-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, EyW5klfjegrcqKioIi7pyhoZFFwiMpHWhUWwHupk4e1n9Njg92o/DmkqVGaFtoV+ CNjF0oawJnN6v612+uHfVA== 0000912057-97-006582.txt : 19970225 0000912057-97-006582.hdr.sgml : 19970225 ACCESSION NUMBER: 0000912057-97-006582 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970224 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: NORTHWESTERN MUTUAL VARIABLE LIFE ACCOUNT CENTRAL INDEX KEY: 0000742277 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] STATE OF INCORPORATION: WI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-03989 FILM NUMBER: 97542328 BUSINESS ADDRESS: STREET 1: 720 E WISCONSIN AVE CITY: MILWAUKEE STATE: WI ZIP: 53202 BUSINESS PHONE: 4142711444 MAIL ADDRESS: STREET 1: 720 EAST WISCONSIN AVENUE CITY: MILWAUKEE STATE: WI ZIP: 53202 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NORTHWESTERN MUTUAL SERIES FUND INC CENTRAL INDEX KEY: 0000742212 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 391603401 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-03990 FILM NUMBER: 97542329 BUSINESS ADDRESS: STREET 1: 720 E WISCONSIN AVE CITY: MILWAUKEE STATE: WI ZIP: 53202 BUSINESS PHONE: 4142711444 MAIL ADDRESS: STREET 1: 720 EAST WISCONSIN AVE CITY: MILWAUKEE STATE: WI ZIP: 53202 FORMER COMPANY: FORMER CONFORMED NAME: NORTHWESTERN MUTUAL VARIABLE LIFE SERIES FUND INC DATE OF NAME CHANGE: 19940830 N-30D 1 N-30D December 31, 1996 NORTHWESTERN MUTUAL LIFE -Registered Trademark- The Quiet Company -Registered Trademark- Northwestern Mutual Variable Life Account [Photo] NORTHWESTERN MUTUAL SERIES FUND, INC. The Northwestern Mutual Life Insurance Company 720 East Wisconsin Avenue Milwaukee, WI 53202 ANNUAL REPORT CONTENTS POLICYOWNER PRIVILEGES FREE TRANSFERS AMONG PORTFOLIOS A limited number of free transfers per year are available with your policy. Same day transfers are also permitted among our investment portfolios by FAX 414-299-4268. The appropriate form (form number 18-1425) can also be used. A blank form is included at the end of this report. Additional forms are available form your Northwestern Mutual Life Agent. POLICYOWNER COMMUNICATIONS You receive confirmation statements with transactions that affect your portfolio(s). NORTHWESTERN MUTUAL LIFE'S VARIABLE POLICIES ARE PARTICIPATING Policies are expected to pay dividends, based on the company's recent mortality and expense experience. Dividends are based on actual experience and are not guaranteed. Some of the popular additional benefits which may be available to policyowners include the following (subject to underwriting and payment of appropriate premium). OPTIONAL WAIVER OF PREMIUM The Waiver of Premium Benefit waives the premiums during total disability. Available at ages 0-59. OPTIONAL ACCIDENTAL DEATH BENEFIT The Accidental Death Benefit provides an additional death benefit when death results from accidental bodily injury. Available at ages 0-65. OPTIONAL ADDITIONAL PURCHASE BENEFIT When the Additional Purchase Benefit is purchased, the company agrees to issue additional policies on several specified purchase dates without requiring evidence of insurability. Available at ages 0-38. Contact your Northwestern Mutual Life Agent if you wish to learn more about your policy or any of the policyowner privileges described above. HOW TO GET MORE INFORMATION NML Express provides 24 hour telephone access to your account information by dialing 1-800-519-4NML Policyowners must provide a policy number plus a Personal Identification Number (PIN) to utilize this service. Call toll free to review policy values and portfolio performance. If a signed authorization has been returned to the Home Office, policyowners may also transfer among portfolios by phone. For more information about Northwestern Mutual Life, visit us on our Website at WWW.NORTHWESTERNMUTUAL.COM
CONTENTS Letter to Policyowners 1 Performance Summary for Separate Accounts 2 Economic Overview and Outlook 3 Growth Stock Portfolio 4 Aggressive Growth Stock Portfolio 7 International Equity Portfolio 10 Growth and Income Stock Portfolio 14 Index 500 Stock Portfolio 17 Money Market Portfolio 25 Balanced Portfolio 27 Select Bond Portfolio 39 High Yield Bond Portfolio 43 Accountants' Letter 46 Variable Life Financial Statements 47 Notes to Financial Statements 51 Series Fund Financial Statements 53 Accountants' Letter 80 Notes to Financial Statements 81 Board of Directors 89 LETTER TO POLICYOWNERS LETTER TO POLICYOWNERS January 31, 1997 This year's annual report represents The variable life insurance policies something of a departure from our on which we are reporting have an traditional communications. We hope important place in the financial that our new format will make our portfolios of many people. We ask you report on the variable insurance to take a little time to make sure you products you own more interesting and understand the products you own, to easier to understand than in prior understand the risks inherent in years. Following this letter, you will investing and to appreciate the find a brief summary of our views on long-term benefits. As you do so, the economy and the stock and bond please draw on the valuable resources markets as well as reports on the of Northwestern Mutual, as represented performance of each of the portfolios by your agent. A regular review of offered to policyowners. your financial circumstances and your personal goals with your Northwestern For this year, as for the last few Mutual agent is an excellent way to years, the performance news is very remain focused, to determine what good. We are delighted to report changes may be appropriate from time excellent returns from most portfolios to time in your mix of investments, for 1996, but we caution you against and to consider additional projecting such returns into the Northwestern Mutual products future. These are unique times, with that may be appropriate for stock values at unprecedented levels you. and new records reached and then broken at a dizzying pace. It is easy [PHOTO] to be euphoric when markets are as strong as they have been in recent As a Variable Life years. There is a temptation to policyowner, you have believe that this bull stock market taken responsibility for can continue forever. But experience your own future and the tells us otherwise. An economic future of the people who slowdown or market slump will occur depend on you. We are sometime, but for long-term investors proud that you have chosen there is little value in attempting to Northwestern Mutual as predict when it will occur. We will your partner as you continue to invest prudently in implement your plan to accordance with the objectives and accomplish your financial policies of the portfolios. goals. We appreciate the confidence you have shown As you compare the returns of the in our organization, and various portfolios, we urge you to we take very seriously our take a long-term view and avoid being responsibility to provide influenced by short-term market you with the highest fluctuations. Do not make the mistake quality insurance of switching from one portfolio to policies, backed by another based just on performance for prudently managed invest- one year or even five years. Instead, ment portfolios. We pledge we suggest that you consider adjusting to continue providing our your investments among portfolios as policyowners with innovative products your circumstances, needs and goals to meet a variety of needs, now and in evolve. Keep in mind that your the future. variable life insurance policy offers dual and complementary benefits: The Northwestern Mutual Life Insurance valuable insurance protection and the Company potential for favorable cash value growth. [SIG] James D. Ericson, President and Chief Executive Officer
-- 1 PERFORMANCE SUMMARY PERFORMANCE SUMMARY as of December 31, 1996 VARIABLE LIFE--POLICIES ISSUED BEFORE OCTOBER 11, 1995
Aggressive Growth & Net Investment Growth Growth International Income Index 500 Money Select High Yield Rates of Return Stock Stock Equity Stock Stock Market Balanced Bond Bond (as of 12/31/96) Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio 1 year........... 20.06% 16.87% 20.16% 19.13% 21.89% 4.54% 12.66% 2.59% 18.93% 5 years.......... - - - - 89.16% 19.22% 60.97% 38.60% - Annualized..... - - - - 13.60% 3.58% 9.99% 6.75% - 10 years......... - - - - 215.95% 65.20% 160.44% 107.31% - Annualized..... - - - - 12.19% 5.15% 10.05% 7.56% - Since inception........ 57.66%* 68.10%* 36.23%* 54.91%* - - - - 41.42%* Annualized..... 18.64% 21.54% 12.31% 17.86% - - - - 13.90%
VARIABLE COMPLIFE--POLICIES ISSUED ON OR AFTER OCTOBER 11, 1995**
Aggressive Growth & Net Investment Growth Growth International Income Index 500 Money Select High Yield Rates of Return Stock Stock Equity Stock Stock Market Balanced Bond Bond (as of 12/31/96) Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio 1 year........... 20.18% 16.99% 20.29% 19.25% 22.01% 4.65% 12.77% 2.69% 19.05% 5 years.......... - - - - 90.13% 19.83% 61.79% 39.31% - Annualized..... - - - - 13.71% 3.69% 10.10% 6.86% - 10 years......... - - - - 219.21% 66.90% 163.13% 109.46% - Annualized..... - - - - 12.31% 5.26% 10.16% 7.67% - Since inception........ 58.09%* 68.56%* 36.60%* 55.34%* - - - - 41.81%* Annualized..... 18.76% 21.66% 12.43% 17.98% - - - - 14.02%
The net investment rates of return shown above should not be considered a representation of investment results which may be anticipated in the future. The net investment rates of return include investment income, capital gains and all common fees of the divisions of the Variable Life Account, but not the additional charges that are unique to your policy. See the prospectus for a description of the effect of investment performance on policy benefits. Policy benefits reflect the investment rates of return of the divisions in which the policy is invested, and will vary depending on the fees and expenses associated with your policy. * Inception date of 5/3/94. ** Product inception date of 10/11/95. Returns prior to 10/11/95 were reflected using the actual investment experience of each division, adjusted for the expenses of the product. These returns are not a guarantee of future performance. Note: "Standard and Poor's 500" and "S&P 500" are trademarks of The McGraw-Hill Companies, Inc. and have been licensed for use by The Northwestern Mutual Life Insurance Company. The Series Fund and its Portfolios are not sponsored, endorsed, sold or promoted by Standard & Poor's, and Standard & Poor's makes no representation regarding the advisability of investing in them. IMPORTANT NOTE: The average annual total returns shown with the graphs on the following pages are not an estimate or a guarantee of future performance. These average annual total returns reflect reinvestment of investment income and capital gain distributions, and deduction of investment management fees and fund expenses, but not product charges. See the prospectus for a description of the effect of investment performance on policy benefits. Policy benefits reflect the investment rates of return of the divisions in which the policy is invested, and will vary depending on the insurance and administrative charges, applicable sales charges, and the mortality and expense risk charge associated with the product. These product charges effectively reduce the dollar amount of any net gains and increase the dollar amount of any net losses. The net investment rates of return shown above reflect the product charges borne by each division of the Variable Life Account, but not the additional charges that are unique to your policy. Your Northwestern Mutual Life agent/registered representative of Northwestern Mutual Investment Service ("NMIS") can provide you with actual rates of return for your variable life insurance policy, showing the effect of all of the applicable charges. -- 2 OVERVIEW AND OUTLOOK - -------------------------------------------------------------------------------- THE ECONOMY The economy -- of the United States and, increasingly, of the entire world -- provides the basic framework for all investments. The continuing strength of the economy, though somewhat surprising when compared with recent business cycle history, has some very solid bases that give reason for optimism about the future. Productivity is rising, exports are growing, and inflation is at the lowest level in 30 years. Among the major secular trends fueling continued economic strength are globalization and the positive impact of technological advances on business productivity. Surely the business cycle is not dead, but the peaks and troughs familiar in the past seem to have moderated to a rolling recovery, with minor corrections from time to time. The most likely scenario for the immediate future seems to be a comfortable economy, with continued moderation in all major indicators. Economic Growth and Inflation EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
REAL ECONOMIC GROWTH INFLATION 1976 5.60% 4.90% 1977 4.90% 6.70% 1978 5.00% 9.00% 1979 2.90% 13.30% 1980 -3.00% 12.50% 1981 2.50% 8.90% 1982 -2.10% 3.80% 1983 4.00% 3.80% 1984 6.80% 3.90% 1985 3.70% 3.80% 1986 3.00% 1.10% 1987 2.90% 4.40% 1988 3.80% 4.40% 1989 3.40% 4.60% 1990 1.30% 6.10% 1991 -1.00% 3.10% 1992 2.70% 2.90% 1993 2.30% 2.70% 1994 3.50% 2.70% 1995 2.00% 2.50% 1996 2.20% 3.30%
Source: U.S. Department of Commerce. Year-to-year percentage change in Real Gross Domestic Product is used for real economic growth. December-to-December percentage change in the Consumer Price Index -- Urban is used for the inflation rate. - -------------------------------------------------------------------------------- THE EQUITY MARKET The equity market was surprisingly strong in 1996, almost matching its spectacular gain in 1995. Across market sectors, energy, banks and semiconductors were among the top performing groups in 1996, as they were in the prior year. In general, larger capitalization stocks outperformed the stocks of smaller companies. The strength in the stock market can be attributed to favorable trends in the economy and interest rates, as well as continued strength in corporate earnings. In addition to these underlying elements, demographics and enthusiasm for equities are fueling continuing inflows of money into stock mutual funds from retirement-oriented vehicles such as 401(k)s. And, given a relatively stable economic environment in the United States, plus increasing strength in many economies abroad, there seems to be little reason to anticipate major changes in stock market trends in the months ahead. Annual Total Returns from S&P 500 Index EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC 1976 23.84% 1977 -7.18% 1978 6.56% 1979 18.44% 1980 32.42% 1981 -4.91% 1982 21.41% 1983 22.51% 1984 6.27% 1985 32.16% 1986 18.47% 1987 5.23% 1988 16.81% 1989 31.49% 1990 -3.17% 1991 30.55% 1992 7.67% 1993 9.99% 1994 1.31% 1995 37.43% 1996 23.07%
Source: @ Computed using data FROM STOCKS, BONDS, BILLS, & INFLATION 1996 YEARBOOK-TM-, Ibbotson Associates, Chicago (annually updated work by Roger G. Ibbotson and Rex Sinquefield). Used with permission. - -------------------------------------------------------------------------------- THE BOND MARKET Returns from investments in bonds have two components: the income received over the period the bond is held and capital appreciation. Total returns are often less than the coupon or stated interest rate -- which is the income actually received by a bond holder -- because the prices of bonds fall when interest rates rise. That is what happened during 1996: yields on long-term bonds increased by approximately 75 basis points (three-quarters of a percentage point) during the year, and bond prices fell accordingly. Overall, 1996 was a disappointing year for bond investors, especially in comparison with the high returns of the prior year. Annual Total Returns from Long-Term Government Bonds EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC 1976 16.75% 1977 -0.69% 1978 -1.18% 1979 -1.23% 1980 -3.95% 1981 1.86% 1982 40.36% 1983 0.65% 1984 15.48% 1985 30.97% 1986 24.53% 1987 -2.71% 1988 9.67% 1989 18.11% 1990 6.18% 1991 19.30% 1992 8.05% 1993 18.24% 1994 -7.77% 1995 31.67% 1996 -0.93%
Source: @ Computed using data FROM STOCKS, BONDS, BILLS, & INFLATION 1996 YEARBOOK-TM-, Ibbotson Associates, Chicago (annually updated work by Roger G. Ibbotson and Rex Sinquefield). Used with permission. -- 3 GROWTH STOCK PORTFOLIO - -------------------------------------------------------------------------------- Objective: Portfolio Strategy: Net Assets: Long-term appreciation of Hold a diversified mix of high quality growth $170,481,467 capital with moderate risk stocks of medium and large companies with above-average potential for earnings growth
GROWTH STOCK PORTFOLIO The Growth Stock Portfolio is invested in high quality companies of large to medium capitalization with strong financial characteristics and the ability to generate internal growth. A key factor in stock selection is the choice of industries with good earnings potential, based on analysis of economic trends to determine their impact on various sectors of the economy. Stock selection is made through "top down" analysis: first industry and market sector choices made based on the economic environment, and then the most promising companies within each sector are selected as holdings. Diversification across 70 to 90 stocks in a wide range of industry groups reduces the Portfolio's risk profile. In the current environment of economic strength, moderate inflation and high employment levels, consumer spending is strong; therefore, consumer cyclicals are overweighted. Performance benefited from opportunistic increases in technology holdings during the year, as some stocks retreated from previous highs, and from reduced exposure in utilities and local telephone companies. A market weight was maintained in energy, in recognition of the positive impact of recovering oil prices. Late in the year, as the economy remained strong, additional investments were made in capital goods. As cash flowed into the Portfolio, a moderate cash position was maintained during most of the year in order to maintain liquidity. Sector Allocation EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC Consumer Cyclicals 21% Consumer Staples/Health Care 18% Basic Materials/Capital Goods 16% Energy 8% Technology 14% Finance 12% Other 11%
Top 10 Holdings 12/31/96 EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
COMPANY % OF NET ASSETS General Electric Company 2.00% International Business Machines Corp. 2.00% Intel Corporation 1.80% AlliedSignal 1.70% Canadian National Railway 1.70% Chase Manhattan Corporation 1.70% United HealthCare Corporation 1.70% Merck & Co., Inc. 1.70% Boeing Company 1.60% Emerson Electric Co. 1.60%
Performance Relative to S&P 500 Index EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
GROWTH STOCK PORTFOLIO S&P 500 INDEX 05-94 10,000 10,000 12-94 10,155 10,320 12-95 13,285 14,180 12-96 16,063 17,413 Average Annual Total Return For Periods Ended December 31, 1996 One Year Since Inception Growth Stock Portfolio 20.91% 19.48% S&P 500 Index 22.80% 23.15%
The Standard & Poor's 500 Composite Stock Price Index is an unmanaged index of 500 selected common stocks, most of which are listed on the New York Stock Exchange. The index is heavily weighted toward stocks with large market capitalizations and represents approximately two-thirds of the total market value of all domestic common stocks. This chart assumes an initial investment of $10,000 made on 5/3/94 (commencement of operations). Returns shown include deductions for management and other fund expenses, and reinvestment of all dividends. Returns exclude deductions for separate account sales loads and account fees. Past performance is not predictive of future performance. Investment return and principal value will fluctuate, so that your shares, when redeemed, may be worth more or less than their original cost. The net investment rates of return shown on page 2 reflect mortality and expense risk charges deducted from the assets of the separate account. The cost of insurance protection, which is not reflected in the returns shown on this chart, would make the return significantly lower. Investors are urged to obtain a personalized illustration of historical performance which reflects the cost of insurance protection. -- 4 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 MARKET VALUE COMMON STOCK (88.9%) SHARES (000'S) - -------------------------------------------------------------- COMPUTER SOFTWARE (CONTINUED) *Microsoft Corporation 24,200 $ 2,000 ----------- TOTAL 8,872 ----------- CONTAINERS (0.9%) Tupperware 30,000 1,609 ----------- DIVERSIFIED (2.3%) Allied Signal Inc. 40,200 2,693 Dial Corp. 78,000 1,151 ----------- TOTAL 3,844 ----------- DRUGS (4.0%) Eli Lilly & Company 28,700 2,095 Merck & Co., Inc. 33,300 2,639 Pfizer Inc. 25,100 2,080 ----------- TOTAL 6,814 ----------- ELECTRICAL EQUIPMENT (4.3%) Emerson Electric Co. 25,800 2,496 General Electric Company 31,900 3,154 W.W. Grainger, Inc. 20,200 1,621 ----------- TOTAL 7,271 ----------- FINANCIAL SERVICES (2.9%) Associates First Capital Corporation 45,000 1,986 Dean Witter, Discover & Co. 8,000 530 Franklin Resources 19,600 1,340 Merrill Lynch & Co. 14,000 1,141 ----------- TOTAL 4,997 ----------- FOOD SERVICE/LODGING (1.7%) McDonald's Corporation 34,400 1,557 Promus Hotels 45,000 1,333 ----------- TOTAL 2,890 ----------- FOODS (3.1%) CPC International Corp. 21,900 1,697 Campbell Soup Company 21,000 1,685 General Mills, Inc. 28,800 1,825 ----------- TOTAL 5,207 ----------- HOSPITAL SUPPLIES (1.4%) Guidant Corp. 4,600 262 Johnson & Johnson 43,500 2,164 ----------- TOTAL 2,426 ----------- HOUSEHOLD PRODUCTS (2.4%) First Brands Corporation 71,200 2,020 Newell Co. 64,400 2,029 ----------- TOTAL 4,049 ----------- INSURANCE (2.1%) CIGNA Corporation 11,300 1,544 Everest Reinsurance Holdings Inc. 68,200 1,961 ----------- TOTAL 3,505 -----------
-- 5 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 ----------- MARKET VALUE COMMON STOCK (88.9%) SHARES (000'S) - -------------------------------------------------------------- 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%, 1/8/97 3,000,000 2,997 ----------- TOBACCO (2.6%) Philip Morris Companies, 6.5%, 1/2/97 4,500,000 4,499 ----------- TOTAL MONEY MARKET INVESTMENTS 18,948 ----------- TOTAL GROWTH STOCK PORTFOLIO $ 170,082 -----------
* 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 -- 6 AGGRESSIVE GROWTH STOCK PORTFOLIO - -------------------------------------------------------------------------------- Objective: Portfolio Strategy: Net Assets: Maximum long-term Strive for the highest possible rate of $871,926,094 appreciation of capital capital appreciation by investing in companies with potential for rapid growth
AGGRESSIVE GROWTH STOCK PORTFOLIO The Aggressive Growth Stock Portfolio owns the stocks of emerging growth companies, generally with market capitalizations of less than $3 billion. Since growth stock portfolios tend to react strongly to changes in financial and economic markets, as well as to changes in the prospects for individual companies, returns of this Portfolio can vary considerably from time to time. A higher level of risk (with risk defined as variability of returns over time) is accepted for the potential of greater long-term returns. The focus in stock selection is on the individual companies' ability to generate revenue, expanding profit margins and solid balance sheets; industry sector selection is of secondary importance. The Portfolio is heavily weighted toward three sectors in which there are companies with particularly promising prospects for growth: technology; consumer cyclicals and health care. Among technology issues, the Portfolio benefited from its investments in software, computer services, telecommunication equipment and semiconductors. A major area of focus within the broad consumer cyclical category is specialty retailers; in this category, office supply and catalog companies continue to perform well. Health care issues underperformed in 1996, but the evolution in the health care industry in the United States, plus demographic trends, make selected companies in this industry attractive for the long term. Holdings of small transportation companies contributed to the Portfolio's performance, as they rebounded from a weak environment in 1995. The business services sector, another area of emphasis, performed well in 1996, as companies increasingly turned to strategic outsourcing. Sector Allocation EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC Consumer Related 19% Technology 27% Health Care 13% Business Services 7% Transportation 8% Energy 6% Financial Services 5% Industrial 6% Cash Equivalents 9%
Performance Relative to Relevant Indicies EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
AGGRESSIVE GROWTH WILSHIRE SMALL WILSHIRE NEXT STOCK PORTFOLIO CAP INDEX 1750 INDEX 11-90 10,000 10,000 10,000 12-90 10,189 10,459 10,459 12-91 15,894 15,873 15,325 12-92 16,839 18,188 18,186 12-93 20,057 21,464 21,357 12-94 21,141 20,801 21,065 12-95 29,488 26,330 27,439 12-96 34,661 31,588 31,801 Average Annual Total Return For Periods Ended December 31, 1996 One Year Five Years Since Inception Aggressive Growth Stock Portfolio 17.70% 16.87% 22.66% Wilshire Small Cap Index 19.97% 14.76% 20.81% Wilshire Next 1750 Index 15.90% 15.72% 20.94%
Since the portfolio invests primarily in small capitalization issues, the indices that best reflect the portfolio's performance are the Wilshire Next 1750 Index and Wilshire Small Cap Index. The Wilshire Next 1750 is an unmanaged, equally weighted index. Included in this index are those stocks which are ranked 750 to 2500 by market capitalization in the Wilshire 5000. The largest sectors represented in this index are financial services, consumer services and basic industry. Its average market capitalization is approximately $491.0 million as of December 31, 1996. The Wilshire Small Cap Index is a subset of the Wilshire Next 1750 and includes 250 stocks chosen based upon their size, sector and liquidity characteristics. Each stock is equally weighted in this unmanaged index. The average market capitalization is approximately $609.4 million as of December 31, 1996. The largest sector weightings include financial services, consumer services and technology. On May 3, 1994, the Northwestern Mutual Aggressive Growth Stock Fund, Inc. (the "Fund") merged into the Northwestern Mutual Series Fund, Inc. Aggressive Growth Stock Portfolio (the "Portfolio"). The Portfolio had no assets prior to the merger. After the merger, the assets of the Portfolio were those of the Fund. The investment objectives, policies, management and expenses of the Portfolio are identical to those of the Fund. Accordingly, the performance of the Fund prior to the merge is included with the performance of the Portfolio in the graph and total return figures above. This chart assumes an initial investment of $10,000 made on 11/30/90 (commencement of the Fund's operations). Returns shown include deductions for management and other fund expenses, and reinvestment of all dividends. Returns exclude deductions for separate account sales loads and account fees. Past performance is not predictive of future performance. Investment return and principal value will fluctuate, so that your shares, when redeemed, may be worth more or less than their original cost. The net investment rates of return shown on page 2 reflect mortality and expense risk charges deducted from the assets of the separate account. The cost of insurance protection, which is not reflected in the returns shown on this chart, would make the return significantly lower. Investors are urged to obtain a personalized illustration of historical performance which reflects the cost of insurance protection. -- 7 AGGRESSIVE GROWTH STOCK PORTFOLIO NORTHWESTERN 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 MARKET VALUE COMMON STOCK (90.8%) SHARES (000'S) - -------------------------------------------------------------- ELECTRONICS (CONTINUED) *Microchip Technology Inc. 149,000 $ 7,580 Molex Inc. 184,782 6,583 Trident International, Inc. 300,000 4,875 ----------- TOTAL 54,286 ----------- ENVIRONMENTAL (2.1%) Cuno, Inc. 94,100 1,400 Kaydon Corporation 172,500 8,129 *Tetra Tech Inc. 464,737 9,179 ----------- TOTAL 18,708 ----------- EXPLORATION / DRILLING (3.4%) BJ Services Company 135,000 6,885 Pride Petroleum Services 348,000 8,091 Production Operators Corp. 151,800 7,059 Titan Exploration Inc. 160,000 1,920 Transocean Offshore, Inc. 90,900 5,693 ----------- TOTAL 29,648 ----------- FINANCIAL SERVICES (2.4%) BA Merchant Services, Inc. 50,500 903 Investors Financial Services C 200,000 5,550 Money Store, Inc. 320,150 8,844 *WFS Financial Corporation 282,160 5,608 ----------- TOTAL 20,905 ----------- FURNITURE / APPLIANCES (1.8%) *Blythe Industries, Inc. 224,400 10,238 Chicago Miniature Lamp 136,900 5,681 ----------- TOTAL 15,919 ----------- INSURANCE COMPANIES (2.0%) Capmac Holdings Inc. 250,000 8,281 CMAC Investment Corp. 243,200 8,938 ----------- TOTAL 17,219 ----------- MACHINERY / EQUIPMENT (0.4%) *ABC Rail Products 193,000 3,836 ----------- MEDIA (1.4%) *Clear Channel Communications 150,000 5,419 Gartner Group, Inc. 142,000 5,529 Universal Outdoor Holdings Inc. 53,000 1,245 ----------- TOTAL 12,193 ----------- MEDICAL PRODUCTS/SUPPLIES (6.3%) Cardinal Health, Inc. 243,920 14,208 *Gulf South Medical Supply, Inc. 334,700 8,577 *Patterson Dental Co. 234,650 6,629 *Physician Sales & Service, Inc. 212,100 3,049 *Steris Corp. 299,500 13,028 *Sybron, Inc. 285,100 9,408 ----------- TOTAL 54,899 ----------- MEDICAL SERVICES (6.9%) Capstone Pharmacy Services, Inc. 400,000 4,550 Compdent Corporation 187,000 6,592 CRA Managed Care Inc. 134,900 6,070 *Interim Service 141,500 5,023 *Medcath Incorporated 216,800 3,469 *Occusystems Inc. 205,900 5,559 *Orthodontic Centers of America 392,800 6,285 *PhyCor, Inc. 245,200 6,958
-- 8 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 ----------- MARKET VALUE COMMON STOCK (90.8%) SHARES (000'S) - -------------------------------------------------------------- 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 -- 9 INTERNATIONAL EQUITY PORTFOLIO - -------------------------------------------------------------------------------- Objective: Portfolio Strategy: Net Assets: Long-term appreciation of Participate in the growth of foreign $505,190,404 capital through economies by investing in securities with diversification into markets high long-term earnings potential relative outside the United States to current market values
INTERNATIONAL EQUITY PORTFOLIO The International Equity Portfolio offers contract owners the opportunity to participate in the growth of companies in countries throughout the world, particularly those with expanding economies. The Portfolio continues to buy the shares of undervalued companies internationally, using a disciplined focus on long-term value. During 1996, the Portfolio significantly outperformed the EAFE ("Europe-Australia-Far East") Index, a composite of approximately 1100 companies in 20 countries in Europe and the Pacific Basin. International markets were generally strong in 1996, with Japan and Korea, in which the Portfolio has relatively modest holdings, the notable exceptions among major markets. In Asia, the Portfolio's performance benefited from its investments in Hong Kong and an underweighting in Japan. Japan's stock market posted lackluster performance, reflecting a mix of relief that economic growth resumed after a five-year slump and concern that Japan's government could staunch that growth by reducing stimulus. In Hong Kong, the market surged, amid expectations of robust economic growth after the country reverts to Chinese control in 1997. In Europe, low inflation, low interest rates, moderate economic growth and strong bond markets fueled solid gains in the stock markets. Spain, Sweden and France were among the strongest European markets. During the year, the percentage of the Portfolio invested in Europe was increased, particularly in the United Kingdom; the percentage of holdings in Asia was decreased, with a major reduction in Japanese investments. At year end 1996, the Portfolio's largest positions by country were United Kingdom (11%), France (9%), Spain (8%), Sweden (8%) and Hong Kong (8%). The International Equity Portfolio is managed for Northwestern Mutual by Templeton Investment Counsel, Inc. Asset Allocation EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC Europe 63% Asia 11% Australia/New Zealand 7% Latin America 6% Canada 3% Non-equity holdings 10%
Perfomance Relative to the EAFE Index EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
INTERNATIONAL EQUITY PORTFOLIO EAFE INDEX 04-93 10,000 10,000 12-93 12,464 10,970 12-94 12,451 11,859 12-95 14,266 13,228 12-96 17,264 14,068 Average Annual Total Return For Periods Ended December 31, 1996 One Year Since Inception International Equity Portfolio 21.01% 16.04% EAFE Index 6.35% 9.74%
As depicted in the graph, the International Equity Portfolio is compared against the Morgan Stanley Capital International EAFE ("Europe-Australia-Far East") Index. The index is composed of approximately 1100 companies in 20 countries in Europe and the Pacific Basin. The objective of the index is to reflect the movements of stock markets in these countries by representing an unmanaged (indexed) portfolio within each country. The indices are constructed so that companies chosen represent about 60% of market capitalization in each market; industry composition of the market is reflected; and a cross section of large, medium, and small capitalization stocks is included, taking into account liquidity concerns. The index is calculated in U. S. dollars. On May 3, 1994, the Northwestern Mutual International Equity Fund, Inc. (the "Fund") merged into the Northwestern Mutual Series Fund, Inc., International Equity Portfolio (the "Portfolio"). The Portfolio had no assets prior to the merger. After the merger, the assets of the Portfolio were those of the Fund. The investment objectives, policies, management and expenses of the Portfolio are identical to those of the Fund. Accordingly, the performance of the Fund prior to the merger is included with the performance of the Portfolio in the graph and total return figures above. This chart assumes an initial investment of $10,000 made on 4/30/93 (commencement of the Fund's operations). Returns shown include deductions for management and other fund expenses, and reinvestment of all dividends. Returns exclude deductions for separate account sales loads and account fees. Past performance is not predictive of future performance. Investment return and principal value will fluctuate, so that your shares, when redeemed, may be worth more or less than their original cost. The net investment rates of return shown on page 2 reflect mortality and expense risk charges deducted from the assets of the separate account. The cost of insurance protection, which is not reflected in the returns shown on this chart, would make the return significantly lower. Investors are urged to obtain a personalized illustration of historical performance which reflects the cost of insurance protection. -- 10 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 MARKET VALUE COMMON STOCK (89.1%) COUNTRY SHARES (000'S) - ---------------------------------------------------------------- BUSINESS & PUBLIC SERVICE (CONTINUED) Societe Generale de Surv Holdings Swtz. 885 $ 2,175 * **Waste Management PLC, ADR U.K. 168,000 1,323 ----------- TOTAL 15,089 ----------- CHEMICALS (4.7%) Bayer AG Ger. 157,000 6,407 European Vinyls Corp. EVC International Neth. 68,985 2,187 Rhone Poulenc SA, Series A Fr. 314,508 10,724 Solvay Et Cie A NPV Bel. 7,300 4,473 ----------- TOTAL 23,791 ----------- CONSTRUCTION AND HOUSING (0.8%) Kyudendo Corp. Jpn. 33,000 342 Sirti SPA Italy 643,000 3,900 ----------- TOTAL 4,242 ----------- ELECTRICAL & ELECTRONICS (2.9%) ABB AG Baden Bearer Swtz. 4,730 5,884 Alcatel Alsthom DG Fr. 58,519 4,701 Hitachi Ltd. Jpn. 113,000 1,054 Philips Electronic Neth. 78,000 3,159 ----------- TOTAL 14,798 ----------- ELECTRICAL COMPONENTS, INSTRUMENTS (1.1%) BICC PLC U.K. 1,199,545 5,651 ----------- ENERGY SOURCES (3.2%) Hafslund Nycomed "A" Norw. 170,000 1,255 Repsol SA Sp. 122,000 4,683 Saga Petrolium Norw. 260,000 4,369 Societe Nationale Elf Aquitane Fr. 66,801 6,081 ----------- TOTAL 16,388 ----------- FINANCIAL SERVICES (2.4%) AXA SA Fr. 47,813 3,041 *Capital Portugal Fund Port. 14,500 1,674 Chile Fund U.S. 35,000 731 India Fund, Series "B" U.K. 1,256,515 1,851 *JF Indonesia Fund, Inc. H.K. 456,600 531 Korea International Trust Kor. 52 1,625 Thai Fund Inc. Thai. 71,516 1,180 *Thailand International Fund Thai. 70 1,610 ----------- TOTAL 12,243 ----------- FOOD & HOUSEHOLD PRODUCTS (3.1%) Albert Fisher Group PLC U.K. 6,734,995 4,904 CP Pokphand Co. H.K. 2,609,900 1,029 Cafe de Coral Holdings, Ltd. H.K. 7,672,000 2,058 Hillsdown Holdings U.K. 1,800,892 6,170
-- 11 NORTHWESTERN MUTUAL SERIES FUND, INC. Schedule of Investments DECEMBER 31, 1996
MARKET VALUE COMMON STOCK (89.1%) COUNTRY SHARES (000'S) - ---------------------------------------------------------------- FOOD & HOUSEHOLD PRODUCTS (CONTINUED) Vitro SA NPV Mex. 768,400 $ 1,396 ----------- TOTAL 15,557 ----------- FOREST PRODUCTS & PAPER (2.7%) Barito Pacific Timber Indo. 937,000 575 Carter Holt Harvey Ltd. N.Z. 2,734,957 6,206 Metsa Serla OY "B" Fin. 277,500 2,083 Stora Kapparbergs, Series "B" Swe. 350,000 4,773 ----------- TOTAL 13,637 ----------- HEALTH & PERSONAL CARE (2.5%) Astra AB Series "A" Free Swe. 140,000 6,919 Nycomed ASA Series "A" Norw. 227,000 3,476 Nycomed ASA Series "B" Norw. 128,200 1,973 ----------- TOTAL 12,368 ----------- INSURANCE (3.7%) Aegon NV Neth. 121,792 7,757 ING Groep NV Neth. 190,000 6,836 London Insurance Group Can. 325,200 4,323 ----------- TOTAL 18,916 ----------- MACHINERY & ENGINEERING (0.9%) VA Technologies AG Bearer(144A) Austrl. 30,000 4,709 ----------- MERCHANDISING (1.1%) Koninklijke Bijenkorf Beheer Neth. 44,098 3,176 Kwik Save Group U.K. 465,057 2,573 ----------- TOTAL 5,749 ----------- METALS & MINING (2.2%) Elkem A S Oslo ord "A" Norw. 192,000 3,166 *Inmet Mining Ltd. Can. 192,500 935 **Pechiney, ADR "A" Fr. 48,183 952 Pechiney SA "A" Fr. 19,000 796 Union Minerie, NPV Bel. 65,171 4,420 Grupo Mexico "B" Mex. 256,000 793 ----------- TOTAL 11,062 ----------- MULTI-INDUSTRY (8.4%) Amer Group "A" Fin. 175,000 3,616 BTR Nylex, Ltd. Austrl. 1,341,100 6,548 BTR, PLC "A" Austrl. 249,000 1,144 Comp Gen de Industrieset de Partec Fr. 4,500 1,241 Harrisons & Crossfield U.K. 539,800 1,221 Hutchinson Whampoa H.K. 798,000 6,268 Jardine Matheson Holdings H.K. 1,035,501 6,834 Jardine Strategic Holdings H.K. 1,019,055 3,689 Marine Wendel SA Fr. 11,490 1,054 Nokia Corp., "A" Fin. 71,000 4,124 Swire Pacific Class "A" H.K. 472,500 4,521 MARKET VALUE COMMON STOCK (89.1%) COUNTRY SHARES (000'S) - ---------------------------------------------------------------- MULTI-INDUSTRY (CONTINUED) Swire Pacific Limited B H.K. 1,314,200 $ 1,988 ----------- TOTAL 42,248 ----------- RAILROAD (0.7%) Brambles Ind. Ltd. Austrl. 183,500 3,581 ----------- TELECOMMUNICATIONS (9.7%) British Telecom U.K. 608,000 4,114 **CIA de Telefons Chile, ADR Chile 36,500 3,691 Cointel CONV Pfd. Arg. 73,150 3,822 Nacional Financiera CNV PRIDES Mex. 117,802 3,976 **Phillipine Long Distance Telephone, ADR Phil. 63,500 3,239 SPT Telecom AS Chez. 36,000 4,482 Stet Di Risp Non-Conv. Italy 2,490,000 8,413 **Telebras ADR Braz. 103,500 7,918 Telefonica de Espania Sp. 315,000 7,321 Telefonica del Peru SA "B" ADR Peru 115,300 2,176 ----------- TOTAL 49,152 ----------- TEXTILES-APPAREL (0.2%) Yizheng Chemical Fibre Company China 3,725,200 901 ----------- UTILITIES-ELECTRIC & GAS (9.1%) British Gas U.K. 1,913,200 7,342 CEZ Ceske Energeticke Zavody Chez 101,990 3,671 Consolidated Electric Power, Asia H.K. 219,000 514 Electricidad de Caracas Venz. 3,986,308 4,043 Endesa National de Electric Sp. 63,000 4,487 EVN Energie Versorgung Aus. 38,400 5,781 Hong Kong Electric H.K. 990,000 3,290 Iberdrola SA Sp. 587,500 8,333 National Power U.K. 493,764 4,128 Thames Water U.K. 251,023 2,627 Veba Warrants Ger. 6,000 1,922 ----------- TOTAL 46,138 ----------- WHOLESALE & INTERNATIONAL TRADE (1.0%) Brierley Investments Ltd. N.Z. 5,716,091 5,294 ----------- TOTAL COMMON STOCK 450,525 -----------
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 -----------
-- 12 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 ----------- MARKET MONEY MARKET VALUE INVESTMENTS (7.5%) COUNTRY PAR (000'S) - ---------------------------------------------------------------- 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 -- 13 GROWTH AND INCOME STOCK PORTFOLIO - -------------------------------------------------------------------------------- Objective: Portfolio Strategy: Net Assets: Long-term growth of capital Actively manage a portfolio of equity $234,183,366 and income, consistent with securities moderate investment risk with a goal of exceeding the total return of the S&P 500 Index
GROWTH AND INCOME PORTFOLIO The Growth and Income Portfolio invests mainly in large-capitalization stocks, with a focus on seeking the best values in the market based on long-term earnings forecasts. A sector balance very close to that of the S&P 500 Index is normally maintained, with the emphasis on undervalued stocks within each sector; a valuation discipline mandates the sale of stocks regarded as overvalued. More focus is placed on capital appreciation and dividend growth than on current dividends. The Portfolio is normally fully invested in equity securities. In 1996, the Portfolio's total return was slightly less than the S&P 500 Index. During most of the year, investors focused on large, high quality companies with good near-term earnings momentum rather than on fundamental value; consequently the Portfolio's value-oriented management style underperformed the market as a whole. Near the end of the year, the Portfolio benefited from a broadening of market strength, as investors moved away from the safety of the highest quality companies and embraced more undervalued issues. At year end, the Portfolio was slightly overweighted in the retail, energy, health care, basic industry and cable television industries. Finance and technology stocks were neutrally weighted; utilities were underweighted. The Growth and Income Stock Portfolio is managed for Northwestern Mutual by J. P. Morgan Investment Management Inc. Sector Allocation EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC Consumer 36% Interest-Sensitive 23% Industry 20% Technology 11% Energy 10%
Top 10 Holdings 12/31/96 EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
COMPANY % OF NET ASSETS Exxon Corp. 3.90% Philip Morris Cos. Inc. 3.30% Procter & Gamble Co. 3.00% Boeing Company 3.00% Wal-Mart Stores, Inc. 2.40% Tele-Communications Inc. 2.10% Nations Bank Corporation 2.00% Warner-Lambert Company 1.90% General Motors Corp. 1.90% E.I. du Pont de Nemours & Co. 1.80%
Performance Relative to S&P 500 Index EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
GROWTH & INCOME STOCK PORTFOLIO S&P 500 INDEX 05-94 10,000 10,000 12-94 10,034 10,320 12-95 13,156 14,180 12-96 15,783 17,413 Average Annual Total Return For Periods Ended December 31, 1996 One Year Since Inception Growth & Income Stock Portfolio 19.97% 18.69% S&P 500 Index 22.80% 23.15%
The Standard & Poor's 500 Composite Stock Price Index is an unmanaged index of 500 selected common stocks, most of which are listed on the New York Stock Exchange. The index is heavily weighted toward stocks with large market capitalizations and represents approximately two-thirds of the total market value of all domestic common stocks. This chart assumes an initial investment of $10,000 made on 5/3/94 (commencement of operations). Returns shown include deductions for management and other fund expenses, and reinvestment of all dividends. Returns exclude deductions for separate account sales loads and account fees. Past performance is not predictive of future performance. Investment return and principal value will fluctuate, so that your shares, when redeemed, may be worth more or less than their original cost. The net investment rates of return shown on page 2 reflect mortality and expense risk charges deducted from the assets of the separate account. The cost of insurance protection, which is not reflected in the returns shown on this chart, would make the return significantly lower. Investors are urged to obtain a personalized illustration of historical performance which reflects the cost of insurance protection. -- 14 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 ----------- MARKET VALUE COMMON STOCK (97.3%) SHARES (000'S) - -------------------------------------------------------------- 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 -----------
-- 15 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 ----------- MARKET VALUE COMMON STOCK (97.3%) SHARES (000'S) - -------------------------------------------------------------- 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 -- 16 INDEX 500 STOCK PORTFOLIO - -------------------------------------------------------------------------------- Objective: Portfolio Strategy: Net Assets: Long-term capital appreciation Invest in a portfolio designed to approximate $740,066,437 through cost-effective the composition and returns of the S&P 500 participation in broad market Index. performance
INDEX 500 STOCK PORTFOLIO The Index 500 Stock Portfolio is designed to achieve results that approximate the performance of the Standard & Poor's 500 Composite Stock Price Index. This composite of 500 stocks of large U.S.-based companies, compiled by Standard & Poor's, is generally regarded as a good proxy for the overall U.S. equity market; the Portfolio therefore enables contract owners to participate in overall performance of the U.S. equity market. The Portfolio continues to achieve the objective of matching the results of the S&P 500 before expenses, outperforming the majority of active stock managers in 1996. Performance Relative to S&P 500 Index EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
INDEX 500 PORTFOLIO S&P 500 INDEX 12-86 10,000 10,000 12-87 10,821 10,510 12-88 11,776 12,255 12-89 13,942 16,139 12-90 13,340 15,639 12-91 17,313 20,409 12-92 18,099 21,960 12-93 19,891 24,178 12-94 20,132 24,468 12-95 27,632 33,619 12-96 33,917 41,284 Average Annual Total Return For Periods Ended December 31, 1996 One Year Five Years Ten Years Index 500 Stock Portfolio 22.75% 14.40% 12.99% S&P 500 Index 22.80% 15.13% 15.23%
On April 30, 1993, the portfolio was indexed to approximate the performance of the Standard & Poor's 500 Composite Stock Price Index. Before that date, the portfolio was actively managed. The Standard & Poor's 500 Composite Stock Price Index is an unmanaged index of 500 selected common stocks, most of which are listed on the New York Stock Exchange. The index is heavily weighted toward stocks with large market capitalizations and represents approximately two-thirds of the total market value of all domestic common stocks. This chart assumes an initial investment of $10,000 made on 12/31/86. Returns shown include deductions for management and other fund expenses, and reinvestment of all dividends. Returns exclude deductions for separate account sales loads and account fees. Past performance is not predictive of future performance. Investment return and principal value will fluctuate, so that your shares, when redeemed, may be worth more or less than their original cost. The net investment rates of return shown on page 2 reflect mortality and expense risk charges deducted from the assets of the separate account. The cost of insurance protection, which is not reflected in the returns shown on this chart, would make the return significantly lower. Investors are urged to obtain a personalized illustration of historical performance which reflects the cost of insurance protection. -- 17 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 MARKET VALUE COMMON STOCK (94.6%) SHARES (000'S) - -------------------------------------------------------------- BANKS (CONTINUED) Bankers Trust New York Corporation 10,100 $ 871 Barnett Banks Inc. 24,200 995 Boatmans Bancshares, Inc. 19,200 1,238 Chase Manhattan Corporation 54,456 4,860 Citicorp 58,400 6,015 Comerica, Inc. 13,300 697 Corestates Financial Corp. 27,600 1,432 Fifth Third Bancorp 13,100 823 First Bank System Inc. 16,700 1,140 First Chicago NBD Corporation 39,528 2,125 First Union Corporation 35,235 2,607 Fleet Financial Group Inc. 32,530 1,622 KeyCorp 28,000 1,414 Mellon Bank Corporation 16,050 1,140 J.P. Morgan & Company, Inc. 23,100 2,255 National City Corp. 27,500 1,234 NationsBank Corp. 35,700 3,490 Norwest Corporation 46,000 2,001 PNC Bank Corp. 42,300 1,592 Republic New York Corporation 6,900 563 Suntrust Banks Inc. 27,700 1,364 US Bancorp of Oregon 18,800 845 Wachovia Corporation 20,500 1,158 Wells Fargo & Company 11,433 3,084 ----------- TOTAL 54,150 ----------- BEVERAGES (3.6%) Anheuser-Busch Companies, Inc. 62,000 2,480 Brown-Forman Corp. 8,600 393 The Coca-Cola Company 308,800 16,251 Adolph Coors Co. 4,700 89 Pepsico Inc. 192,800 5,639 Seagram Company Ltd. 46,300 1,794 ----------- TOTAL 26,646 ----------- BUILDING & CONSTRUCTION (0.4%) Case Corporation 9,100 496 Centex Corporation 3,500 132 Crane Co. 5,750 167 Fluor Corporation 10,400 653 Kaufman & Broad Home Corp. 4,800 62 Masco Corporation 19,900 716 Owens Corning Fiberglas Corp. 6,400 273 Pulte Corporation 2,900 89 Sherwin-Williams Company 10,700 599 ----------- TOTAL 3,187 ----------- CHEMICALS (2.6%) Air Products & Chemicals, Inc. 13,800 954 B.F. Goodrich Company 6,700 271 Dow Chemical Company 30,200 2,367 E.I. du Pont de Nemours & Co. 69,900 6,597 Eastman Chemical Company 9,625 532
-- 18 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 MARKET VALUE COMMON STOCK (94.6%) SHARES (000'S) - -------------------------------------------------------------- COMPUTERS AND RELATED SERVICES (CONTINUED) *Unisys Corporation 21,700 $ 146 ----------- TOTAL 32,135 ----------- COMPUTER SOFTWARE (0.9%) Autodesk, Inc. 5,700 160 Bay Networks 24,100 503 Cabletron Systems Inc. 19,400 645 First Data Corporation 55,500 2,026 Oracle Corporation 81,600 3,407 Shared Medical Systems Corp. 2,900 143 ----------- TOTAL 6,884 ----------- CONTAINERS (0.2%) Ball Corporation 3,800 99 Bemis Company, Inc. 6,500 240 *Crown Cork & Seal Company, Inc. 15,900 865 *Tupperware 7,700 413 ----------- TOTAL 1,617 ----------- DIVERSIFIED (1.8%) Alco Standard Corporation 16,200 836 Allied Signal Inc. 35,100 2,352 Cognizant Corp. 21,200 700 Corning Inc. 28,600 1,323 Loews Corp. 14,300 1,348 Minnesota Mining & Manufacturing Co. 51,900 4,301 Tenneco Inc. 21,200 957 Textron Inc. 10,300 971 Whitman Education Group Inc. 12,900 295 ----------- TOTAL 13,083 ----------- DRUGS (6.1%) Alza Corp. 10,500 272 American Home Products Corporation 79,300 4,649 *Amgen Inc. 32,800 1,784 Bristol-Myers Squibb Company 62,200 6,764 Eli Lilly & Company 68,500 5,000 Merck & Co., Inc. 149,600 11,856 Pfizer Inc. 80,000 6,630 Pharmacia & Upjohn Inc. 63,105 2,501 Schering-Plough Corporation 45,800 2,966 *Warner-Lambert Company 33,700 2,528 ----------- TOTAL 44,950 ----------- ELECTRICAL EQUIPMENT (3.6%) Emerson Electric Co. 27,800 2,690 General Electric Company 204,300 20,200 General Instrument Corp. 17,000 368 W.W. Grainger, Inc. 6,600 530 Honeywell Inc. 15,700 1,032 Raychem Corp. 5,500 441 Thomas & Betts Corporation 6,600 293
-- 19 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 MARKET VALUE COMMON STOCK (94.6%) SHARES (000'S) - -------------------------------------------------------------- FOOD SERVICE/LODGING (CONTINUED) *Shoney's Inc. 6,000 $ 42 Wendy's International, Inc. 16,100 330 ----------- TOTAL 7,784 ----------- FOODS (2.8%) Archer Daniels Midland Company 67,570 1,487 CPC International Corp. 17,800 1,380 Campbell Soup Company 29,000 2,327 Conagra Inc. 29,900 1,488 General Mills, Inc. 19,400 1,229 H.J. Heinz Company 45,650 1,632 Hershey Foods Corp. 19,100 836 Kellogg Company 26,200 1,719 Pioneer Hi-Bred International 10,200 714 Quaker Oats Company 16,900 644 Ralston Purina Group 13,100 961 Sara Lee Corporation 60,000 2,235 Unilever, N.V. 19,900 3,487 Wm. Wrigley Jr. Company 14,400 810 ----------- TOTAL 20,949 ----------- HOUSEHOLD FURNITURE (0.4%) Armstrong World Industries Inc. 5,100 354 Black & Decker Corporation 10,900 328 Maytag Corporation 12,400 245 Newell Co. 19,700 621 Rubbermaid, Inc. 18,600 423 The Stanley Works 11,000 297 Whirlpool Corporation 9,200 429 ----------- TOTAL 2,697 ----------- INSURANCE (3.1%) Aetna Inc. 18,663 1,493 Alexander & Alexander Services 5,600 97 Allstate Corporation 55,214 3,196 American International Group, Inc. 58,250 6,306 Aon Corporation 13,400 832 CIGNA Corporation 9,300 1,271 The Chubb Corporation 21,600 1,161 General Re Corporation 10,300 1,625 ITT Hartford Group 14,600 985 Jefferson-Pilot Corp. 8,800 498 Lincoln National Corporation 12,900 677 MBIA Incorporated 5,400 547 MGIC Investment Corp. 7,300 555 Providian Corporation 11,600 596 SAFECO Inc. 15,600 615 St. Paul Companies, Inc. 10,300 604 Torchmark Corporation 8,700 439 UNUM Corporation 9,100 657 USF&G Corp. 14,400 301 USLIFE Corporation 4,250 141 ----------- TOTAL 22,596 -----------
-- 20 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 MARKET VALUE COMMON STOCK (94.6%) SHARES (000'S) - -------------------------------------------------------------- MEDICAL PRODUCTS/SUPPLIES (CONTINUED) U.S. Surgical Corporation 7,800 $ 307 ----------- TOTAL 20,737 ----------- MEDICAL SERVICES (0.8%) *Beverly Enterprises, Inc. 12,300 157 Columbia/HCA Healthcare Corporation 83,300 3,394 Humana, Inc. 20,200 386 Manor Care, Inc. 7,800 211 *Tenet Healthcare Corp. 26,900 588 United Healthcare Corp. 22,800 1,026 ----------- TOTAL 5,762 ----------- METALS & MINING (1.1%) Alcan Aluminum Limited 28,100 945 Aluminum Co. of America 21,500 1,371 ASARCO, Inc. 5,300 132 Barrick Gold Corporation 44,300 1,274 Battle Mountain Gold Company 27,900 192 Cyprus Minerals Co. 11,550 270 Echo Bay Mines Limited Co. 17,300 115 Freeport-McMoRan Copper & Gold Inc. 24,000 717 Homestake Mining Company 18,200 259 Inco Limited 20,900 666 Newmont Mining Corporation 12,388 554 Phelps Dodge Corporation 8,000 540 Placer Dome Incorporated 29,700 646 Reynolds Metals Company 7,900 445 Santa Fe Pacific Gold Corporation 16,360 252 ----------- TOTAL 8,378 ----------- OFFICE EQUIPMENT-SERVICES (2.8%) Automatic Data Processing, Inc. 36,000 1,544 Computer Associates International Inc. 45,275 2,252 *Computer Sciences Corp. 9,400 772 *Microsoft Corporation 148,300 12,253 Moore Corporation Ltd. 12,400 253 *Novell, Inc. 42,700 404 Pitney Bowes Inc. 18,400 1,003 Xerox Corporation 40,300 2,121 ----------- TOTAL 20,602 ----------- OIL & GAS-DOMESTIC (1.9%) Amerada Hess Corporation 11,600 671 Amoco Company 61,700 4,967 Ashland, Inc. 8,000 351 Atlantic Richfield Company 20,000 2,650 Kerr-McGee Corporation 6,000 432 Louisiana Land & Exploration Co. 4,200 225 Occidental Petroleum Corporation 40,800 954 *ORYX Energy Company 13,000 322 Pennzoil Company 5,800 328
-- 21 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 ----------- MARKET VALUE COMMON STOCK (94.6%) SHARES (000'S) - -------------------------------------------------------------- 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
-- 22 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 MARKET VALUE COMMON STOCK (94.6%) SHARES (000'S) - -------------------------------------------------------------- TELECOMMUNICATIONS (CONTINUED) Scientific-Atlanta, Inc. 9,600 $ 144 *Tellabs Inc. 22,200 835 *WorldCom Inc. 50,800 1,324 ----------- TOTAL 13,122 ----------- TOBACCO (1.8%) American Brands Inc. 21,100 1,047 Philip Morris Companies, Inc. 101,100 11,386 UST Incorporated 23,100 748 ----------- TOTAL 13,181 ----------- TRUCKING-SHIPPING (0.1%) Caliber System, Inc. 4,900 94 *Federal Express Corp. 14,100 627 Ryder System, Inc. 10,200 287 ----------- TOTAL 1,008 ----------- UTILITY-ELECTRIC (2.9%) American Electric Power Co. Inc. 23,300 958 Baltimore Gas & Electric Co. 18,300 490 Carolina Power & Light Company 18,800 686 Central & South West Corporation 26,200 671 Cinergy Corporation 19,617 655 Consolidated Edison Co. of New York 29,200 854 DTE Energy Company 18,000 583 Dominion Resources Inc. 22,400 862 Duke Power Company 25,000 1,156 Edison International 53,800 1,069 Entergy Corporation 28,700 796 FPL Group, Inc. 22,700 1,044 GPU, Inc. 43,500 1,463 Houston Industries Incorporated 29,100 658 *Niagara Mohawk Power Corporation 17,900 177 Northern States Power Company 8,600 395 Ohio Edison Company 18,900 430 PECO Energy Company 27,600 697 P P & L Resources, Inc. 20,100 462 Pacific Enterprises 10,600 322 Pacific Gas & Electric Company 51,200 1,075 PacifiCorp 36,600 750 Public Service Entrprise Group, Inc. 29,600 807 Southern Company 83,600 1,891 Texas Utilities Company 27,900 1,137 UNICOM Corp. 26,800 727 Union Electric Company 12,700 489 ----------- TOTAL 21,304 ----------- UTILITY-GAS (0.4%) Columbia Gas System Inc. 6,900 439 Consolidated Natural Gas Company 11,800 652 Nicor Inc. 6,200 222 Noram Energy Corporation 17,000 261
-- 23 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 -- 24 MONEY MARKET PORTFOLIO - -------------------------------------------------------------------------------- Objective: Portfolio Strategy: Net Assets: Maximum current income Achieve stability of capital by investing in $176,298,542 consistent with liquidity and short- term debt securities stability of capital
MONEY MARKET PORTFOLIO The Money Market Portfolio, which invests only in high quality commercial paper and other short-term debt securities with maturities generally not exceeding one year, is the least risky of the Portfolios. During 1996, money market rates were relatively stable, with an overall decrease of about 25 basis points (a quarter of a percentage point). The Money Market Portfolio extended maturities during the year but maintained an average maturity shorter than the broad universe of money market funds. This strategy is appropriate at this time, since no dramatic movement in short-term interest rates is anticipated. AN INVESTMENT IN THE MONEY MARKET PORTFOLIO IS NEITHER INSURED NOR GUARANTED BY THE U.S. GOVERNMENT AND THERE CAN BE NO ASSURANCE THAT THE PORTFOLIO WILL BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE. -- 25 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 MARKET VALUE MONEY MARKET INVESTMENTS (92.8%) PAR (000'S) - -------------------------------------------------------------- OFFICE EQUIPMENT (CONTINUED) Xerox Credit Corporation, 6.85%, 1/2/97 $2,888,000 $ 2,887 Xerox Corporation, 5.29%, 2/4/97 7,900,000 7,861 ----------- TOTAL 18,617 ----------- PRINTING & PUBLISHING (4.6%) Dow Jones & Co. Inc., 5.35%, 2/5/97 8,100,000 8,058 ----------- PROFESSIONAL SERVICES (4.0%) PHH Corp., 5.47%, 1/23/97 7,000,000 6,977 ----------- RETAIL-GENERAL (4.5%) J.C. Penney Funding Corporation, 5.32%, 1/23/97 1,700,000 1,694 J.C. Penney Funding Corporation, 5.33%, 3/7/97 6,200,000 6,140 ----------- TOTAL 7,834 ----------- TELECOMMUNICATIONS (2.6%) Bellsouth Telecommunications, 5.37%, 3/4/97 4,520,000 4,478 ----------- TOBACCO (4.8%) BAT Capital Corporation, 5.42%, 2/14/97 8,500,000 8,444 ----------- UTILITY-ELECTRIC (4.6%) National Rural Utility Coop Finance, 5.3%, 2/11/97 8,000,000 7,952 ----------- TOTAL COMMERCIAL PAPER 161,708 ----------- 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 MONEY MARKET PORTFOLIO $ 174,258 -----------
The Accompanying Notes are an Integral Part of the Financial Statements -- 26 BALANCED PORTFOLIO - -------------------------------------------------------------------------------- Objective: Portfolio Strategy: Net Assets: A high level of current income Achieve consistent returns and low volatility $2,326,233,275 and capital growth with a low by diversifying among assets risk profile
BALANCED PORTFOLIO In order to capitalize on changing financial market and economic conditions, the Balanced Portfolio's asset allocation is adjusted as appropriate among three investment classes: stocks, bonds and money market instruments. The equity portion of the Portfolio is indexed, meaning that the portfolio is designed to achieve results that approximate the performance of the Standard & Poor's 500 Composite Stock Price Index, which is generally regarded as a good proxy for the overall U.S. equity market. The bond portion of the Portfolio is actively managed, with investments in high quality bonds adjusted frequently as to maturity, market sectors and duration. During the year, the asset mix of the bond component was shifted moderately from government toward corporate securities. Liquidity is maintained by holding a portion of the Portfolio in money market investments, which are high quality short-term debt securities. With a relatively fully invested position and an emphasis on equities over fixed-income securities, the Balanced Portfolio benefited from the strength of the stock market in 1996. Over the course of the year, the stock and cash segments of the Portfolio were increased slightly, while bond exposure was reduced. This strategy proved successful, as rising interest rates pushed bond returns lower. Percentage Holdings 12/31/96 EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC Equities 55% Bonds 32% Money Market Investments 13%
Performance Relative to Relevant Indices EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
BALANCED PORTFOLIO MERRILL LYNCH DOMESTIC MASTER INDEX 91-DAY T-BILL S&P 500 INDEX 12-86 10,000 10,000 10,000 10,000 12-87 10,715 10,240 10,673 10,510 12-88 11,581 11,063 11,412 12,255 12-89 13,394 12,632 12,438 16,139 12-90 13,598 13,782 13,185 15,639 12-91 16,771 15,967 14,346 20,409 12-92 17,712 17,177 14,909 21,960 12-93 19,467 18,899 15,385 24,178 12-94 19,498 18,365 16,029 24,468 12-95 24,644 21,767 16,996 33,619 12-96 27,959 22,548 17,898 41,284 Average Annual Total Return For Periods Ended December 31, 1996 One Year Five Years Ten Years Balanced Portfolio 13.45% 10.76% 10.83% S&P 500 Index 22.80% 15.13% 15.23% MLDM Index 3.59% 7.15% 8.47% ML 91-Day T-Bill 5.31% 4.52% 5.99%
In the graph, the Portfolio is compared against three indices representing the three major components of the Portfolio: equities, fixed income and cash equivalent investments. The Merrill Lynch Domestic Master Index is an unmanaged market value weighted index comprised of U.S. Government, mortgage and investment-grade corporate bonds. The index measures the income provided by, and the price changes of, the underlying securities. The Standard & Poor's 500 Composite Stock Price Index is an unmanaged index of 500 selected common stocks, most of which are listed on the New York Stock Exchange. The index is heavily weighted toward stocks with large market capitalizations and represents approximately two-thirds of the total market value of all domestic common stocks. This chart assumes an initial investment of $10,000 made on 12/31/86. Returns shown include deductions for management and other fund expenses, and reinvestment of all dividends. Returns exclude deductions for separate account sales loads and account fees. Past performance is not predictive of future performance. Investment return and principal value will fluctuate, so that your shares, when redeemed, may be worth more or less than their original cost. The net investment rates of return shown on page 2 reflect mortality and expense risk charges deducted from the assets of the separate account. The cost of insurance protection, which is not reflected in the returns shown on this chart, would make the return significantly lower. Investors are urged to obtain a personalized illustration of historical performance which reflects the cost of insurance protection. -- 27 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 MARKET VALUE COMMON STOCK (54.1%) SHARES (000'S) - ------------------------------------------------------------- BANKS (CONTINUED) Bankers Trust New York Corporation 18,200 $ 1,570 Barnett Banks Inc. 43,500 1,789 Boatmans Bancshares, Inc. 34,500 2,225 Chase Manhattan Corporation 97,824 8,731 Citicorp 104,800 10,794 Comerica, Inc. 23,900 1,252 Corestates Financial Corp. 49,600 2,573 Fifth Third Bancorp 23,600 1,482 First Bank System Inc. 30,000 2,048 First Chicago NBD Corporation 71,005 3,817 First Union Corporation 63,205 4,677 Fleet Financial Group Inc. 58,419 2,914 KeyCorp 50,200 2,535 Mellon Bank Corporation 28,850 2,048 J.P. Morgan & Company, Inc. 41,500 4,051 National City Corp. 49,400 2,217 NationsBank Corp. 64,000 6,256 Norwest Corporation 82,500 3,589 PNC Bank Corp. 76,000 2,859 Republic New York Corporation 12,300 1,004 Suntrust Banks Inc. 49,700 2,448 U.S. Bancorp of Oregon 33,700 1,514 Wachovia Corporation 36,800 2,079 Wells Fargo & Company 20,566 5,548 ------------ TOTAL 97,235 ------------ BEVERAGES (2.1%) Anheuser-Busch Companies Inc. 111,300 4,452 Brown-Forman Corp. 15,400 705 The Coca-Cola Company 554,400 29,175 Adolph Coors Co. 8,400 160 Pepsico Inc. 346,200 10,126 Seagram Company Ltd. 83,100 3,220 ------------ TOTAL 47,838 ------------ BUILDING & CONSTRUCTION (0.3%) Case Corporation 16,400 894 Centex Corporation 6,300 237 Crane Co. 10,250 297 Fluor Corporation 18,600 1,167 Kaufman & Broad Home Corp. 8,700 112 Masco Corporation 35,800 1,289 Owens-Corning Fiberglas Corp. 11,500 490 Pulte Corporation 5,200 160 Sherwin-Williams Company 19,100 1,070 ------------ TOTAL 5,716 ------------ CHEMICALS (1.5%) Air Products & Chemicals, Inc. 24,900 1,721 Dow Chemical Company 54,100 4,240 E.I. du Pont de Nemours & Company 125,400 11,835
-- 28 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 MARKET VALUE COMMON STOCK (54.1%) SHARES (000'S) - ------------------------------------------------------------- COMPUTERS & RELATED SERVICES (CONTINUED) *Tandem Computers Inc. 26,300 $ 362 *Unisys Corporation 39,000 263 ------------ TOTAL 57,682 ------------ COMPUTER SOFTWARE (0.5%) Autodesk, Inc. 10,200 286 Bay Networks 43,200 902 Cabletron Systems Inc. 34,800 1,157 First Data Corporation 99,700 3,639 Oracle Corporation 146,500 6,116 Shared Medical Systems Corp. 5,200 256 ------------ TOTAL 12,356 ------------ CONTAINERS (0.1%) Ball Corporation 6,800 177 Bemis Company, Inc. 11,700 431 *Crown Cork & Seal Company, Inc. 28,600 1,555 *Tupperware Corporation 13,900 745 ------------ TOTAL 2,908 ------------ DIVERSIFIED (1.0%) Alco Standard Corporation 29,000 1,497 Allied Signal Inc. 63,000 4,221 Cognizant Corp. 38,100 1,257 Corning Inc. 51,300 2,373 Loews Corp. 25,600 2,413 Minnesota Mining & Manufacturing Co. 93,100 7,716 Tenneco Inc. 38,000 1,715 Textron Inc. 18,400 1,734 Whitman Education Group Inc. 23,100 528 ------------ TOTAL 23,454 ------------ DRUGS (3.5%) Alza Corp. 18,800 486 American Home Products Corporation 142,300 8,342 *Amgen Inc. 58,900 3,203 Bristol-Myers Squibb Company 111,600 12,136 Eli Lilly & Company 123,000 8,979 Merck & Co., Inc. 268,600 21,287 Pfizer Inc. 143,600 11,901 Pharmacia & Upjohn Inc. 113,230 4,487 Schering-Plough Corporation 82,300 5,329 *Warner-Lambert Company 60,400 4,530 ------------ TOTAL 80,680 ------------ ELECTRICAL EQUIPMENT (2.1%) Emerson Electric Co. 50,000 4,837 General Electric Company 366,900 36,277 General Instrument Corp. 30,500 659 W.W. Grainger, Inc. 11,800 947 Honeywell Inc. 28,200 1,854 Raychem Corp. 10,000 801
-- 29 NORTHWESTERN MUTUAL SERIES FUND, INC. Schedule of Investments DECEMBER 31, 1996
MARKET VALUE COMMON STOCK (54.1%) SHARES (000'S) - ------------------------------------------------------------- ELECTRICAL EQUIPMENT (CONTINUED) Thomas & Betts Corporation 11,800 $ 523 Westinghouse Electric Corporation 93,900 1,866 ------------ TOTAL 47,764 ------------ ELECTRONICS (0.3%) AMP Incorporated 48,936 1,878 *Applied Materials Inc. 40,100 1,441 Harris Corporation 8,700 597 Intergraph Corp. 10,600 109 *LSI Logic Corp. 28,700 768 *National Semiconductor Corporation 30,900 753 Perkin-Elmer Corporation 9,600 565 Tektronix, Inc. 7,300 374 ------------ TOTAL 6,485 ------------ ENVIRONMENTAL CONTROL (0.4%) Browning-Ferris Industries Inc. 47,400 1,244 Johnson Controls Inc. 9,200 762 Laidlaw Transportation Limited, Class B 69,900 804 Millipore Corp. 9,600 397 Safety-Kleen Corp. 13,000 213 Tyco International Ltd. 34,900 1,845 WMX Technologies, Inc. 108,100 3,527 ------------ TOTAL 8,792 ------------ FINANCIAL SERVICES (1.5%) H.F. Ahmanson & Company 23,500 764 American Express Company 105,600 5,966 American General Corporation 45,300 1,852 Beneficial Corporation 12,000 761 Dean Witter, Discover & Co. 35,850 2,375 Golden West Financial Corporation 12,800 808 Great Western Financial Corporation 30,700 890 Green Tree Financial Corp. 30,600 1,182 Household International Inc. 21,600 1,993 MBNA Corp. 49,625 2,059 Marsh & McLennan Companies Inc. 16,000 1,664 Merrill Lynch & Co. 36,700 2,991 Morgan Stanley Group Inc. 34,000 1,942 Salomon Inc. 24,300 1,145 Transamerica Corporation 14,800 1,169 Travelers Group Inc. 142,726 6,476 ------------ TOTAL 34,037 ------------ FOOD SERVICE/LODGING (0.6%) Darden Restaurant Inc. 35,100 307 HFS Incorporated 28,700 1,715 Hilton Hotels Corporation 55,000 1,437 *ITT Corp. 25,900 1,123 Luby's Cafeterias, Inc. 5,400 107 MARKET VALUE COMMON STOCK (54.1%) SHARES (000'S) - ------------------------------------------------------------- FOOD SERVICE/LODGING (CONTINUED) Marriott International 28,500 $ 1,575 Mc Donald's Corporation 155,500 7,036 *Ryan's Family Steak Houses, Inc. 11,300 78 *Shoney's Inc. 10,800 76 Wendy's International, Inc. 28,800 590 ------------ TOTAL 14,044 ------------ FOODS (1.6%) Archer Daniels Midland Company 121,218 2,667 CPC International Corp. 32,000 2,480 Campbell Soup Company 52,100 4,181 Conagra Inc. 53,600 2,667 General Mills, Inc. 34,900 2,212 H.J. Heinz Company 81,950 2,930 Hershey Foods Corp. 34,200 1,496 Kellogg Company 47,000 3,084 Pioneer Hi-Bred International 18,400 1,288 Quaker Oats Company 30,300 1,155 Ralston Purina Group 23,600 1,732 Sara Lee Corporation 107,800 4,016 Unilever, N.V. 35,700 6,256 Wm. Wrigley Jr. Company 25,900 1,457 ------------ TOTAL 37,621 ------------ HOUSEHOLD FURNITURE (0.2%) Armstrong World Industries Inc. 9,200 639 Black & Decker Corporation 19,600 590 Maytag Corporation 22,300 440 Newell Co. 35,400 1,115 Rubbermaid, Inc. 33,400 760 The Stanley Works 19,800 535 Whirlpool Corporation 16,600 774 ------------ TOTAL 156,300 4,853 ------------ INSURANCE (1.8%) Aetna Inc. 33,593 2,687 Alexander & Alexander Services 10,100 175 Allstate Corporation 99,047 5,732 American International Group, Inc. 104,650 11,328 Aon Corporation 24,100 1,497 CIGNA Corporation 16,800 2,295 The Chubb Corporation 38,800 2,086 General Re Corporation 18,400 2,903 ITT Hartford Group 26,200 1,768 Jefferson-Pilot Corp. 15,850 898 Lincoln National Corporation 23,200 1,218 MBIA Incorporated 9,600 972 MGIC Investment Corp. 13,100 996 Providian Corporation 20,900 1,074 SAFECO Inc. 28,100 1,108 St. Paul Companies, Inc. 18,500 1,085 Torchmark Corporation 15,700 793 UNUM Corporation 16,300 1,178
-- 30 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 MARKET VALUE COMMON STOCK (54.1%) SHARES (000'S) - ------------------------------------------------------------- MEDICAL PRODUCTS/SUPPLIES (CONTINUED) Johnson & Johnson 296,700 $ 14,761 Medtronic, Incorporated 53,400 3,631 *St. Jude Medical, Inc. 18,050 769 U.S. Surgical Corporation 14,000 551 ------------ TOTAL 37,208 ------------ MEDICAL SERVICES (0.4%) *Beverly Enterprises, Inc. 22,100 282 Columbia/HCA Healthcare Corporation 149,550 6,094 Humana, Inc. 36,200 692 Manor Care, Inc. 14,000 378 *Tenet Healthcare Corp. 48,400 1,059 United Healthcare Corp. 41,000 1,845 ------------ TOTAL 10,350 ------------ METALS & MINING (0.6%) Alcan Aluminum Limited 50,400 1,694 Aluminum Co. of America 38,600 2,461 ASARCO, Inc. 9,500 236 Barrick Gold Corporation 79,600 2,288 Battle Mountain Gold Company 50,100 344 Cyprus Minerals Co. 20,800 486 Echo Bay Mines Limited Co. 31,100 206 Freeport-McMoRan Copper & Gold Inc. 43,100 1,288 Homestake Mining Company 32,700 466 Inco Limited 37,500 1,195 Newmont Mining Corporation 22,189 993 Phelps Dodge Corporation 14,400 972 Placer Dome Incorporated 53,400 1,161 Reynolds Metals Company 14,200 801 Santa Fe Pacific Gold Corporation 29,340 451 ------------ TOTAL 15,042 ------------ OFFICE EQUIPMENT-SERVICES (1.6%) Automatic Data Processing, Inc. 64,700 2,774 Computer Associates International Inc. 81,275 4,043 *Computer Sciences Corp. 16,900 1,388 *Microsoft Corporation 266,300 22,003 Moore Corporation Ltd. 22,300 454 *Novell, Inc. 76,600 725 Pitney Bowes Inc. 33,100 1,804 Xerox Corporation 72,300 3,805 ------------ TOTAL 36,996 ------------ OIL & GAS-DOMESTIC (1.1%) Amerada Hess Corporation 20,800 1,204 Amoco Company 110,800 8,919 Ashland, Inc. 14,400 632 Atlantic Richfield Company 35,800 4,743 Kerr-McGee Corporation 10,800 778 Louisiana Land & Exploration Co. 7,600 408
-- 31 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 ------------ MARKET VALUE COMMON STOCK (54.1%) SHARES (000'S) - ------------------------------------------------------------- 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
-- 32 NORTHWESTERN MUTUAL SERIES FUND, INC. Schedule of Investments DECEMBER 31, 1996
MARKET VALUE COMMON STOCK (54.1%) SHARES (000'S) - ------------------------------------------------------------- RETAIL-GENERAL (CONTINUED) Circuit City Stores, Inc. 21,800 $ 657 Dayton Hudson Corporation 48,300 1,896 Dillard Department Stores, Inc. 25,300 781 *Federated Department Stores, Inc. 46,300 1,580 The Gap, Inc. 63,200 1,904 Home Depot, Inc. 107,067 5,367 K Mart Corporation 107,800 1,118 The Limited Inc. 60,400 1,110 Longs Drug Stores Corp. 4,300 211 Lowe's Companies, Inc. 38,500 1,367 May Department Stores Company 56,100 2,623 Mercantile Stores Company 8,200 405 Nordstrom, Inc. 18,100 641 J.C. Penney Company Inc. 51,400 2,506 Pep Boys - Manny, Moe & Jack 13,900 427 *Price/Costco, Inc. 43,851 1,102 Rite Aid Corporation 27,300 1,085 Sears, Roebuck & Company 87,200 4,022 TJX Companies, Inc. 17,300 820 Tandy Corporation 13,000 572 *Toys 'R' Us 61,100 1,833 Wal-mart Stores Inc. 511,100 11,691 Walgreen Company 54,800 2,192 Woolworth Corp. 29,700 650 ------------ TOTAL 51,685 ------------ SOAPS & TOILETRIES (1.3%) Alberto-Culver Company 6,200 298 Avon Products, Inc. 29,600 1,691 Clorox Company 11,500 1,154 Colgate-Palmolive Co. 32,700 3,016 Gillette Company 99,400 7,728 International Flavors & Fragrances, Inc. 24,700 1,112 Procter & Gamble Company 152,000 16,340 ------------ TOTAL 31,339 ------------ STEEL (0.2%) Allegheny Teledyne Inc. 38,862 894 *Armco Inc. 23,800 98 *Bethlehem Steel Corporation 24,800 223 Inland Steel Industries, Inc. 10,900 218 Nucor Corp. 19,500 995 USX-Marathon Group 64,100 1,530 Worthington Industries 20,200 366 ------------ TOTAL 4,324 ------------ TECHNOLOGY (1.2%) Advanced Micro Devices, Inc. 30,400 783 Intel Corp. 182,800 23,935 Micron Technology 46,500 1,354 Texas Instruments Incorporated 42,300 2,697 ------------ TOTAL 28,769 ------------ MARKET VALUE COMMON STOCK (54.1%) SHARES (000'S) - ------------------------------------------------------------- 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
-- 33 NORTHWESTERN MUTUAL SERIES FUND, INC. Schedule of Investments DECEMBER 31, 1996
MARKET VALUE COMMON STOCK (54.1%) SHARES (000'S) - ------------------------------------------------------------- UTILITY-ELECTRIC (CONTINUED) Union Electric Company 22,800 $ 878 ------------ TOTAL 38,324 ------------ UTILITY-GAS (0.2%) Columbia Gas System Inc. 12,300 783 Consolidated Natural Gas Co. 21,100 1,166 Nicor Inc. 11,100 397 Noram Energy Corporation 30,600 470 ONEOK, Inc. 6,100 183 Peoples Energy Corporation 7,800 264 Sonat Inc. 19,200 989 Williams Companies Inc. 34,950 1,311 ------------ TOTAL 5,563 ------------ UTILITY-TELEPHONE (3.4%) AT&T Corporation 361,000 15,703 Airtouch Communications Inc. 111,700 2,820 ALLTEL Corporation 42,200 1,324 Ameritech Corporation 122,400 7,420 Bell Atlantic Corporation 97,500 6,313 Bellsouth Corporation 221,400 8,939 GTE Corporation 214,300 9,751 MCI Communications Corporation 152,600 4,988 NYNEX Corp. 98,000 4,716 Pacific Telesis Group 95,400 3,506 SBC Communications Incorporated 134,500 6,960 Sprint Corporation 95,900 3,824 U S West Inc. 106,400 3,431 ------------ TOTAL 79,695 ------------ TOTAL COMMON STOCK 1,256,996 ------------
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 ----------- MARKET VALUE BONDS (30.0%) PAR (000'S) - -------------------------------------------------------------- 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
-- 34 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 MARKET VALUE BONDS (30.0%) PAR (000'S) - -------------------------------------------------------------- FEDERAL GOVERNMENT & AGENCIES (CONTINUED) Goverment National Mortgage Assoc., 7%, 5/15/23 $ 203,959 $ 200 Goverment National Mortgage Assoc., 7 1/2%, 1/15/24 202,019 203 Goverment National Mortgage Assoc., 7%, 7/15/23 723,852 711 Goverment National Mortgage Assoc., 8 1/2%, 2/15/25 98,671 103 Goverment National Mortgage Assoc., 7%, 8/15/23 28,989 28 Goverment National Mortgage Assoc., 8 1/2%, 7/15/24 184,028 192 Goverment National Mortgage Assoc., 7%, 6/15/23 686,360 675 Goverment National Mortgage Assoc., 7%, 7/15/23 58,075 57 Goverment National Mortgage Assoc., 7%,10/15/23 139,685 137 Goverment National Mortgage Assoc., 7%, 9/15/23 635,325 624 Goverment National Mortgage Assoc., 7 1/2%, 5/15/24 925,312 929 Goverment National Mortgage Assoc., 7%,10/15/23 104,293 102 Goverment National Mortgage Assoc., 7 1/2%, 1/15/24 1,030,704 1,035 Goverment National Mortgage Assoc., 7%, 11/15/23 706,058 694 Goverment National Mortgage Assoc., 7%, 11/15/23 745,487 733 Goverment National Mortgage Assoc., 8 1/2%, 2/15/25 16,334 17 Goverment National Mortgage Assoc., 7%, 11/15/23 520,301 511 Goverment National Mortgage Assoc., 7%, 9/15/23 34,562 34 Goverment National Mortgage Assoc., 8 1/2%, 7/15/24 198,576 207 Goverment National Mortgage Assoc., 8 1/2%, 4/15/26 850,992 888 Goverment National Mortgage Assoc., 7%, 10/15/23 98,922 97 Goverment National Mortgage Assoc., 8 1/2%, 11/15/24 183,555 191 Goverment National Mortgage Assoc., 8 1/2%, 1/15/25 18,647 19 Goverment National Mortgage Assoc., 7 1/2%, 11/15/24 988,390 992 Goverment National Mortgage Assoc., 7 1/2%, 2/15/24 1,541,156 1,547 Goverment National Mortgage Assoc., 7 1/2%, 3/15/24 1,414,953 1,420
-- 35 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 MARKET VALUE BONDS (30.0%) PAR (000'S) - -------------------------------------------------------------- FEDERAL GOVERNMENT & AGENCIES (CONTINUED) Goverment National Mortgage Assoc., 8 1/2%, 2/15/26 $ 45,636 $ 48 Goverment National Mortgage Assoc., 8 1/2%, 5/15/26 462,390 482 Goverment National Mortgage Assoc., 8 1/2%, 4/15/26 926,761 967 Goverment National Mortgage Assoc., 8 1/2%, 4/15/26 78,886 82 Goverment National Mortgage Assoc., 8 1/2%, 4/15/26 890,665 929 Goverment National Mortgage Assoc., 8 1/2%, 4/15/26 91,390 95 Goverment National Mortgage Assoc., 8 1/2%, 5/15/26 37,168 39 Goverment National Mortgage Assoc., 8 1/2%, 5/15/26 855,776 893 Goverment National Mortgage Assoc., 8 1/2%, 9/15/22 15,555 16 Goverment National Mortgage Assoc., 8 1/2%,10/15/22 210,285 219 Goverment National Mortgage Assoc., 7%, 5/15/23 449,340 442 Goverment National Mortgage Assoc., 8 1/2%, 9/15/21 184,067 192 Goverment National Mortgage Assoc., 8 1/2%, 7/15/21 157,482 164 Goverment National Mortgage Assoc., 8 1/2%, 5/15/22 8,580 9 Goverment National Mortgage Assoc., 8 1/2%, 10/15/22 11,955 12 Goverment National Mortgage Assoc., 8 1/2%, 9/15/22 183,944 192 Goverment National Mortgage Assoc., 8 1/2%, 10/15/22 45,824 48 Goverment National Mortgage Assoc., 8 1/2%,12/15/22 51,407 54 Goverment National Mortgage Assoc., 8 1/2%,11/15/22 24,480 26 U.S. Treasury, 6 3/4%, 8/15/26 13,100,000 13,190 U.S. Treasury, 6 1/2%, 11/15/26 12,000,000 11,775 U.S. Treasury, 6 3/8%, 5/15/99 110,700,000 111,669 U.S. Treasury, 7%, 7/15/06 28,050,000 29,146 ----------- TOTAL 253,256 ----------- FINANCE COMPANIES (0.3%) Associates Corp. of North America, 7.95%, 2/15/10 5,550,000 6,056 ----------- FINANCIAL SERVICES (0.7%) Eaglemark Trust, 6 3/4%, 11/15/02(144A) 8,184,312 8,266 Union Planters Capital Trust A, 8.2%, 12/15/26(144A) 4,000,000 3,964
-- 36 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 MARKET VALUE BONDS (30.0%) PAR (000'S) - -------------------------------------------------------------- UTILITY-ELECTRIC (CONTINUED) Ohio Edison Company, 7 3/8%, 9/15/02 $ 3,665,000 $ 3,703 Pacific Gas & Electric Co., 7 1/4%, 3/1/26 9,050,000 8,722 Pacific Gas & Electric Co., 5 3/8%, 8/1/98 5,000,000 4,945 PECO Energy Company, 7 1/2%, 1/15/99 4,250,000 4,343 PECO Energy Company, 7 3/4%, 3/1/23 8,850,000 8,620 Public Service Electric & Gas, 6 7/8%, 1/1/03 9,000,000 8,991 Southern California Edison Co., 7 1/4%, 3/1/26 10,000,000 9,541 Texas Utilities Electric Co., 7 7/8%, 3/1/23 4,000,000 3,984 ----------- TOTAL 78,439 ----------- UTILITY-GAS (0.3%) Columbia Gas System Inc., 7.32%, 11/28/10 7,571,000 7,440 ----------- TOTAL BONDS 696,110 -----------
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
-- 37 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 MARKET VALUE MONEY MARKET INVESTMENTS (15.9%) PAR (000'S) - ------------------------------------------------------------- RETAIL-GENERAL (CONTINUED) +Partially held by the custodian in a segregated account as collateral for open futures positions. Information regarding open futures contracts as of December 31, 1996 is summarized below:
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 -- 38 SELECT BOND PORTFOLIO - -------------------------------------------------------------------------------- Objective: Portfolio Strategy: Net Assets: A stable and relatively high Invest in high grade corporate bonds, $214,333,586 level of long-term total return U.S. government bonds and bonds of and preservation of capital government agencies
SELECT BOND PORTFOLIO The Select Bond Portfolio invests in high quality debt securities, primarily corporate bonds and mortgage-backed securities. Exposure to market sectors is adjusted as yield spreads change among the various classes of securities. Duration is altered with frequent, moderate adjustments in recognition or anticipation of interest rate changes. Many bond managers viewed the Federal Reserve Board's quarter point reduction in the federal funds rate in January 1996 as a harbinger of a volatile year with frequent interest rate adjustments by the central bank. The year proved volatile for bonds, but not because of Federal Reserve actions: the January reduction was the Fed's only change during the year. As the economy remained relatively strong, interest rates rose at mid-year and ended the year approximately 75 basis points higher than a year ago, pushing bond prices in general lower for the year. In 1996, the Portfolio's asset mix was shifted from government toward corporate securities, including bonds backed by mortgages and other assets. Late in the year, taking advantage of many high quality new corporate issues, available cash was used to further increase the position in corporate bonds. At year end, the Portfolio was essentially fully invested, with a cash position of 4%, significantly less than at mid-year. At the end of 1996, the Portfolio was positioned neutrally with regard to interest rates, on the assumption that neither Federal Reserve actions nor a major shift in the economy will produce significant changes in interest rates over the next few months. Percentage Holdings 12/31/96 EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC Corporate Bonds 40% Asset-Backed Securities 35% Federal Government 21% Money Market Investments 4%
Performance Relative to Merrill Lynch Domestic Master Index EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
SELECT BOND PORTFOLIO MLDM INDEX 12-86 10,000 10,000 12-87 9,895 10,240 12-88 10,709 11,063 12-89 12,225 12,632 12-90 13,214 13,782 12-91 15,504 15,967 12-92 16,704 17,177 12-93 18,510 18,899 12-94 18,087 18,365 12-95 21,541 21,767 12-96 22,255 22,548 Average Annual Total Return For Periods Ended December 31, 1996 One Year Five Years Ten Years Select Bond Portfolio 3.31% 7.50% 8.33% MLDM Index 3.59% 7.15% 8.47%
Since the Portfolio invests broadly in U.S. Government, mortgage and corporate bonds, the graph depicts an appropriate comparison to the Merrill Lynch Domestic Master Index. The index is an unmanaged market value weighted index comprised of U.S. Government, mortgage and investment-grade corporate bonds. The index measures the income provided by, and the price changes of, the underlying securities. This chart assumes an initial investment of $10,000 made on 12/31/86. Returns shown include deductions for management and other fund expenses, and reinvestment of all dividends. Returns exclude deductions for separate account sales loads and account fees. Past performance is not predictive of future performance. Investment return and principal value will fluctuate, so that your shares, when redeemed, may be worth more or less than their original cost. The net investment rates of return shown on page 2 reflect mortality and expense risk charges deducted from the assets of the separate account. The cost of insurance protection, which is not reflected in the returns shown on this chart, would make the return significantly lower. Investors are urged to obtain a personalized illustration of historical performance which reflects the cost of insurance protection. -- 39 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 MARKET VALUE BONDS (89.4%) PAR (000'S) - -------------------------------------------------------------- CMO & LOAN BACKED CERTIFICATES (CONTINUED) Federal Home Loan Mortgage Corp., 7 1/2%, 8/1/26 $ 156,990 $ 157 Federal Home Loan Mortgage Corp., 7 1/2%, 8/1/26 353,900 354 Federal Home Loan Mortgage Corp., 7 1/2%, 8/1/26 205,060 205 Federal Home Loan Mortgage Corp., 7 1/2%, 9/1/26 2,993,171 2,997 Federal Home Loan Mortgage Corp., 7 1/2%, 10/1/26 887,068 888 Federal Home Loan Mortgage Corp., 7 1/2%, 9/1/26 408,450 409 Federal Home Loan Mortgage Corp., 7 1/4%, 4/15/18 2,054,661 2,070 Federal Home Loan Mortgage Corp., 7%, 3/15/07 1,875,000 1,871 Federal Home Loan Mortgage Corp., 7 1/2%, 1/1/26 243,110 243 Federal Home Loan Mortgage Corp., 7 1/2%, 8/1/26 100,378 100 Federal Home Loan Mortgage Corp., 6 1/2%, 4/1/11 6,409,666 6,297 Federal Home Loan Mortgage Corp., 6%, 7/15/07 3,900,000 3,787 Federal Home Loan Mortgage Corp., 7 1/2%, 8/1/26 412,918 413 Federal National Mortgage Assoc., 6 3/4%, 12/25/23 3,500,000 3,310 Federal National Mortgage Assoc., 8.4%, 2/25/09 2,500,000 2,633 Federal National Mortgage Assoc., 7%, 6/1/03 4,003,321 4,013 Premier Auto Trust, 6.65%, 4/2/98 2,093,233 2,100 Rural Housing Trust, 6.33%, 4/1/26 2,255,994 2,211 ----------- TOTAL 44,052 ----------- FEDERAL GOVERNMENT AND AGENCIES (32.4%) Government National Mortgage Assoc., 8 1/2%, 3/15/23 10,829 11 Government National Mortgage Assoc., 7%, 5/15/23 461,199 454 Government National Mortgage Assoc., 7 1/2%, 2/15/24 1,776,622 1,783 Government National Mortgage Assoc., 7%, 5/15/23 2,897,022 2,847 Government National Mortgage Assoc., 8 1/2%, 9/15/24 15,373 16 Government National Mortgage Assoc., 8 1/2/%, 6/15/23 18,051 19 Government National Mortgage Assoc., 8 1/2%, 6/15/24 349,657 365 Government National Mortgage Assoc., 8 1/2%, 7/15/24 84,851 88
-- 40 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 ----------- MARKET VALUE BONDS (89.4%) PAR (000'S) - -------------------------------------------------------------- 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
-- 41 NORTHWESTERN MUTUAL SERIES FUND, INC. Schedule of Investments DECEMBER 31, 1996
MARKET VALUE BONDS (89.4%) PAR (000'S) - -------------------------------------------------------------- UTILITY-ELECTRIC (CONTINUED) Public Service Electric & Gas Co., 6 7/8%, 1/1/03 $2,250,000 $ 2,248 Texas Utilities Electric Co., 7 7/8%, 3/1/23 1,000,000 996 ----------- TOTAL 21,402 ----------- UTILITY-GAS (0.9%) Columbia Gas System Inc., 7.32%, 11/28/10 2,000,000 1,965 ----------- TOTAL BONDS 189,388 ----------- 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 MARKET VALUE MONEY MARKET INVESTMENTS (10.6%) PAR (000'S) - -------------------------------------------------------------- FINANCE COMPANIES (CONTINUED) Avco Financial Services Inc., 5 7/8%, 10/15/97 $2,200,000 $ 2,201 ----------- TOTAL 4,401 ----------- FINANCIAL SERVICES (3.4%) Beneficial Corp., 6.86%, 11/19/97 2,200,000 2,219 General Electric Capital Corp., 5.4%, 1/8/97 5,000,000 4,995 ----------- TOTAL 7,214 ----------- UTILITY-ELECTRIC (2.1%) DTE Energy Company, 5.41%, 5/1/97 4,000,000 3,997 Duke Power Company, 6.85%, 1/2/97 400,000 400 ----------- TOTAL 4,397 ----------- TOTAL MONEY MARKET INVESTMENTS 22,416 ----------- TOTAL SELECT BOND PORTFOLIO $ 211,804 -----------
The Accompanying Notes are an Integral Part of the Financial Statements -- 42 HIGH YIELD BOND PORTFOLIO - -------------------------------------------------------------------------------- Objective: Portfolio Strategy: Net Assets: High current income and capital Generate superior performance by investing in a $93,879,092 appreciation with moderate risk diversified mix of fixed income securities rated below investment grade
HIGH YIELD BOND PORTFOLIO Investing in a portfolio of high yield bonds provides investors who can accept a moderate level of risk with a high level of current income, coupled with the opportunity for capital gains. The investment approach is credit-driven, with rigorous industry and credit analysis utilized to identify investment opportunities in issuers with stable or improving credit fundamentals whose bonds are rated below investment grade. Securities are actively traded in order to maximize returns within appropriate parameters of risk, quality, seniority and duration. In many ways, investing in high yield bonds is akin to equity investing, since an issuer's financial situation and operational performance are the key determinants of continued ability to meet obligations to pay interest and principal. Of particular interest are solid investments in companies that have the possibility of a positive event, such as a significant improvement in credit rating or earnings or a change in ownership. When financial performance falls short of expectations, exposure is normally reduced. In a high-yield portfolio, some defaults over time are inevitable; diversification across many holdings mitigates the impact of defaults on the total portfolio. Because of their high coupon rates, high yield bonds are less sensitive to fluctuations in interest rates than investment grade bonds with lower coupons. The high yield market outperformed investment grade bonds during 1996, as interest rates moved somewhat higher. The strong economic environment also contributed to good returns from high yield bonds during the year, as issuers' businesses remained solid and there were few defaults. The Portfolio achieved particularly good returns from investments in dollar-denominated bonds of companies in foreign emerging markets. The Portfolio was fully invested throughout the year, with cash positions of 3% to 5%. A portfolio duration of 4.5 to 4.75 years was maintained. The Portfolio is broadly diversified by industry sector, with the highest percentages invested in the Leisure related and Cable Television industries. During the year, the investment mix was refined to reduce cyclical exposure and increase participation in stable or defensive industry sectors. Percentage Holdings by Industry Sector EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC Consumer Staples 26% Technology 25% Basic Materials 11% Financial 9% Consumer Cyclicals 8% Energy/Utilities 8% Other 7% Cash Equivalents 6%
Performance Relative to Lehman Brothers High Yield Index EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
HIGH YIELD BOND PORTFOLIO LEHMAN BROTHERS INDEX 05-94 10,000 10,000 12-94 10,302 10,188 12-95 12,030 11,952 12-96 14,409 13,409 Average Annual Total Return For Periods Ended December 31, 1996 One Year Since Inception High Yield Bond Portfolio 19.77% 14.70% Lehman Brothers Index 12.19% 11.65%
The total return performance for the High Yield Bond Portfolio is shown in comparison with the Lehman Brothers High Yield Intermediate Market Index. The Lehman Brothers index is thought to be a better measure of portfolio performance since it has a quality and maturity profile that more closely resembles the High Yield Bond Portfolio. The Lehman Brothers High Yield Intermediate Market Index is made up of dollar-denominated, nonconvertible, SEC publicly registered fixed rate noninvestment grade issues. The bonds will have remaining maturities of between one and ten years and have an outstanding par value of at least $100 million. Yankee and global bonds (SEC registered) of issuers in G-7 countries are included. Original issue zero coupon bonds and step-up coupon structures are also included; however, the index excludes pay-in-kind (PIK) bonds. Each bond must be rated Ba1 or lower by Moody's Investor Service. If a Moody's rating is unavailable, the bonds must be rated BB+ or lower by Standard & Poor's, or by Fitch if an S&P rating is unavailable. A few unrated bonds are included in the index; to be eligible they must have previously held a high yield rating or have been associated with a high yield issuer. The index is an unmanaged market value weighted index and measures the income provided by, and the price changes of, the underlying securities. This chart assumes an initial investment of $10,000 made on 5/3/94 (commencement of operations). Returns shown include deductions for management and other fund expenses, and reinvestment of all dividends. Returns exclude deductions for separate account sales loads and account fees. Past performance is not predictive of future performance. Investment return and principal value will fluctuate, so that your shares, when redeemed, may be worth more or less than their original cost. The net investment rates of return shown on page 2 reflect mortality and expense risk charges deducted from the assets of the separate account. The cost of insurance protection, which is not reflected in the returns shown on this chart, would make the return significantly lower. Investors are urged to obtain a personalized illustration of historical performance which reflects the cost of insurance protection. -- 43 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 ---------- MARKET VALUE BONDS (87.0%) PAR (000'S) - -------------------------------------------------------------- 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
-- 44 NORTHWESTERN MUTUAL SERIES FUND, INC. Schedule of Investments DECEMBER 31, 1996
MARKET VALUE BONDS (87.0%) PAR (000'S) - -------------------------------------------------------------- TELECOMMUNICATIONS (CONTINUED) ++Mobilemedia Communications, 10 1/2%, 12/1/03 $2,000,000 $ 410 Paging Network, 10%, 10/15/08(144A) 2,000,000 2,028 Sprint Spectrum L.P./Fin., 11%, 8/15/06 1,000,000 1,083 ++Sprint Spectrum L.P./Fin., 12 1/2%, 8/15/06 1,000,000 673 ++Telewest PLC, 11%, 10/1/07 2,000,000 1,390 ---------- TOTAL 7,642 ---------- TRUCKING-SHIPPING (2.3%) Ryder System Incorporated, 10%, 12/1/06(144A) 1,000,000 1,038 Stena AB, 10 1/2%, 12/15/05 1,000,000 1,080 ---------- TOTAL 2,118 ---------- UTILITY-PROJECT (3.4%) CE Casecan Water & Energy, 11.95%, 11/15/10 1,000,000 1,113 Calpine Corp., 10 1/2%, 5/15/06 2,000,000 2,118 ---------- TOTAL 3,231 ---------- TOTAL BONDS 81,753 ---------- 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 -- 45 ACCOUNTANTS' LETTER [LOGO] [LOGO] REPORT OF INDEPENDENT ACCOUNTANTS To The Northwestern Mutual Life Insurance Company and Policyowners of Northwestern Mutual Variable Life Account In our opinion, the accompanying combined statement of assets and liabilities and the related combined and separate statements of operations and changes in equity present fairly, in all material respects, the financial position of Northwestern Mutual Variable Life Account and the Index 500 Stock Division, Growth Stock Division, Growth and Income Stock Division, Aggressive Growth Stock Division, International Equity Division, Select Bond Division, High Yield Bond Division, Money Market Division and the Balanced Division thereof at December 31, 1996, the results of their operations and the changes in their equity for the year then ended and for each of the other periods presented, in conformity with generally accepted accounting principles. These financial statements are the responsibility of The Northwestern Mutual Life Insurance Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included direct confirmation of the number of shares owned at December 31, 1996 with Northwestern Mutual Series Fund, Inc., provide a reasonable basis for the opinion expressed above. [SIGNATURE] Milwaukee, Wisconsin January 22, 1997 -- 46 VARIABLE LIFE FINANCIAL STATEMENTS NORTHWESTERN MUTUAL VARIABLE LIFE ACCOUNT Financial Statements DECEMBER 31, 1996 STATEMENT OF ASSETS AND LIABILITIES (IN THOUSANDS) ASSETS Investments at Market Value: Northwestern Mutual Series Fund, Inc. Growth Stock 9,868 shares (cost $12,373)................ $ 14,446 Aggressive Growth Stock 13,266 shares (cost $34,933)............... 41,721 International Equity 18,828 shares (cost $25,015)............... 29,335 Growth and Income Stock 12,617 shares (cost $14,934)............... 16,629 Index 500 Stock 28,578 shares (cost $43,159)............... 58,729 Money Market 14,751 shares (cost $14,751)............... 14,751 Balanced 58,687 shares (cost $80,512)............... 100,825 Select Bond 5,100 shares (cost $5,931)................. 6,243 High Yield Bond 3,542 shares (cost $3,821)................. 3,892 $ 286,571 --------- Due from Sale of Fund Shares.................................. 38 Due from Northwestern Mutual Life Insurance Company........... 170 --------- Total Assets............................................ $ 286,779 --------- --------- LIABILITIES Due to Northwestern Mutual Life Insurance Company........... $ 38 Due on Purchase of Fund Shares.............................. 170 --------- Total Liabilities....................................... 208 --------- EQUITY (NOTE 8) Policies Issued Before October 11, 1995..................... 240,097 Policies Issued On or After October 11, 1995................ 46,474 --------- Total Equity............................................ 286,571 --------- Total Liabilities and Equity............................ $ 286,779 --------- ---------
The Accompanying Notes are an Integral Part of the Financial Statements -- 47 VARIABLE LIFE FINANCIAL STATEMENTS NORTHWESTERN MUTUAL VARIABLE LIFE ACCOUNT Statement of Operations and Changes in Equity (IN THOUSANDS)
AGGRESSIVE GROWTH COMBINED GROWTH STOCK DIVISION STOCK DIVISION ----------------------------- ----------------------------- ----------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, 1996 1995 1996 1995 1996 1995 ------------- ------------- ------------- ------------- ------------- ------------- INVESTMENT INCOME Dividend Income............. $ 11,085 $ 4,153 $ 564 $ 188 $ 892 $ 54 Mortality and Expense Risks..................... 1,102 736 46 21 139 57 Taxes....................... 461 314 19 9 57 24 ------------- ------------- ------------- ------------- ------------- ------------- Net Investment Income (Loss).................... 9,522 3,103 499 158 696 (27) ------------- ------------- ------------- ------------- ------------- ------------- REALIZED AND UNREALIZED GAIN ON INVESTMENTS Realized Gain on Investments............... 2,405 1,300 88 16 301 58 Unrealized Appreciation of Investments During the Year...................... 21,398 30,929 1,191 906 2,690 3,798 ------------- ------------- ------------- ------------- ------------- ------------- Net Gain on Investments..... 23,803 32,229 1,279 922 2,991 3,856 ------------- ------------- ------------- ------------- ------------- ------------- Increase in Equity Derived from Investment Activity.................. 33,325 35,332 1,778 1,080 3,687 3,829 ------------- ------------- ------------- ------------- ------------- ------------- EQUITY TRANSACTIONS Policyowners' Net Payments.................. 101,055 51,813 3,397 2,327 11,065 6,744 Policy Loans, Surrenders, and Death Benefits........ (16,316) (10,909) (436) (251) (2,117) (830) Mortality and Other (net)... (16,382) (9,537) (665) (427) (1,943) (1,184) Transfers from Other Divisions................. 45,652 12,075 4,758 1,048 14,807 3,476 Transfers to Other Divisions................. (45,652) (12,075) (447) (186) (1,660) (368) ------------- ------------- ------------- ------------- ------------- ------------- Increase in Equity Derived from Equity Transactions.... 68,357 31,367 6,607 2,511 20,152 7,838 ------------- ------------- ------------- ------------- ------------- ------------- Net Increase in Equity........ 101,682 66,699 8,385 3,591 23,839 11,667 EQUITY Beginning of Period......... 184,889 118,190 6,061 2,470 17,885 6,218 ------------- ------------- ------------- ------------- ------------- ------------- End of Period............... $286,571 $184,889 $14,446 $6,061 $41,724 $17,885 ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
The Accompanying Notes are an Integral Part of the Financial Statements --- 48 NORTHWESTERN MUTUAL VARIABLE LIFE ACCOUNT Statement of Operations and Changes in Equity (IN THOUSANDS)
INTERNATIONAL EQUITY GROWTH & INCOME DIVISION STOCK DIVISION -------------------------------- ------------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, 1996 1995 1996 1995 -------------- -------------- -------------- ------------- INVESTMENT INCOME Dividend Income............. $ 924 $ 67 $ 1,458 $ 496 Mortality and Expense Risks..................... 100 52 58 30 Taxes....................... 42 22 24 13 -------------- -------------- -------------- ------------- Net Investment Income (Loss).................... 782 (7) 1,376 453 -------------- -------------- -------------- ------------- REALIZED AND UNREALIZED GAIN ON INVESTMENTS Realized Gain on Investments............... 49 2 117 25 Unrealized Appreciation of Investments During the Year...................... 3,197 1,389 728 1,057 -------------- -------------- -------------- ------------- Net Gain on Investments..... 3,246 1,391 845 1,082 -------------- -------------- -------------- ------------- Increase in Equity Derived from Investment Activity.................. 4,028 1,384 2,221 1,535 -------------- -------------- -------------- ------------- EQUITY TRANSACTIONS Policyowners' Net Payments.................. 8,006 6,472 4,523 3,211 Policy Loans, Surrenders, and Death Benefits........ (1,566) (634) (692) (388) Mortality and Other (net)... (1,529) (1,156) (867) (611) Transfers from Other Divisions................. 6,728 2,112 3,950 1,329 Transfers to Other Divisions................. (827) (750) (974) (312) -------------- -------------- -------------- ------------- Increase in Equity Derived from Equity Transactions.... 10,812 6,044 5,940 3,229 -------------- -------------- -------------- ------------- Net Increase in Equity........ 14,840 7,428 8,161 4,764 EQUITY Beginning of Period......... 14,493 7,065 8,467 3,703 -------------- -------------- -------------- ------------- End of Period............... $ 29,333 $ 14,493 $ 16,628 $ 8,467 -------------- -------------- -------------- ------------- -------------- -------------- -------------- ------------- STOCK DIVISION MONEY MARKET DIVISION ----------------------------- ----------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, 1996 1995 1996 1995 ------------- ------------- ------------- ------------- INVESTMENT INCOME Dividend Income............. $ 1,153 $ 282 $ 508 $ 252 Mortality and Expense Risks..................... 221 141 47 22 Taxes....................... 93 60 17 9 ------------- ------------- ------------- ------------- Net Investment Income (Loss).................... 839 81 444 221 ------------- ------------- ------------- ------------- REALIZED AND UNREALIZED GAIN ON INVESTMENTS Realized Gain on Investments............... 359 339 -- -- Unrealized Appreciation of Investments During the Year...................... 8,074 8,323 -- -- ------------- ------------- ------------- ------------- Net Gain on Investments..... 8,433 8,662 0 0 ------------- ------------- ------------- ------------- Increase in Equity Derived from Investment Activity.................. 9,272 8,743 444 221 ------------- ------------- ------------- ------------- EQUITY TRANSACTIONS Policyowners' Net Payments.................. 12,626 11,096 43,564 4,335 Policy Loans, Surrenders, and Death Benefits........ (3,465) (2,239) (576) (285) Mortality and Other (net)... (2,351) (2,021) (5,552) (645) Transfers from Other Divisions................. 8,372 1,623 2,573 1,210 Transfers to Other Divisions................. (2,211) (2,683) (32,622) (1,738) ------------- ------------- ------------- ------------- Increase in Equity Derived from Equity Transactions.... 12,971 5,776 7,387 2,877 ------------- ------------- ------------- ------------- Net Increase in Equity........ 22,243 14,519 7,831 3,098 EQUITY Beginning of Period......... 36,486 21,967 6,919 3,821 ------------- ------------- ------------- ------------- End of Period............... $ 58,729 $ 36,486 $ 14,750 $ 6,919 ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
The Accompanying Notes are an Integral Part of the Financial Statements --- 49 VARIABLE LIFE FINANCIAL STATEMENTS NORTHWESTERN MUTUAL VARIABLE LIFE ACCOUNT Statement of Operations and Changes in Equity (IN THOUSANDS)
BALANCED DIVISION SELECT BOND DIVISION HIGH YIELD BOND DIVISION ----------------------------- ----------------------------- ----------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, 1996 1995 1996 1995 1996 1995 ------------- ------------- ------------- ------------- ------------- ------------- INVESTMENT INCOME Dividend Income............. $ 5,010 $ 2,521 $ 176 $ 110 $ 400 $ 183 Mortality and Expense Risks..................... 452 385 26 20 13 8 Taxes....................... 193 165 11 9 5 3 ------------- ------------- ------------- ------------- ------------- ------------- Net Investment Income....... 4,365 1,971 139 81 382 172 ------------- ------------- ------------- ------------- ------------- ------------- REALIZED AND UNREALIZED GAIN ON INVESTMENTS Realized Gain on Investments............... 1,462 839 8 13 21 8 Unrealized Appreciation of Investments During the Year...................... 5,413 14,831 22 596 83 29 ------------- ------------- ------------- ------------- ------------- ------------- Net Gain on Investments..... 6,875 15,670 30 609 104 37 ------------- ------------- ------------- ------------- ------------- ------------- Increase in Equity Derived from Investment Activity.................. 11,240 17,641 169 690 486 209 ------------- ------------- ------------- ------------- ------------- ------------- EQUITY TRANSACTIONS Policyowners' Net Payments.................. 15,417 15,637 1,356 1,230 1,101 761 Policy Loans, Surrenders, and Death Benefits........ (7,030) (5,858) (191) (311) (243) (113) Mortality and Other (net)... (3,034) (3,110) (248) (234) (193) (149) Transfers from Other Divisions................. 2,467 255 954 335 1,043 687 Transfers to Other Divisions................. (5,909) (5,344) (553) (513) (449) (181) ------------- ------------- ------------- ------------- ------------- ------------- Increase in Equity Derived from Equity Transactions.... 1,911 1,580 1,318 507 1,259 1,005 ------------- ------------- ------------- ------------- ------------- ------------- Net Increase in Equity........ 13,151 19,221 1,487 1,197 1,745 1,214 EQUITY Beginning of Period......... 87,675 68,454 4,756 3,559 2,147 933 ------------- ------------- ------------- ------------- ------------- ------------- End of Period............... $100,826 $ 87,675 $ 6,243 $ 4,756 $ 3,892 $ 2,147 ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
The Accompanying Notes are an Integral Part of the Financial Statements --- 50 NOTES TO FINANCIAL STATEMENTS NORTHWESTERN MUTUAL VARIABLE LIFE ACCOUNT Notes to Financial Statements DECEMBER 31, 1996 NOTE 1 -- Northwestern Mutual Variable Life Account (the "Account") is registered as a unit investment trust under the Investment Company Act of 1940 and is a segregated asset account of The Northwestern Mutual Life Insurance Company ("Northwestern Mutual Life") used to fund variable life insurance policies. NOTE 2 -- The preparation of the financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Principal accounting policies are summarized below. NOTE 3 -- All assets of each Division of the Account are invested in shares of the corresponding Portfolio of Northwestern Mutual Series Fund, Inc. (the "Fund"). The shares are valued at the Fund's offering and redemption price per share. The Northwestern Mutual Series Fund, Inc. is a diversified open-end investment company registered under the Investment Company Act of 1940. NOTE 4 -- Dividend income from the Fund is recorded on the record date of the dividends. Transactions in Fund shares are accounted for on the trade date. The basis for determining cost on sale of Fund shares is identified cost. Purchases and sales of Fund shares for the year ended December 31, 1996 by each Division are shown below:
PURCHASES SALES --------------- --------------- Growth Stock Division........... $ 7,412,020 $ 305,733 Aggressive Growth Division...... 21,639,501 793,842 International Equity Division... 11,936,199 340,985 Growth & Income Stock Division........................ 7,873,227 556,889 Index 500 Stock Division........ 14,876,042 1,066,298 Money Market Division........... 19,565,721 11,733,323 Balanced Division............... 11,918,678 5,643,557 Select Bond Division............ 1,881,306 424,108 High Yield Bond Division........ 2,085,969 444,972
NOTE 5 -- A deduction for mortality and expense risks is determined daily and paid to Northwestern Mutual Life. Generally, for policies issued before October 11, 1995, and policies issued on or after October 11, 1995 the deduction is at an annual rate of .50% and .60%, respectively, of the net assets of the Account. The mortality risk is that insureds may not live as long as estimated. The expense risk is that expenses of issuing and administering the policies may exceed the estimated costs. Certain deductions are also made from the annual or single premiums before amounts are allocated to the Account. These deductions are for (1) sales load, (2) administrative expenses, (3) taxes and (4) a risk charge for the guaranteed minimum death benefit. Additional mortality costs are deducted from the policy annually and are paid to Northwestern Mutual Life to cover the cost of providing insurance protection. This cost is actuarially calculated based upon the insured's age, the 1980 Commissioners Standard Ordinary Mortality Table and the amount of insurance provided under the policy. NOTE 6 -- Northwestern Mutual Life is taxed as a "life insurance company" under the Internal Revenue Code. The variable life insurance policies which are funded in the Account are taxed as part of the operations of Northwestern Mutual Life. Policies provide that a charge for taxes may be made against the assets of the Account. Generally, for policies issued before October 11, 1995, Northwestern Mutual Life charges the Account at an annual rate of .20% of the Account's net assets and reserves the right to increase, decrease or eliminate the charge for taxes in the future. Generally, for policies issued on or after October 11, 1995, there is no charge being made against the assets of the Account for federal income taxes, but Northwestern Mutual Life reserves the right to charge for taxes in the future. NOTE 7 -- The Account is credited for the policyowners' net annual premiums at the respective policy anniversary dates regardless of when policyowners actually pay their premiums. Northwestern Mutual Life's equity represents any unpaid portion of net annual premiums. -- 51 NORTHWESTERN MUTUAL VARIABLE LIFE ACCOUNT Notes to Financial Statements DECEMBER 31, 1996 NOTE 8 -- Equity Values by Division are shown below
POLICIES ISSUED ON OR AFTER OCTOBER 11, 1995 EQUITY OF ------------------------ POLICYOWNERS NML ------------- --------- Growth Stock Division................................................................... $ 1,990 $ 1,816 $ 3,806 Aggressive Growth Stock Division........................................................ 6,342 5,826 12,168 International Equity Division........................................................... 3,185 2,607 5,792 Growth and Income Stock Division........................................................ 2,036 1,679 3,715 Index 500 Stock Division................................................................ 4,353 3,689 8,042 Money Market Division................................................................... 2,762 6,390 9,152 Balanced Division....................................................................... 1,378 1,037 2,415 Select Bond Division.................................................................... 329 241 570 High Yield Bond Division................................................................ 462 352 814 ------------- --------- --------- $ 22,837 $ 23,637 $ 46,474 ------------- --------- --------- ------------- --------- ---------
POLICIES ISSUED BEFORE OCTOBER 11, 1995 EQUITY OF ------------------------ POLICYOWNERS NML ------------- --------- Growth Stock Division.................................................................. $ 9,235 $ 1,405 $ 10,640 Aggressive Growth Stock Division....................................................... 25,388 4,165 29,553 International Equity Division.......................................................... 20,256 3,287 23,543 Growth and Income Stock Division....................................................... 11,145 1,768 12,913 Index 500 Stock Division............................................................... 45,632 5,055 50,687 Money Market Division.................................................................. 5,263 336 5,599 Balanced Division...................................................................... 92,454 5,956 98,410 Select Bond Division................................................................... 5,184 489 5,673 High Yield Bond Division............................................................... 2,670 409 3,079 ------------- --------- ---------- $ 217,227 $ 22,870 $ 240,097 ------------- --------- ---------- ------------- --------- ----------
-- 52 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 --- 53 NORTHWESTERN MUTUAL SERIES FUND, INC. Growth Stock Portfolio Statement of Changes in Net Assets (IN THOUSANDS)
FOR THE YEAR ENDED DECEMBER 31, -------------------- 1996 1995 --------- -------- 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 --------- -------- --------- --------
The Accompanying Notes are an Integral Part of the Financial Statements --- 54 NORTHWESTERN MUTUAL SERIES FUND, INC. Growth Stock Portfolio Financial Highlights (FOR A SHARE OUTSTANDING THROUGHOUT THE YEAR)
FOR THE PERIOD FOR THE YEAR ENDED MAY 3, 1994* DECEMBER 31, THROUGH -------------------- DECEMBER 31, 1996 1995 1994 --------- -------- -------------- 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 --------- ---------
*Commencement of Operations **Computed on an annualized basis. +Total Return includes deductions for management and other fund expenses; excludes deductions for sales loads and account fees. ++Reflects total return for the period; not annualized. # Disclosure required for fiscal years beginning after September 1, 1995. The Accompanying Notes are an Integral Part of the Financial Statements --- 55 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 --- 56 NORTHWESTERN MUTUAL SERIES FUND, INC. Aggressive Growth Stock Portfolio Statement of Changes in Net Assets (IN THOUSANDS)
FOR THE YEAR ENDED DECEMBER 31, --------------------- 1996 1995 --------- --------- 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 --------- --------- --------- ---------
The Accompanying Notes are an Integral Part of the Financial Statements --- 57 NORTHWESTERN MUTUAL SERIES FUND, INC. Aggressive Growth Stock Portfolio Financial Highlights (FOR A SHARE OUTSTANDING THROUGHOUT THE YEAR)
FOR THE PERIOD MAY 3, FOR THE YEAR 1994* ENDED DECEMBER 31, THROUGH --------------------- DECEMBER 31, 1996 1995 1994 --------- --------- --------------- 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 --------- ---------
* Commencement of Operations. ** Computed on an annualized basis. + Total Return includes deductions for management and other fund expenses; excludes deductions for sales loads and account fees. ++ Reflects total return for the period; not annualized. # Disclosure required for fiscal years beginning after September 1, 1995. The Accompanying Notes are an Integral Part of the Financial Statements --- 58 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 --- 59 NORTHWESTERN MUTUAL SERIES FUND, INC. International Equity Portfolio Statement of Changes in Net Assets (IN THOUSANDS)
FOR THE YEAR ENDED DECEMBER 31, --------------------- 1996 1995 --------- --------- 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 --------- --------- --------- ---------
The Accompanying Notes are an Integral Part of the Financial Statements --- 60 NORTHWESTERN MUTUAL SERIES FUND, INC. International Equity Portfolio Financial Highlights (FOR A SHARE OUTSTANDING THROUGHOUT THE YEAR)
FOR THE PERIOD FOR THE YEAR MAY 3, 1994* ENDED DECEMBER 31, THROUGH --------------------- DECEMBER 31, 1996 1995 1994 --------- --------- --------------- 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 --------- ---------
*Commencement of Operations **Computed on an annualized basis. +Total Return includes deductions for total net expenses; excludes deductions for sales loads and account fees. ++Reflects total return for the period; not annualized. # Disclosure required for fiscal years beginning after September 1, 1995. The Accompanying Notes are an Integral Part of the Financial Statements --- 61 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 --- 62 NORTHWESTERN MUTUAL SERIES FUND, INC. Growth and Income Stock Portfolio Statement of Changes in Net Assets (IN THOUSANDS)
FOR THE YEAR ENDED DECEMBER 31, --------------------- 1996 1995 --------- --------- 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 --------- --------- --------- ---------
The Accompanying Notes are an Integral Part of the Financial Statements --- 63 NORTHWESTERN MUTUAL SERIES FUND, INC. Growth and Income Stock Portfolio Financial Highlights (FOR A SHARE OUTSTANDING THROUGHOUT THE YEAR)
FOR THE PERIOD MAY 3, FOR THE YEAR 1994* ENDED DECEMBER 31, THROUGH --------------------- DECEMBER 31, 1996 1995 1994 --------- --------- --------------- 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 --------- ---------
* Commencement of Operations. ** Computed on an annualized basis. + Total Return includes deductions for management and other fund expenses; excludes deductions for sales loads and account fees. ++ Reflects total return for the period; not annualized. # Disclosure required for fiscal years beginning after September 1, 1995. The Accompanying Notes are an Integral Part of the Financial Statements --- 64 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 --- 65 NORTHWESTERN MUTUAL SERIES FUND, INC. Index 500 Stock Portfolio Statement of Changes in Net Assets (IN THOUSANDS)
FOR THE YEAR ENDED DECEMBER 31, --------------------- 1996 1995 --------- --------- 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 --------- --------- --------- ---------
The Accompanying Notes are an Integral Part of the Financial Statements --- 66 NORTHWESTERN MUTUAL SERIES FUND, INC. Index 500 Stock Portfolio Financial Highlights (FOR A SHARE OUTSTANDING THROUGHOUT THE YEAR)
FOR THE YEARS ENDED DECEMBER 31, ------------------------------------------------------- 1996 1995 1994 1993 1992 --------- --------- --------- -------- -------- 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 --------- ---------
+Total Return includes deductions for management and other fund expenses; excludes deductions for sales loads and account fees. #Disclosure required for fiscal years beginning after September 1, 1995. The Accompanying Notes are an Integral Part of the Financial Statements --- 67 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 --- 68 NORTHWESTERN MUTUAL SERIES FUND, INC. Money Market Portfolio Statement of Changes in Net Assets (IN THOUSANDS)
FOR THE YEAR ENDED DECEMBER 31, --------------------- 1996 1995 --------- --------- INCREASE IN NET ASSETS Operations Net Investment Income............... $ 7,576 $ 6,333 --------- --------- Net Increase in Net Assets Resulting from Operations......... 7,576 6,333 --------- --------- Distributions to Shareholders from: Net Investment Income............... (7,576) (6,333) --------- --------- Net Decrease in Net Assets Resulting from Distributions to Shareholders...................... (7,576) (6,333) --------- --------- Fund Share Transactions Proceeds from Sale of 122,068 and 74,140 Shares...................... 122,068 74,140 Proceeds from Shares Issued on Reinvestment of Distributions Paid (7,576 and 6,333 shares, respectively)...................... 7,576 6,333 Payments for 85,918 and 52,118 Shares Redeemed.................... (85,918) (52,118) --------- --------- Net Increase in Net Assets Resulting from Fund Share Transactions (43,726 and 28,355 shares, respectively)..................... 43,726 28,355 --------- --------- Total Increase in Net Assets.......... 43,726 28,355 NET ASSETS Beginning of Year..................... 132,572 104,217 --------- --------- End of Year (includes no undistributed net investment income) $176,298 $132,572 --------- --------- --------- ---------
The Accompanying Notes are an Integral Part of the Financial Statements --- 69 NORTHWESTERN MUTUAL SERIES FUND, INC. Money Market Portfolio Financial Highlights (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
FOR THE YEARS ENDED DECEMBER 31, --------------------------------------------------------- 1996 1995 1994 1993 1992 --------- --------- --------- --------- --------- SELECTED PER SHARE DATA Net Asset Value, Beginning of Year.... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 Net Investment Income............... 0.05 0.06 0.05 0.03 0.03 Less Distributions from Net Investment Income............................. (0.05) (0.06) (0.05) (0.03) (0.03) --------- --------- --------- --------- --------- Net Asset Value, End of Year.......... $ 1.00 $ 1.00 1.00 1.00 1.00 --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- Total Return+......................... 5.29% 5.82% 4.06% 2.88% 3.49% --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- RATIOS AND SUPPLEMENTAL DATA Net Assets, End of Year (in thousands)........................... $176,298 $132,572 $104,217 $ 12,657 14,091 --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- Ratio of Expenses to Average Net Assets............................... 0.30% 0.30% 0.30% 0.30% 0.30% --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- Ratio of Net Investment Income to Average Net Assets................... 5.13% 5.61% 4.64% 2.87% 3.40% --------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
+ Total Return includes deductions for management expenses; excludes deductions for sales loads and account fees. The Accompanying Notes are an Integral Part of the Financial Statements --- 70 BALANCED PORTFOLIO NORTHWESTERN MUTUAL SERIES FUND, INC. Balanced Portfolio Financial Statements (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 1996 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 --- 71 NORTHWESTERN MUTUAL SERIES FUND, INC. Balanced Portfolio Statement of Changes in Net Assets (IN THOUSANDS)
FOR THE YEAR ENDED DECEMBER 31, ------------------------- 1996 1995 ----------- ----------- 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 ----------- ----------- ----------- -----------
The Accompanying Notes are an Integral Part of the Financial Statements --- 72 NORTHWESTERN MUTUAL SERIES FUND, INC. Balanced Portfolio Financial Highlights (FOR A SHARE OUTSTANDING THROUGHOUT THE YEAR)
FOR THE YEARS ENDED DECEMBER 31, ------------------------------------------------------------- 1996 1995 1994 1993 1992 ----------- ----------- ----------- -------- -------- 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 ----------- -----------
+Total Return includes deductions for management expenses; excludes deductions for sales loads and account fees. # Disclosure required for fiscal years beginning after September 1, 1995. The Accompanying Notes are an Integral Part of the Financial Statements --- 73 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 -- 74 NORTHWESTERN MUTUAL SERIES FUND, INC. Select Bond Portfolio Statement of Changes in Net Assets (IN THOUSANDS)
FOR THE YEAR ENDED DECEMBER 31, --------------------- 1996 1995 --------- --------- 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 --------- --------- --------- ---------
The Accompanying Notes are an Integral Part of the Financial Statements -- 75 NORTHWESTERN MUTUAL SERIES FUND, INC. Select Bond Portfolio Financial Highlights (FOR A SHARE OUTSTANDING THROUGHOUT THE YEAR)
FOR THE YEARS ENDED DECEMBER 31, ------------------------------------------------------- 1996 1995 1994 1993 1992 --------- --------- --------- -------- -------- SELECTED PER SHARE DATA Net Asset Value, Beginning of Year.... $ 1.23 $ 1.06 $ 1.15 $ 1.14 $ 1.18 Income from Investment Operations: Net Investment Income............. 0.07 0.07 0.06 0.08 0.09 Net Realized and Unrealized Gain (Loss) on Investments............ (0.04) 0.13 (0.09) 0.05 -- --------- --------- --------- -------- -------- Total from Investment Operations..................... 0.03 0.20 (0.03) 0.13 0.09 --------- --------- --------- -------- -------- Less Distributions: Dividends from Net Investment Income........................... (0.04) (0.03) (0.06) (0.08) (0.09) Distributions from Realized Gains on Investments................... -- -- -- (0.04) (0.04) --------- --------- --------- -------- -------- Total Distributions............. (0.04) (0.03) (0.06) (0.12) (0.13) --------- --------- --------- -------- -------- Net Asset Value, End of Year............ $ 1.22 $ 1.23 $ 1.06 $ 1.15 $ 1.14 --------- --------- --------- -------- -------- --------- --------- --------- -------- -------- Total Return+........................... 3.31% 19.10% (2.28%) 10.81% 7.74% --------- --------- --------- -------- -------- --------- --------- --------- -------- -------- RATIOS AND SUPPLEMENTAL DATA Net Assets, End of Year (in thousands)............................. $214,333 $198,142 $158,508 $17,485 $15,851 --------- --------- --------- -------- -------- --------- --------- --------- -------- -------- Ratio of Expenses to Average Net Assets................................. 0.30% 0.30% 0.30% 0.30% 0.30% --------- --------- --------- -------- -------- --------- --------- --------- -------- -------- Ratio of Net Investment Income to Average Net Assets..................... 6.48% 6.61% 7.02% 6.40% 7.52% --------- --------- --------- -------- -------- --------- --------- --------- -------- -------- Portfolio Turnover Rate................. 195.98% 69.06% 108.00% 67.69% 63.29% --------- --------- --------- -------- -------- --------- --------- --------- -------- --------
+Total Return includes deductions for management expenses; excludes deductions for sales loads and account fees. The Accompanying Notes are an Integral Part of the Financial Statements -- 76 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 -- 77 NORTHWESTERN MUTUAL SERIES FUND, INC. High Yield Bond Portfolio Statement of Changes in Net Assets (IN THOUSANDS)
FOR THE YEAR ENDED DECEMBER 31, ------------------- 1996 1995 -------- -------- 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 -------- -------- -------- --------
The Accompanying Notes are an Integral Part of the Financial Statements -- 78 NORTHWESTERN MUTUAL SERIES FUND, INC. High Yield Bond Portfolio Financial Highlights (FOR A SHARE OUTSTANDING THROUGHOUT THE YEAR)
FOR THE PERIOD FOR THE YEAR MAY 3, 1994* ENDED DECEMBER 31, THROUGH ------------------- DECEMBER 31, 1996 1995 1994 -------- -------- --------------- 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% -------- -------- --------------- -------- -------- ---------------
*Commencement of Operations. **Computed on an annualized basis. +Total Return includes deductions for management and other fund expenses; excludes deductions for sales loads and account fees. ++Reflects total return for the period; not annualized. The Accompanying Notes are an Integral Part of the Financial Statements -- 79 ACCOUNTANTS' LETTER [LOGO] [LOGO] Report of Independent Accountants To The Shareholders and Board of Directors of Northwestern Mutual Series Fund, Inc. In our opinion, the accompanying statements of assets and liabilities, including the schedules of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of the Index 500 Stock Portfolio, Growth Stock Portfolio, Growth and Income Stock Portfolio, Aggressive Growth Stock Portfolio, International Equity Portfolio, Select Bond Portfolio, High Yield Bond Portfolio, Money Market Portfolio and Balanced Portfolio (constituting Northwestern Mutual Series Fund, Inc., hereafter referred to as the "Fund") at December 31, 1996, the results of each of their operations for the year then ended, the changes in each of their net assets for the two years in the period ended December 31, 1996, and the financial highlights for the periods indicated, in conformity with generally accepted accounting principles. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentations. We believe that our audits, which included confirmations of the securities at December 31, 1996 by correspondence with the custodian and brokers and the application of alternative auditing procedues where confirmations from brokers were not received, provide a reasonable basis for the opinion expressed above. [SIGNATURE] Milwaukee, Wisconsin January 24, 1997 -- 80 NOTES TO FINANCIAL STATEMENTS NORTHWESTERN MUTUAL SERIES FUND, INC. Notes to Financial Statements DECEMBER 31, 1996 NOTE 1 -- Northwestern Mutual Series Fund, Inc. (the "Series Fund"), is registered as a diversified open-end investment company under the Investment Company Act of 1940. The Series Fund consists of the Growth Stock Portfolio, Aggressive Growth Stock Portfolio, International Equity Portfolio, Growth and Income Stock Portfolio, Index 500 Stock Portfolio, Money Market Portfolio, Balanced Portfolio, Select Bond Portfolio and the High Yield Bond Portfolio (the "Portfolios"). Shares are presently offered only to The Northwestern Mutual Life Insurance Company ("Northwestern Mutual Life") and its segregated asset accounts. NOTE 2 -- The preparation of the financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Principal accounting policies are summarized below. NOTE 3 -- Bonds are valued on the basis of prices furnished by a service which determines prices for normal institutional size trading units of bonds, without regard to exchange or over-the-counter prices. When quotations are not readily available, bonds are valued at fair market value determined by procedures approved by the Board of Directors. Stocks listed on a national or foreign stock exchange are valued at the final sale price, or final bid price in absence of a sale. Stocks not listed on a national or foreign stock exchange are valued at the closing bid price on the over-the-counter market. Money market investments, other than in the Money Market Portfolio, with maturities exceeding sixty days but generally not exceeding one year are valued by marking to market on the basis of an average of the most recent bid prices or yields. Money market investments with maturities of sixty days or less and all securities in the Money Market Portfolio are valued on an amortized cost basis or, if the current market value differs substantially from the amortized cost, by marking to market. NOTE 4 -- Securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts on the date of valuation. Purchases and sales of securities and income items denominated in foreign currencies are translated in U.S. dollar amounts on the respective dates of such transactions. When the International Equity Portfolio purchases or sells a foreign security it may enter into a foreign exchange currency contract to minimize market risk from the trade date to the settlement date of such transaction. Such foreign exchange currency contracts are marked to market daily. The International Equity Portfolio does not separately report the results of operations due to changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss from investments. Net realized foreign exchange gains or losses arise from sales of foreign currencies, currency gains or losses realized between the trade date and settlement date on security transactions, the differences between the amounts of dividends and foreign withholding taxes recorded on the portfolio's books, and the U.S. dollar equivalent of the amounts actually received or paid. NOTE 5 -- The Growth Stock, Index 500 Stock and Balanced Portfolios invest in futures contracts as an alternative to investing in individual securities. The Growth Stock, Index 500 Stock and Balanced Portfolios could be exposed to market risk due to changes in the value of the underlying securities or due to an illiquid secondary market. Futures contracts are marked to market daily based upon quoted settlement prices. The Portfolios receive from or pay to brokers an amount of cash equal to the daily fluctuation in the value of the contracts. Such receipts or payments, known as the "variation margin," are recorded by the Portfolios as unrealized gains or losses. When the contract is closed, the Portfolios record a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. -- 81 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:
U.S. GOVT TOTAL SECURITY TOTAL SECURITY SECURITY SALES/ PORTFOLIOS PURCHASES PURCHASES MATURITIES - -------------------------------------------------------------------- --------------- --------------- --------------- 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 U.S. GOVT SECURITY SALES/ PORTFOLIOS MATURITIES - -------------------------------------------------------------------- ------------- 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..................................................... --
- -------------------------------------------------------------------------------- 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:
FIRST $50 NEXT $50 PORTFOLIOS MILLION MILLION EXCESS - --------------------------------- ----------- ----------- ------------- 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%
These amounts are paid to Northwestern Mutual Investment Services, Inc. ("NMIS") a wholly-owned subsidiary of Northwestern Mutual Life, which is the manager and investment adviser of the Fund. Northwestern Mutual Life is also a party to the agreement. Other costs for each Portfolio are paid either by the Portfolios, Northwestern Mutual Life, or NMIS depending upon the applicable agreement in place. Certain portfolios pay a portion of their custodian fees indirectly through expense offset arrangements. Custodian fees are reduced for Portfolios that maintain compensating balances in non-interest bearing accounts. The portfolios could have invested the assets used to pay for the custodian fees, had the assets not been used in the expense offset arrangements. As of December 31, 1996, the amounts paid through expense offset arrangements are $6,935 in the Index 500 Portfolio, $2,738 in the Growth Stock Portfolio, $4,443 in the Growth and Income Stock Portfolio, $20,886 in the Aggressive Growth Stock Portfolio and $7,697 in the High Yield Bond Portfolio. J.P. Morgan Investment Management, Inc. ("J.P. Morgan") and Templeton Investment Counsel, Inc. ("Templeton Counsel") have been retained under an investment sub-advisory agreement to provide investment advice and, in general, to conduct the management investment program of the Growth and Income Stock Portfolio and the International Equity Portfolio, respectively. Of the advisory fees received by NMIS from the Growth and Income Stock Portfolio, .45% on the first $100 million of the Portfolio's net assets, .40% on the next $100 million, .35% on the next $200 million and .30% on the net assets in excess of $400 million will be paid by NMIS to J.P. Morgan. Of the advisory fees received by NMIS from the International Equity Portfolio, .50% on the first $100 million of the Portfolio's net assets and .40% on net assets in excess of $100 million will be paid by NMIS to Templeton Counsel. -- 82 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:
(IN THOUSANDS) AGGRESSIVE GROWTH AND GROWTH GROWTH INTERNATIONAL INCOME STOCK STOCK EQUITY STOCK PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO ----------- ----------- ------------ ----------- 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 ----------- ----------- ------------ ----------- 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 ----------- ----------- ------------ ----------- ----------- ----------- ------------ -----------
- -------------------------------------------------------------------------------- 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:
NET INVESTMENT NET CAPITAL PORTFOLIOS INCOME GAINS - ------------------------------------- ------------ ------------ 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
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:
NET INVESTMENT NET CAPITAL PORTFOLIOS INCOME GAINS - -------------------------------- --------------- --------------- 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
NOTE 10 -- NML voluntarily reimburses the International Equity Portfolio for the benefit NML receives from foreign dividend taxes charged against the Portfolio. The amount reimbursed represents approximately 65% of the foreign dividend tax withheld from the Portfolio. Reimbursements are recorded when foreign dividend taxes are accrued. This voluntary reimbursement began April 1, 1996 and totals $921,388 as of December 31, 1996. -- 83 NOTES -- 84 Northwestern Mutual Life-Registered Trademark- 720 East Wisconsin Avenue Milwaukee, Wisconsin 53202 VARIABLE LIFE TRANSFER / ALLOCATION / DOLLAR COST AVERAGING POLICYOWNER SERVICES Insured Policy Number Date GA# SA# Business Number: Home Number:
A TOTAL OF SIX DIVISIONS MAY BE ELECTED WITH A MINIMUM OF 10% IN EACH DIVISION. THIS APPLIES TO EXISTING ASSETS, FUTURE ALLOCATIONS AND DOLLAR COST AVERAGING. 1. REDISTRIBUTION OF EXISTING ASSETS: Complete this section if you want to redistribute the money already invested. Future investments will continue to be allocated as they were prior to the transfer, unless section 2 is completed. INVESTMENT DIVISIONS CHANGE TO Select Bond ------------% International Equity ------------% Money Market ------------% Balanced ------------% Index 500 Stock ------------% Aggressive Growth Stock ------------% High Yield Bond ------------% Growth Stock ------------% Growth and Income Stock ------------% Total ----100 ----% 2. ALLOCATION OF FUTURE PREMIUM/DIVIDENDS: Complete this section to change where your future Premium/ Dividends are invested. Allocations of future investments will be effective with the next Premium/Dividend deposit. ALLOCATION OF FUTURE INVESTMENT DIVISIONS PREMIUMS/DIVIDENDS Select Bond ------------% International Equity ------------% Money Market ------------% Balanced ------------% Index 500 Stock ------------% Aggressive Growth Stock ------------% High Yield Bond ------------% Growth Stock ------------% Growth and Income Stock ------------% Total ----100 ----% 3. DOLLAR COST AVERAGING (DCA): FOR VCL ONLY Effective date for the first DCA transfer. / / The month following the date this form is signed. Must have assets in Money Market on that date. Choose Money Market in section 1 and Money Market in section 2 / / With the next Premium/Dividend deposit, choose Money Market in section 2. How would you like the fund transferred? Choose one: / / Transfer in monthly installments so that at year end, Money Market valance will be zero. / / Specified amount to be transferred monthly of $ ----------------. Select Bond ------------% International Equity ------------% Balanced ------------% Index 500 Stock ------------% Aggressive Growth Stock ------------% High Yield Bond ------------% Growth Stock ------------% Growth and Income Stock ------------% Total ----100 ----% 4. TERMINATION OF DOLLAR COST AVERAGING: / / IMMEDIATELY / / NEXT POLICY ANNIVERSARY Any existing funds will remain in the Money Market Division unless you elect to transfer assets. Future premium and dividends will be allocated on the policy anniversary date according to your allocation instructions.
5. SPECIAL INSTRUCTIONS: - -------------------------------------------------------------------------------- ------------------------------------------------------------------------------ 6. EFFECTIVE DATE: This asset transfer and/or allocaiton of future investments shall be effective on ------------------------ (insert specific future date if desired). If no date is specified, or if this form is not received at NML's Home Office (see address on reverse side) on or prior to 3:00 p.m. Central time on that date, this transfer shall be effective on the date this form is received (complete and signed) at NML's Home Office. 7. SIGNATURE OF OWNER(S)/TRUSTEE REQUIRED (TITLE MUST BE INCLUDED): - -------------------- Date signed - ------------ - -------------------- Date signed - ------------ 18-1425 (2/96) WORD 6 ADDITIONAL INFORMATION 1. REDISTRIBUTION OF EXISTING ASSETS: The Owner may transfer the assets invested for this policy to any of the Divisions, as long as these assets, following the transfer, are allocated among not more than six Divisions. Transfers may be made as often as twelve times in a policy year. 2. ALLOCATION OF FUTURE PREMIUM/DIVIDENDS: Allocation of the first net annual premium will be allocated to the Money Market Division until the Initial Allocation Date. On the Initial Allocation Date, amounts in the Money Market Division will be allocated in accordance with the application. 3. DOLLAR COST AVERAGING (DCA): If DCA is chosen, Money Market must be one of the Divisions elected for future premium/dividend allocation. A total of six Divisions may be elected between current and future assets and DCA. 4. TERMINATION OF DOLLAR COST AVERAGING (DCA): Any assets still in the Money Market Division will remain, unless YOU elect to transfer them. HOW TO SUBMIT THIS FORM FIRST CLASS MAIL Please mail form to Northwestern Mutual Life, 720 E. Wisconsin, WI 53202, ATTENTION POS. FAX The properly completed and signed form may be FAXed to the Home Office at the numbers provided. Fax telephone numbers listed by POS Regions are: East 414-299-4268 Central 414-299-4982 West 414-299-4268 South 414-299-3382 EPS 414-299-5123
The original form is NOT needed. Please keep it for your records. LINK NML Agents only: If timing is critical and FAX equipment is unavailable, this request may be LINKed to the Home Office. You must have a properly completed and signed form in your possession. The original signed form MUST be received in the Home Office within five (5) working days from the date of the LINK. The transaction will take effect based on the time that the LINK is received in the Home Office. SIGNATURE INSTRUCTIONS SIGNATURE BY OWNER All Owners must sign their names as they appear in the policy contract. If the Owner's name has changed since the policy was issued, he/she should add his/her present surname to his/her name as it appears in the policy contract. SIGNATURE BY ASSIGNEE If the policy is assigned, the assignee must sign the form. See rules below if the assignee is a corporation, partnership or trust. SIGNATURE ON BEHALF OF CORPORATION If the policyowner is a corporation, an officer of the corporation must sign on behalf of the corporation with his/her title. The name of the corporation must appear above the signature. SIGNATURE ON BEHALF OF PARTNERSHIP If the policyowner is a partnership, the name of the partnership must appear above the signature. A partner other than the Insured must sign. SIGNATURE ON BEHALF OF TRUST If the partnership is a trust, the authorized Trustee must sign his/her name, followed by the word "Trustee." The name of the trust must appear above the signature. NOTES -- 87 NOTES -- 88 NORTHWESTERN MUTUAL SERIES FUND, INC. DIRECTORS James D. Ericson .... President and Chief Executive Officer, Northwestern Mutual Life, ..................................................................... Milwaukee Martin F. Stein ................ Chariman of the Board, EyeCare One Corporation, ..................................................................... Milwaukee John K. MacIver ............ Partner, Michael Best & Friedrich Attorneys at Law, ..................................................................... Milwaukee Stephen N. Graff ......................... Retired Partner, Arthur Andersen, LLP ..................................................................... Milwaukee William J. Blake ........................ Chairman, Blake Financial Corporation, ..................................................................... Milwaukee OFFICERS James D. Ericson ..................................................... President Mark G. Doll ........................................ Vice President & Treasurer Merrill C. Lundberg .................................................. Secretary Barbara E. Courtney ................................................. Controller This report is submitted for the general information of owners of Northwestern Mutual Variable Life policies. This report is not authorized for distribution to prospective purchasers of variable life policies unless it is accompanied by an effective prospectus. Northwestern Mutual Variable Life policies are sold through individuals who, in addition to being licensed life insurance agents of Northwestern Mutual Life, are registered representatives of Northwestern Mutual Investment Services, Inc., a wholly-owned subsidiary of Northwestern Mutual Life and a registered broker-dealer under the Securities Exchange Act of 1934 and a member of the National Association of Securities Dealers, Inc. 90-1899 (12-96) NORTHWESTERN MUTUAL LIFE-Registered Trademark- PO Box 3095 Milwaukee WI 53201-3095 Address Correction Requested -----END PRIVACY-ENHANCED MESSAGE-----