purchase and sell financial futures
contracts, stock index futures contracts, and foreign currency futures contracts
for hedging purposes only and not for speculation. It may engage in such
transactions only if the total contract value of the futures contracts does not
exceed 20% of the Portfolio's total assets. See "Financial Futures Contracts",
p. 12.

The International Equity Portfolio has an unlimited right to purchase
securities in any foreign country, developed or underdeveloped. An investor
should consider carefully the risks involved in investing in securities issued
by companies and governments of foreign nations, which are in addition to the
usual risks inherent in domestic investments. There is the possibility of
expropriation, nationalization or confiscatory taxation, taxation of income
earned in foreign nations (including withholding taxes) or other taxes imposed
with respect to investments in foreign nations, foreign exchange controls (which
may include suspension of the ability to transfer currency from a given
country), default in foreign government securities, political or social
instability or diplomatic developments which could affect investments in
securities or issuers in those nations. These considerations generally are more
of a concern in developing countries, where the possibility of political
instability (including revolution) and dependence on foreign economic assistance
may be greater than in developed countries. Investments in companies domiciled
in developing countries therefore may be subject to potentially higher risks
than investments in developed countries.

In many countries there is less publicly available information about
issuers than is available in reports about companies in the United States.
Foreign companies are not generally subject to uniform accounting and auditing
and financial reporting standards, and auditing practices and requirements may
not be comparable to those applicable to United States companies. It may be
more difficult to obtain or enforce judgments obtained against foreign entities.
Commission rates in foreign countries, which are generally fixed rather than
subject to negotiation as in the United States, are likely to be higher.
Further, the settlement period of securities transactions in foreign markets may
be longer than in domestic markets. In many foreign countries there is less
government supervision and regulation of business and industry practices, stock
exchanges, brokers and listed companies than in the United States. Foreign
securities transactions may be subject to higher brokerage costs than domestic
securities transactions. Foreign securities often trade with less frequency and
volume than domestic securities and are therefore less liquid and more volatile
than securities of comparable domestic issuers. The International Equity
Portfolio may invest in Eastern Europe. This involves special risks that are
described in the Statement of Additional Information.

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<PAGE>

FINANCIAL FUTURES CONTRACTS

Each of the Portfolios (except the Select Bond, High Yield Bond and Money
Market Portfolios) may enter into stock index futures contracts, including
indexes on specific securities, as a hedge against changes in the market values
of common stocks. The Select Bond, High Yield Bond, Balanced and International
Equity Portfolios may enter into interest rate futures contracts as a hedge
against changes in prevailing levels of interest rates. In both cases, the
purpose is to establish more definitely the effective return on securities held
or intended to be acquired by the Portfolios. The Portfolios' hedging may
include sales of futures as an offset against the effect of expected decreases
in stock values or increases in interest rates, and purchases of futures as an
offset against the effect of expected increases in stock values or decreases in
interest rates.

A Portfolio will not enter into a futures contract if, as a result thereof,
(i) the aggregate market value of all open futures positions would exceed
one-third of the Portfolio's total assets or (ii) the sum of the initial margin
deposits of all open futures positions (other than an offsetting transaction)
would be more than 5% of the Portfolio's total assets. More than 5% of the
Portfolio's total assets may be committed to the aggregate of initial and
variation margin payments however. Furthermore, in order to be certain that the
Portfolio has sufficient assets to satisfy its obligations under a futures
contract, the Portfolio deposits cash or cash equivalents equal in value to the
market value of the futures contract in a segregated account for the Portfolio
with the Fund's custodian.

Financial futures prices are volatile and difficult to forecast and the
correlation between changes in prices of futures contracts and the securities
being hedged can be only approximate. A decision of whether, when and how to
hedge involves the exercise of skill and judgment, and even a well-conceived
hedge may be unsuccessful to some degree because of market behavior or
unexpected stock market or interest rate trends.

Because of the low margin deposits required, futures trading involves an
extremely high degree of leverage. A relatively small price movement in a
futures contract may result in immediate and substantial loss, as well as gain,
to the investor. Thus, a purchase or sale of a futures contract may result in
losses in excess of the amount invested in the futures contract.

A description of financial futures contracts is included in the Statement
of Additional Information.

EURODOLLAR CERTIFICATES OF DEPOSIT

The Money Market, Balanced, Growth and Income Stock, Growth Stock and High
Yield Bond Portfolios may purchase Eurodollar certificates of deposit issued by
foreign branches of U.S. banks, but consideration will be given to their
marketability and possible restrictions on the flow of international currency
transactions. Investment in such securities involves considerations which are
not ordinarily associated with investing in domestic instruments, including
currency exchange control regulations, the possibility of expropriation,
seizure, or nationalization of foreign deposits, less liquidity and increased
volatility in foreign securities markets, and the impact of political, social or
diplomatic developments or the adoption of other foreign government restrictions
that might adversely affect the payment of principal and interest. If the Fund
were to invoke legal processes, it might encounter greater difficulties abroad
than in the United States.

REPURCHASE AGREEMENTS AND WARRANTS

Certain securities of each Portfolio may be subject to repurchase
agreements. Each of the Portfolios (except the Select Bond and Money Market
Portfolios) may also invest in warrants. A description of repurchase agreements
and warrants is included in the Statement of Additional Information.

- --------------------------------------------------------------------------------
INVESTMENT RESTRICTIONS

The significant investment restrictions common to all the Portfolios are
described below. The investment restrictions of a Portfolio may be changed only
with the approval of the majority of the Portfolio's shares outstanding. These
investment restrictions provide that each Portfolio will not:

1. Acquire more than 25% of any class of equity securities of any one
issuer.

2. With respect to at least 75% of the value of the total assets of the
Portfolio, invest more than 5% of the value of such assets in the
securities of any one issuer (except securities issued or guaranteed
by the U.S.

12
<PAGE>

Government or its agencies), or invest in more than 10% of the
outstanding voting securities of any one issuer.

3. Purchase the securities of any other investment company, except in
open-market transactions involving no commission or profit to a dealer
(other than the customary broker's commission) or in connection with
mergers, consolidations or acquisitions of assets, in amounts not
exceeding 10% of the total assets of the Portfolio.

4. Invest more than 15% of the value of the total assets of the Portfolio
in securities which are restricted as to disposition under federal
securities laws and in other illiquid assets. For the Money Market
Portfolio the limit is 10%.

5. Invest more than 25% of the value of the total assets of the Portfolio
in securities of issuers in any one industry except for investments by
the Money Market Portfolio and the Balanced Portfolio in U.S. Treasury
Bills, other obligations of or guaranteed by the U.S. Government or
its agencies, certificates of deposit or bankers' acceptances.

6. Make loans aggregating more than 10% of the total assets of the
Portfolio at any one time, provided that neither the purchase of a
portion of an issue of publicly distributed bonds, debentures, or
other debt securities, nor the purchase of short-term debt
securities, is to be considered as a loan.

Additional investment restrictions are included in the Statement of
Additional Information.

- --------------------------------------------------------------------------------
MANAGEMENT OF THE FUND

The Board of Directors of the Fund is responsible for the administration of
the affairs of the Fund. The Fund's investment adviser is NMIS, a wholly-owned
subsidiary of Northwestern Mutual Life. NMIS' address is 720 East Wisconsin
Avenue, Milwaukee, Wisconsin 53202. NMIS has served as investment adviser to
each of the mutual funds sponsored by Northwestern Mutual Life, subject to the
supervision and control of the boards of directors of the funds, since their
incorporation. NMIS provides investment advice and recommendations regarding the
purchase and sale of securities for the Fund's Portfolios.

Northwestern Mutual Life employs a full staff of investment personnel to
manage its investment assets. Northwestern Mutual Life's personnel and related
facilities are utilized by NMIS in performing its investment advisory functions.

J. P. Morgan Investment Management, Inc. ("J. P. Morgan Investment"), a
Delaware corporation with principal offices at 522 Fifth Avenue, New York, New
York 10036, a wholly-owned subsidiary of J. P. Morgan & Co., is the sub-adviser
for the Growth and Income Stock Portfolio. Templeton Investment Counsel, Inc.,
a Florida corporation with principal offices at 500 East Broward Boulevard, Ft.
Lauderdale, Florida 33394, a wholly-owned indirect subsidiary of Franklin
Resources, Inc., is the sub-adviser for the International Equity Portfolio.
Each of the sub-advisers has been retained by Northwestern Mutual Life and the
Fund pursuant to an investment sub-advisory agreement to provide investment
advice and, in general, to conduct the management investment program of the
Portfolio, subject to the general control of the Board of Directors of the Fund.

PORTFOLIO MANAGERS

Mark G. Doll, Senior Vice President of Northwestern Mutual Life, joined
Northwestern Mutual Life in 1972 and holds B.A. and M.B.A. degrees from the
University of Wisconsin-Milwaukee. He is a Chartered Financial Analyst. Mr.
Doll is responsible for the publicly traded investments of Northwestern Mutual
Life and for investment management of the Balanced Portfolio.

Patricia L. Van Kampen, Vice President of Common Stocks of Northwestern
Mutual Life, joined Northwestern Mutual Life in 1974. She holds a B.A. degree
from St. Norbert College and an M.B.A. from Marquette University, and is a
Chartered Financial Analyst. Ms. Van Kampen is responsible for all common stock
investments of Northwestern Mutual Life, and for investment management of the
Balanced Portfolio.

William R. Walker, Director of Common Stocks of Northwestern Mutual Life,
joined Northwestern Mutual Life in 1984. Prior to this, he worked for the
Chicago Board Options Exchange, the Milwaukee Company, and Armco Insurance. Mr.
Walker is a Chartered Financial Analyst, and holds a B.S. degree from Marquette

13
<PAGE>

University and an M.B.A. from Miami of Ohio. He has primary responsibility for
the management of the Aggressive Growth Stock Portfolio, as well as the small
company portfolio of Northwestern Mutual Life.

Julie M. Van Cleave, Director of Common Stocks of Northwestern Mutual Life,
joined Northwestern Mutual Life in 1984 and holds B.A. and M.B.A. degrees from
the University of Wisconsin-Madison. Ms. Van Cleave is a Chartered Financial
Analyst and has primary responsibility for the Growth Stock Portfolio and the
large company portfolio of Northwestern Mutual Life.

Steven P. Swanson, Vice President of Securities of Northwestern Mutual
Life, joined Northwestern Mutual Life in 1981. He received a B.A. degree from
Lawrence University and an M.B.A. from the University of Michigan. Mr. Swanson
is responsible for the High Yield Bond Portfolio and also manages the high yield
bond portfolio of Northwestern Mutual Life.

Jefferson V. DeAngelis, Vice President - Fixed Income of Northwestern
Mutual Life, joined Northwestern Mutual Life in 1983. Subsequently, he was a
portfolio manager for Van Kampen Merritt. Before returning to Northwestern
Mutual Life in 1992, he served as a portfolio manager for Putnam Management
Company from February of 1987 through February of 1992. He received a BA degree
from Carroll College and a MBA degree from Marquette University, and is a
Chartered Financial Analyst. Mr. DeAngelis has primary investment
responsibility for the Select Bond Portfolio, the fixed income securities of the
Balanced Portfolio and various portfolios of Northwestern Mutual Life.

Lisa Waller Oram, Managing Director of J.P. Morgan Investment, joined J.P.
Morgan in 1982. She holds undergraduate and graduate degrees from the
University of Wisconsin-Madison. Ms. Oram is a Chartered Financial Analyst.
She has primary responsibility for the Growth and Income Stock Portfolio, and
also manages several pension fund and mutual fund accounts.

Marc S. Joseph, Vice President/Portfolio Manager of Templeton Investment
Counsel, Inc. ("Templeton"), joined Templeton in September of 1993. Prior to
this, Mr. Joseph served as Vice President of Pacific Financial Research from
May of 1990 through August of 1993. He holds a BS degree in Computer Science
from the College of William & Mary, an MBA from Harvard Business School, and a
JD from Harvard Law School. He has primary responsibility for the
International Equity Portfolio, and manages several other unaffiliated mutual
funds. Mr. Joseph also has various research responsibilities at Templeton.

INVESTMENT ADVISORY FEES AND OTHER EXPENSES

Each Portfolio pays a monthly fee for investment advisory services at an
annual rate based on the aggregate average daily net asset values of the
Portfolio. For the Index 500 Stock Portfolio the rate is .20%, 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:

Portfolio First $50 Million Next $50 Million Excess
- --------- ----------------- ---------------- ------
Growth and Income Stock .70% .60% .55%
Growth Stock .60% .50% .40%
Aggressive Growth Stock .80% .65% .50%
High Yield Bond .60% .50% .40%
International Equity .85% .65% .65%

Of the amounts received by NMIS from the Fund, the sub-adviser for the
Growth and Income Stock Portfolio will be paid by NMIS at the annual rate of
.45% on the first $100 million of the Portfolio's assets, .40% on the next $100
million, .35% on the next $200 million and .30% on assets in excess of $400
million. For the International Equity Portfolio the sub-adviser will be paid by
NMIS at the annual rate of .50% of the Portfolio's assets, reduced to .40% on
assets in excess of $100 million.

The following table shows the annual expenses for each of the Portfolios,
as a percentage of the average net assets of the Portfolio, based on 1996
operations for the Portfolios and their predecessors:

14
<PAGE>

Portfolio Investment Advisory Fee Other Expenses Total Expenses
- --------- ----------------------- --------------- --------------
Index 500 Stock .20% .01% .21%
Select Bond .30% .00% .30%
Money Market .30% .00% .30%
Balanced .30% .00% .30%
Growth and Income Stock .61% .01% .62%
Growth Stock .52% .05% .57%
Aggressive Growth Stock .53% .01% .54%
High Yield Bond .57% .03% .60%
International Equity .67% .14% .81%

PORTFOLIO TRANSACTIONS

The investment adviser and the sub-advisers place all orders for the
purchase and sale of securities, options and futures contracts for the
Portfolios. Orders may be placed with Robert W. Baird & Co. Incorporated, a
broker-dealer firm which is a corporate affiliate of Northwestern Mutual Life,
subject to all applicable legal requirements, when the investment adviser or
sub-adviser believes that the combination of price and execution are comparable
to that of other broker-dealers. Additional information about portfolio
transactions and brokerage allocation is included in the Statement of Additional
Information.

- --------------------------------------------------------------------------------
CAPITAL STOCK

The Fund was incorporated in Maryland on December 22, 1983.

The Fund issues a separate class of capital stock for each Portfolio. Each
share of capital stock issued with respect to a Portfolio has a pro rata
interest in the assets of that Portfolio and has no interest in the assets of
any other Portfolio. Each share of capital stock is entitled to one vote on all
matters submitted to a vote of shareholders. Shares of a Portfolio will be voted
separately, however, on matters affecting only that Portfolio, including
approval of the Investment Advisory Agreement and changes in fundamental
investment policies of a Portfolio. The assets of each Portfolio are charged
with the liabilities of the Portfolio and their proportionate share of the
general liabilities of the Fund based on the relative asset size of the
Portfolios at the time the liabilities are incurred. All shares may be redeemed
for cash at any time.

All of the outstanding shares of each Portfolio are owned of record by
Northwestern Mutual Life. Shares of each Portfolio are presently being offered
only to Northwestern Mutual Life and its separate investment accounts used for
variable annuity contracts and variable life insurance policies. The shares
held in connection with certain of the separate investment accounts are voted by
Northwestern Mutual Life in accordance with instructions received from the
owners of the variable annuity contracts and variable life insurance policies.
The shares held by Northwestern Mutual Life as general assets are voted by
Northwestern Mutual Life in the same proportions as the shares held in
connection with these separate investment accounts. If applicable laws,
regulations or interpretations change so as to permit Northwestern Mutual Life
to vote the Fund shares in its own discretion, it may elect to do so.

As stated above, the shares of the Fund are offered to separate investment
accounts to fund both variable life insurance policies and variable annuity
contracts. Because of differences in tax treatment or other considerations it
is possible that the interests of variable life insurance policyowners, owners
of variable annuity contracts or owners of other contracts that may participate
in the Fund in the future might at some time be in conflict. The Board of
Directors of the Fund will monitor for any material conflicts and determine what
action, if any, should be taken. Northwestern Mutual Life has agreed to be
responsible, at its cost, to remedy or eliminate any irreconcilable material
conflict up to and including establishing a new registered management investment
company and segregating the assets underlying the variable annuity contracts and
variable life insurance policies.

There are no material pending legal proceedings to which the Fund is a
party.

15
<PAGE>

TAXES AND DIVIDENDS

Each Portfolio is qualified or intends to qualify as a regulated investment
company under Subchapter M of the Internal Revenue Code. It is the Fund's policy
to comply with the provisions of the Code regarding distribution of investment
income and capital gains so as to relieve each Portfolio from all, or
substantially all, Federal taxes. Each Portfolio expects to distribute all or
substantially all net investment income and net capital gains, if any, from the
sale of investments.

Shareholders of each Portfolio are entitled to receive such dividends from
net investment income and distributions of net capital gains as the Directors of
the Fund may declare. Dividends from net investment income and net capital gains
will be declared for the Index 500 Stock, Select Bond, Balanced, Growth and
Income Stock, Growth Stock, Aggressive Growth Stock, High Yield Bond and
International Equity Portfolios annually, and for the Money Market Portfolio on
each business day.

Net investment income of each Portfolio will be determined at the close of
trading on the New York Stock Exchange on each day during which the Exchange is
open for trading. Net investment income of each Portfolio consists of:
1. all dividends, interest income and discount earned by the Portfolio
(including original issue and market discount) and

2. net short-term capital gain less

3. all expenses of the Portfolio.

- --------------------------------------------------------------------------------
OFFERING AND REDEMPTION OF SHARES

Shares of capital stock of each Portfolio of the Fund are offered and
redeemed at their net asset value as next determined following receipt of a
purchase order or tender for redemption without the addition of any selling
commission or "sales load" or any redemption charge. The redemption price may be
more or less than the shareholder's cost.

Equity securities listed on a stock exchange are valued at the closing sale
price or, if no sale took place, the closing bid price. Stock index futures
contracts and interest rate futures contracts are valued at the closing
settlement price on the commodities exchange. Debt securities with maturities
generally exceeding one year are valued on the basis of valuations furnished by
Interactive Data Corporation. Money market instruments with maturities
exceeding 60 days but generally not exceeding one year are valued by marking to
market, except for the Money Market Portfolio. Debt securities with remaining
maturities of 60 days or less, and all debt securities of the Money Market
Portfolio, are valued on an amortized cost basis or, if the current market value
differs substantially from the amortized cost, by marking to market. All other
assets are valued at their fair value as determined in good faith by the
Directors. Net asset value is determined as of the close of trading on the New
York Stock Exchange on each day during which the Exchange is open for trading.
In accordance with the requirements of the Investment Company Act of 1940 the
Portfolios will also determine the net asset value of their shares on any other
day on which there is sufficient trading to materially affect the value of their
securities.

A more detailed discussion of asset valuation methods is included in the
Statement of Additional Information.

16
<PAGE>

NORTHWESTERN MUTUAL
SERIES FUND, INC.

------------------------------------------

CROSS REFERENCE SHEET

Cross reference sheet showing location in Statement of Additional
Information required by the Items in Part B of Form N-1A.

Heading in Statement
Item Number of Additional Information
----------- -------------------------

10 Cover Page

11 Table of Contents

12 Name Change of the Fund

13 Investment Policies

14 Management of the Fund

15 Ownership of Shares of the Fund

16 Investment Advisory and
Other Services

17 Portfolio Transactions and
Brokerage Allocation and Other
Practices

18 Capital Stock

19 Purchase, Redemption and
Pricing of Shares

20 Taxes and Dividends

21 *

22 Calculation of Yield Quota-
tions of Money Market Portfolio

23 Report of Independent Accountants,
Financial Statements and
Schedules of Investments

- -------------------------------------------------------------
* Indicates inapplicable or negative
<PAGE>

- --------------------------------------------------------------------------------
NORTHWESTERN MUTUAL
SERIES FUND, INC.
Consisting of
Index 500 Stock Portfolio
Select Bond Portfolio
Money Market Portfolio
Balanced Portfolio
Growth and Income Stock Portfolio
Growth Stock Portfolio
Aggressive Growth Stock Portfolio
High Yield Bond Portfolio
International Equity Portfolio
- --------------------------------------------------------------------------------

This Statement of Additional Information is not a prospectus but
supplements and should be read in conjunction with the Prospectus for
the Fund. A copy of the Prospectus may be obtained from The
Northwestern Mutual Life Insurance Company, 720 East Wisconsin Avenue,
Milwaukee, Wisconsin 53202, telephone number (414) 271-1444.

- --------------------------------------------------------------------------------

The date of the Prospectus to which this Statement of
Additional Information Relates is April 30, 1997.

The date of this Statement of Additional Information is
April 30, 1997.

B-1
<PAGE>

TABLE OF CONTENTS

CROSS-REFERENCE TO
PAGE PAGE IN PROSPECTUS
---- ------------------

Investment Policies B-3 5
Investment Restrictions B-3 12
Repurchase Agreements B-4 12
Financial Futures Contracts B-4 12
Covered Call Option Contracts B-12 -
Reverse Repurchase Agreements B-12 -
Warrants B-13 12
Asset-Backed and Variable Rate Securities B-13 -
Short-Term Trading B-14 -
Firm Commitment Agreements and "When-Issued" B-14 -
Securities
Private Placement Transactions B-14 13
and Illiquid Assets
Risk Factors for the International
Equity Portfolio B-15 11
Portfolio Turnover B-17 -
Management of the Fund B-18 13
Ownership of Shares of the Fund B-20 15
Investment Advisory and Other Services B-22 13
Portfolio Transactions and B-25 15
Brokerage Allocation and Other Practices
Capital Stock B-26 15
Purchase, Redemption and Pricing of B-27 16
Shares
Taxes and Dividends B-30 16
Calculation of Yield Quotations of B-30 5
the Money Market Portfolio
Name Change of the Fund B-31 -
Appendix A B-32 6
Appendix B B-38 7
Report of Independent Accountants B-39 3
Financial Statements and Schedules B-40 3
of Investments

B-2
<PAGE>

INVESTMENT POLICIES

INVESTMENT RESTRICTIONS

The investment restrictions not listed in the Prospectus and generally
common to the Index 500 Stock, Select Bond, Money Market, Balanced, Growth and
Income Stock, Growth Stock, Aggressive Growth Stock, High Yield Bond and
International Equity Portfolios of the Fund ("Portfolios") are described below.
The investment restrictions of the Portfolios numbered 1-8 below are
"fundamental policies" and may be changed only with the approval of the majority
of the Portfolio's shares outstanding. These investment restrictions provide
that each Portfolio will not:

1. Invest for the purpose of influencing management or exercising
control, but freedom of action is reserved with respect to exercise of
voting rights in respect of each Portfolio's securities.

2. Purchase any security on margin, but each Portfolio may obtain such
short-term credits as are necessary for the clearance of purchases and
sales of securities.

3. Make short sales of securities.

4. Act as a securities underwriter for other issuers, but each Portfolio
may purchase securities under circumstances where, if the securities
are later publicly offered or sold by the Portfolio, it might be
deemed to be an underwriter for purposes of the Securities Act of
1933.

5. Purchase or sell real estate. However, each Portfolio may invest in
securities issued by companies, including real estate investment
trusts, which invest in real estate or interests therein.

6. Invest in commodities or commodity contracts. However, each Portfolio
(except the Select Bond, Money Market and High Yield Bond Portfolios)
may invest in stock index futures contracts, including indexes on
specific industries, and the Select Bond, High Yield Bond,
International Equity and Balanced Portfolios may invest in interest
rate futures contracts in accordance with their investment objectives
and policies. The International Equity and High Yield Bond Portfolios
may invest in foreign currency futures contracts.

7. Issue senior securities or borrow money except for short-term credits
as may be necessary for the clearing of transactions and except for
temporary purposes to the extent of 5% of the total assets of the
Portfolio. Reverse repurchase agreements and financial futures
contracts are not considered to be "senior securities" or "borrowing
money" for the purpose of this restriction.

8. Make loans to persons who intend to use the proceeds for non-business
purposes or to companies which (including predecessors) have been in
business for less than three years.

B-3
<PAGE>

Repurchase agreements are not considered to be "loans" for the purpose
of this restriction.

As a non-fundamental investment policy, which may be changed by the Board
of Directors without shareholder approval, the International Equity Portfolio
will not invest more than 15% of its total assets in securities of foreign
issuers which are not listed on a recognized United States or foreign securities
exchange.

REPURCHASE AGREEMENTS

Each of the Portfolios may invest in repurchase agreements. A repurchase
agreement customarily obligates the seller at the time it sells securities to
the Portfolio to repurchase the securities at a mutually agreed upon time and
price. The total amount received on repurchase would be calculated to exceed
the price paid by the Portfolio, reflecting an agreed upon market rate of
interest for the period from the time of the repurchase agreement to the
settlement date, and would not necessarily be related to the interest rate on
the underlying securities. The differences between the total amount to be
received upon repurchase of the securities and the price which was paid by the
Portfolio upon their acquisition is accrued as interest and is included in the
Portfolio's net income declared as dividends. Each Portfolio intends to limit
repurchase agreements to transactions with financial institutions having total
assets in excess of $1,000,000,000 and with broker-dealers. Securities subject
to repurchase agreements shall be limited to obligations of or guaranteed by the
U.S. Government or its agencies or by the Government of Canada or of a Province
of Canada or any instrumentality or political subdivision thereof, certificates
of deposit of banks or commercial paper which meets the criteria for other
commercial paper in which the Portfolio may invest. A Portfolio will not invest
more than 10% of its total assets in repurchase agreements which have maturities
of more than seven days and will not invest in repurchase agreements with
maturities of over 30 days. Under no circumstances will a Portfolio enter into a
repurchase agreement with The Northwestern Mutual Life Insurance Company
("Northwestern Mutual Life").

Each Portfolio has the right to sell securities subject to repurchase
agreements but would be required to deliver identical securities upon maturity
of the repurchase agreement unless the seller fails to pay the repurchase price.
It is each Portfolio's intention not to sell securities subject to repurchase
agreements prior to the agreement's maturity. To the extent that the proceeds
from any sale upon a default in the obligation to repurchase were less than the
repurchase price, the Portfolio would suffer a loss. The Portfolio might also
incur disposition costs in connection with liquidating its collateral and, if
bankruptcy proceedings are commenced with respect to the seller, realization
upon the collateral by the Portfolio may be delayed or limited and a loss may be
incurred if the collateral securing the repurchase agreement declines in value
during the bankruptcy proceedings. To minimize the possibility of losses due to
the default or bankruptcy of the seller, the Fund has adopted standards of
creditworthiness for all broker-dealers with which the Fund enters into
repurchase agreements and will review compliance by such broker-dealers
periodically.

FINANCIAL FUTURES CONTRACTS

The Index 500 Stock, Balanced, Growth and Income Stock, Growth Stock,
Aggressive Growth Stock, and International Equity Portfolios may invest in stock
index futures contracts, including indexes on specific industries, and

B-4
<PAGE>

the Select Bond, High Yield Bond, International Equity and Balanced Portfolios
may invest in interest rate futures contracts. The following describes the
stock index and interest rate futures markets and the manner in which the
Portfolios will implement the policy.

USE. The Portfolios, as identified above, may enter into stock index
futures contracts as a hedge against changes in the market values of common
stocks and may enter into interest rate futures contracts as a hedge against
changes in prevailing levels of interest rates. In both cases, the purpose is
to establish more definitely the effective return on securities held or intended
to be acquired by the Portfolios. The Portfolios' hedging may include sales of
futures as an offset against the effect of expected decreases in stock values or
increases in interest rates, and purchases of futures as an offset against the
effect of expected increases in stock values or decreases in interest rates.

The Portfolios will not enter into financial futures contracts for
speculation, and will only enter into futures contracts that are traded on
national futures exchanges and are standardized as to maturity date and
underlying securities. Currently, stock index futures contracts can be
purchased or sold with respect to the Standard and Poor's 500 Stock Index on the
Chicago Mercantile Exchange, the New York Stock Exchange Composite Index on the
New York Futures Exchange and the Value Line Stock Index on the Kansas City
Board of Trade. The principal interest rate futures exchanges in the United
States are the Chicago Board of Trade, the Chicago Mercantile Exchange and the
New York Futures Exchange. Futures exchanges and trading are regulated under
the Commodity Exchange Act by the Commodity Futures Trading Commission.

The Portfolios will incur brokerage commissions in connection with
transactions in futures contracts.

DESCRIPTION. A stock index futures contract is an agreement whereby one
party agrees to take and another party agrees to make delivery of an amount of
cash equal to a specified dollar amount times the difference between the stock
index value at the close of the last trading day of the contract and the price
at which the futures contract is originally struck. A stock index assigns
relative values to the common stocks included in the index, and the index
fluctuates with changes in the market values of the common stocks included. No
physical delivery of the underlying stocks in the index is made.

Currently, stock index futures contracts covering the stock market as a
whole and covering certain industries are being traded. It is expected that
futures contracts covering stock indexes of additional industries will
eventually be traded.

An interest rate futures contract is an agreement whereby one party agrees
to sell and another party agrees to purchase a specified amount of a specified
financial instrument (debt security) at a specified price at a

B-5
<PAGE>

specified date, time and place. Although interest rate futures contracts
typically require actual future delivery of and payment for financial
instruments, the contracts are usually closed out before the delivery date.

A public market exists in interest rate futures contracts covering
primarily the following financial instruments: U.S. Treasury bonds; U.S.
Treasury notes; Government National Mortgage Association (GNMA) modified
pass-through mortgage-backed securities; three-month U.S. Treasury bills; 90-day
commercial paper; bank certificates of deposit; and Eurodollar certificates of
deposit. It is expected that futures contracts trading in additional financial
instruments will be authorized. The standard contract size is $100,000 for
futures contracts in U.S. Treasury bonds, U.S. Treasury notes and GNMA
pass-through securities and $1,000,000 for the other designated contracts.

It is each Portfolio's policy to close out open futures contracts before
delivery. Closing out an open futures contract sale or purchase is effected by
entering into an offsetting futures contract purchase or sale, respectively, for
the same aggregate amount of the stock index or the financial instrument and the
same delivery date. If the offsetting purchase price is less than the original
sale price, the Portfolio realizes a gain, and if it is more, the Portfolio
realizes a loss. Conversely, if the offsetting sale price is more than the
original purchase price, the Portfolio realizes a gain, and if it is less, the
Portfolio realizes a loss. The transaction costs must also be included in these
calculations. There can be no assurance, however, that the Portfolio will be
able to enter into an offsetting transaction with respect to a particular
contract at a particular time. If the Portfolio is not able to enter into an
offsetting transaction, the Portfolio will continue to be required to maintain
the margin deposits on the contract.

As an example of an offsetting transaction, the contractual obligations
arising from the sale of one contract of September Treasury Bills on an exchange
may be fulfilled at any time before delivery of the contract is required (i.e.,
on a specified date in September, the "delivery month") by the purchase of one
contract of September Treasury Bills on the same exchange. In such instance the
difference between the price at which the futures contract was sold and the
price paid for the offsetting purchase, after allowance for transaction costs,
represents the profit or loss to the Portfolio.

Persons who trade in futures contracts may be broadly classified as
"hedgers" and "speculators." Hedgers, such as the Portfolios, whose business
activity involves investment or other commitment in equity and debt securities
or other obligations, use the financial futures markets primarily to offset
unfavorable changes in value that may occur because of fluctuations in the value
of the securities or obligations held or expected to be acquired by them.

The speculator, like the hedger, generally expects neither to deliver nor
to receive the security underlying the futures contract, but unlike the hedger,
hopes to profit from fluctuations in prevailing stock market values or interest
rates.

Each Portfolio's futures transactions will be entered into for traditional
hedging purposes--that is, futures contracts will be sold to protect against a
decline in the price of securities that the Portfolio owns, or futures contracts
will be purchased to protect the Portfolio against an

B-6
<PAGE>

increase in the price of securities it intends to purchase. As evidence of this
hedging intent, each Portfolio expects that approximately 75% of such futures
contract purchases will be "completed"; that is, upon sale (offsetting) of these
long contracts, equivalent amounts of related securities will have been or are
then being purchased by the Portfolio in the cash market.

MARGIN. Initial margin is the amount of funds that must be deposited by a
Portfolio with its broker in order to initiate futures trading. An initial
margin deposit is intended to assure the Portfolio's performance of the futures
contract. The margin required for a particular futures contract is set by the
exchange on which the contract is traded and may range upward from less than 5%
of the value of the contract being traded.

Variation margin is the amount of subsequent payments that must be made to
and from the broker to maintain the Portfolio's open position in the futures
contracts. Variation margin payments are made on a daily basis as the price of
the underlying stock index or financial instrument fluctuates. If the value of
the open futures position changes (by increase, in the case of a sale, or by
decrease, in the case of a purchase) so that the loss on the futures contract
reaches a point at which the margin on deposit does not satisfy margin
requirements, the broker will require the Portfolio to make a variation margin
payment in the amount of the insufficiency. However, if the value of a position
increases because of favorable price changes in the futures contract so that the
margin deposit exceeds the required margin, the Portfolio will promptly demand
payment by the broker of variation margin in the amount of the excess. All
variation margin payments received by the Portfolio will be held by the Fund's
custodian in a separate account for the Portfolio.

In computing net asset value daily each Portfolio will mark to market the
current value of its open futures contracts. Each Portfolio expects to earn
interest income on its initial margin deposits.

EXAMPLE OF PURCHASE OF STOCK INDEX FUTURES CONTRACT. A Portfolio might
purchase a stock index futures contract when it anticipates a significant market
or market sector advance and wishes to participate in such advance at a time
when the Portfolio is not fully invested, for example, because the Portfolio has
not selected the individual stocks which it wishes to purchase. The Portfolio
would be endeavoring to eliminate the effect of all or part of an expected
increase in the market price of the stocks that the Portfolio may purchase at a
later date.

For example, assume that the prices of certain stocks that the Portfolio
may later purchase tend to move in concert with the Standard and Poor's 500
Stock Index. The Portfolio wishes to attempt to fix the purchase price of its
anticipated stock investment until the time (three months in this example) when
it may purchase the stock. Assume the stock has a market price of 125 and the
Portfolio believes that, because of an anticipated advance in the stock market,
the price will have risen in three months. The Portfolio might enter into
futures contract purchases of the Standard and Poor's 500 Stock Index for a
price of 125. If the market price of the stock should increase from 125 to 130,
the futures market price for the Standard and Poor's 500 Stock Index might also
increase, e.g., from 125 to 130. In that case, the five-point increase in the
price that the Portfolio would have to pay for the stock would be offset by the
five-point gain realized by closing out the futures contract purchase.

B-7
<PAGE>

If the Portfolio should be mistaken in its forecast of market values, and
the stock index should decline below 125, the market value of the stocks being
hedged would presumably decline. Unless the Portfolio would purchase the stocks
for the decreased price, the Portfolio would realize a loss on the sale of the
futures contract which would not be offset by the price decrease.

EXAMPLE OF SALE OF STOCK INDEX FUTURES CONTRACT. The Portfolio might sell
stock index futures contracts in anticipation of a general market or market
sector decline that may adversely affect the market values of the stocks held by
the Portfolio. The Portfolio would be endeavoring to substantially reduce the
risk of a decline in the value of its stocks without selling the stocks with
resultant transaction costs.

For example, assume that the market price of certain stocks held by the
Portfolio tend to move in concert with the Standard and Poor's 500 Stock Index.
The stock currently has a market value of 125, which the Portfolio believes will
decline because of an anticipated decline in the stock market. The Portfolio
wishes to attempt to fix the current market value of the stock until some time
in the future. The Portfolio might enter into a futures contract sale of the
Standard and Poor's 500 Stock Index at a price of 125. If the market price of
the stock should decline from 125 to 120, the futures market price of the
Standard and Poor's 500 Stock Index might also decline, e.g. from 125 to 120.
In that case the five-point loss in the market value of the stock would be
offset by the five-point gain realized by closing out the futures contract. The
futures market price of the Standard and Poor's 500 Stock Index might decline to
more or less than 120 because of the imperfect correlation with the prices of
the stocks hedged.

If the Portfolio should be mistaken in its forecast of the stock market,
and the futures market price of the Standard and Poor's 500 Stock Index should
increase above 125, the market price of the stock would increase. The benefit
of this increase would be offset by the loss realized on closing out the futures
contract sale.

EXAMPLE OF PURCHASE OF INTEREST RATE FUTURES CONTRACT. The Portfolio might
purchase an interest rate futures contract when it wishes to defer for a time a
fully invested position in longer term securities, for example, in order to
continue holding shorter term securities with higher yields. The Portfolio
would be endeavoring to eliminate the effect of all or part of an expected
increase in market price of the longer term bonds that the Portfolio may wish to
purchase at a later date.

For example, assume that the market price of a type of longer term bonds
that the Portfolio may later purchase, currently yielding 10%, tends to move in
concert with futures market prices of long-term U.S. Treasury bonds. The
Portfolio wishes to attempt to fix the purchase price (and thus the 10% yield)
of its anticipated longer term bond investment until the time (four months away
in this example) when it may purchase the bond. Assume the longer term bond has
a market price of 100, and the Portfolio believes that, because of an
anticipated decline in interest rates, the price will have risen (and
correspondingly the yield will have declined) in four months. The Portfolio
might enter into futures contract purchases of Treasury bonds for a price of 98.
At the same time, the Portfolio would purchase, for example at 100, or continue
to hold, shorter term securities that are either maturing in four months or are
earmarked by the Portfolio for sale in four months. Assume these short-term
securities are yielding 15%. If the market price of the

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longer term bond should increase from 100 to 105, the futures market price for
Treasury bonds might also increase, e.g., from 98 to 103. In that case, the
five-point increase in the price that the Portfolio would have to pay for the
longer term bond would be offset by the five-point gain realized by closing out
the futures contract purchase.

If the Portfolio should be mistaken in its forecast of interest rates, and
the futures market price of the U.S. Treasury obligation should decline below
98, the market price of the security being hedged would presumably decline. If
short-term rates at the same time fall to 10% or below, it is likely that the
Portfolio would follow through with its anticipated purchases of longer term
bonds, as the market price of available longer term bonds would have decreased.
The benefit of this price decrease, and thus the yield increase, would be offset
by the loss realized on closing out the futures contract purchase.

EXAMPLE OF SALE OF INTEREST RATE FUTURES CONTRACT. The Portfolio might
sell an interest rate futures contract in order to maintain the income derived
from its continued holding of a long-term security while endeavoring to avoid
part or all of the loss in market value that would otherwise accompany a decline
in prices of longer term securities because of an increase in prevailing
interest rates.

For example, assume that the market price of a certain longer term security
held by the Portfolio tends to move in concert with the futures market prices of
long-term U.S. Treasury bonds. The security has a current market price of 100,
which the Portfolio believes will decline because of an anticipated rise in
interest rates. The Portfolio wishes to attempt to fix the current market value
of this security until some point in the future. The Portfolio might enter into
a futures contract sale of Treasury bonds at a price of 98. If the market value
of the security should decline from 100 to 95, the futures market price of
Treasury bonds might also decline, e.g., from 98 to 93. In that case, the
five-point loss in the market value of the security would be offset by the
five-point gain realized by closing out the futures contract sale. The futures
market price of Treasury bonds might decline to more or less than 93 because of
the imperfect correlation with the prices of the securities hedged.

If the Portfolio should be mistaken in its forecast of interest rates, and
the futures market price of the U.S. Treasury obligation should increase above
98, the market price of the securities, including the security being hedged,
would increase. The benefit of this increase would be offset by the loss
realized on closing out the futures contract sale.

RISKS. Financial futures prices are volatile and difficult to forecast.
Stock index futures prices reflect the market values of the stocks included in
the index, while interest rate futures contracts are influenced, among other
things, by changes in prevailing interest rates and anticipation of future
interest rate changes. The factors influencing interest rate futures prices are
in turn affected by government fiscal and monetary policies and actions, and
national and international political and economic events, while stock market
values are also influenced by corporate management policies, consumer demand,
competition, sources of raw materials and supplies and government regulation.

At best, the correlation between changes in prices of futures contracts and
the securities being hedged can be only approximate. The degree of

B-9
<PAGE>

imperfection of correlation depends upon circumstances, such as: variations in
speculative market demand for futures and for equity or debt securities,
including technical influences in futures trading, and differences between the
securities being hedged and the instruments underlying the standard futures
contracts available for trading. A decision of whether, when and how to hedge
involves the exercise of skill and judgment, and even a well-conceived hedge may
be unsuccessful to some degree because of market behavior or unexpected stock
market or interest rate trends.

Because of the low margin deposits required, futures trading involves an
extremely high degree of leverage. As a result, a relatively small price
movement in a futures contract may result in immediate and substantial loss, as
well as gain, to the investor. For example, if at the time of purchase, 10% of
the value of the futures contract is deposited as initial margin, a 10% decrease
in the value of the futures contract would result in a total loss of the initial
margin deposit before any deduction for the transaction costs, if the account
were then closed out, and 15% decrease would result in a loss equal to 150% of
the initial margin deposit. Thus, a purchase or sale of a futures contract may
result in losses in excess of the amount invested in the futures contract.
However, the Portfolio would presumably have sustained comparable losses if,
instead of the futures contract, it had invested in the underlying security.
Furthermore, in order to be certain that the Portfolio has sufficient assets to
satisfy its obligations when it purchases a futures contract, the Portfolio
deposits cash or cash equivalents equal in value to the market value of the
futures contract in a segregated account for the Portfolio with the Fund's
custodian.

Most United States interest rate futures exchanges and the Chicago
Mercantile Exchange limit the amount of fluctuation permitted in futures
contract prices during a single trading day. The daily limit establishes the
maximum amount that the price of a futures contract may vary either up or down
from the previous day's settlement price at the end of a trading session. Once
the daily limit has been reached in a particular type of contract, no trades may
be made on that day at a price beyond that limit. The daily limit governs only
price movement during a particular trading day and therefore does not limit
potential losses because the limit may prevent the liquidation of unfavorable
positions. Futures contract prices have occasionally moved to the daily limit
for several consecutive trading days with little or no trading, thereby
preventing prompt liquidation of futures positions and subjecting some futures
traders to substantial losses.

FOREIGN CURRENCY FUTURES. The International Equity and High Yield Bond
Portfolios have the authority to deal in forward foreign exchange between
currencies of the different countries in which the Portfolio will invest as a
hedge against possible variations in the foreign exchange rate between these
currencies. This is accomplished through contractual agreements to purchase or
sell a specified currency at a specified future date and price set at the time
of the contract. The Portfolios' dealings in forward foreign exchange will be
limited to hedging involving either specific transactions or portfolio
positions. Transaction hedging is the purchase or sale of forward foreign
currency with respect to specific receivables or payables of the Portfolio
arising from the purchase and sale of portfolio securities, the sale and
redemption of shares of the Portfolio, or the payment of dividends and
distributions by the Portfolio. Position hedging is the sale of forward foreign
currency with respect to portfolio security positions denominated or quoted in
such foreign currency. The International Equity and High Yield Bond Portfolios
will not speculate in forward foreign exchange.

B-10
<PAGE>

At best, the correlation between changes in prices of futures contracts and
the securities being hedged can be only approximate. The degree of imperfection
of correlation depends upon circumstances, such as: variations in speculative
market demand for futures and for equity or debt securities, including technical
influences in futures trading, and differences between the securities being
hedged and the instruments underlying the standard futures contracts available
for trading. A decision of whether, when and how to hedge involves the exercise
of skill and judgment, and even a well-conceived hedge may be unsuccessful to
some degree because of market behavior or unexpected stock market or interest
rate trends.

Because of the low margin deposits required, futures trading involves an
extremely high degree of leverage. As a result, a relatively small price
movement in a futures contract may result in immediate and substantial loss, as
well as gain, to the investor. For example, if at the time of purchase, 10% of
the value of the futures contract is deposited as initial margin, a 10% decrease
in the value of the futures contract would result in a total loss of the initial
margin deposit before any deduction for the transaction costs, if the account
were then closed out, and a 15% decrease would result in a loss equal to 150% of
the initial margin deposit. Thus, a purchase or sale of a futures contract may
result in losses in excess of the amount invested in the futures contract.
However, the Portfolio would presumably have sustained comparable losses if,
instead of the futures contract, it had invested in the underlying security.
Furthermore, in order to be certain that the Portfolio has sufficient assets to
satisfy its obligations when it purchases a futures contract, the Portfolio
deposits cash or cash equivalents equal in value to the market value of the
futures contract in a segregated account with the Fund's custodian.

FEDERAL INCOME TAX TREATMENT. For Federal income tax purposes, each
Portfolio is required to recognize as income for each taxable year its net

B-11
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unrealized gains and losses on futures contracts as of the end of the year as
well as those actually realized during the year. Any gain or loss recognized
with respect to a futures contract is considered to be 60% long-term and 40%
short-term, without regard to the holding period of the contract. In the case
of a futures transaction classified as a "mixed straddle," the recognition of
losses may be deferred to a later taxable year.

In order for each Portfolio to continue to qualify for Federal income tax
treatment as a regulated investment company, at least 90% of its gross income
for a taxable year must be derived from qualifying income, i.e., dividends,
interest, income derived from loans of securities, and gains from the sale of
securities. Any net gain realized from the closing out of futures contracts,
for purposes of the 90% requirement, is considered gain from the sale of
securities and therefore is qualifying income. In addition, gains realized on
the sale or other disposition of securities held for less than three months must
be limited to less than 30% of the Portfolio's annual gross income.
Consequently, in order for the Portfolio to avoid realizing a gain within a
three-month period, the Portfolio may be required to defer the closing out of a
contract beyond the time when it would otherwise be advantageous to do so.

COVERED CALL OPTION CONTRACTS

The Index 500 Stock, Balanced, Growth and Income Stock, Growth Stock,
Aggressive Growth Stock and High Yield Bond Portfolios may engage in writing
covered call option contracts--options on securities owned by the Portfolios--
and may purchase call options only to close out a position acquired through the
writing of such options. Any option written or purchased by a Portfolio must be
listed on a domestic exchange. A covered call option gives the purchaser of the
option the right to purchase the underlying security at a fixed exercise price
at any time prior to the expiration of the option, regardless of the market
price of the security during the option period. As consideration for the option
the purchaser pays the Portfolio a premium which the Portfolio retains whether
or not the option is exercised. A covered call option will benefit a Portfolio
if, over the option period, the underlying security declines in value or does
not appreciate above the aggregate value of the exercise price and the premium.
However, a Portfolio risks a loss of profits if the underlying security
appreciates above the aggregate value of the exercise price and the premium.

The Portfolios may also close out a position acquired through writing a
call option by purchasing a call option on the same security with the same
exercise price and expiration date as the call option which it has previously
written on the security. Thus, when a security subject to a call option is sold
from a Portfolio (i.e., to protect the Portfolio from possible depreciation of
the security), the Portfolio will purchase a call option on the security to
close out the existing call option. Depending on the premium of the contract, a
Portfolio will realize a profit or a loss on the transaction. Option
transactions may increase a Portfolio's transaction costs and turnover rate and
will be initiated only where appropriate to achieve a Portfolio's investment
objectives.

REVERSE REPURCHASE AGREEMENTS

The Money Market and Balanced Portfolios may enter into reverse repurchase
agreements with banks and broker-dealers. Such agreements involve the sale of
money market securities held by a Portfolio pursuant to an

B-12
<PAGE>

agreement to repurchase the securities at an agreed upon price, date and
interest payment. The Portfolio will use the proceeds of reverse repurchase
agreements to purchase other money market securities which either mature, or can
be sold under an agreement to resell, at or prior to the expiration of the
reverse repurchase agreement. A Portfolio will utilize reverse repurchase
agreements when the interest income to be earned from the investment of proceeds
from the transaction is greater than the interest expense of the reverse
repurchase transaction. When effecting reverse repurchase transactions, a
Portfolio will hold securities of a dollar amount equal in value to the
securities subject to the reverse repurchase agreement in a segregated account.
Amounts subject to reverse repurchase agreements are also subject to a 300%
asset coverage requirement. If such amounts in the aggregate exceed this asset
coverage requirement, the Portfolio would be obligated within three days to
reduce such amounts to meet the requirement. Under no circumstances will a
Portfolio enter into a reverse repurchase agreement with Northwestern Mutual
Life.

WARRANTS

The Index 500 Stock, Balanced, Growth and Income Stock, Growth Stock,
Aggressive Growth Stock and High Yield Bond Portfolios may invest in warrants.
No Portfolio intends to invest more than 2% of its net assets in warrants that
are not listed on a national securities exchange. In no event will a
Portfolio's investment in warrants exceed 5% of its net assets. (A warrant is a
right to buy a certain security at a set price during a certain time period.)

ASSET-BACKED AND VARIABLE RATE SECURITIES

Consistent with its investment objectives and policies, the Money Market
Portfolio may invest in asset-backed and variable rate securities.

Asset-backed securities represent fractional interests in pools of retail
installment loans or revolving credit receivables. These assets are generally
held by a special purpose trust and payments of principal and interest, or
interest only, are passed through or paid through monthly or quarterly to
certificate holders. Payments may be guaranteed up to certain amounts by
letters of credit issued by a financial institution affiliated or unaffiliated
with the trustee or originator of the trust. Underlying receivables are
generally subject to prepayment, which may reduce the overall return to
certificate holders. Nevertheless, for asset-backed securities, principal
repayment rates tend not to vary much with interest rates and the short-term
nature of the underlying loans or other receivables tends to dampen the impact
of any change in the prepayment level. Certificate holders may also experience
delays in payment on the certificates if the full amounts due on underlying
sales contracts or other receivables are not realized by the trust because of
unanticipated legal or administrative costs of enforcing the contracts, or
because of depreciation or damage to the collateral securing certain contracts,
or other factors.

Variable rate securities bear rates of interest that are adjusted
periodically or which "float" continuously according to formulae intended to
minimize fluctuations in values of the instruments. For the Money Market
Portfolio, the Fund determines the maturity of variable rate securities in
accordance with Securities and Exchange Commission rules that allow the Fund to
consider certain of such instruments as having maturities less than the maturity
date on the instrument.

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<PAGE>

SHORT-TERM TRADING

Each Portfolio will generally not engage in short-term trading (purchases
and sales within seven days).

FIRM COMMITMENT AGREEMENTS AND "WHEN-ISSUED" SECURITIES

Each Portfolio may enter into firm commitment agreements for the purchase
of securities at an agreed upon price on a specified future date. A Portfolio
may purchase new issues of securities on a "when-issued" basis, whereby the
payment obligation and interest rate on the instruments are fixed at the time of
the transaction. Such transactions might be entered into, for example, when the
manager of a Portfolio anticipates a decline in the yield of securities of a
given issuer and is able to obtain a more advantageous yield by committing
currently to purchase securities to be issued or delivered later.

A Portfolio will not enter into such a transaction for the purpose of
investment leverage. Liability for the purchase price - and all the rights and
risks of ownership of the securities - accrue to the Portfolio at the time it
becomes obligated to purchase such securities, although delivery and payment
occur at a later date. Accordingly, if the market price of the security should
decline, the effect of the agreement would be to obligate the Portfolio to
purchase the security at a price above the current market price on the date of
delivery and payment. During the time the Portfolio is obligated to purchase
such securities it will maintain in a segregated account U.S. Government
securities, high-grade debt obligations, or cash or cash equivalents of an
aggregate current value sufficient to make payment for the securities.

PRIVATE PLACEMENT TRANSACTIONS AND ILLIQUID ASSETS

Each Portfolio may invest up to 15% of its total assets in securities
acquired in private placement transactions and other illiquid assets. For the
Money Market Portfolio the limit is 10%. For the purpose of determining each
Portfolio's net asset value, these assets will be valued at their fair value as
determined in good faith by the Fund's Directors. If a Portfolio should have
occasion to sell an investment in restricted securities at a time when the
market for such investments is unfavorable, a considerable period may elapse
between the time when the decision to sell it is made and the time when the
Portfolio will be able to sell the investment, with a possible adverse effect
upon the amount to be realized from the sale.

Notwithstanding these limitations a Portfolio may purchase securities
which, though not registered under the Securities Act of 1933 (the "1933 Act"),
are eligible for purchase and sale pursuant to Rule 144A under the 1933 Act.
Rule 144A permits unregistered securities to be traded among qualified
institutional investors, including the Portfolios. Rule 144A securities that
are determined to be liquid are not subject to the limitations on illiquid
assets. The Fund's investment adviser, Northwestern Mutual Investment Services,
Inc., determines and monitors the liquidity status of each Rule 144A security in
which a Portfolio invests, subject to supervision and oversight by the Board of
Directors of the Fund. The investment adviser takes into account all of the
factors which may have a material bearing on the ability of the Portfolio to
dispose of the security in seven days or less, at a price reasonably consistent
with the value used to determine the Portfolio's net

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<PAGE>

asset value per share, including the following factors: (1) the frequency and
volume of trades, (2) the number and sources of price quotes, (3) the number,
and identity, of dealers willing to purchase or sell the issue, and the number
and identity of other potential purchasers, (4) any dealer undertakings to make
a market in the security, (5) the nature of the security, and (6) the nature of
the market in which the issue is traded, including the time typically required
to make trades, the methods of soliciting offers and the mechanics of transfer.

RISK FACTORS FOR THE INTERNATIONAL EQUITY PORTFOLIO

The International Equity Portfolio has an unlimited right to purchase
securities in any foreign country, developed or developing, if they are listed
on an exchange, as well as a limited right to purchase such securities if they
are unlisted. Investors should consider carefully the risks involved in
securities of companies and governments of foreign nations, which are in
addition to the usual risks inherent in domestic investments.

Investments in companies domiciled in developing countries may be subject
to potentially higher risks than investments in developed countries. These
risks include (i) less social, political and economic stability; (ii) the small
current size of the markets for such securities and the currently low or
nonexistent volume of trading, which result in a lack of liquidity and in
greater price volatility; (iii) certain national policies which may restrict the
Portfolio's investment opportunities, including restrictions on investment in
issuers or industries deemed sensitive to national interests; (iv) foreign
taxation; (v) the absence of developed structures governing private or foreign
investment or allowing for judicial redress for injury to private property; (vi)
the absence, until recently in certain Eastern European countries, of a capital
market structure or market-oriented economy; and (vii) the possibility that
recent favorable economic developments in Eastern Europe may be slowed or
reversed by unanticipated political or social events in such countries.

Despite the dissolution of the Soviet Union, the Communist Party may
continue to exercise a significant role in certain Eastern European countries.
To the extent of the Communist Party's influence, investments in such countries
may involve risks of nationalization, expropriation and confiscatory taxation.
The communist governments of a number of Eastern European countries expropriated
a large amount of private property in the past, in many cases without adequate
compensation, and there can be no assurance that such expropriation will not
occur in the future. In the event of such expropriation, the International
Equity Portfolio could lose a substantial portion of any investments it has made
in the affected countries. Further, no accounting standards exist in Eastern
European countries. Finally, even though certain Eastern European currencies
may be convertible into U.S. dollars, the conversion rates may be artificial to
the actual market values and may be adverse to the Portfolio's shareholders.

There may be less publicly available information about foreign companies
comparable to the reports and ratings published about companies in the United
States. Foreign companies are not generally subject to uniform accounting,
auditing and financial reporting standards, and auditing practices and
requirements may not be comparable to those applicable to United States
companies. Foreign markets have substantially less volume than the New York
Stock Exchange, and securities of some foreign companies are less liquid and
more volatile than securities of comparable United States companies.

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<PAGE>

Commission rates in foreign countries, which are generally fixed rather than
subject to negotiation as in the United States, are likely to be higher. In
many foreign countries there is less government supervision and regulation of
stock exchanges, brokers and listed companies than in the United States.

The International Equity Portfolio endeavors to buy and sell foreign
currencies on as favorable a basis as practicable. Some price spread on
currency exchange (to cover service charges) may be incurred, particularly when
the Portfolio changes investment from one country to another or when proceeds of
the sale of shares in U.S. dollars are used for the purchase of securities in
foreign countries. Also, some countries may adopt policies which would prevent
the Portfolio from transferring cash out of the country or withhold portions of
interest and dividends at the source, or impose other taxes with respect to the
Portfolio's investments in securities of issuers of that country. There is the
possibility of expropriation, nationalization or confiscatory taxation, foreign
exchange controls (which may include suspension of the ability to transfer
currency from a given country), default in foreign government securities,
political or social instability or diplomatic developments which could affect
investments in securities of issuers in those nations.

The International Equity Portfolio may be affected either unfavorably or
favorably by fluctuations in the relative rates of exchange between the
currencies of different nations, by exchange control regulations and by
indigenous economic and political developments. Through the Portfolio's
flexible policy, the Portfolio's manager endeavors to avoid unfavorable
consequences and to take advantage of favorable developments in particular
nations where from time to time it places the Portfolio's investments. The
exercise of this flexible policy may include decisions to purchase securities
with substantial risk characteristics and other decisions such as changing the
emphasis on investments from one nation to another and from one type of security
to another. Some of these decisions may later prove profitable and others may
not. No assurance can be given that profits, if any, will exceed losses.

The Directors of the Fund consider at least annually the likelihood of the
imposition by any foreign government of exchange control restrictions which
would affect the liquidity of the Portfolio's assets maintained with custodians
in foreign countries, as well as the degree of risk from political acts of
foreign governments to which such assets may be exposed. They also consider the
degree of risk involved through the holding of portfolio securities in domestic
and foreign securities depositories. However, in the absence of willful
misfeasance, bad faith or gross negligence on the part of the Portfolio's
investment adviser, or reckless disregard of its obligations and duties under
the Investment Advisory Agreement, any losses resulting from the holding of the
Portfolio's portfolio securities in foreign countries and/or with securities
depositories will be at risk of the shareholders. No assurance can be given
that the Directors' appraisal of the risks will always be correct or that such
exchange control restrictions or political acts of foreign governments might not
occur.

The International Equity Portfolio may enter into a contract for the
purchase or sale of a security denominated in a foreign currency and may enter
into a forward foreign currency contract ("forward contract") in order to "lock
in" the U.S. dollar price of the security. In addition, when the Portfolio's
manager believes that the currency of a particular foreign country may suffer or
enjoy a substantial movement against another currency, it may

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<PAGE>

enter into a forward contract to sell or buy the amount of the former foreign
currency, approximating the value of some or all of the Portfolio's portfolio
securities denominated in such foreign currency. The projection of short-term
currency market movement is extremely difficult, and the successful execution of
a short-term hedging strategy is highly uncertain.

It is impossible to forecast with absolute precision the market value of
portfolio securities at the expiration of the contract. Accordingly, it may be
necessary for the Portfolio to purchase additional foreign currency on the spot
market (and bear the expense of such purchase) if the market value of the
security is less than the amount of foreign currency the Portfolio is obligated
to deliver and if a decision is made to sell the security and make delivery of
the foreign currency. Conversely, it may be necessary to sell on the spot
market some of the foreign currency received upon the sale of the portfolio
security if its market value exceeds the amount of foreign currency the
Portfolio is obligated to deliver.

If the Portfolio retains the portfolio security and engages in an
offsetting transaction, the Portfolio will incur a gain or a loss to the extent
that there has been movement in forward contract prices. If the Portfolio
engages in an offsetting transaction, it may subsequently enter into a new
forward contract to sell the foreign currency. Should forward prices decline
during the period between the Portfolio entering into a forward contract for the
sale of a foreign currency and the date it enters into an offsetting contract
for the purchase of the foreign currency, the Portfolio will realize a gain to
the extent the price of the currency it has agreed to sell exceeds the price of
the currency it has agreed to purchase. Should forward prices increase, the
Portfolio will suffer a loss to the extent the price of the currency it has
agreed to purchase exceeds the price of the currency it has agreed to sell.

PORTFOLIO TURNOVER

Portfolio turnover may vary from year to year or within a year depending
upon economic, market and business conditions. The annual portfolio turnover
rates of the Portfolios cannot be accurately predicted. It is anticipated
that the annual portfolio turnover rate for the Index 500 Stock Portfolio will
not exceed 2% and that the rate for the High Yield Bond Portfolio will
generally not exceed 140%. For the other Portfolios, it is anticipated that
the rate will generally not exceed 100%. In 1996, the portfolio turnover rates
for the Select Bond Portfolio and the fixed income securities of the Balanced
Portfolio were higher than usual because of a change in the portfolio
managers. Short-term debt securities are excluded in the calculation of
portfolio turnover rates. U.S. Government securities are included in the
calculation of portfolio turnover rates.

For years 1995 and 1996, the portfolio turnover rates were:

Portfolio Turnover Rate 1996 1995
----------------------- ---- ----

Index 500 Stock Portfolio 3.45% 3.19%
Select Bond Portfolio 195.98% 69.06%
Balanced Portfolio 67.66% 37.28%
Growth and Income Stock Portfolio 93.92% 80.00%
Growth Stock Portfolio 37.61% 46.83%
Aggressive Growth Stock Portfolio 47.25% 37.84%
High Yield Bond Portfolio 143.92% 116.57%
International Equity Portfolio 17.07% 26.71%

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The annual portfolio turnover rate of each Portfolio is the lesser of
purchases or sales of the Portfolio's securities for the year stated as a
percentage of the average value of the Portfolio's assets.

MANAGEMENT OF THE FUND

The following is a list of the Directors and Officers of the Fund together
with a brief description of their principal occupations during the past five
years.

James D. Ericson, President and Director*
720 East Wisconsin Avenue
Milwaukee, WI 53202

Trustee of Northwestern Mutual Life; President and Chief Executive
Officer of Northwestern Mutual Life since 1993; President and Chief
Operating Officer from 1991 to 1993; prior thereto, President

Stephen N. Graff, Director*
805 Lone Tree Road
Elm Grove, WI 53122

Retired Partner, Arthur Andersen LLP (Public Accountants) since 1994;
Senior Partner, 1993-1994; prior thereto, Managing Partner -
Milwaukee, WI office; Trustee of Northwestern Mutual Life since 1996

Martin F. Stein, Director
1800 East Capitol Drive
Milwaukee, WI 53211

Chairman of the Board of EyeCare One Corporation (retail sales of
eyewear)

John K. MacIver, Director
100 East Wisconsin Avenue
Milwaukee, WI 53202

Partner, Michael Best & Friedrich, Attorneys at Law

William J. Blake, Director
1105 North Waverly Place
Milwaukee, WI 53202

Chairman, Blake Financial Corporation (real estate investments and
venture capital)

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<PAGE>

Mark G. Doll, Vice President and Treasurer
720 East Wisconsin Avenue
Milwaukee, WI 53202

Senior Vice President of Northwestern Mutual Life since 1996; Senior
Vice President and Treasurer, 1995; prior thereto, Vice President and
Treasurer. Executive Vice President, Investment Advisory Services of
Northwestern Mutual Investment Services, Inc. since 1996; prior
thereto, President

Patricia L. Van Kampen, Vice President-Investments
720 East Wisconsin Avenue
Milwaukee, WI 53202

Vice President-Common Stocks of Northwestern Mutual Life; Vice
President-Common Stocks of Northwestern Mutual Investment Services,
Inc.

William R. Walker, Vice President-Investments
720 East Wisconsin Avenue
Milwaukee, Wisconsin 53202

Director of Common Stocks of Northwestern Mutual Life since 1993;
Associate Director of Common Stocks from 1992 to 1993; prior thereto,
Investment Officer; Vice President of Northwestern Mutual Investment
Services, Inc.

Julie M. Van Cleave, Vice President-Investments
720 East Wisconsin Avenue
Milwaukee, Wisconsin 53202

Director of Common Stocks of Northwestern Mutual Life since 1993;
Associate Director of Common Stocks from 1992 to 1993; prior thereto,
Investment Officer; Vice President-Common Stocks of Northwestern
Mutual Investment Services since 1993

Steven P. Swanson, Vice President-Investments
720 East Wisconsin Avenue
Milwaukee, Wisconsin 53202

Vice President-Securities of Northwestern Mutual Life since 1994;
prior thereto, Director-Securities; Vice President of Northwestern
Mutual Investment Services, Inc. since 1994

Jefferson V. DeAngelis, Vice President-Investments
720 East Wisconsin Avenue
Milwaukee, WI 53202

Vice President-Public Fixed Income Securities of Northwestern Mutual
Life since 1993; prior thereto, Director-Public Fixed Income; Vice
President-Fixed Income Securities of Northwestern Mutual Investment
Services, Inc. since 1993

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<PAGE>

Merrill C. Lundberg, Secretary
720 East Wisconsin Avenue
Milwaukee, WI 53202

Assistant General Counsel of Northwestern Mutual Life; Secretary of
Northwestern Mutual Investment Services, Inc.

Barbara E. Courtney, Controller
720 East Wisconsin Avenue
Milwaukee, WI 53202

Associate Director of Mutual Fund Accounting of Northwestern Mutual
Life since 1996; prior thereto, Assistant Director of Investment
Accounting; Assistant Treasurer of Northwestern Mutual Investment
Services, Inc.

* Directors identified with an asterisk are "interested persons" as
defined in Section 2(a)(19) of the Investment Company Act of 1940.

John K. MacIver has served as a Director since February 2, 1984. William J.
Blake has served as a Director since March 9, 1988. James D. Ericson has served
as a Director since April 27, 1994. Stephen N. Graff and Martin F. Stein have
served as Directors since March 29, 1995.

OWNERSHIP OF SHARES OF THE FUND

All of the outstanding shares of the Fund are held by Northwestern Mutual
Life for its General Account and for its separate investment accounts used for
variable annuity contracts and variable life income policies. Additional shares
are being offered only to Northwestern Mutual Life and the separate investment
accounts.

The following tables show the allocation of shares of the Portfolios of the
Fund among the General Account and the separate investment accounts as of
January 31, 1997.

INDEX 500 STOCK PORTFOLIO

NML Variable Annuity Account A 39,430,655 shares ( 10.78%)
NML Variable Annuity Account B 250,839,805 shares ( 68.59%)
NML Variable Annuity Account C 46,162,298 shares ( 12.62%)
Northwestern Mutual Variable Life Account 29,295,632 shares ( 8.01%)
General Account 0 shares ( 0.00%)
Total 365,728,390 shares (100.00%)

SELECT BOND PORTFOLIO

NML Variable Annuity Account A 21,324,558 shares ( 12.18%)
NML Variable Annuity Account B 133,843,930 shares ( 76.48%)
NML Variable Annuity Account C 14,674,873 shares ( 8.38%)
Northwestern Mutual Variable Life Account 5,176,186 shares ( 2.96%)
General Account 0 shares ( 0.00%)
Total 175,019,547 shares (100.00%)

B-20
<PAGE>

MONEY MARKET PORTFOLIO

NML Variable Annuity Account A 23,146,016 shares ( 13.11%)
NML Variable Annuity Account B 124,429,639 shares ( 70.45%)
NML Variable Annuity Account C 13,928,428 shares ( 7.89%)
Northwestern Mutual Variable Life Account 15,099,145 shares ( 8.55%)
General Account 0 shares ( 0.00%)
Total 176,603,228 shares (100.00%)

BALANCED PORTFOLIO

NML Variable Annuity Account A 156,496,692 shares ( 11.57%)
NML Variable Annuity Account B 1,060,350,108 shares ( 78.43%
NML Variable Annuity Account C 76,184,006 shares ( 5.63%)
Northwestern Mutual Variable Life Account 59,041,220 shares ( 4.37%)
General Account 0 shares ( 0.00%)
Total 1,352,072,026 shares (100.00%)

GROWTH AND INCOME STOCK PORTFOLIO

NML Variable Annuity Account A 9,960,265 shares ( 5.50%)
NML Variable Annuity Account B 118,332,804 shares ( 65.38%)
NML Variable Annuity Account C 9,822,428 shares ( 5.43%)
Northwestern Mutual Variable Life Account 13,044,016 shares ( 7.21%)
General Account 29,832,628 shares ( 16.48%)
Total 180,992,141 shares (100.00%)

GROWTH STOCK PORTFOLIO

NML Variable Annuity Account A 6,397,488 shares ( 5.36%)
NML Variable Annuity Account B 68,368,170 shares ( 57.29%)
NML Variable Annuity Account C 6,810,542 shares ( 5.71%)
Northwestern Mutual Variable Life Account 10,436,432 shares ( 8.74%)
General Account 27,334,590 shares ( 22.90%)
Total 119,347,222 shares (100.00%)

AGGRESSIVE GROWTH STOCK PORTFOLIO

NML Variable Annuity Account A 25,118,653 shares ( 8.96%)
NML Variable Annuity Account B 210,797,007 shares ( 75.18%)
NML Variable Annuity Account C 30,408,494 shares ( 10.85%)
Northwestern Mutual Variable Life Account 14,037,278 shares ( 5.01%)
General Account 0 shares ( 0.00%)
Total 280,361,432 shares (100.00%)

HIGH YIELD PORTFOLIO

NML Variable Annuity Account A 5,068,953 shares ( 5.67%)
NML Variable Annuity Account B 44,927,125 shares ( 50.21%)
NML Variable Annuity Account C 2,992,832 shares ( 3.35%)
Northwestern Mutual Variable Life Account 3,791,843 shares ( 4.24%)
General Account 32,681,513 shares ( 36.53%)
Total 89,462,266 shares (100.00%)

B-21
<PAGE>

INTERNATIONAL EQUITY PORTFOLIO

NML Variable Annuity Account A 26,864,227 shares ( 8.15%)
NML Variable Annuity Account B 251,329,706 shares ( 76.23%)
NML Variable Annuity Account C 31,991,986 shares ( 9.70%)
Northwestern Mutual Variable Life Account 19,514,173 shares ( 5.92%)
General Account 0 shares ( 0.00%)
Total 329,700,092 shares (100.00%)

The shares held in connection with certain of the separate investment
accounts are voted by Northwestern Mutual Life in accordance with instructions
received from owners of variable annuity contracts and variable life insurance
policies. The shares held in its General Account are voted by Northwestern
Mutual Life in the same proportions as the shares held in connection with these
separate investment accounts. If applicable laws or regulations change so as to
permit Northwestern Mutual Life to vote the Fund shares in its own discretion,
it may elect to do so.

INVESTMENT ADVISORY AND OTHER SERVICES

The Fund's investment adviser, Northwestern Mutual Investment Services,
Inc. ("NMIS"), is a wholly-owned subsidiary of Northwestern Mutual Life. The
adviser provides investment advice and recommendations regarding the purchase
and sale of securities for the Portfolios and the selection of brokers pursuant
to Investment Advisory Agreements (the "Agreements"). Each Agreement provides
that the adviser will also provide certain services and pay the expenses of the
Fund for certain other administrative services, office space and facilities and
the services of all directors, officers and employees of the Fund. Each
Portfolio (except the Select Bond, Money Market and Balanced Portfolios) pays
its own expenses for fees for services rendered by the custodian, legal counsel
and auditors; costs of Federal registrations of Fund shares; expenses of
meetings and reports; taxes; and brokerage and other expenses directly related
to portfolio transactions.

For acting as investment adviser and for providing such services and paying
such expenses the adviser is paid a monthly fee at the annual rates set forth in
the prospectus for the respective Portfolios. The Fund also pays all interest
charges, brokerage commissions, taxes and extraordinary expenses incurred in
connection with the operation of the Fund. Expenses paid by the Fund are
charged to the Portfolios to which the expenses relate.

For the fiscal years ended December 31, 1995 and 1996, NMIS received
$13,247,019 and $17,368,648, respectively, for its services as investment
adviser to the Fund.

"Northwestern Mutual Life" is the name and service mark of The Northwestern
Mutual Life Insurance Company and the right of the Fund to use the name and mark
is subject to the consent of Northwestern Mutual Life. Under the Agreement
providing such consent, the Fund recognizes the prior rights of Northwestern
Mutual Life in the name and mark, agrees that use of the name and mark by the
Fund will inure to the benefit of Northwestern Mutual Life and agrees that its
right to use the name and mark can be terminated by

B-22
<PAGE>

Northwestern Mutual Life and will automatically be terminated if at any time
NMIS ceases to be the investment adviser to the Fund or if NMIS ceases to be a
subsidiary of Northwestern Mutual Life.

Templeton Investment Counsel, Inc. ("Templeton Counsel"), a Florida
corporation with principal offices at 500 East Broward Boulevard, Ft.
Lauderdale, Florida 33394 has been retained under an investment sub-advisory
agreement to provide investment advice and, in general, to conduct the
management investment program of the International Equity Portfolio, subject to
the general control of the Board of Directors of the Fund. Templeton Counsel is
a wholly-owned indirect subsidiary of Franklin Resources, Inc. Certain clients
of Templeton Counsel may have investment objectives and policies similar to
those of the International Equity Portfolio. Templeton Counsel may, from time
to time, make recommendations which result in the purchase or sale of a
particular security by its other clients simultaneously with the International
Equity Portfolio. If transactions on behalf of more than one client during the
same period increase the demand for securities being purchased or the supply of
securities being sold, there may be an adverse effect on price. It is the
policy of Templeton Counsel to allocate advisory recommendations and the placing
of orders in a manner which is deemed equitable by Templeton Counsel to the
accounts involved, including the International Equity Portfolio. When two or
more of the clients of Templeton Counsel (including the International Equity
Portfolio) are purchasing the same security on a given day from the same broker-
dealer, such transactions may be averaged as to price. For its services
pursuant to the sub-advisory agreement, Templeton Counsel is paid, by NMIS,
compensation at the annual rate of .50% of the average net assets of the
International Equity Portfolio, reduced to .40% on assets in excess of $100
million.

J.P. Morgan Investment Management Inc. ("J.P. Morgan Investment"), 522
Fifth Avenue, New York, New York 10036, provides investment advisory services to
the Growth and Income Stock Portfolio, pursuant to an investment sub-advisory
agreement. For the services provided, NMIS pays J.P. Morgan Investment a fee at
the annual rate of .45% on the first $100 million of the Portfolio's assets,
.40% on the next $100 million, .35% on the next $200 million and .30% on assets
in excess of $400 million.

J.P. Morgan Investment is an investment manager for corporate, public, and
union employee benefit funds, foundations, endowments, insurance companies,
government agencies and the accounts of other institutional investors. A wholly
owned subsidiary of J.P. Morgan & Co. Inc., J.P. Morgan Investment was
incorporated in the state of Delaware on February 7, 1984 and commenced
operations on July 2, 1984. It was formed from the Institutional Investment
Group of Morgan Guaranty Trust Company of New York, also a subsidiary of J.P.
Morgan & Co. Inc.

Morgan acquired its first tax-exempt client in 1913 and its first pension
account in 1940. Assets under management have grown to over $112 billion. With
offices in London and Singapore, J.P. Morgan Investment draws from a worldwide
resources base to provide comprehensive service to an international group of
clients. Investment management activities in Japan, Australia, and Germany are
carried out by affiliates, Morgan Trust Bank in Tokyo, J.P. Morgan Investment
Management Australia Limited in Melbourne, and J.P. Morgan Investment GmbH in
Frankfurt.

J.P. Morgan Investment currently provide investment advisory services to
the following investment companies: Global Money Fund, International Growth

B-23
<PAGE>

Fund, and Growth and Income Fund of Sierra Trust Funds, Global Money Fund and
International Growth Fund of The Sierra Variable Trust, Frank Russell Equity Q
Fund and Frank Russell Quantitative Equity Fund of Frank Russell Investment Co.,
Preferred Fixed Income Fund and Preferred Money Market Fund of Caterpillar
Investment Management Ltd., AST Money Market Fund of American Skandia Life
Investment Management Inc., Benham European Government Bond Fund, and Equity
Income Series and Multi-Strategy Series of Pacific Select Fund.

Northwestern Mutual Life is the licensee under a License Agreement with
Standard & Poor's, dated as of November 30, 1990, relating to the Fund as well
as certain other mutual funds sponsored by Northwestern Mutual Life. The
following disclaimers and limitations are included in accordance with the
requirements of the License Agreement:

The Fund is not sponsored, endorsed, sold or promoted by Standard &
Poor's ("S&P"), a division of The McGraw-Hill Companies, Inc. Corporation,
and none of the Portfolios of the Fund is so sponsored, endorsed, sold or
promoted. S&P makes no representation or warranty, express or implied, to
the owners of the Fund or any of its Portfolios or any member of the public
regarding the advisability of investing in securities generally or in the
Fund or any of its Portfolios particularly or the ability of the S&P 500
Index to track general stock market performance. S&P's only relationship
to the Licensee is the licensing of certain trademarks and trade names of
S&P and of the S&P 500 Index which is determined, composed and calculated
by S&P without regard to the Licensee or the Fund. S&P has no obligation
to take the needs of the Licensee or the owners of the Fund or any of its
Portfolios into consideration in determining, composing or calculating the
S&P 500 Index. S&P is not responsible for and has not participated in the
determination of the timing of, prices at, or quantities of the Fund or any
of its Portfolio to be issued or in the determination or calculation of the
equation by which the Fund or any of its Portfolios is to be converted into
cash. S&P has no obligation or liability in connection with the
administration, marketing or trading of the Fund.

S&P DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE S&P
500 INDEX OR ANY DATA INCLUDED THEREIN AND S&P SHALL HAVE NO LIABILITY FOR
ANY ERRORS, OMISSIONS, OR INTERRUPTIONS THEREIN. S&P MAKES NO WARRANTY,
EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY LICENSEE, OWNERS OF THE
FUND, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE S&P 500 INDEX OR
ANY DATA INCLUDED THEREIN. S&P MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND
HEREBY EXPRESSLY DISCLAIMS ALL WARRANTIES OR MERCHANTABILITY OR FITNESS FOR
A PARTICULAR PURPOSE OR USE WITH RESPECT TO THE S&P 500 INDEX OR ANY DATA
INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL
S&P HAVE ANY LIABILITY FOR ANY SPECIAL, PUNITIVE, INDIRECT, OR
CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS), EVEN IF NOTIFIED OF THE
POSSIBILITY OF SUCH DAMAGES.

The custodian for the Index 500 Stock, Aggressive Growth Stock and Balanced
Portfolio is The Chase Manhattan Bank, N.A., One Chase Manhattan Plaza, New
York, New York 10081. The custodian for the Select Bond, High Yield Bond, Money
Market, Growth Stock and Growth and Income Stock Portfolios is Bankers Trust
Company, 16 Wall Street, New York, New York 10015. The custodian for the
International Equity Portfolio is Brown Brothers Harriman & Co., 40 Water
Street, Boston, Massachusetts 02109. The custodians maintain custody of
securities and other assets of the respective Portfolios and perform certain
services in connection with the purchase, sale, exchange and

B-24
<PAGE>

pledge of securities of the Portfolios. Canadian Imperial Bank of Commerce,
Commerce Court, Ontario, Canada M5L 1A2 provides custodial services for the Fund
in Canada.

Price Waterhouse LLP, 100 East Wisconsin Avenue, Suite 1500, Milwaukee,
Wisconsin 53202, is the independent public accountant of the Fund and performs
auditing services for the Fund.

PORTFOLIO TRANSACTIONS AND BROKERAGE ALLOCATION AND OTHER PRACTICES

There is generally no stated commission in the case of fixed-income
securities, which are traded in the over-the-counter markets, but the price paid
by the Fund usually includes an undisclosed dealer commission or mark-up. In
underwritten offerings, the price paid by the Fund includes a disclosed, fixed
commission or discount retained by the underwriter or dealer. Transactions on
U.S. stock exchanges and other agency transactions involve the payment by the
Fund of negotiated brokerage commissions. Such commissions vary among different
brokers. Also, a particular broker may charge different commissions according
to such factors as the difficulty and size of the transaction. In the case of
securities traded on some foreign stock exchanges, brokerage commissions may be
fixed and the investment adviser or sub-adviser may be unable to negotiate
commission rates for these transactions.

The investment adviser, or sub-adviser in the case of the Growth and Income
Stock and International Equity Portfolios, places all orders for the purchase
and sale of portfolio securities, options, and futures contracts for each
Portfolio through a substantial number of brokers and dealers or futures
commission merchants. In executing transactions, the investment adviser or sub-
adviser will attempt to obtain the best net results for the Portfolio, taking
into account such factors as price (including the applicable brokerage
commission or dollar spread), size of order, the nature of the market for the
security, the timing of the transaction, the reputation, experience and
financial stability of the broker-dealer involved, the quality of the service,
the difficulty of execution and operational facilities of the firms involved,
and the firm's risk in positioning a block of securities. In transactions on
stock exchanges in the United States, payments of brokerage commissions are
negotiated. In effecting purchases and sales of portfolio securities in
transactions on United States stock exchanges for the account of the Fund, the
investment adviser or sub-adviser may pay higher commission rates than the
lowest available when the investment adviser or sub-adviser believes it is
reasonable to do so in light of the value of the brokerage and research services
provided by the broker effecting the transaction, as described below. In the
case of securities traded on some foreign stock exchanges, brokerage commissions
may be fixed and the investment adviser or sub-adviser may be unable to
negotiate commission rates for these transactions. In the case of securities
traded on the over-the-counter markets, there is generally no stated commission,
but the price includes an undisclosed commission or markup.

Some securities considered for investment by the Fund's Portfolios may
also be appropriate for other clients served by the investment adviser
orsub-adviser. If a purchase or sale of securities consistent with the
investment policies of a Portfolio and one or more of these clients served by
the investment adviser or sub-adviser is considered at or about the same
time, transactions in such securities will be allocated among the Portfolios
and clients in a manner deemed fair and reasonable by the investment adviser
or

B-25
<PAGE>

sub-adviser. Although there is no specified formula for allocating such
transactions, the various allocation methods used by the investment adviser
or sub-adviser, and the results of such allocations, are subject to periodic
review by the Fund's investment adviser and directors.

It has for many years been a common practice in the investment advisory
business for advisers of investment companies and other institutional investors
to receive research services from broker-dealers which execute portfolio
transactions for the clients of such advisers. Consistent with this practice,
the investment adviser or sub-adviser may receive research services from many
broker-dealers with which the investment adviser or sub-adviser places portfolio
transactions. These services, which in some cases may also be purchased for
cash, include such matters as general economic and security market reviews,
industry and company reviews, evaluations of securities and recommendations as
to the purchase and sale of securities. Some of these services may be of value
to the investment adviser or sub-adviser in advising its various clients
(including the Portfolios), although not all of these services are necessarily
useful and of value in managing a Portfolio.

As permitted by Section 28(e) of the Securities Exchange Act of 1934, the
investment adviser or sub-adviser may cause a Portfolio to pay a broker-dealer,
which provides "brokerage and research services" (as defined in the Act) to the
investment adviser or sub-adviser, an amount of disclosed commission for
effecting a securities transaction for the Portfolio in excess of the commission
which another broker-dealer would have charged for effecting that transaction.

There are no arrangements whatsoever, written or oral, relating to the
allocation to specific brokers of orders for Portfolio transactions.
Consideration is given to those firms providing statistical and research
services to the investment adviser or sub-adviser, but it is not the policy of
any Portfolio to pay higher brokerage commissions to a firm solely because it
has provided such services. In 1996 all brokerage business was allocated to
firms which provided these services. Statistical and research services
furnished by brokers typically include: analysts' reports on companies and
industries, market forecasts, economic analyses and the like. Such services may
tend to reduce the expenses of the adviser or sub-adviser and this has been
considered in setting the advisory fee paid by each Portfolio. During the years
ended December 31, 1994, 1995, and 1996, the Fund paid brokerage commissions of
$845,127, $1,174,651 and $1,859,133, respectively.

The Directors of the Fund have recently authorized the investment adviser
and sub-advisers to place portfolio orders for the Fund with Robert W. Baird &
Co. Incorporated, a broker-dealer which is a corporate affiliate of
Northwestern Mutual Life. This authorization is subject to all applicable
legal requirements, including procedures adopted by the Directors. However, no
orders have been placed with that broker-dealer firm or with any other firm
which is an affiliate of the Fund, its adviser or Northwestern Mutual Life
during the three most recent fiscal years of the Fund.

CAPITAL STOCK

The capital stock of the Fund is divided into nine classes corresponding to
the nine Portfolios of the Fund.

B-26
<PAGE>

Each class is preferred over the other classes with respect to the assets
of the Portfolio to which the class relates. Dividends and distributions,
including distributions in the event of liquidation, are payable only out of
assets of the Portfolio to which the class relates. All shares of the Fund are
entitled to vote on all matters submitted to a vote of the shareholders except
that shares shall be voted by class on matters concerning only that class, to
approve an investment advisory agreement, to approve changes in fundamental
policies with respect to that class and when otherwise required by the
Investment Company Act of 1940. Shares may be redeemed only for cash, except
that capital stock of any class may be redeemed in kind with assets of the
Portfolio to which the class relates if the Directors deem such action
desirable. Each share is nonassessable and shareholders have no preemptive or
conversion rights.

PURCHASE, REDEMPTION AND PRICING OF SHARES

Shares of each Portfolio are offered and redeemed at their net asset value
as next determined following receipt of a purchase order or tender for
redemption without the addition of any selling commission or "sales load" or any
redemption charge. The redemption price may be more or less than the
shareholder's cost.

The net asset value of each share of each Portfolio is the net asset value
of the entire Portfolio divided by the number of shares of the Portfolio
outstanding. The net asset value of an entire Portfolio is determined by
computing the value of all assets of the Portfolio and deducting all
liabilities, including reserves and accrued liabilities of the Portfolio.
Portfolio securities for which market quotations are readily available are
valued at current market value.

Equity securities listed on a stock exchange and all call options are
valued at the closing sale price on the stock or options exchange or, if there
has been no such sale, at the closing bid price; stock index futures contracts
and interest rate futures contracts are valued at the closing settlement price
on the commodities exchange; unlisted equity securities are valued at the
closing bid price on the over-the-counter market.

Debt securities with maturities generally exceeding one year are valued on
the basis of valuations furnished by Interactive Data Corporation, a facility
which utilizes electronic data processing techniques to report valuations for
normal institutional size trading units of debt securities, without regard to
exchange or over-the-counter prices, unless the Directors of the Fund determine
that in the case of a particular security some other value is fair.

Money market instruments and debt securities with maturities exceeding
sixty days but generally not exceeding one year are valued by marking to market,
except for the Money Market Portfolio. Marking to market is based on an average
(provided by a communication network) of the most recent bid prices or yields.
The marking to market method takes into account unrealized appreciation or
depreciation due to changes in interest rates or other factors which would
influence the current fair values of such securities.

Securities with remaining maturities of sixty days or less, and all debt
securities of the Money Market Portfolio, are valued on an amortized cost basis
or, if the current market value differs substantially from the amortized cost,
by marking to market. Under the amortized cost method of valuation, the

B-27
<PAGE>

security will initially be valued at the cost on the date of purchase (or, in
the case of securities purchased with more than 60 days remaining to maturity
the market value on the 61st day prior to maturity); and thereafter the
Portfolio will assume a constant proportionate amortization in value until
maturity of any discount or premium.

The value of a foreign security held by the International Equity
Portfolio is determined in its national currency as of the close of trading
on the foreign exchange on which it is traded, or as of 4:00 p.m., New York
time, if that is earlier, and that value is then converted into its U.S.
dollar equivalent at foreign exchange rates in effect at 11:00 a.m., New York
time, on the day the value of the foreign security is determined. If no sale
is reported at that time, the mean between the current bid and asked price is
used. Occasionally, events which affect the values of such securities and
such exchange rates may occur between the times at which they are determined
and the close of the New York Stock Exchange, and will therefore not be
reflected in the computation of the Portfolio's net asset value. If events
materially affecting the value of such securities occur during such period,
then these securities will be valued at fair value as determined by the
management and approved in good faith by the Directors of the Fund. Trading
in securities on European and Far Eastern securities exchanges and
over-the-counter markets is normally completed well before the close of
business in New York on each day on which the New York Stock Exchange is
open. Trading in European or Far Eastern securities generally, or in a
particular country or countries, may not take place on every New York
business day. Furthermore, trading takes place in various foreign markets on
days which are not business days in New York and on which the Fund's net
asset value is not calculated. The International Equity Portfolio calculates
net asset value per share, and therefore effects sales and redemptions of its
shares, as of the close of the New York Stock Exchange once on each day on
which that Exchange is open. Such calculation does not take place
contemporaneously with the determination of the prices of many of the
portfolio securities used in such calculation and if events occur which
materially affect the value of these foreign securities, they will be valued
at fair market value as determined by the management and approved in good
faith by the Directors of the Fund.

All other assets, including any securities for which market quotations are
not readily available, will be valued at their fair value as determined in good
faith by the Directors of the Fund. The net asset value is determined as of the
close of trading on the New York Stock Exchange on each day during which the
Exchange is open for trading. In accordance with the requirements of the
Investment Company Act of 1940 the Portfolios will also determine the net asset
value of their shares on any other day on which there is sufficient trading to
materially affect the value of their securities.

The Money Market Portfolio will use its best efforts to maintain a constant
net asset value per share of $1.00 (computed to an accuracy of $.005); however,
the net asset value is subject to fluctuation based upon changes in the value of
the Portfolio's securities. Accordingly, if net losses on the Portfolio's
securities for a given period exceed income after expenses, the net asset value
per share of Money Market Portfolio capital stock will decline. The Board of
Directors of the Fund will take such action as it considers appropriate to
maintain the stability of the net asset value per share. For example, the
Directors may reduce or suspend the payment of dividends if the net asset value
per share should decline below $.995 and the Directors may supplement such
dividends with other distributions if the net asset value per share should rise
above $1.005.

B-28
<PAGE>

The total offering price per share for each Portfolio is computed as
follows:

SPECIMEN PRICE-MAKE-UP SHEET
(as of December 31, 1996)

INDEX 500 SELECT BOND MONEY MARKET BALANCED
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------- --------- --------- ---------

NET ASSETS $740,066,437 $214,333,586 $176,298,542 $2,326,233,275

NUMBER OF SHARES
OUTSTANDING 360,058,793 175,166,354 176,314,115 1,353,952,132

NET ASSET VALUE
PER SHARE 2.055 $1.224 $1.000 $1.718
(NET ASSETS
DIVIDED BY
NUMBER OF SHARES
(OUTSTANDING)

OFFERING AND
REDEMPTION
PRICE PER SHARE $2.06 $1.22 $1.00 $1.72

AGGRESSIVE
GROWTH AND GROWTH STOCK GROWTH STOCK
INCOME PORTFOLIO PORTFOLIO PORTFOLIO
---------------- --------- ---------

NET ASSETS $234,183,366 $170,481,467 $871,926,094

NUMBER OF SHARES
OUTSTANDING 177,727,725 116,462,642 277,222,110

NET ASSET VALUE
PER SHARE
(NET ASSETS
DIVIDED BY
NUMBER OF SHARES
OUTSTANDING) $1.318 $1.464 $3.145

OFFERING AND
REDEMPTION PRICE
PER SHARE $1.32 $1.46 $3.15

B-29
<PAGE>

HIGH YIELD INTERNATIONAL
BOND PORTFOLIO EQUITY PORTFOLIO
-------------- ----------------

NET ASSETS $93,879,092 $505,190,404

NUMBER OF SHARES
OUTSTANDING 85,420,549 324,246,353

NET ASSET VALUE
PER SHARE
(NET ASSETS
DIVIDED BY
NUMBER OF SHARES
OUTSTANDING) $1.099 $1.558

OFFERING AND
REDEMPTION PRICE
PER SHARE $1.10 $1.56

Payment for the shares redeemed must be made within seven days after the
evidence of ownership of such shares is tendered to the Fund; however, the right
to redeem Fund shares may be suspended, or payment of the redemption value
postponed, during any period in which the New York Stock Exchange is closed or
trading thereon is restricted, or any period during which an emergency exists,
or as otherwise permitted by the Investment Company Act of 1940.

TAXES AND DIVIDENDS

Each Portfolio is qualified or intends to qualify as a regulated investment
company under Subchapter M of the Internal Revenue Code. In order to avoid
taxation of capital gains under Subchapter M of the Code, each Portfolio, except
the Money Market Portfolio, will distribute net capital gains annually. Net
capital gains from the sale of investments will be calculated by subtracting any
unused capital loss carryforward from net realized gain for the year, as
prescribed by the Internal Revenue Code. No distribution of realized capital
gains will be made until any capital loss carryforward has been exhausted or
expired. At the end of its last fiscal year, the Select Bond Portfolio had a
capital loss carryforward of $199,271. The other Portfolios had no capital loss
carryforward.

CALCULATION OF YIELD QUOTATIONS OF THE MONEY MARKET PORTFOLIO

The Money Market Portfolio's yield is its current investment income
expressed in annualized terms. The Portfolio's yield is calculated by
determining the net change in the value of a pre-existing account having a
balance of one share at the beginning of a seven-day base period. The net
change in the value of the account is divided by the value of the account at the
beginning of the period to obtain the base period return. The result is then
multiplied by 365 and divided by seven, with the resulting annualized yield
carried to the nearest hundredth of one percent. For purposes of this
calculation the net change in the value of the account reflects the value of
additional Portfolio shares purchased with dividends from the original share and
dividends declared on both the original share and any such additional shares.
The calculation reflects net investment income of the Portfolio for the period,
including accrued interest income plus or minus amortized purchase discount or
premium, less all accrued expenses, but does not include realized or unrealized
gains or losses.

B-30
<PAGE>

- --------------------------------------------------------------------------------

NAME CHANGE OF THE FUND

The name of Northwestern Mutual Series Fund, Inc. was changed from
Northwestern Mutual Variable Life Series Fund, Inc. on May 1, 1994.
- --------------------------------------------------------------------------------

B-31
<PAGE>

APPENDIX A

Description of Ratings as Provided by the Rating Services

CORPORATE BONDS

MOODY'S INVESTORS SERVICE, INC.

Aaa--Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.

Aa--Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they compromise what are generally known
as high grade bonds. They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat larger than in Aaa
securities.

A--Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving security
to principal and interest are considered adequate but elements may be present
which suggest a susceptibility to impairment sometime in the future.

Baa--Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.

Ba--Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and, thereby, not well safeguarded
during other good and bad times over the future. Uncertainty of position
characterizes bonds in this class.

B--Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the security over any long period of time may be small.

Caa--Bonds which are rated Caa are of poor standing. Such securities may
be in default or there may be present elements of danger with respect to
principal or interest.

Ca--Bonds which are rated Ca represent obligations which are speculative in
a high degree. Such issues are often in default or have other marked
shortcomings.

B-32
<PAGE>

C--Bonds which are rated C are the lowest rated class of bonds and are
regarded as having extremely poor prospects of ever attaining any real
investment standing.

Absence of Rating: Where no rating has been assigned or where a rating has
been suspended or withdrawn, it may be for reasons unrelated to the quality of
the issue.

Should no rating be assigned, the reason may be one of the following:

1. An application for rating was not received or accepted.

2. The issue or issuer belongs to a group of securities that are not
rated as a matter of policy.

3. There is a lack of essential data pertaining to the issue or issuer.

4. The issue was privately placed, in which case the rating is not
published in Moody's publications.

Suspension or withdrawal may occur if new and material circumstances arise,
the effects of which preclude satisfactory analysis; if there is no longer
available reasonable up-to-date data to permit a judgment to be formed; if a
bond is called for redemption; or for other reasons.

Note: Moody's applies numerical modifiers 1, 2 and 3 in each generic
ratings classification from Aa through B in its corporate bond rating system.
The modifier 1 indicates that the security ranks in the higher end of its
generic rating category; the modifier 2 indicates a mid-range ranking; and the
modifier 3 indicates that the issue ranks in the lower end of its generic rating
category.

STANDARD & POOR'S

AAA--Debt rated AAA has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.

AA--Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in small degree.

A--Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.

BBB--Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.

BB, B, CCC, CC, C--Debt is regarded as having predominantly speculative
characteristics with respect to capacity to pay interest and repay principal in
accordance with the terms of this obligation. "BB" indicates the least degree
of speculation and "C" the highest degree of speculation. While such debt will
likely have some quality and protective characteristics, these are

B-33
<PAGE>

outweighed by large uncertainties or major risk exposures to adverse conditions.

BB--Debt rated "BB" has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure
to adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The "BB"
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied "BBB-" rating.

B--Debt rated "B" has a greater vulnerability to default but currently has
the capacity to meet interest payments and principal repayments. Adverse
business, financial, or economic conditions will likely impair capacity or
willingness to pay interest and repay principal. The "B" rating category is
also used for debt subordinated to senior debt that is assigned an actual or
implied "BB" or "BB-" rating.

CCC--Debt rated "CCC" has a currently indefinable vulnerability to default,
and is dependent upon favorable business, financial and economic conditions to
meet timely payment of interest and repayment of principal. In the event of
adverse business, financial or economic conditions, it is not likely to have the
capacity to pay interest and repay principal. The "CCC" rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
"B" or "B-" rating.

CC--The rating "CC" is typically applied to debt subordinated to senior
debt that is assigned an actual or implied "CCC" rating.

C--The rating "C" is typically applied to debt subordinated to senior debt
which is assigned an actual or implied "CCC-" debt rating. The "C" rating may
be used to cover a situation where a bankruptcy petition has been filed, but
debt service payments are continued.

CI--The rating "CI" is reserved for income bonds on which no interest is
being paid.

D--Debt rated "D" is in payment default. The "D" rating is used when
interest payments or principal are not made on the date due even if the
applicable grace period has not expired, unless S&P believe that such payments
will be made during such grace period. The "D" rating also will be used upon
the filing of a bankruptcy petition if debt service payments are jeopardized.

Plus (+) or Minus (-)--The ratings from "AA" to "CCC" may be modified by
the addition of a plus or minus sign to show relative standing within the major
rating categories.

NR--Not rated.

PREFERRED STOCKS

MOODY'S INVESTORS SERVICE, INC.

aaa--considered to be a top-quality preferred stock. This rating indicates
good asset protection and the least risk of dividend impairment within the
universe of preferred stocks.

B-34
<PAGE>

aa--considered a high-grade preferred stock. This rating indicates that
there is a reasonable assurance that earnings and asset protection will remain
relatively well maintained in the foreseeable future.

a--considered to be an upper-medium-grade preferred stock. While risks are
judged to be somewhat greater than in the aaa and aa classifications, earnings
and asset protection are, nevertheless, expected to be maintained at adequate
levels.

baa--considered to be medium-grade, neither highly protected nor poorly
secured. Earnings and asset protection appear adequate at present but may be
questionable over any great length of time.

ba--considered to have speculative elements and its future cannot be
considered well assured. Earnings and asset protection may be very moderate and
not well safeguarded during adverse periods. Uncertainty of position
characterizes preferred stocks in this class.

b--generally lacks the characteristics of a desirable investment.
Assurance of dividend payments and maintenance of other terms of the issue over
any long period of time may be small.

caa--likely to be in arrears on dividend payments. This rating designation
does not purport to indicate the future status of payments.

ca--speculative in a high degree and is likely to be in arrears on
dividends with little likelihood of eventual payments.

c--lowest rated class of preferred or preference stock. Issues so rated
can be regarded as having extremely poor prospects of ever attaining any real
investment standing.

Moody's applies numerical modifiers 1, 2 and 3 in each rating
classification: the modifier 1 indicates that the security ranks in the higher
end of its generic rating category; the modifier 2 indicates a mid-range
ranking; and the modifier 3 indicates that the issue ranks in the lower end of
its generic rating category.

STANDARD & POOR'S

"AAA"--This is the highest rating that may be assigned by S&P to a
preferred stock issue and indicates an extremely strong capacity to pay the
preferred stock obligations.

"AA"--A preferred stock issue rated "AA" also qualifies as a high-quality
fixed-income security. The capacity to pay preferred stock obligations is very
strong, although not as overwhelming as for issues rated "AAA".

"A"--An issued rated "A" is backed by a sound capacity to pay the preferred
stock obligations, although it is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions.

"BBB"--An issue rated "BBB" is regarded as backed by an adequate capacity
to pay the preferred stock obligations. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing

B-35
<PAGE>

circumstances are more likely to lead to a weakened capacity to make payments
for preferred stock in this category than for issues in the "A" category.

"BB", "B", "CCC"--Preferred stock rated "BB", "B", and "CCC" are regarded,
on balance, as predominantly speculative with respect to the issuer's capacity
to pay preferred stock obligations. "BB" indicates the lowest degree of
speculation and "CCC" the highest degree of speculation. While such issues will
likely have some quality and protective characteristics, these are outweighed by
large uncertainties or major risk exposures to adverse conditions.

"CC"--The rating "CC" is reserved for a preferred stock issue in arrears on
dividends or sinking fund payments but that is currently paying.

"C"--The preferred stock rated "C" is a non-paying issue.

"D"--A preferred stock rated "D" is a non-paying issue with the issuer in
default on debt instruments.

NR indicates that no rating has been requested, that there is insufficient
information on which to base a rating, or that S&P does not rate a particular
type of obligation as a matter of policy.

Plus(+) or Minus(-)--To provide more detailed indications of preferred
stock quality, the ratings from "AA" to "CCC" may be modified by the addition of
a plus or minus sign to show relative standing within the major rating
categories.

COMMERCIAL PAPER

MOODY'S INVESTORS SERVICE

The term "commercial paper" as used by Moody's means promissory obligations
not having an original maturity in excess of one year.

Moody's employs the following three designations, all judged to be
investment grade, to indicate the relative repayment capacity of rated issuers:

Issuers rated PRIME-1 (or supporting institutions) have a superior ability
for repayment of senior short-term debt obligations. PRIME-1 repayment ability
will often be evidenced by the following characteristics:

-- Leading market positions in well-established industries.

-- High rates of return on funds employed.

-- Conservative capitalization structures with moderate reliance on debt
and ample asset protection.

-- Broad margins in earnings coverage of fixed financial charges and high
internal cash generation.

-- Well-established access to a range of financial markets and assured
sources of alternate liquidity.

B-36
<PAGE>

Issuers rated PRIME-2 (or supporting institutions) have a strong ability
for repayment of senior short-term debt obligations. This will normally be
evidenced by many of the characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound, may be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.

Issuers rated PRIME-3 (or supporting institutions) have an acceptable
ability for repayment of senior short-term debt obligations. The effect of
industry characteristics and market composition may be more pronounced.
Variability in earnings and profitability may result in changes in the level of
debt protection measurements and the requirement for relatively high financial
leverage. Adequate alternate liquidity is maintained.

Issuers rated NOT PRIME do not fall within any of the Prime rating
categories.

STANDARD & POOR'S

S&P commercial paper rating is a current assessment of the likelihood of
timely payment of debt having an original maturity of no more than 365 days.
Ratings are graded into several categories ranging from "A-1" for the highest
quality obligations to "D" for the lowest. These categories are as follows:

A-1 Commercial paper rated "A-1" is regarded as having a very strong
degree of safety regarding timely payment. A "+" designation is
applied to those issues which possess extremely strong safety
characteristics.

A-2 Commercial paper rated "A-2" is regarded as having a satisfactory
capacity for timely payment. However, the relative degree of safety
is not as high as for issues designated "A-1"

A-3 Commercial paper rated "A-3" is regarded as having an adequate
capacity for timely payment. They are, however, more vulnerable to
the adverse effects of changes in circumstances than obligations
carrying the higher designations.

B Commercial paper rated "B" is regarded as having only speculative
capacity for timely payment.

C Commercial paper rated "C" is regarded as having a doubtful capacity
for repayment.

D Commercial paper rated "D" is in payment default. The "D" rating is
used when interest payments or principal payments are not made on the
date due even if the applicable grace period has not expired, unless
S&P believes that such payments will be made during such grace period.

B-37
<PAGE>

APPENDIX B

Glossary of Terms

CERTIFICATE OF DEPOSIT
A certificate of deposit is a short term obligation of a commercial bank.

EURODOLLAR CERTIFICATE OF DEPOSIT
A Eurodollar certificate of deposit is a short term obligation of a foreign
subsidiary of a U.S. bank payable in U.S. dollars.

TIME DEPOSIT
A time deposit is a deposit in a commercial bank for a specified period of
time at a fixed interest rate for which a negotiable certificate is not
received.

BANKERS' ACCEPTANCE
A bankers' acceptance is a time draft drawn on a commercial bank by a
borrower, usually in connection with international commercial transactions.

VARIABLE AMOUNT MASTER NOTE
A variable amount master note is a note which fixes a minimum and maximum
amount of credit and provides for lending and repayment within those limits at
the discretion of the lender.

COMMERCIAL PAPER
Commercial paper is a short term promissory note issued by a corporation
primarily to finance short term credit needs.

B-38

<PAGE>

ACCOUNTANTS' LETTER

PRICE WATERHOUSE LLP

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.

PRICE WATERHOUSE LLP

Milwaukee, Wisconsin
January 24, 1997

B-39
<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

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
----------
----------

STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996

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
----------
----------

The Accompanying Notes are an Integral Part of the Financial Statements

B-40
<PAGE>

GROWTH STOCK PORTFOLIO

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

B-41
<PAGE>

GROWTH STOCK PORTFOLIO

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

B-42
<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

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
----------
----------

STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996

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
----------
----------

The Accompanying Notes are an Integral Part of the Financial Statements

B-43
<PAGE>

AGGRESSIVE GROWTH STOCK PORTFOLIO

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

B-44
<PAGE>

AGGRESSIVE GROWTH STOCK PORTFOLIO

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

B-45
<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

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
----------
----------

STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996

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
----------
----------

The Accompanying Notes are an Integral Part of the Financial Statements

B-46
<PAGE>

INTERNATIONAL EQUITY PORTFOLIO

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

B-47
<PAGE>

INTERNATIONAL EQUITY PORTFOLIO

NORTHWESTERN MUTUAL SERIES FUND, INC.
INTERNATIONAL EQUITY PORTFOLIO
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT THE YEAR)

<TABLE>
<CAPTION>
FOR THE
FOR THE YEAR PERIOD MAY 3,
ENDED DECEMBER 31, 1994* 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

B-48
<PAGE>

GROWTH AND INCOME STOCK PORTFOLIO

NORTHWESTERN MUTUAL SERIES FUND, INC.
GROWTH AND INCOME STOCK PORTFOLIO
FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1996

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
----------
----------

STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996

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
----------
----------

The Accompanying Notes are an Integral Part of the Financial Statements

B-49
<PAGE>

GROWTH AND INCOME STOCK PORTFOLIO

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

B-50
<PAGE>

GROWTH AND INCOME STOCK PORTFOLIO

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>

The Accompanying Notes are an Integral Part of the Financial Statements

B-51
<PAGE>

INDEX 500 STOCK PORTFOLIO

NORTHWESTERN MUTUAL SERIES FUND, INC.
INDEX 500 STOCK PORTFOLIO
FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1996

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
----------
----------

STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996

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
----------
----------

The Accompanying Notes are an Integral Part of the Financial Statements

B-52
<PAGE>

INDEX 500 STOCK PORTFOLIO

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

B-53
<PAGE>

INDEX 500 STOCK PORTFOLIO

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

B-54
<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

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
----------
----------

STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996

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
----------
----------

The Accompanying Notes are an Integral Part of the Financial Statements

B-55
<PAGE>

MONEY MARKET PORTFOLIO

NORTHWESTERN MUTUAL SERIES FUND, INC.
MONEY MARKET PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
(IN THOUSANDS)

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

B-56
<PAGE>

MONEY MARKET PORTFOLIO

NORTHWESTERN MUTUAL SERIES FUND, INC.
MONEY MARKET PORTFOLIO
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)

+ 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

B-57
<PAGE>

BALANCED PORTPOLIO

NORTHWESTERN MUTUAL SERIES FUND, INC.
BALANCED PORTFOLIO
FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1996

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
------------
------------

STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996

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
----------
----------

The Accompanying Notes are an Integral Part of the Financial Statement

B-58
<PAGE>

BALANCED PORTFOLIO

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

B-59
<PAGE>

BALANCED PORTFOLIO

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

B-60
<PAGE>

SELECT BOND PORTFOLIO

NORTHWESTERN MUTUAL SERIES FUND, INC.
SELECT BOND PORTFOLIO
FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1996

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
----------
----------

STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996

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
----------
----------

The Accompanying Notes are an Integral Part of the Financial Statements

B-61
<PAGE>

SELECT BOND PORTFOLIO

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

B-62
<PAGE>

SELECT BOND PORTFOLIO

NORTHWESTERN MUTUAL SERIES FUND, INC.
SELECT BOND PORTFOLIO
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT THE YEAR)

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

B-63
<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

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
----------
----------

STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996

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
----------
----------

The Accompanying Notes are an Integral Part of the Financial Statements

B-64
<PAGE>

HIGH YIELD BOND PORTFOLIO

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

B-65
<PAGE>

HIGH YIELD BOND PORTFOLIO

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

B-66
<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.

B-67
<PAGE>

NOTES TO FINANCIAL STATEMENTS

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.

B-68
<PAGE>

NOTES TO FINANCIAL STATEMENTS

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
----------- ----------- ------------ -----------
----------- ----------- ------------ -----------

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.

B-69
<PAGE>

GROWTH STOCK PORTFOLIO

NORTHWESTERN MUTUAL SERIES FUND, INC.
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1996

MARKET
VALUE
COMMON STOCK (88.9%) SHARES (000'S)
- --------------------------------------------------------------
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
*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
-----------

B-70
<PAGE>

GROWTH STOCK PORTFOLIO

NORTHWESTERN MUTUAL SERIES FUND, INC.
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1996

MARKET
VALUE
COMMON STOCK (88.9%) SHARES (000'S)
- --------------------------------------------------------------
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
-----------

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
-----------

MARKET
VALUE
MONEY MARKET INVESTMENTS (11.1%) PAR (000'S)
- --------------------------------------------------------------
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%, 1/8/9 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
-----------

*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:

NUMBER OF EXPIRATION APPRECIATION
ISSUER CONTRACTS DATE (000'S)
- -------------------- ---------- ------------ -------------
S&P 500 STOCK INDEX 20 MARCH 1997 157

The Accompanying Notes are an Integral Part of the Financial Statements

B-71
<PAGE>

AGGRESSIVE GROWTH STOCK PORTFOLIO

NORHTWESTERN MUTUAL SERIES FUND, INC.
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1996

MARKET
VALUE
COMMON STOCK (90.8%) SHARES (000'S)
- --------------------------------------------------------------
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
*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

B-72
<PAGE>

AGGRESSIVE GROWTH STOCK PORTFOLIO

NORTHWESTERN MUTUAL SERIES FUND, INC.
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1996

MARKET
VALUE
COMMON STOCK (90.8%) SHARES (000'S)
- --------------------------------------------------------------
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
-----------
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
-----------

MARKET
VALUE
MONEY MARKET INVESTMENTS (9.2%) PAR (000'S)
- --------------------------------------------------------------
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
-----------

*Non-Income Producing

The Accompanying Notes are an Integral Part of the Financial Statements

B-73
<PAGE>

INTERNATIONAL EQUITY PORTFOLIO

NORTHWESTERN MUTUAL SERIES FUND, INC.
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1996

MARKET
VALUE
COMMON STOCK (89.1%) COUNTRY SHARES (000'S)
- ----------------------------------------------------------------
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
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

B-74
<PAGE>

INTERNATIONAL EQUITY PORTFOLIO

NORTHWESTERN MUTUAL SERIES FUND, INC.
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1996

MARKET
VALUE
COMMON STOCK (89.1%) COUNTRY SHARES (000'S)
- ----------------------------------------------------------------
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
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
-----------

MARKET
VALUE
BONDS (3.0%) COUNTRY PAR (000'S)
- ----------------------------------------------------------------
CMO AND LOAN BACKED CERTIFICATES (2.0%)
Federal National Mortgage
Assoc. 1/30/97 U.S. $10,000,000 $ 9,956
-----------

B-75
<PAGE>

INTERNATIONAL EQUITY PORTFOLIO

NORTHWESTERN MUTUAL SERIES FUND, INC.
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1996

MARKET
VALUE
BONDS (3.0%) COUNTRY PAR (000'S)
- ----------------------------------------------------------------
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
-----------
MARKET
MONEY MARKET VALUE
INVESTMENTS (7.5%) COUNTRY PAR (000'S)
- ----------------------------------------------------------------
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
-----------

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
-----------

* Non-Income Producing
** ADR-American Depository Receipts

The Accompanying Notes are an Integral Part of the Financial Statements

B-76
<PAGE>

GROWTH AND INCOME STOCK PORTFOLIO

NORTHWESTERN MUTUAL SERIES FUND, INC.
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1996

MARKET
VALUE
COMMON STOCK (97.3%) SHARES (000'S)
- --------------------------------------------------------------
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
-----------
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
-----------

B-77
<PAGE>

GROWTH AND INCOME STOCK PORTFOLIO

NORTHWESTERN MUTUAL SERIES FUND, INC.
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1996

MARKET
VALUE
COMMON STOCK (97.3%) SHARES (000'S)
- --------------------------------------------------------------

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
-----------
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
-----------

MARKET
VALUE
BONDS (0.4%) PAR (000'S)
- --------------------------------------------------------------
FINANCIAL SERVICES (0.4%)
Berkshire Hathaway, 1%, 12/3/01 $1,000,000 $ 913
-----------
TOTAL BONDS 913
-----------

MARKET
VALUE
MONEY MARKET INVESTMENTS (2.3%) PAR (000'S)
- --------------------------------------------------------------
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
-----------

The Accompanying Notes are an Integral Part of the Financial Statements

B-78
<PAGE>

INDEX 500 STOCK PORTFOLIO

NORTHWESTERN MUTUAL SERIES FUND, INC.
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1996

MARKET
VALUE
COMMON STOCK (94.6%) SHARES (000'S)
- --------------------------------------------------------------
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
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

B-79
<PAGE>

INDEX 500 STOCK PORTFOLIO

NORTHWESTERN MUTUAL SERIES FUND, INC.
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1996

MARKET
VALUE
COMMON STOCK (94.6%) SHARES (000'S)
- --------------------------------------------------------------
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
*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

B-80
<PAGE>

INDEX 500 STOCK PORTFOLIO

NORTHWESTERN MUTUAL SERIES FUND, INC.
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1996

MARKET
VALUE
COMMON STOCK (94.6%) SHARES (000'S)
- --------------------------------------------------------------
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
*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
-----------

B-81
<PAGE>

INDEX 500 STOCK PORTFOLIO

NORTHWESTERN MUTUAL SERIES FUND, INC.
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1996

MARKET
VALUE
COMMON STOCK (94.6%) SHARES (000'S)
- --------------------------------------------------------------
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
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

B-82
<PAGE>

INDEX 500 STOCK PORTFOLIO

NORTHWESTERN MUTUAL SERIES FUND, INC.
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1996

MARKET
VALUE
COMMON STOCK (94.6%) SHARES (000'S)
- --------------------------------------------------------------
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
-----------
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

B-83
<PAGE>

INDEX 500 STOCK PORTFOLIO

NORTHWESTERN MUTUAL SERIES FUND, INC.
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1996
MARKET
VALUE
COMMON STOCK (94.6%) SHARES (000'S)
- --------------------------------------------------------------
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
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

B-84
<PAGE>

INDEX 500 STOCK PORTFOLIO

NORTHWESTERN MUTUAL SERIES FUND, INC.
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1996

MARKET
VALUE
COMMON STOCK (94.6%) SHARES (000'S)
- --------------------------------------------------------------
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
-----------

MARKET
VALUE
PREFERRED STOCK (0.0%) SHARES (000'S)
- --------------------------------------------------------------
DRUGS (0.00%)
Fresenius National Medical Car 11,600 $ 2
-----------
INSURANCE (0.0%)
Aetna Incorporated 1,288 102
-----------
TOTAL PREFERRED STOCK 104
-----------

MARKET
VALUE
MONEY MARKET INVESTMENTS (5.4%) PAR (000'S)
- --------------------------------------------------------------
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
-----------

* 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:

UNREALIZED
APPRECIATION/
NUMBER OF EXPIRATION (DEPRECIATION)
ISSUER CONTRACTS DATE (000'S)
- -------------------- ---------- ------------ --------------
S&P 500 Stock Index 93 March 1997 $793
S&P 500 Stock Index 9 June 1997 $(64)
--------------
Total $729
--------------
--------------

The Accompanying Notes are an Integral Part of the Financial Statements

B-85
<PAGE>

MONEY MARKET PORTFOLIO

NORTHWESTERN MUTUAL SERIES FUND, INC.
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1996

MARKET
VALUE
MONEY MARKET INVESTMENTS (92.8%) PAR (000'S)
- -------------------------------------------------------------
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

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
----------

MARKET
VALUE
ASSET-BACKED SECURITIES (7.2%) PAR (000'S)
- -------------------------------------------------------------
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 INVESTMENTS $ 174,258
----------

The Accompanying Notes are an Integral Part of the Financial Statements

B-86
<PAGE>

BALANCED PORTFOLIO

NORTHWESTERN MUTUAL SERIES FUND, INC.
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1996

MARKET VALUE
COMMON STOCK (54.1%) SHARES (000'S)
- -------------------------------------------------------------
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
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

B-87
<PAGE>

BALANCED PORTFOLIO

NORTHWESTERN MUTUAL SERIES FUND, INC.
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1996

MARKET VALUE
COMMON STOCK (54.1%) SHARES (000'S)
- -------------------------------------------------------------
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
*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

B-88
<PAGE>

BALANCED PORTFOLIO

NORTHWESTERN MUTUAL SERIES FUND, INC.
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1996

MARKET
VALUE
COMMON STOCK (54.1%) SHARES (000'S)
- -------------------------------------------------------------
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
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

B-89
<PAGE>

BALANCED PORTFOLIO

NORTHWESTERN MUTUAL SERIES FUND, INC.
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1996

MARKET
VALUE
COMMON STOCK (54.1%) SHARES (000'S)
- -------------------------------------------------------------
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
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

B-90
<PAGE>

BALANCED PORTFOLIO

NORTHWESTERN MUTUAL SERIES FUND, INC.
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1996

MARKET
VALUE
COMMON STOCK (54.1%) SHARES (000'S)
- -------------------------------------------------------------
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
------------
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

B-91
<PAGE>

BALANCED PORTFOLIO

NORTHWESTERN MUTUAL SERIES FUND, INC.
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1996

MARKET
VALUE
COMMON STOCK (54.1%) SHARES (000'S)
- -------------------------------------------------------------
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
------------
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

B-92
<PAGE>

BALANCED PORTFOLIO

NORTHWESTERN MUTUAL SERIES FUND, INC.
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1996

MARKET
VALUE
COMMON STOCK (54.1%) SHARES (000'S)
- -------------------------------------------------------------
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
------------
MARKET
VALUE
PREFERRED STOCKS (0.0%) SHARES (000'S)
- --------------------------------------------------------------
DRUGS (0.0%)
Fresenius National Medical Care 21,900 $ 3
-----------
INSURANCE (0.0%)
Aetna Incorporated 2,599 206
-----------
TOTAL PREFERRED STOCK 209
-----------
MARKET
VALUE
BONDS (30.0%) PAR (000'S)
- --------------------------------------------------------------
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
-----------
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

B-93
<PAGE>

BALANCED PORTFOLIO

NORTHWESTERN MUTUAL SERIES FUND, INC.
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1996

MARKET
VALUE
BONDS (30.0%) PAR (000'S)
- --------------------------------------------------------------
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
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

B-94
<PAGE>

BALANCED PORTFOLIO

NORTHWESTERN MUTUAL SERIES FUND, INC.
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1996

MARKET
VALUE
BONDS (30.0%) PAR (000'S)
- --------------------------------------------------------------
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
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

B-95
<PAGE>

BALANCED PORTFOLIO

NORTHWESTERN MUTUAL SERIES FUND, INC.
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1996

MARKET
VALUE
BONDS (30.0%) PAR (000'S)
- --------------------------------------------------------------
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
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
-----------
MARKET
VALUE
MONEY MARKET INVESTMENTS (15.9%) PAR (000'S)
- -------------------------------------------------------------
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

B-96
<PAGE>

BALANCED PORTFOLIO

NORTHWESTERN MUTUAL SERIES FUND, INC.
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1996

MARKET
VALUE
MONEY MARKET INVESTMENTS (15.9%) PAR (000'S)
- -------------------------------------------------------------
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

+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:

UNREALIZED
NUMBER OF EXPIRATION APPRECIATION
ISSUER CONTRACTS DATE (000'S)
- ------ --------- ---------- ------------
S&P 500 Stock Index 51 March 1997 1

The Accompanying Notes are an Integral Part of the Financial Statements

B-97
<PAGE>

SELECT BOND PORTFOLIO

NORTHWESTERN MUTUAL SERIES FUND, INC.
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1996

MARKET
VALUE
BONDS (89.4%) PAR (000'S)
- --------------------------------------------------------------
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
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

B-98

<PAGE>

SELECT BOND PORTFOLIO

NORTHWESTERN MUTUAL SERIES FUND, INC.
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1996
MARKET
VALUE
BONDS (89.4%) PAR (000'S)
- --------------------------------------------------------------
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
-----------
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

B-99
<PAGE>

SELECT BOND PORTFOLIO

NORTHWESTERN MUTUAL SERIES FUND, INC.
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1996
MARKET
VALUE
BONDS (89.4%) PAR (000'S)
- --------------------------------------------------------------
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
-----------

MARKET
VALUE
MONEY MARKET INVESTMENTS (10.6%) PAR (000'S)
- --------------------------------------------------------------
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
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
-----------

The Accompanying Notes are an Integral Part of the Financial Statements

B-100
<PAGE>

HIGH YIELD BOND PORTFOLIO

NORTHWESTERN MUTUAL SERIES FUND, INC.
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1996
MARKET
VALUE
BONDS (87.0%) PAR (000'S)
- --------------------------------------------------------------
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
----------
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

B-101
<PAGE>

HIGH YIELD BOND PORTFOLIO

NORTHWESTERN MUTUAL SERIES FUND, INC.
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1996

MARKET
VALUE
BONDS (87.0%) PAR (000'S)
- --------------------------------------------------------------
++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
----------

MARKET
VALUE
COMMON STOCK (1.5%) SHARES (000'S)
- --------------------------------------------------------------
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
----------

MARKET
VALUE
PREFERRED STOCK (5.1%) SHARES (000'S)
- --------------------------------------------------------------
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
----------

MARKET
VALUE
MONEY MARKET INVESTMENTS (6.4%) PAR (000'S)
- --------------------------------------------------------------
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
----------

*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

B-102
<PAGE>

PART C
OTHER INFORMATION

Item 24. FINANCIAL STATEMENTS AND EXHIBITS

(a) Financial Statements

FINANCIAL STATEMENTS INCLUDED IN THE PROSPECTUS:
Financial Highlights

1996 FINANCIAL STATEMENTS FOR NORTHWESTERN MUTUAL
SERIES FUND, INC. INCLUDED IN THE STATEMENT OF
ADDITIONAL INFORMATION:
Report of Independent Accountants
Statement of Assets and Liabilities
Statement of Operations
Statement of Changes in Net Assets
Financial Highlights
Notes to Financial Statements
Schedules of Investments

(b) Exhibits

Ex-99.B2 Amendment to By-Laws.

EX-99.B11 Consent of Price Waterhouse LLP.

EX-99.B16 Schedule of computation for the Money Market Portfolio's
yield quotation for the seven-day period ended January 31,
1997, as provided in the Registration Statement.

EX-27 Financial Data Schedule for period ended December 31, 1996.

Item 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
Shares of the Registrant have been offered and sold only to The
Northwestern Mutual Life Insurance Company ("Northwestern Mutual
Life"), a mutual insurance company organized by a special act of the
Wisconsin Legislature, and its separate investment accounts created
pursuant to Wisconsin insurance laws. Certain of the separate
investment accounts are registered under the Investment Company Act of
1940 as unit investment trusts, and the purchasers of variable annuity
contracts and variable life insurance policies issued in connection
with such accounts have the right to instruct Northwestern Mutual Life
with respect to the voting of the Registrant's shares held by those
accounts. Subject to such voting instruction rights, Northwestern
Mutual Life and its separate investment accounts directly control the
Registrant. However, the present practice of Northwestern Mutual
Life, as disclosed elsewhere in this Amended Registration Statement,
is to vote the shares of the Registrant held as general assets in the
same proportions as the shares for which voting instructions are
reserved. Subsidiaries of Northwestern Mutual Life when

C-1
<PAGE>

considered in the aggregate as a single subsidiary would not
constitute a significant subsidiary.

Item 26. NUMBER OF HOLDERS OF SECURITIES

All of the outstanding shares of the Registrant are owned by
Northwestern Mutual Life and are allocated among the general assets
and four separate investment accounts.

Item 27. INDEMNIFICATION

Article IX of Registrant's by-laws is included as Exhibit 2 to the
Registration Statement under the Securities Act of 1933 and the
Investment Company Act of 1940. The by-laws of Northwestern Mutual
Life permit indemnification by Northwestern Mutual Life of persons who
are serving as directors of another corporation at the request of
Northwestern Mutual Life. Pursuant to the by-law provision, the
Trustees of Northwestern Mutual Life have adopted a resolution
extending to all of the directors of the Registrant the benefits of
the indemnification arrangements for employees, officers and Trustees
of Northwestern Mutual Life. Directors' and officers' liability
insurance which covers the directors and officers of the Registrant as
well as Trustees and officers of Northwestern Mutual Life is also in
force. The amount of coverage is $15 million. The deductible amount
is $5,000 per person and $50,000 in the aggregate, except that the
deductible amount is $1,000,000 ($1 million) for claims covered by
corporate indemnification. The cost of this insurance is allocated
among Northwestern Mutual Life and its subsidiaries and no part of the
premium has been paid by the Registrant.

Item 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER

In addition to its investment advisory function, Northwestern Mutual
Investment Services, Inc. ("NMIS"), the Registrant's investment
adviser, is responsible for the selection, training and supervision of
life insurance agents of Northwestern Mutual Life who engage in the
distribution of variable life insurance policies and variable annuity
contracts issued by Northwestern Mutual Life. The directors and
officers of NMIS also serve as officers of Northwestern Mutual Life.

Item 29. PRINCIPAL UNDERWRITERS

Not applicable.

Item 30. LOCATION OF ACCOUNTS AND RECORDS

Pursuant to the investment advisory agreement, NMIS, the Registrant's
adviser, provides facilities and personnel for maintaining the
Registrant's books and records. Northwestern Mutual Life is also a
party to the agreement and provides space, facilities and personnel
used in carrying out this function. Documents are kept at 720 East
Wisconsin Avenue, Milwaukee, Wisconsin 53202, the address of NMIS and
of Northwestern Mutual Life.

C-2
<PAGE>

Item 31. MANAGEMENT SERVICES

Not applicable.

Item 32. UNDERTAKINGS

Not applicable.

C-3
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Amended
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Milwaukee, and State of Wisconsin, on the 27th
day of February, 1997.

NORTHWESTERN MUTUAL SERIES FUND, INC.
(Registrant)

By:JAMES D. ERICSON
---------------------------------------
James D. Ericson, President

Pursuant to the requirements of the Securities Act of 1933, this Amended
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.

Signature Title
--------- -----

JAMES D. ERICSON President, Director
- -------------------- and Principal Execu-
James D. Ericson tive Officer

MARK G. DOLL Vice President,
- -------------------- Treasurer and Principal
Mark G. Doll Financial Officer

BARBARA E. COURTNEY Controller and
- -------------------- Principal Accounting
Barbara E. Courtney Officer Dated
February 27,
1997
WILLIAM J. BLAKE* Director
- --------------------
William J. Blake

STEPHEN N. GRAFF* Director
- --------------------
Stephen N. Graff

MARTIN F. STEIN* Director
- --------------------
Martin F. Stein

JOHN K. MACIVER* Director
- --------------------
John K. MacIver*

* By JAMES D. ERICSON
-----------------------------
James D. Ericson, Attorney
in fact, pursuant to the Power
of Attorney attached hereto

C-4
<PAGE>

POWER OF ATTORNEY

The undersigned Directors of Northwestern Mutual Series Fund, Inc. (the
"Company"), hereby constitute and appoint James D. Ericson and Edward J. Zore,
or either of them, their true and lawful attorneys and agents, to sign the names
of the undersigned Directors to any instruments or documents filed as part of or
in connection with or in any way related to the registration statement or
statements and any and all amendments thereto, to be filed under the Securities
Act of 1933 in connection with shares of the common stock of the Company offered
to the public; and each of the undersigned hereby ratifies and confirms all that
said attorneys and agents shall do or cause to be done by virtue hereof.

IN WITNESS WHEREOF, each of the undersigned has subscribed these presents,
as indicated, February 6, 1997.

STEPHEN N. GRAFF Director
--------------------------
Stephen N. Graff

WILLIAM J. BLAKE Director
--------------------------
William J. Blake

JOHN K. MACIVER Director
--------------------------
John K. MacIver

MARTIN F. STEIN Director
--------------------------
Martin F. Stein

JAMES D. ERICSON Director
--------------------------
James D. Ericson

C-5

<PAGE>

EXHIBIT INDEX
EXHIBITS FILED WITH FORM N-1A
POST-EFFECTIVE AMENDMENT NO. 14 TO
REGISTRATION STATEMENT UNDER SECTION 6 OF
THE SECURITIES ACT OF 1933
AND SECTION 8(b) OF THE INVESTMENT COMPANY ACT OF 1940
FOR
NORTHWESTERN MUTUAL SERIES FUND, INC.

Exhibit Number Exhibit Name
- -------------- ------------
EX-99.B2 Amendment to By-Laws.

EX-99.B11 Consent of Price Waterhouse LLP.

EX-99.B16 Schedule of computation for the Money Market
Portfolio's yield quotation for the seven-day
period ended January 31, 1997, as provided in the
Registration Statement.

EX-27 Financial Data Schedule for period ended December
31, 1996 for each Portfolio of Northwestern Mutual
Series Fund, Inc.

<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS OF NORTHWESTERN MUTUAL SERIES FUND, INC. GROWTH STOCK PORTFOLIO
DECEMBER 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NAME> GROWTH STOCK PORTFOLIO
<NUMBER> 1
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 140,243
<INVESTMENTS-AT-VALUE> 170,082
<RECEIVABLES> 496
<ASSETS-OTHER> 145
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 170,723
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 241
<TOTAL-LIABILITIES> 241
<SENIOR-EQUITY> 139,825
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 116,463
<SHARES-COMMON-PRIOR> 67,734
<ACCUMULATED-NII-CURRENT> 32
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 629
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 29,996
<NET-ASSETS> 170,482
<DIVIDEND-INCOME> 1,903
<INTEREST-INCOME> 578
<OTHER-INCOME> 0
<EXPENSES-NET> 714
<NET-INVESTMENT-INCOME> 1,767
<REALIZED-GAINS-CURRENT> 5,039
<APPREC-INCREASE-CURRENT> 17,013
<NET-CHANGE-FROM-OPS> 23,819
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1,749
<DISTRIBUTIONS-OF-GAINS> 5,031
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 45,246
<NUMBER-OF-SHARES-REDEEMED> 1,147
<SHARES-REINVESTED> 4,630
<NET-CHANGE-IN-ASSETS> 84,925
<ACCUMULATED-NII-PRIOR> 11
<ACCUMULATED-GAINS-PRIOR> 621
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 17
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 731
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 1.26
<PER-SHARE-NII> .02
<PER-SHARE-GAIN-APPREC> .25
<PER-SHARE-DIVIDEND> .02
<PER-SHARE-DISTRIBUTIONS> .05
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.46
<EXPENSE-RATIO> .57
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS OF NORTHWESTERN MUTUAL SERIES FUND, INC. INTERNATIONAL EQUITY
PORTFOLIO DECEMBER 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NAME> INTERNATIONAL EQUITY PORTFOLIO
<NUMBER> 2
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 415,111
<INVESTMENTS-AT-VALUE> 503,681
<RECEIVABLES> 3,009
<ASSETS-OTHER> 16
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 506,706
<PAYABLE-FOR-SECURITIES> 358
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,159
<TOTAL-LIABILITIES> 1,517
<SENIOR-EQUITY> 396,978
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 324,246
<SHARES-COMMON-PRIOR> 252,496
<ACCUMULATED-NII-CURRENT> 12,699
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 6,939
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 88,973
<NET-ASSETS> 505,189
<DIVIDEND-INCOME> 13,211
<INTEREST-INCOME> 2,777
<OTHER-INCOME> 12
<EXPENSES-NET> 3,386
<NET-INVESTMENT-INCOME> 12,614
<REALIZED-GAINS-CURRENT> 7,391
<APPREC-INCREASE-CURRENT> 61,490
<NET-CHANGE-FROM-OPS> 81,495
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 8,311
<DISTRIBUTIONS-OF-GAINS> 11,653
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 64,977
<NUMBER-OF-SHARES-REDEEMED> 7,589
<SHARES-REINVESTED> 14,362
<NET-CHANGE-IN-ASSETS> 163,062
<ACCUMULATED-NII-PRIOR> 8,396
<ACCUMULATED-GAINS-PRIOR> 11,201
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3,386
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 1.35
<PER-SHARE-NII> .04
<PER-SHARE-GAIN-APPREC> .24
<PER-SHARE-DIVIDEND> .03
<PER-SHARE-DISTRIBUTIONS> .04
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.56
<EXPENSE-RATIO> 0.81
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS OF NORTHWESTERN MUTUAL SERIES FUND, INC. GROWTH & INCOME STOCK
PORTFOLIO DECEMBER 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NAME> GROWTH & INCOME STOCK PORTFOLIO
<NUMBER> 3
<MULTIPLIER> 1000

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 209,676
<INVESTMENTS-AT-VALUE> 234,001
<RECEIVABLES> 484
<ASSETS-OTHER> 85
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 234,570
<PAYABLE-FOR-SECURITIES> 81
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 305
<TOTAL-LIABILITIES> 386
<SENIOR-EQUITY> 203,771
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 177,728
<SHARES-COMMON-PRIOR> 113,090
<ACCUMULATED-NII-CURRENT> 25
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 6,063
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 24,325
<NET-ASSETS> 234,184
<DIVIDEND-INCOME> 3,457
<INTEREST-INCOME> 342
<OTHER-INCOME> 0
<EXPENSES-NET> 1,145
<NET-INVESTMENT-INCOME> 2,654
<REALIZED-GAINS-CURRENT> 21,066
<APPREC-INCREASE-CURRENT> 11,131
<NET-CHANGE-FROM-OPS> 34,851
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 2,646
<DISTRIBUTIONS-OF-GAINS> 18,392
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 51,364
<NUMBER-OF-SHARES-REDEEMED> 2,670
<SHARES-REINVESTED> 15,944
<NET-CHANGE-IN-ASSETS> 97,261
<ACCUMULATED-NII-PRIOR> 17
<ACCUMULATED-GAINS-PRIOR> 3,389
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 24
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,169
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 1.21
<PER-SHARE-NII> .02
<PER-SHARE-GAIN-APPREC> .23
<PER-SHARE-DIVIDEND> .02
<PER-SHARE-DISTRIBUTIONS> .12
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.32
<EXPENSE-RATIO> 0.62
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS OF NORTHWESTERN MUTUAL SERIES FUND, INC. INDEX 500 STOCK PORTFOLIO
DECEMBER 31, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NAME> INDEX 500 STOCK PORTFOLIO
<NUMBER> 4
<MULTIPLIER> 1000

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 520,051
<INVESTMENTS-AT-VALUE> 739,761
<RECEIVABLES> 1,437
<ASSETS-OTHER> 97
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 741,295
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,229
<TOTAL-LIABILITIES> 1,229
<SENIOR-EQUITY> 489,109
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 360,059
<SHARES-COMMON-PRIOR> 287,518
<ACCUMULATED-NII-CURRENT> 13,866
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 16,652
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 220,439
<NET-ASSETS> 740,066
<DIVIDEND-INCOME> 12,257
<INTEREST-INCOME> 2,897
<OTHER-INCOME> 0
<EXPENSES-NET> 1,288
<NET-INVESTMENT-INCOME> 13,866
<REALIZED-GAINS-CURRENT> 17,014
<APPREC-INCREASE-CURRENT> 96,274
<NET-CHANGE-FROM-OPS> 127,154
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 6,192
<DISTRIBUTIONS-OF-GAINS> 9,632
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 72,277
<NUMBER-OF-SHARES-REDEEMED> 8,757
<SHARES-REINVESTED> 9,021
<NET-CHANGE-IN-ASSETS> 244,933
<ACCUMULATED-NII-PRIOR> 6,192
<ACCUMULATED-GAINS-PRIOR> 9,270
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 69
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,357
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 1.72
<PER-SHARE-NII> .04
<PER-SHARE-GAIN-APPREC> .35
<PER-SHARE-DIVIDEND> .02
<PER-SHARE-DISTRIBUTIONS> .03
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 2.06
<EXPENSE-RATIO> 0.21
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS OF NORTHWESTERN MUTUAL SERIES FUND, INC. MONEY MARKET
PORTFOLIO DECEMBER 31, 1996 AND IS QUALIFIED IN ITS ENITRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NAME> MONEY MARKET PORTFOLIO
<NUMBER> 5
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 174,258
<INVESTMENTS-AT-VALUE> 174,258
<RECEIVABLES> 1,816
<ASSETS-OTHER> 268
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 176,342
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 44
<TOTAL-LIABILITIES> 44
<SENIOR-EQUITY> 176,298
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 176,314
<SHARES-COMMON-PRIOR> 132,588
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 176,298
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 8,018
<OTHER-INCOME> 0
<EXPENSES-NET> 442
<NET-INVESTMENT-INCOME> 7,576
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 7,576
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 7,576
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 122,068
<NUMBER-OF-SHARES-REDEEMED> 89,918
<SHARES-REINVESTED> 7,756
<NET-CHANGE-IN-ASSETS> 43,726
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 442
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .05
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> .05
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.30
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS OF NORTHWESTERN MUTUAL SERIES FUND, INC. BALANCED PORTFOLIO
DECEMBER 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NAME> BALANCED PORTFOLIO
<NUMBER> 6
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 1,827,741
<INVESTMENTS-AT-VALUE> 2,323,101
<RECEIVABLES> 14,192
<ASSETS-OTHER> 86
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 2,337,329
<PAYABLE-FOR-SECURITIES> 7,100
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 4,045
<TOTAL-LIABILITIES> 11,145
<SENIOR-EQUITY> 1,712,739
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 1,353,952
<SHARES-COMMON-PRIOR> 1,298,518
<ACCUMULATED-NII-CURRENT> 86,699
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 31,435
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 495,361
<NET-ASSETS> 2,326,234
<DIVIDEND-INCOME> 25,205
<INTEREST-INCOME> 68,022
<OTHER-INCOME> 0
<EXPENSES-NET> 6,578
<NET-INVESTMENT-INCOME> 86,649
<REALIZED-GAINS-CURRENT> 27,969
<APPREC-INCREASE-CURRENT> 164,495
<NET-CHANGE-FROM-OPS> 279,113
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 83,501
<DISTRIBUTIONS-OF-GAINS> 35,154
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 51,923
<NUMBER-OF-SHARES-REDEEMED> 73,638
<SHARES-REINVESTED> 77,149
<NET-CHANGE-IN-ASSETS> 242,945
<ACCUMULATED-NII-PRIOR> 83,551
<ACCUMULATED-GAINS-PRIOR> 38,620
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 6,578
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 1.60
<PER-SHARE-NII> .06
<PER-SHARE-GAIN-APPREC> .15
<PER-SHARE-DIVIDEND> .06
<PER-SHARE-DISTRIBUTIONS> .03
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.72
<EXPENSE-RATIO> 0.30
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS OF NORTHWESTERN MUTUAL SERIES FUND, INC. SELECT BOND PORTFOLIO
DECEMBER 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NAME> SELECT BOND PORTFOLIO
<NUMBER> 7
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 210,020
<INVESTMENTS-AT-VALUE> 211,804
<RECEIVABLES> 2,848
<ASSETS-OTHER> 67
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 214,719
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 386
<TOTAL-LIABILITIES> 386
<SENIOR-EQUITY> 200,018
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 175,166
<SHARES-COMMON-PRIOR> 161,337
<ACCUMULATED-NII-CURRENT> 13,300
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (769)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,784
<NET-ASSETS> 214,333
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 13,903
<OTHER-INCOME> 0
<EXPENSES-NET> 615
<NET-INVESTMENT-INCOME> 13,288
<REALIZED-GAINS-CURRENT> 569
<APPREC-INCREASE-CURRENT> (6,987)
<NET-CHANGE-FROM-OPS> 6,870
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 7,025
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 23,808
<NUMBER-OF-SHARES-REDEEMED> 16,109
<SHARES-REINVESTED> 6,130
<NET-CHANGE-IN-ASSETS> 16,191
<ACCUMULATED-NII-PRIOR> 7,037
<ACCUMULATED-GAINS-PRIOR> (1,338)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 615
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 1.23
<PER-SHARE-NII> .07
<PER-SHARE-GAIN-APPREC> (.04)
<PER-SHARE-DIVIDEND> (.04)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.22
<EXPENSE-RATIO> 0.30
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS OF NORTHWESTERN MUTUAL SERIES FUND, INC. HIGH YIELD BOND PORTFOLIO
DECEMBER 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NAME> HIGH YIELD BOND PORTFOLIO
<NUMBER> 8
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 90,922
<INVESTMENTS-AT-VALUE> 93,951
<RECEIVABLES> 1,519
<ASSETS-OTHER> 50
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 95,520
<PAYABLE-FOR-SECURITIES> 1,570
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 72
<TOTAL-LIABILITIES> 1,642
<SENIOR-EQUITY> 89,726
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 85,421
<SHARES-COMMON-PRIOR> 54,536
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (297)
<ACCUMULATED-NET-GAINS> 1,420
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 3,029
<NET-ASSETS> 93,878
<DIVIDEND-INCOME> 111
<INTEREST-INCOME> 7,134
<OTHER-INCOME> 55
<EXPENSES-NET> 433
<NET-INVESTMENT-INCOME> 6,867
<REALIZED-GAINS-CURRENT> 3,638
<APPREC-INCREASE-CURRENT> 2,795
<NET-CHANGE-FROM-OPS> 13,300
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 7,126
<DISTRIBUTIONS-OF-GAINS> 2,541
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 23,742
<NUMBER-OF-SHARES-REDEEMED> 1,697
<SHARES-REINVESTED> 8,840
<NET-CHANGE-IN-ASSETS> 37,904
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 323
<OVERDISTRIB-NII-PRIOR> (38)
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 12
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 445
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 1.03
<PER-SHARE-NII> .09
<PER-SHARE-GAIN-APPREC> .10
<PER-SHARE-DIVIDEND> .09
<PER-SHARE-DISTRIBUTIONS> .03
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.10
<EXPENSE-RATIO> 0.60
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS OF NORTHWESTERN MUTUAL SERIES FUND, INC. AGGRESSIVE GROWTH STOCK
PORTFOLIO DECEMBER 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NAME> AGGRESIVE GROWTH STOCK PORTFOLIO
<NUMBER> 9
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 632,730
<INVESTMENTS-AT-VALUE> 871,390
<RECEIVABLES> 6,080
<ASSETS-OTHER> 129
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 877,599
<PAYABLE-FOR-SECURITIES> 3,823
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,850
<TOTAL-LIABILITIES> 5,673
<SENIOR-EQUITY> 581,301
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 277,222
<SHARES-COMMON-PRIOR> 208,208
<ACCUMULATED-NII-CURRENT> (210)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 52,175
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 238,660
<NET-ASSETS> 871,926
<DIVIDEND-INCOME> 832
<INTEREST-INCOME> 2,974
<OTHER-INCOME> 0
<EXPENSES-NET> 4,016
<NET-INVESTMENT-INCOME> (210)
<REALIZED-GAINS-CURRENT> 52,175
<APPREC-INCREASE-CURRENT> 56,387
<NET-CHANGE-FROM-OPS> 108,352
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 572
<DISTRIBUTIONS-OF-GAINS> 24,986
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 64,691
<NUMBER-OF-SHARES-REDEEMED> 3,953
<SHARES-REINVESTED> 8,276
<NET-CHANGE-IN-ASSETS> 294,912
<ACCUMULATED-NII-PRIOR> 572
<ACCUMULATED-GAINS-PRIOR> 24,986
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 37
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4,053
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 2.77
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> .49
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> .11
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 3.15
<EXPENSE-RATIO> 0.54
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<PAGE>

EX-99.B2

AMENDMENT TO THE BY-LAWS ADOPTED AT A MEETING
OF THE DIRECTORS OF NORTHWESTERN MUTUAL SERIES FUND, INC.
ON FEBRUARY 6, 1997

BE IT RESOLVED, that subsection 8.02 of the By-laws of the
corporation is hereby amended by adding the following
sentence at the end thereof as a new paragraph:

"The Select Bond Portfolio may invest up to 10% of its total
net assets in high yield bonds and up to 10% of its total
net assets in foreign securities, consistent with its
investment objective."

<PAGE>

EX-99.B11

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the use in the Statement of Additional Information
constituting part of this Post-Effective Amendment No. 14 to the Registration
Statement on Form N-1A (the "Registration Statement") of our report dated
January 24, 1997, relating to the financial statements and financial highlights
of Northwestern Mutual Series Fund, Inc., which appears in such Statement of
Additional Information, and to the incorporation by reference of our report
into the Prospectus which constitutes part of this Registration Statement. We
also consent to the reference to us under the heading "Condensed Financial
Information" in such Prospectus and to the reference to us under the heading
"Investment Advisory and Other Services" in such Statement of Additional
Information.

PRICE WATERHOUSE LLP

Milwaukee, Wisconsin
February 27, 1997

<PAGE>

EX-99.B16

MONEY MARKET PORTFOLIO
YIELD
1/31/97

DATE NET ASSETS DIVIDENDS
---- ---------- ---------

1/25/97 $175,946,717.85 $ 24,960.96
1/26/97 $175,946,717.85 $ 24,960.96
1/27/97 $176,286,691.25 $ 24,960.96
1/28/97 $177,0206,19.88 $ 25,093.49
1/29/97 $177,214,992.70 $ 24,613.63
1/30/97 $176,574,023.74 $ 24,733.57
1/31/97 $176,283,526.81 $ 24,925.99

1,235,273,290.08 $174,249.56
---------------- -----------

AVG. NET ASSETS $176,467,612.87

YIELD 5.15%

COMPOUNDED YIELD 5.28%