-----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, IvUhTRHCl6rudvV0G2/0Ei67+NfIMoMF2kFqO13ejUb4SZZGF90BJOHMWC+7SQ/z 6TI7kn7vxdmV0CU1mgOwkg== 0001047469-98-006909.txt : 19980220 0001047469-98-006909.hdr.sgml : 19980220 ACCESSION NUMBER: 0001047469-98-006909 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980219 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: SEC FILE NUMBER: 811-03989 FILM NUMBER: 98545261 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 N-30D 1 N-30D December 31, 1997 NORTHWESTERN MUTUAL LIFE-C- THE QUIET COMPANY-C- ANNUAL REPORT [GRAPHIC] - ----------------------------------------- Northwestern Mutual Variable Life Account - ----------------------------------------- Northwestern Mutual Series Fund, Inc. The Northwestern Mutual Life Insurance Company 720 East Wisconsin Avenue Milwaukee, WI 53202 CONTENTS POLICYOWNER PRIVILEGES FREE TRANSFERS AMONG PORTFOLIOS A limited number of free transfers per year are available with your policy. Same day transfers are permitted among our investment portfolios by phone using NML Express (see box upper right) or by FAX 414-299-4268. The appropriate form (form number 18-1425) is included at the end of this report. Additional forms are available form your Northwestern Mutual Life Agent. Mail forms are processed when received. 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. ADDITIONAL BENEFITS Some of the popular optional additional benefits which may be available to policyowners include the following (subject to underwriting and payment of appropriate premium). WAIVER OF PREMIUM The Waiver of Premium Benefit waives the premiums during total disability. Available at ages 0-59. ACCIDENTAL DEATH BENEFIT The Accidental Death Benefit provides an additional death benefit when death results from accidental bodily injury. Available at ages 0-65. 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 (1-800-519-4665) 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 Series Fund Schedule of Investments 4 Aggressive Growth Stock Portfolio 4 International Equity Portfolio 7 Growth Stock Portfolio 11 Growth and Income Stock Portfolio 14 Index 500 Stock Portfolio 17 Balanced Portfolio 24 High Yield Bond Portfolio 36 Select Bond Portfolio 39 Money Market Portfolio 43 Accountants' Letter 45 Series Fund Financial Statements 46 Aggressive Growth Stock Portfolio 46 International Equity Portfolio 49 Growth Stock Portfolio 52 Growth and Income Stock Portfolio 55 Index 500 Stock Portfolio 58 Balanced Portfolio 61 High Yield Bond Portfolio 64 Select Bond Portfolio 67 Money Market Portfolio 70 Notes to Series Fund Financial Statements 73 Accountants' Letter 76 Variable Life Financial Statements 78 Notes to Financial Statements 82 Directors and Officers 89 LETTER TO POLICYOWNERS LETTER TO POLICYOWNERS January 31, 1998 In 1997, the stock market continued its powerful upward trend, delivering returns over 20% for an unprecedented third consecutive year. In contrast to the prior year, the bond market's performance was also quite strong, with total returns from corporate bonds just under 10%. In a year when few active fund managers were able to generate returns that matched the broad market indexes, the portfolios underlying Northwestern Mutual's annuity products performed in line with their stated objectives, providing policy owners attractive returns. The forces behind this market strength are the same as in recent years -- a steadily expanding economy virtually devoid of inflation. For nearly 20 years, the Federal Reserve Bank and most of its counterparts around the world have been practicing sound monetary policies: in order to conquer inflation, they have been willing to risk slow growth and even recession. It now appears that the goal of price stability has been achieved. The positive surprise has been that there has been no major recession, in large part because technological advances have resulted in major gains in productivity. One major question facing world markets today is the economic crisis in Asia, which is already beginning to affect markets in other parts of the world. One positive effect is a flight to quality: investors are moving from risky Asian markets to more secure U.S. markets; this is one reason for the excellent performance of the U.S. bond market in the fourth quarter. The downside is that in weaker Asian economies, there will be less demand for U.S. products of all sorts -- Disney movies, Coca-Cola soft drinks, General Motors automobiles, and Intel computer chips -- and this will dampen overall demand. At the same time, countries with devalued currencies will use their productive capacity to flood world markets with goods that are cheap in dollars and other strong currencies, creating difficult competitive situations for other global manufacturers. Experts differ in evaluating how significant the problems in Asia will be for other markets around the world, but they will certainly be an influence in the months ahead. We at Northwestern Mutual have taken steps to minimize exposure to problems in Asia, by adjusting asset mixes and focusing on high quality issues that rely largely on domestic markets for earnings growth, and we will continue to monitor the situation closely. [PHOTO] In recent years, the stock market has moved rather steadily upward; there has not been a major correction since 1990. The bond market has also been generally strong, though not as consistently as the stock market. Although both stocks and bonds may continue to perform well, there are limits. Stock prices today are quite high by almost any traditional measure. Bond prices, too, have already reflected most of the positive factors in the market and the economy today. Markets do fluctuate; this is a reality of investing. By purchasing your variable life policy, you have demonstrated already that you are thinking of the distant future. In evaluating the performance of the funds underlying your policy, we urge you to maintain a long-term point of view and avoid being influenced by market fluctuations. It is a good idea to adjust your investments among portfolios as your circumstances, needs and goals evolve, but it would be a mistake to let short-term market moves influence your investment strategy. The variable life insurance policies on which we are reporting have an important place in the financial portfolios of many people. Northwestern Mutual also offers many other insurance and investment products that address a wide variety of financial needs, including variable annuities and our Mason Street family of mutual funds, introduced in 1997. As you consider your financial goals and requirements, we hope that you will consider Northwestern Mutual products that may be appropriate for you. Your Northwestern Mutual agent stands ready to provide help as you plan for a secure financial future. We join our agents in thanking you for selecting Northwestern Mutual to help you accomplish your financial goals. The Northwestern Mutual Life Insurance Company [SIGNATURE] James D. Ericson, President and Chief Executive Officer -- 1 PERFORMANCE SUMMARY PERFORMANCE SUMMARY as of December 31, 1997 VARIABLE LIFE--POLICIES ISSUED BEFORE OCTOBER 11, 1995
Aggressive Growth & Net Investment Growth International Growth Income Index 500 High Yield Select Money Rates of Return Stock Equity Stock Stock Stock Balanced Bond Bond Market (as of 12/31/97) Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio 1 year........... 13.07% 11.50% 28.95% 29.12% 32.27% 20.67% 15.04% 8.70% 4.74% 5 years.......... - - - - 141.02% 85.21% - 40.82% 21.50% Annualized..... - - - - 19.24% 13.12% - 7.09% 3.97% 10 years......... - - - - 288.93% 195.37% - 129.34% 63.36% Annualized..... - - - - 14.55% 11.44% - 8.65% 5.03% Since inception........ 90.07%* 51.89%* 103.30%* 100.03%* - - 62.70%* - - Annualized..... 19.16% 12.09% 21.37% 20.84% - - 14.21% - -
VARIABLE COMPLIFE--POLICIES ISSUED ON OR AFTER OCTOBER 11, 1995**
Aggressive Growth & Net Investment Growth International Growth Income Index 500 High Yield Select Money Rates of Return Stock Equity Stock Stock Stock Balanced Bond Bond Market (as of 12/31/97) Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio 1 year........... 13.18% 11.61% 29.08% 29.25% 32.41% 20.79% 15.16% 8.81% 4.84% 5 years.......... - - - - 142.26% 86.16% - 41.54% 22.12% Annualized..... - - - - 19.36% 13.23% - 7.19% 4.08% 10 years......... - - - - 292.95% 198.43% - 131.70% 65.05% Annualized..... - - - - 14.67% 11.55% - 8.77% 5.14% Since inception........ 90.78%* 52.46%* 104.06%* 100.78%* - - 63.30%* - - Annualized..... 19.28% 12.20% 21.50% 20.96% - - 14.33% - -
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 - -------------------------------------------------------------------------------- Economic Overview and Outlook THE ECONOMY During 1997, the domestic economy continued its seven-year trend of moderate growth with minimal inflation and very low unemployment -- really the best of all possible economic scenarios. For some 20 years, since the painful double-digit inflation of the 1970s, monetary policies in the United States, Europe and Japan have focused on fighting inflation. It now appears that price stability has been achieved, with benefits felt throughout the economy. Low interest rates encourage capital investment, which stimulates the industrial sector while improving productivity. For consumers, modest income gains can translate to real improvements in living standards, and confident consumers spend and invest, providing further strength for the economy. The strong economy has bolstered tax revenues, enabling the Federal government to develop a balanced budget for 1999, following 30 years of deficits. The only real cloud on the horizon is the economic crisis in Asia. Crashing stock markets, currency devaluations, corporate bankruptcies and shrinking consumer demand will surely affect economies and markets elsewhere; the chief question is whether the effects will be minor or substantial. For now, virtually all economists are projecting another year of moderate growth for the U.S. economy. Economic Growth and Inflation EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC Real Economic Growth Inflation 1988 3.8% 4.4% 1989 3.4% 4.6% 1990 1.3% 6.1% 1991 -1.0% 3.1% 1992 2.7% 2.9% 1993 2.3% 2.7% 1994 3.5% 2.7% 1995 2.0% 2.5% 1996 2.2% 3.3% 1997 3.7% 1.7%
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. 1997 numbers are preliminary. - -------------------------------------------------------------------------------- THE EQUITY MARKET The bull market for stocks continued throughout 1997, with a vast array of performance records set. For the year, the Dow Jones Industrial Average rose 23% and the Standard & Poor's 500 stock index rose 31%, the first time either index has risen more than 20% for three consecutive years. The strong gains masked the reality of a two-tier market, led by big names such as General Electric and Coca-Cola, while the stocks of smaller companies languished during much of the year. The latter part of the year was notable for significantly increased volatility; in fact, almost all of the market's gains came in the first seven months. A few high-profile earnings disappointments in August made investors nervous, leading to sell-offs. Then, in late October, economies and stock markets in Asia began to crumble, sparking corrections in markets throughout the world. During the fourth quarter, the U.S. stock market experienced a brief but sharp correction before recovering at year end. Annual Total Returns from S&P 500 Index EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC 12/31/88 16.6% 12/31/89 31.7% 12/31/90 -3.1% 12/31/91 30.5% 12/31/92 7.6% 12/31/93 10.1% 12/31/94 1.2% 12/31/95 37.4% 12/31/96 22.8% 12/31/97 33.4%
Source: Standard & Poor's - -------------------------------------------------------------------------------- THE BOND MARKET In 1997, a powerful combination of economic and financial forces resulted in excellent performance in the U.S. bond market. This bull market for bonds culminated in the fourth quarter, when bonds outperformed the very strong stock market. Bonds traditionally perform well when inflation is not a concern, and this was the case throughout 1997. Disinflation and a disappearing Federal deficit combined to push interest rates lower and bond prices higher. The economic crisis in Asia, though devastating for the countries involved, is a major positive force for the U.S. bond market, as investors seek high quality. At year end, the bond market appeared to be anticipating further easing of monetary policy by the Federal Reserve, not because of slowing domestic growth, but as a means of supporting the currencies of Southeast Asian nations. The expanding importance of international events in determining the direction of domestic stock and bond markets substantially increases the complexity of predicting market trends. The many possible policy directions and outcomes of the Asian crisis make future trends in the bond market very hard to forecast, but at year-end 1997, most indicators seem to be positive. Annual Total Returns from Merrill Lynch Domestic Master Index EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC 12/31/88 8.0% 12/31/89 14.2% 12/31/90 9.1% 12/31/91 15.9% 12/31/92 7.6% 12/31/93 10.0% 12/31/94 -2.8% 12/31/95 18.5% 12/31/96 3.6% 12/31/97 9.7%
Source: Merrill Lynch. The Merrill Lynch Domestic Master Index is an unmanaged market value weighted index comprised of U.S. Government, mortgage and investment-grade corporate bonds. --- 3 AGGRESSIVE GROWTH STOCK PORTFOLIO - -------------------------------------------------------------------------------- Objective: Portfolio Strategy: Invested Assets: Maximum long-term appreciation Strive for the highest possible rate of capital $1,066,942,882 of 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. Consistent with the universe of small company stocks, the Portfolio's performance lagged the broad market averages during 1997. The Portfolio remains concentrated in four sectors in which there are many companies with good growth opportunities: technology, business services, consumer products and services, and health care. Some adjustments have been made to minimize exposure to economic problems in Asia by increased emphasis on companies whose main growth opportunities are in the United States. In the technology sector, the emphasis is now on software, rather than equipment. Most of the health care companies in the Portfolio provide devices and services to the domestic health care industry, and this remains an attractive market segment. Holdings in the broadcasting industry are expected to benefit from continued consolidation in this industry. A solid base of holdings in the consumer group should enable the Portfolio to participate in continued strength in domestic consumer spending. Modest holdings of S&P Index Futures enable the Portfolio to use a portion of the cash that is held for future investments to participate in broad market performance. Sector Allocation EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC Consumer 21% Technology 26% Business Services 11% Health Care 12% Energy 8% Industrial & Transportation 9% Finance 4% S&P 500 Index Futures 2% Short-Term Investments 7%
Performance Relative to Relevant Indices EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
AGGRESSIVE GROWTH STOCK WILSHIRE SMALL WILSHIRE NEXT Portfolio Cap Index 1750 Index 11/30/90 $10,000 $10,000 $10,000 12/31/90 10,189 10,459 10,459 12/31/91 15,894 15,873 15,325 12/31/92 16,839 18,188 18,186 12/31/93 20,057 21,464 21,357 12/31/94 21,141 20,801 21,065 12/31/95 29,448 26,330 27,439 12/31/96 34,661 31,588 31,801 12/31/97 39,467 40,511 39,348 Average Annual Total Return For Periods Ended December 31, 1997 One Year Five Years Since Inception Aggressive Growth Stock Portfolio 13.86% 18.57% 21.38% Wilshire Small Cap Index 28.25% 17.37% 21.83% Wilshire Next 1750 Index 23.73% 16.69% 21.33%
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 $769 million as of December 31, 1997. 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 $867 million as of December 31, 1997. 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. -- 4 Aggressive Growth Stock Portfolio NORTHWESTERN MUTUAL SERIES FUND, INC. Schedule of Investments DECEMBER 31, 1997
MARKET VALUE COMMON STOCK (91.20%) SHARES (000'S) - ------------------------------------------------------------- BASIC MATERIALS (0.88%) *Cambrex Corporation 203,000 $ 9,338 ------------ CAPITAL GOODS (4.42%) *Brooks Automation, Inc. 105,200 1,933 *CTB International Corp. 168,600 2,402 *Jabil Circuit, Inc. 246,000 9,778 Kaydon Corporation 360,000 11,745 *Kaynar Technologies, Inc. 232,200 6,618 *Tetra Tech, Inc. 503,375 10,068 *Triumph Group, Inc.-new 138,400 4,602 ------------ TOTAL 47,146 ------------ COMMUNICATION SERVICES ( 2.85%) *LCI International, Inc. 387,500 11,916 *Pacific Gateway Exchange, Inc. 228,000 12,269 *Premiere Technologies, Inc. 225,400 6,227 ------------ TOTAL 30,412 ------------ CONSUMER CYCLICAL (15.15%) *Blyth Industries, Inc. 437,100 13,086 *Catalina Marketing Corporation 238,600 11,035 *Cendant Corp. 610,557 20,988 *Dollar Tree Stores, Inc. 251,300 10,397 *Dura Automotive Systems, Inc. 206,900 5,120 Fastenal Co. 214,100 8,189 Galileo International, Inc. 331,200 9,149 *Getty Communications PLC-ADR 454,900 6,767 *Jones Apparel Group, Inc. 234,800 10,096 *K & G Mens' Center, Inc. 518,150 10,752 *Kohls Department Stores 239,500 16,316 *O'Reilly Automotive, Inc. 517,400 13,582 *Signature Resorts, Inc. 400,000 8,750 *Tower Automotive, Inc. 239,800 10,086 *VWR Scientific Products Corp. 258,400 7,300 ------------ TOTAL 161,613 ------------ CONSUMER STAPLES (5.86%) *American Italian Pasta Co.-Cl A 270,600 6,765 Cardinal Health, Inc. 198,418 14,906 *Chancellor Media Corp. 208,000 15,522 *Clear Channel Communications 179,000 14,219 *Ivex Packaging Corp. Del 52,500 1,260 *Robert Mondavi Corporation 202,000 9,848 ------------ TOTAL 62,520 ------------ ENERGY (7.57%) *Barrett Resources Corporation 122,500 3,706 *BJ Services Company 149,200 10,733 *EVI, Inc. 216,000 11,178 *Global Industries, Ltd. 816,600 13,882 *Marine Drilling Co's, Inc. 352,000 7,304 *Nabors Industries, Inc. 276,700 8,699 *Pride International, Inc. 370,300 9,350 MARKET VALUE COMMON STOCK (91.20%) SHARES (000'S) - ------------------------------------------------------------- ENERGY (CONTINUED) Tosco Corporation 170,200 $ 6,436 Transocean Offshore, Inc. 196,800 9,483 ------------ TOTAL 80,771 ------------ FINANCE (4.00%) *Affiliated Managers Group 241,500 7,003 CMAC Investment Corp. 152,800 9,225 *ESG RE Ltd. 251,900 5,920 Investors Financial Services 200,000 9,200 Money Store, Inc. 171,850 3,609 *Trammel Crow Co. 300,400 7,735 ------------ TOTAL 42,692 ------------ HEALTHCARE (11.72%) *Advanced Health Corp. 283,000 4,493 *Concentra Managed Care, Inc. 350,061 11,814 *Lincare Holdings, Inc. 177,400 10,112 *Medcath, Inc. 288,800 4,368 *NCS Healthcare, Inc.-Cl A 287,800 7,591 *Patterson Dental Co. 243,350 11,011 *Pediatrix Med Group, Inc. 215,900 9,230 *Pharmerica, Inc. 626,300 6,498 *PhyCor, Inc. 289,000 7,803 *Physician Sales & Services, Inc. 250,000 5,375 *Quorum Health Group, Inc. 452,700 11,827 *Spine-Tech, Inc. 147,300 7,577 *Sybron Intl Corp.-Wisconsin 300,200 14,091 *Wesley Jessen Visioncare 340,000 13,260 ------------ TOTAL 125,050 ------------ MISCELLANEOUS (8.73%) *ABR Information Services, Inc. 266,700 6,367 *Administaff, Inc. 439,100 11,362 *Billing Information Concepts 222,300 10,670 Cintas Corp. 355,200 13,853 *Corrections Corp. of America 136,900 5,074 *Interim Services, Inc. 463,200 11,985 *Metzler Group, Inc. 269,500 10,814 *Robert Half International, Inc. 576,450 23,058 ------------ TOTAL 93,183 ------------ TECHNOLOGY (25.64%) *ADC Telecommunications 329,900 13,773 AVX Corp. 125,600 2,316 Cambridge Technology Partners 422,100 17,570 *CBT Group PLC-ADR 223,400 18,347 *Ciena Corp. 164,400 10,049 *Computer Horizons Corp. 299,350 13,471 *Concord EFS, Inc. 303,100 7,540 *DST Systems, Inc. 248,300 10,599 *Gasonics Intl Corp. 439,800 4,343 HBO & Co. 331,600 15,917 *Hyperion Software 309,400 11,061
--- 5 NORTHWESTERN MUTUAL SERIES FUND, INC. Schedule of Investments DECEMBER 31, 1997
MARKET VALUE COMMON STOCK (91.20%) SHARES (000'S) - ------------------------------------------------------------- TECHNOLOGY (CONTINUED) *Integrated Process Equipment Corp. 303,200 $ 4,775 *Kent Electronics Corp. 186,100 4,676 *Komag, Inc. 465,000 6,917 *Microchip Technology, Inc. 228,100 6,843 *Molex, Inc. 342,846 9,857 National Data Corporation 163,500 5,906 *Pairgain Technologies, Inc. 237,200 4,596 Paychex, Inc. 346,555 17,544 *Peoplesoft, Inc. 499,800 19,492 *PMC-Sierra, Inc. 158,000 4,898 *QLogic Corp. 175,500 5,177 *Saville Systems PLC-ADR 463,400 19,231 *Sterling Software, Inc. 259,500 10,640 *Sykes Enterprises, Inc. 358,300 6,987 *Tellabs, Inc. 266,400 14,086 *Transaction Systems Architects 181,600 6,901 ------------ TOTAL 273,512 ------------ TRANSPORTATION (4.38%) *Coach USA, Inc. 398,300 13,343 *Heartland Express Incorporated 389,500 10,468 *Hub Group, Inc. 151,100 4,495 *Knight Transportation, Inc. 291,600 8,092 *Swift Transportation Co., Inc. 320,800 10,386 ------------ TOTAL 46,784 ------------ TOTAL COMMON STOCK 973,021 ------------ MARKET VALUE MONEY MARKET INVESTMENTS (8.80%) PAR (000'S) - ------------------------------------------------------------- GOVERNMENT (0.18%) +Federal Home Loan Mortgage, 5.61%, 02/13/98 $ 2,000,000 $ 1,987 ------------ FINANCE (1.87%) Chrysler Financial Corp., 5.74%, 01/23/98 20,000,000 19,930 ------------ PERSONAL CREDIT INSTITUTIONS (6.75%) Associates Corp. of N A, 6.74%, 01/02/98 12,200,000 12,198 Commercial Credit Corp., 5.65%, 01/28/98 20,000,000 19,915 General Electric Capital, 5.88%, 01/21/98 20,000,000 19,934 General Motors Acceptance Corp., 5.84%, 01/14/98 20,000,000 19,958 ------------ TOTAL 72,005 ------------ TOTAL MONEY MARKET INSTRUMENTS 93,922 ------------ TOTAL AGGRESSIVE GROWTH PORTFOLIO (COST $745,200)^ $ 1,066,943 ------------
ADR-American Depository Receipt * 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, 1997 is summarized below:
UNREALIZED NUMBER OF EXPIRATION DEPRECIATION ISSUER CONTRACTS DATE (000'S) - -------------------- ---------- ------------ ------------- S&P 500 Stock Index 100 March 1998 (382)
^At December 31, 1997, the aggregate cost of securities for federal income tax purposes was $745,593 and the net unrealized appreciation of investments based on that cost was $321,350 which is comprised of $354,153 aggregate gross unrealized appreciation and $32,803 aggregate gross unrealized depreciation. The Accompanying Notes are an Integral Part of the Financial Statements --- 6 INTERNATIONAL EQUITY PORTFOLIO - -------------------------------------------------------------------------------- Objective: Portfolio Strategy: Invested Assets: Long-term appreciation of Participate in the growth of foreign $657,718,113 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. In selecting investments, the principal focus is on identifying undervalued stocks of companies with strong finances and good long-term growth opportunities, rather than on choosing regions of the world in which to invest. The Portfolio is normally fully invested in equity securities. Throughout the year, well over half the Portfolio was invested in European companies, with particular emphasis on financial service providers and pharmaceutical firms. Performance benefited from very strong stock markets throughout Europe, especially in the U.K., which represented 22% of holdings at year end. Very modest exposure to the collapsing markets of Asia was a significant factor that enabled the Portfolio to perform far better than the Europe-Australasia-Far East Index, with which it is compared. With market values of quality companies in the region much lower than a few months ago, there are now attractive buying opportunities among stocks of companies with strong balance sheets in growing industries such as telecommunications. The International Equity Portfolio is managed for Northwestern Mutual by Templeton Investment Counsel, Inc. Asset Allocation 12/31/97 EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC Europe 72% Latin America 10% Asia 7% Australia/New Zealand 6% Canada 3% Non-equity holdings 2%
Perfomance Relative to the EAFE Index EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
INTERNATIONAL EQUITY PORTFOLIO EAFE INDEX 4/30/93 $10,000 $10,000 12/31/93 $12,464 $10,970 12/31/94 $12,451 $11,859 12/31/95 $14,266 $13,228 12/31/96 $17,264 $14,068 12/31/97 $19,384 $14,364 Average Annual Total Return For Periods Ended December 31, 1997 One Year Since Inception International Equity Portfolio 12.28% 15.22% EAFE Index 2.10% 8.06%
As depicted in the graph, the International Equity Portfolio is compared against the Morgan Stanley Capital International EAFE ("Europe-Australasia-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. -- 7 International Equity Portfolio NORTHWESTERN MUTUAL SERIES FUND, INC. Schedule of Investments DECEMBER 31, 1997
MARKET VALUE COMMON STOCK (95.96%) COUNTRY SHARES (000'S) - ----------------------------------------------------------------- AEROSPACE & MILITARY TECHNOLOGY (0.10%) Hong Kong Aircraft & Engineering H.K. 257,900 $ 649 ----------- APPLIANCES & HOUSEHOLD DURABLES (1.21%) Electrolux AB B Free Swe. 48,200 3,347 Thorn PLC U.K. 1,557,085 4,048 Thorn PLC , B Shares U.K. 1,816,600 568 ----------- TOTAL 7,963 ----------- AUTOMOBILES (5.95%) Autoliv, Inc. Swe. 279,100 9,141 #Autoliv, Inc., IDR Swe. 65,000 2,118 Bertrand Faure SA Fr. 5,642 401 Fiat SPA Ord. Italy 1,527,900 4,446 Renault SA Fr. 405,775 11,419 Volvo Aktiebolaget, B Free Swe. 433,000 11,624 ----------- TOTAL 39,149 ----------- BANKING & CREDIT (18.53%) Australia & New Zealand Bank Group Austrl. 926,097 6,118 Banco Bradesco SA Braz. 623,750,000 6,148 *Banco Bradesco SA - Rights Braz. 26,668,540 96 Banco de Andulucia Sp. 30,000 5,019 Banco Itau S.A. Braz. 2,079,000 1,118 Banque Nationale de Paris Fr. 135,400 7,200 +Banque Nationale de Paris, ADR (144A) Fr. 146,500 7,790 Barclay's Bank, PLC U.K. 245,016 6,534 BCO BilboaVizcaya Sp. 177,000 5,725 BPI SGPS SA Port. 201,963 4,916 Canadian Imperial Bank of Commerce Can. 309,200 9,637 +Corporacion Bancaria de Espana S.A., ADR Sp. 195,000 5,960 Credit Commercial de France Fr. 25,500 1,748 Deutsche Bank AG Ger. 193,600 13,545 HSBC Holdings U.K. 214,979 5,299 Korea Long Term Credit Bank Kor. 161,953 994 Merita Limited "A" Fin. 1,800,000 9,850 National Bank of Canada Montreal Can. 360,000 5,937 Panin Bank Indo. 5,346,000 657 *Panin Bank - Warrants Indo. 763,714 7 Suisse Group Credit Swtz. 55,725 8,634 Svenska Handelsbanken S.A. Swe. 230,000 7,957 MARKET VALUE COMMON STOCK (95.96%) COUNTRY SHARES (000'S) - ----------------------------------------------------------------- BANKING & CREDIT (CONTINUED) *Unibanco Uniao de Bancos Braz. 14,033,500 $ 956 ----------- TOTAL 121,845 ----------- BROADCAST ADVERTISING PUBLISHING (0.40%) Marieberg Tidings "A" Free Swe. 35,000 820 South China Morning Post Ltd. H.K. 2,554,000 1,796 ----------- TOTAL 2,616 ----------- BUILDING MATERIALS AND COMPONENTS (1.70%) Hepworth PLC U.K. 607,200 2,218 Pioneer International Ltd. Austrl. 3,197,946 8,730 Siam City Cement Public Co, Ltd. Thai. 240,039 249 ----------- TOTAL 11,197 ----------- BUSINESS & PUBLIC SERVICE (2.35%) Esselte AB, Series "A" Free Swe. 269,900 5,102 Hyder PLC U.K. 371,666 5,920 Hyder PLC Cum. Red. Pfd. U.K. 401,400 789 Societe Generale de Surv Holdings Swtz. 885 1,699 *Waste Management International, PLC U.K. 310,700 900 *+Waste Management PLC, ADR U.K. 168,000 1,050 ----------- TOTAL 15,460 ----------- CHEMICALS (4.47%) Bayer AG Ger. 157,000 5,828 Courtaulds PLC U.K. 1,851,700 9,049 European Vinyls Corp. EVC International Neth. 68,985 1,531 Imperial Chemical Industries, PLC U.K. 19,000 297 Rhone Poulenc SA, Series "A" Fr. 283,108 12,687 ----------- TOTAL 29,392 ----------- CONSTRUCTION & HOUSING (0.62%) Kyudenko Corp. Jpn. 33,000 167 Sirti SPA Italy 643,000 3,891 ----------- TOTAL 4,058 ----------- ELECTRICAL & ELECTRONICS (3.21%) ABB AG Baden Bearer Swtz. 4,730 5,951 Alcatel Alsthom DG Fr. 58,519 7,441 Philips Electronic Neth. 128,400 7,702 ----------- TOTAL 21,094 -----------
--- 8 NORTHWESTERN MUTUAL SERIES FUND, INC. Schedule of Investments DECEMBER 31, 1997
MARKET VALUE COMMON STOCK (95.96%) COUNTRY SHARES (000'S) - ----------------------------------------------------------------- ELECTRICAL COMPONENTS, INSTRUMENTS (0.62%) BICC PLC U.K. 1,450,345 $ 4,093 ----------- ENERGY SOURCES (6.66%) +Gazprom, ADR (144a) Rus. 142,100 3,428 Hafslund Nycomed "A" Norw. 170,000 1,038 Petroleo Brasileiro S.A.- Petrobras Braz. 32,500,000 7,600 Repsol SA Sp. 122,000 5,203 Saga Petroleum Norw. 260,000 4,479 Societe Nationale Elf Aquitaine Fr. 66,801 7,773 +YPF S.A., ADR Arg. 418,500 14,307 ----------- TOTAL 43,828 ----------- FINANCIAL SERVICES (2.94%) AXA-UAP SA Fr. 218,313 16,900 India Fund, Series "B" U.K. 1,256,515 1,861 #Korea International Trust IDR Kor. 52 410 Peregrine Investments Holdings, Ltd. H.K. 262,000 186 ----------- TOTAL 19,357 ----------- FOOD & HOUSEHOLD PRODUCTS (3.56%) Albert Fisher Group PLC U.K. 6,734,996 3,989 Cafe de Coral Holdings, Ltd. H.K. 7,672,000 1,683 CP Pokphand Co. H.K. 2,609,900 411 Hillsdown Holdings U.K. 1,800,892 4,385 Tate & Lyle, PLC U.K. 762,600 6,286 The Oshawa Group Ltd. Can. 187,300 3,272 Vitro SA NPV Mex. 768,400 3,388 ----------- TOTAL 23,414 ----------- FOREST PRODUCTS & PAPER (1.95%) Carter Holt Harvey Ltd. N.Z. 3,929,357 6,069 Metsa Serla OY "B" Fin. 277,500 2,166 P.T. Barito Pacific Timber Indo. 937,000 269 Stora Kapparbergs, Series "B" Swe. 350,000 4,345 ----------- TOTAL 12,849 ----------- HEALTH & PERSONAL CARE (4.27%) Astra AB Series "A" Free Swe. 373,333 6,470 Medeva PLC U.K. 4,250,000 11,328 Nycomed Amersham PLC U.K. 191,276 7,239 Nycomed Amersham PLC, B Shares U.K. 83,406 3,032 ----------- TOTAL 28,069 ----------- INDUSTRIAL COMPONENTS (3.17%) BTR PLC U.K. 5,674,500 17,179 BTR, PLC "A" Austrl. 249,000 737 MARKET VALUE COMMON STOCK (95.96%) COUNTRY SHARES (000'S) - ----------------------------------------------------------------- INDUSTRIAL COMPONENTS (CONTINUED) Granges AB Swe. 188,100 $ 2,951 ----------- TOTAL 20,867 ----------- INSURANCE (2.65%) Aegon NV Neth. 106,192 9,455 ING Groep NV Neth. 190,000 8,004 ----------- TOTAL 17,459 ----------- MACHINERY & ENGINEERING (0.69%) VA Technologies AG Bearer Aus. 30,000 4,548 ----------- MERCHANDISING (1.06%) David Jones Ltd. Austrl. 742,100 836 Koninklijke Bijenkorf Beheer Neth. 44,098 2,763 Kwik Save Group U.K. 465,057 2,242 Somerfield PLC U.K. 318,200 1,099 ----------- TOTAL 6,940 ----------- METALS & MINING (4.69%) Anglo American Platinum So. Corporation Africa 35,700 477 British Steel PLC U.K. 5,270,900 11,361 Elkem A S Oslo ord "A" Norw. 192,000 2,552 Grupo Mexico "B" Mex. 1,320,000 4,912 +Minorco SA, ADR Lux. 318,150 5,329 +Pechiney ADR "A" Fr. 48,183 928 Pechiney SA "A" Fr. 19,000 750 *Union Minerie, NPV Bel. 65,171 4,521 ----------- TOTAL 30,830 ----------- MISCELLANEOUS MATERIAL/COMMODITIES (0.04%) Korea Chemical Company, Ltd. Kor. 16,700 278 ----------- MULTI-INDUSTRY (5.65%) Amer Group "A" Fin. 175,000 3,358 Comp Gen de Industrieset de Partec Fr. 4,500 1,616 Harrisons & Crossfield U.K. 2,490,000 5,777 Hutchinson Whampoa H.K. 798,000 4,995 Jardine Matheson Holdings Sing. 1,212,301 6,183 Jardine Strategic Holdings Sing. 1,019,055 2,690 Marine Wendel SA Fr. 11,490 1,306 Nokia Corp., "A" Fin. 71,000 5,042 Swire Pacific Class "A" H.K. 472,500 2,604 Swire Pacific Limited B H.K. 3,534,200 3,580 ----------- TOTAL 37,151 ----------- TELECOMMUNICATIONS (8.25%) British Telecom U.K. 608,000 4,799 Cointel CONV Pfd. Arg. 73,150 5,121
--- 9 NORTHWESTERN MUTUAL SERIES FUND, INC. Schedule of Investments DECEMBER 31, 1997
MARKET VALUE COMMON STOCK (95.96%) COUNTRY SHARES (000'S) - ----------------------------------------------------------------- TELECOMMUNICATIONS (CONTINUED) +Compania de Telecomunicaciones, ADR Chile 155,125 $ 4,634 +Phillipine Long Distance Telephone, ADR Phil. 127,000 2,858 +PT Indosat, ADR Indo. 146,600 2,831 Telecom Italia SPA Italy 2,490,000 10,985 +Telebras ADR Braz. 81,900 9,536 Telebras Braz. 17,646,200 1,795 Telefonica de Espania Sp. 315,000 8,990 +Telefonica del Peru S "A" B, ADR Peru 115,300 2,688 ----------- TOTAL 54,237 ----------- TEXTILES-APPAREL (0.34%) Yizheng Chemical Fibre Company China 12,469,200 2,253 ----------- TRANSPORTATION - AIRLINES (0.90%) Air New Zealand Ltd. "B" N.Z. 1,150,000 2,304 +Quantas Airways (144A) ADR Austrl. 165,000 2,920 Singapore Airlines Ltd. Sing. 105,000 685 ----------- TOTAL 5,909 ----------- TRANSPORTATION - RAILROAD (1.07%) Mayne Nickless Limited Austrl. 1,336,500 7,062 ----------- UTILITIES-ELECTRIC & GAS (8.29%) BG PLC U.K. 3,330,352 15,014 *Centrica PLC U.K. 1,913,200 2,817 *CEZ Ceske Energeticke Zavody Chez. 101,990 3,339 Electricidad de Caracas Venz. 8,690 10 Endesa National de Electric Sp. 252,000 4,472 EVN Energie Versorgung Aus. 38,400 5,039 Hong Kong Electric H.K. 1,790,000 6,826 Iberdrola SA Sp. 587,500 7,728 Korea Electric Power Corp. Kor. 33,000 306 +Korea Electric Power Corp. , ADR Kor. 35,425 356 National Power U.K. 493,764 4,874 Thames Water U.K. 251,023 $ 3,744 ----------- TOTAL 54,525 ----------- WHOLESALE & INTERNATIONAL TRADE (0.62%) Brierley Investments Ltd. N.Z. 5,716,091 4,083 ----------- TOTAL COMMON STOCK 631,175 -----------
MARKET VALUE BONDS (0.32%) COUNTRY PAR (000'S) - ---------------------------------------------------------------- FINANCIAL SERVICES (0.32%) PIV Financial Investments, Ltd., 4.5%, 12/01/00 H.K 2,750,000 $ 2,104 ----------- TOTAL BONDS 2,104 -----------
MARKET MONEY MARKET VALUE INVESTMENTS (3.72%) COUNTRY PAR (000'S) - ---------------------------------------------------------------- GOVERNMENT (0.42%) U.S. Treasury, 5.125%, 4/30/98 U.S. $ 2,757,000 $ 2,753 ----------- PERSONAL CREDIT INSTITUTIONS (1.61%) Associates Corporation of N.A., 6.74%, 1/02/98 U.S. 5,600,000 5,599 General Electric Capital, 5.649%, 1/28/98 U.S. 5,000,000 4,979 ----------- TOTAL 10,578 ----------- TELECOMMUNICATIONS (0.93%) Nacional Financiera CNV, 11.25%, 5/15/98 Mex. 117,802 6,126 ----------- FINANCE (0.76%) Chrysler Financial Corporation, 5.8%, 1/23/98 U.S. 5,000,000 4,982 ----------- TOTAL MONEY MARKET INVESTMENTS 24,439 ----------- TOTAL INTERNATIONAL EQUITY PORTFOLIO (COST $543,741)^ $ 657,718 -----------
* Non-Incoming Producing. + ADR-American Depository Receipt. # IDR-International Depository Receipt. ^At December 31, 1997, the aggregate cost of securities for federal income tax purposes was $545,315 and the net unrealized appreciation of investments based on that cost was $112,403 which is comprised of $161,863 aggregate gross unrealized appreciation and $49,460 aggregate gross unrealized depreciation. Investment Percentage by Country: 22.58% United Kingdom 11.85 France 6.80 Sweden 6.55 Spain 4.48 Netherlands 4.17 United States 4.14 Brazil 39.43 Other
The Accompanying Notes are an Integral Part of the Financial Statements --- 10 GROWTH STOCK PORTFOLIO - -------------------------------------------------------------------------------- Objective: Portfolio Strategy: Invested Assets: Long-term appreciation of Hold a diversified mix of high quality growth $242,685,559 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 are made based on the economic environment, and then the most promising companies within each sector are selected as holdings. A strategy of this portfolio is to go beyond the most familiar "blue chip" names to seek out medium-sized companies with stock prices that do not yet reflect their potential for growth. Diversification across 70 to 90 stocks in a wide range of industry groups reduces the portfolio's risk profile. Throughout 1997 the Growth Stock Portfolio benefited from continued strength in the stock market, achieving total return of almost 30% for the year. The Portfolio slightly underperformed the S&P 500 Index for two major reasons. A significant proportion of the total return from the S&P 500 Index came from a few very large companies, most of which are also included in the Growth Stock Portfolio. However, these companies' weights are less in the Portfolio than in the Index, largely because approximately 20% of the Portfolio is invested in mid-range capitalization stocks, which did not advance as strongly in 1997. Additionally, as the market became more volatile late in the year, responding sharply to any hint of negative news, the Portfolio was adjusted to a more defensive posture, focused on high quality issues with below average market sensitivity. Changes included decreased exposure to money center banks, which are likely to be hurt by economic problems in Asia, and reduced positions in economically sensitive areas such as consumer cyclicals and basic materials. A drop in prices of previously high-flying technology stocks created a buying opportunity late in the year. Positions were also increased in Consumer Staples and Health Care, which have little sensitivity to broad economic trends or to problems in international economies. Sector Allocation EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC Consumer Staples 17% Basic Materials/Capital Goods 14% Finance 14% Consumer Cyclicals 13% Technology 12% Energy 10% Health Care 9% Other Industries 7% Cash Equivalents 4%
Top 10 Holdings 12/31/97 EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC General Electric Company 3.17% Kohls Department Stores 2.04% Fiserv 1.93% Ecolab, Inc. 1.89% Pfizer, Inc. 1.80% Eli Lilly & Company 1.65% Associates First Capital Corporation 1.61% Philip Morris Companies 1.60% Procter & Gamble Company 1.59% BankAmerica Corporation 1.59%
Performance Relative to S&P 500 Index EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
INDEX 500 PORTFOLIO S&P 500 INDEX 12/31/87 $10,000 $10,000 12/31/88 $10,883 $11,660 12/31/89 $12,885 $15,356 12/31/90 $12,328 $14,880 12/31/91 $16,000 $19,419 12/31/92 $16,726 $20,894 12/31/93 $18,382 $23,005 12/31/94 $18,605 $23,281 12/31/95 $25,536 $31,988 12/31/96 $31,345 $39,281 12/31/97 $41,752 $52,362 AVERAGE ANNUAL TOTAL RETURN FOR PERIODS ENDED DECEMBER 31, 1997 ONE YEAR FIVE YEARS TEN YEARS Index 500 Portfolio 33.20% 20.08% 15.36% S&P 500 Index 33.36% 20.18% 18.01%
Note to chart: 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. -- 11 Growth Stock Portfolio NORTHWESTERN MUTUAL SERIES FUND, INC. Schedule of Investments DECEMBER 31, 1997
MARKET VALUE COMMON STOCK (95.98%) SHARES (000'S) - -------------------------------------------------------------- BASIC MATERIALS (3.60%) E.I. du Pont de Nemours & Co. 32,000 $ 1,922 Ecolab, Inc. 82,700 4,585 Monsanto Co. 53,000 2,226 ----------- TOTAL 8,733 ----------- CAPITAL GOODS (10.28%) Allied Signal, Inc. 89,200 3,473 Avery Dennison Corporation 56,200 2,515 Boeing Company 56,400 2,760 Deere & Company 47,000 2,741 Emerson Electric Co. 37,400 2,111 General Electric Company 105,000 7,704 *Gulfstream Aerospace 60,000 1,755 Tyco International, Ltd. 42,000 1,893 ----------- TOTAL 24,952 ----------- COMMUNICATION SERVICES (2.25%) MCI Communications Corporation 62,000 2,654 *Teleport Communications 10,700 587 *WorldCom, Inc. 73,200 2,214 ----------- TOTAL 5,455 ----------- CONSUMER CYCLICAL (12.97%) *Barnes & Noble, Inc. 70,000 2,336 Borg Warner Automotive 48,200 2,506 *Federated Department Stores, Inc. 39,500 1,701 Ford Motor Company 41,100 2,001 Harley Davidson, Inc. 96,400 2,639 Home Depot, Inc. 47,550 2,800 *Kohls Department Stores 72,800 4,960 Mattel, Inc. 63,281 2,357 McGraw-Hill Companies, Inc. 26,200 1,939 New York Times Company 51,100 3,379 *Promus Hotels 6,612 278 Tribune Company 27,600 1,718 Wal-Mart Stores, Inc. 72,400 2,855 ----------- TOTAL 31,469 ----------- CONSUMER STAPLES (17.29%) *Benckiser N V 77,300 3,179 Campbell Soup Company 52,000 3,023 Dial Corp. 131,000 2,727 Walt Disney Company 28,900 2,863 Gillette Company 19,500 1,959 Hershey Foods Corp. 57,000 3,530 McDonald's Corporation 24,400 1,165 Nabisco Holdings Corp. 39,700 1,923 Newell Co. 84,500 3,591 Pepsico, Inc. 90,000 3,279 Philip Morris Companies 85,500 3,874 Procter & Gamble Company 48,400 3,863 Unilever N.V. 50,400 3,147 MARKET VALUE COMMON STOCK (95.98%) SHARES (000'S) - -------------------------------------------------------------- CONSUMER STAPLES (CONTINUED) Walgreen Company 122,200 $ 3,834 ----------- TOTAL 41,957 ----------- ENERGY (10.28%) Amoco Company 30,200 2,571 British Petroleum Co. Ltd. 36,900 2,940 Diamond Offshore Drilling, Inc. 50,000 2,406 Exxon Corporation 26,400 1,615 *Falcon Drilling, Inc. 34,600 1,213 Mobil Corporation 38,000 2,743 Schlumberger Limited 44,000 3,542 Tosco Corporation 79,200 2,995 Transocean Offshore, Inc. 39,600 1,908 Unocal Corp. 48,600 1,886 *Western Atlas International, Inc. 15,300 1,132 ----------- TOTAL 24,951 ----------- FINANCE (13.52%) Associates First Capital Corporation 55,000 3,912 Banc One Corporation 52,000 2,824 Bank New York, Inc. 23,200 1,341 BankAmerica Corporation 52,800 3,855 Chase Manhattan Corporation 23,040 2,523 Citicorp 25,000 3,161 First Union Corporation 55,000 2,819 Franklin Resources 39,400 3,425 Merrill Lynch & Co. 28,000 2,042 Morgan Stanley, Dean Witter, Discover & Co. 64,900 3,837 Travelers Group, Inc. 57,000 3,071 ----------- TOTAL 32,810 ----------- HEALTHCARE (8.72%) Bristol Myers Squibb Co. 37,700 3,567 Guidant Corp. 18,300 1,139 *Healthsouth Corp. 109,924 3,050 Johnson & Johnson 36,500 2,404 Eli Lilly & Company 57,400 3,996 Merck & Co., Inc. 24,800 2,635 Pfizer, Inc. 58,500 4,362 ----------- TOTAL 21,153 ----------- TECHNOLOGY (12.39%) *Cisco Systems Incorporated 45,000 2,509 Compaq Computer Corp. 44,200 2,495 *DST Systems, Inc. 54,400 2,322 First Data Corporation 51,100 1,495 *Fiserv 95,100 4,672 W.W. Grainger, Inc. 14,700 1,429 Hewlett-Packard Company 36,800 2,300 Intel Corp. 30,000 2,108 International Business Machines 35,200 3,681 Lucent Technologies, Inc. 15,171 1,212 *Microsoft Corporation 29,400 3,800
--- 12 NORTHWESTERN MUTUAL SERIES FUND, INC. Schedule of Investments DECEMBER 31, 1997
MARKET VALUE COMMON STOCK (95.98%) SHARES (000'S) - -------------------------------------------------------------- TECHNOLOGY (CONTINUED) Motorola , Inc. 26,800 $ 1,529 *Quantum Corp. 26,400 530 ----------- TOTAL 30,082 ----------- TRANSPORTATION (3.70%) *AMR Corporation 19,400 2,493 Canadian National Railway Co. 70,500 3,331 *Midwest Express Holdings, Inc. 21,200 823 Southwest Airlines Co. 94,500 2,327 ----------- TOTAL 8,974 ----------- UTILITIES (0.98%) Sonat, Inc. 52,000 2,379 ----------- TOTAL COMMON STOCK 232,915 ----------- MARKET VALUE MONEY MARKET INVESTMENTS (4.02%) PAR (000'S) - -------------------------------------------------------------- GOVERNMENT (0.28%) Federal Home Loan Mortgage Corp., 5.61%, 02/13/98 $ 700,000 $ 695 ----------- PERSONAL CREDIT INSTITUTIONS (3.74%) Associates Corp. of N A, 6.74%, 01/02/98 1,100,000 1,099 Commercial Credit Corp., 5.65%, 01/28/98 2,000,000 1,992 General Electric Capital, 5.88%, 01/21/98 3,000,000 2,990 General Motors Acceptance Corp., 5.84%, 01/14/98 3,000,000 2,995 ----------- TOTAL 9,076 ----------- TOTAL MONEY MARKET INVESTMENTS 9,771 ----------- TOTAL GROWTH STOCK PORTFOLIO (COST $170,190)^ $ 242,686 -----------
*Non-Income Producing. ^At December 31, 1997, the aggregate cost of securities for federal income tax purposes was $170,202 and the net unrealized appreciation of investments based on that cost was $72,484 which is comprised of $74,074 aggregate gross unrealized appreciation and $1,590 aggregate gross unrealized depreciation. The Accompanying Notes are an Integral Part of the Financial Statements --- 13 GROWTH AND INCOME STOCK PORTFOLIO - -------------------------------------------------------------------------------- Objective: Portfolio Strategy: Invested Assets: Long-term growth of capital and Actively manage a portfolio of equity $370,013,960 income, consistent with securities with a goal of exceeding the total moderate investment risk return of the S&P 500 Index.
GROWTH AND INCOME STOCK 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 similar to that of the S&P 500 Index is normally maintained, with the emphasis on undervalued stocks within each industry group; 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. The Portfolio performed well throughout 1997, benefiting from strength in the equity market as a whole and from favorable stock selection. The practice of seeking undervalued names within each market segment proved particularly successful in several instances. For example, during most of the year, the decision was made not to hold Merck, a very high quality drug company whose stock price had been bid up excessively in the market's apparent preference for a few big names. Late in the year, the stock pulled back in response to new competitive pressures for several of Merck's drugs. Further analysis, taking into account a slower growth rate, revealed a buying opportunity; by year end, Merck was a major holding with a significant gain. An especially fortunate circumstance was the acquisition of MCI, a significant holding, by Worldcom at a price that represented a substantial gain; the acquisition was scheduled to be consummated early in 1998. During the fourth quarter, in the wake of the economic crisis in Asia, several defensive moves were made including a move from money center to regional banks and increased focus on domestic oil refiners, particularly Tosco, in the energy sector. 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 Finance 15% Basic Materials/Capital Goods 15% Consumer Staples 13% Health Care 11% Technology 11% Energy 10% Consumer Cyclicals 9% Other Industries 16%
Top 10 Holdings 12/31/97 EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC Tosco Corporation 3.18% Merck & Company, Inc. 2.80% MCI Communications Corporation 2.69% Warner-Lambert Company 2.58% Anheuser Busch Companies, Inc. 2.34% Tele Communications, Inc. 2.30% Cooper Industries, Inc. 2.21% United Healthcare Corp. 2.21% Starwood Lodging Trust 2.19% First Union Corporation 2.18%
Performance Relative to S&P 500 Index EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
GROWTH & INCOME STOCK PORTFOLIO S&P 500 INDEX 5/3/94 $10,000 $10,000 12/31/94 $10,034 $10,320 12/31/95 $13,156 $14,180 12/31/96 $15,783 $17,413 12/31/97 $20,523 $23,211 AVERAGE ANNUAL TOTAL RETURN FOR PERIODS ENDED DECEMBER 31, 1997 ONE YEAR SINCE INCEPTION Growth & Income Stock Portfolio 30.33% 21.69% S&P 500 Index 33.36% 25.86%
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, 1997
MARKET VALUE COMMON STOCK (98.52%) SHARES (000'S) - -------------------------------------------------------------- BASIC MATERIALS (3.10%) Albemarle Corporation 50,400 $ 1,203 Allegheny Teledyne, Inc. 62,000 1,604 Dow Chemical Company 34,700 3,522 Temple-Inland, Inc. 98,400 5,148 ----------- TOTAL 11,477 ----------- CAPITAL GOODS (11.47%) AlliedSignal, Inc. 176,800 6,884 Boeing Company 31,100 1,522 *Coltec Industries, Inc. 159,100 3,689 Cooper Industries, Inc. 167,000 8,183 Emerson Electric Co. 67,800 3,826 Johnson Controls, Inc. 75,000 3,581 Tenneco, Inc. 114,100 4,507 Tyco International Ltd. 100,748 4,540 Waste Management, Inc. 207,800 5,715 ----------- TOTAL 42,447 ----------- COMMUNICATION SERVICES (6.48%) GTE Corporation 148,800 7,775 MCI Communications Corporation 232,800 9,967 Sprint Corp. 106,300 6,232 ----------- TOTAL 23,974 ----------- CONSUMER CYCLICAL (9.22%) Circuit City Stores-Circuit City Group 82,200 2,923 *Federated Department Stores, Inc. 74,100 3,191 *Fruit Of The Loom, Incorporated 214,400 5,494 Goodyear Tire & Rubber Company 104,900 6,674 International Game Technology 139,000 3,510 *ITT Corp. 28,400 2,354 *Toys "R" Us, Inc. 190,400 5,986 *Westpoint Stevens, Inc. 84,200 3,978 ----------- TOTAL 34,110 ----------- CONSUMER STAPLES (13.01%) Anheuser Busch Companies, Inc. 196,400 8,642 Pepsico, Inc. 114,500 4,172 Philip Morris Companies, Inc. 155,500 7,046 Procter & Gamble Company 99,500 7,941 Ralston Purina Group 56,800 5,279 *Tele Communications, Inc. 300,289 8,502 Time Warner, Inc. 34,100 2,114 *U S West Inc. 154,100 4,450 ----------- TOTAL 48,146 ----------- ENERGY (10.07%) Atlantic Richfield Co. 42,400 3,397 British Petroleum Co. Ltd 395 31 Exxon Corporation 82,300 5,036 *Input/Output, Inc. 216,800 6,436 Mobil Corporation 96,400 6,959 Occidental Petroleum, Inc. 123,300 3,614 MARKET VALUE COMMON STOCK (98.52%) SHARES (000'S) - -------------------------------------------------------------- ENERGY (CONTINUED) Tosco Corporation 311,300 $ 11,771 ----------- TOTAL 37,244 ----------- FINANCE (14.75%) Ambac, Inc. 41,600 1,914 American Express Corporation 40,600 3,624 Chase Manhattan Corporation 31,900 3,493 First Union Corporation 157,130 8,053 Fleet Financial Group Inc. 52,500 3,934 Marsh & McLennan Companies, Inc. 99,700 7,434 MBIA, Inc. 14,500 969 Morgan Stanley, Dean Witter, Discover & Co. 74,400 4,399 Nationsbank Corp. 88,700 5,394 Providian Financial Corp. 99,300 4,487 Simon Debartolo Group, Inc. 123,200 4,027 Southtrust, Inc. 28,300 1,795 Washington Mutual, Inc. 79,300 5,060 ----------- TOTAL 54,583 ----------- HEALTHCARE (11.11%) *Alza Corporation 84,100 2,675 *Crescendo Pharmaceuticals 4,605 53 *Humana, Inc. 128,600 2,669 Merck & Company, Inc. 97,400 10,349 Pfizer, Inc. 102,500 7,643 United Healthcare Corp. 164,500 8,174 Warner-Lambert Company 77,000 9,548 ----------- TOTAL 41,111 ----------- REAL ESTATE INVESTMENT TRUSTS (2.19%) Starwood Lodging Trust 140,100 8,108 ----------- TECHNOLOGY (11.34%) Autodesk, Inc. 75,700 2,801 *Bay Networks, Inc. 91,400 2,336 *Cisco Systems, Inc. 49,150 2,740 *EMC Corporation 274,400 7,529 First Data Corporation 212,600 6,219 International Business Machines Corporation 71,800 7,508 *Learning, Inc. 2,000 32 Motorola, Inc. 44,600 2,545 Perkin Elmer Corporation 31,200 2,217 *Quantum Corporation 175,100 3,513 *Sun Microsystems, Inc. 113,200 4,514 ----------- TOTAL 41,954 ----------- TRANSPORTATION (2.60%) *Consolidated Freightways Corp. 800 11 Union Pacific Corporation 108,400 6,768 *Wisconsin Central Transportation 121,000 2,828 ----------- TOTAL 9,607 -----------
--- 15 NORTHWESTERN MUTUAL SERIES FUND, INC. Schedule of Investments DECEMBER 31, 1997
MARKET VALUE COMMON STOCK (98.52%) SHARES (000'S) - -------------------------------------------------------------- UTILITIES (3.18%) Dominion Resources, Inc. 69,300 $ 2,950 Enron Corp. 116,000 4,821 New England Electric Systems 47,900 2,048 Northern States Power Company 33,400 1,945 ----------- TOTAL 11,764 ----------- TOTAL COMMON STOCK 364,525 ----------- MARKET VALUE MONEY MARKET INSTRUMENT (1.48%) SHARES (000'S) - -------------------------------------------------------------- PERSONAL CREDIT INSTITUTIONS (1.48%) Associates Corporation of N.A., 6.74%, 1/2/98 1,500,000 $ 1,500 General Electric Capital Corp., 5.649%, 1/28/98 1,000,000 996 General Motors Acceptance Corp., 5.839%, 1/14/98 3,000,000 2,993 ----------- TOTAL 5,489 ----------- TOTAL MONEY MARKET INSTRUMENTS 5,489 ----------- TOTAL GROWTH & INCOME PORTFOLIO (COST $342,839)^ $ 370,014 -----------
* Non-Income Producing. ^At December 31, 1997, the aggregate cost of securities for federal income tax purposes was $343,055 and the net unrealized appreciation of investments based on that cost was $26,959 which is comprised of $37,245 aggregate gross unrealized appreciation and $10,286 aggregate gross unrealized depreciation. The Accompanying Notes are an Integral Part of the Financial Statements --- 16 INDEX 500 STOCK PORTFOLIO - -------------------------------------------------------------------------------- Objective: Portfolio Strategy: Invested Assets: Long-term capital appreciation Invest in a portfolio designed to approximate $1,152,781,092 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 Corporation, 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. Sector Allocation EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC Finance 16% Consumer Staples 15% Basic Materials/Capital Goods 13% Technology 12% Health Care 11% Consumer Cyclical 9% Energy 8% Other Industries 11% S&P 500 Index Futures 5%
Top 10 Holdings 12/31/97 EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
COMPANY % OF NET ASSETS General Electric Company 3.03% The Coca-Cola Company 2.09% Microsoft Corporation 1.96% Exxon Corporation 1.91% Merck & Co., Inc. 1.62% Royal Dutch Petroleum Co., ADR 1.47% Intel Corp. 1.45% Philip Morris Companies, Inc. 1.39% Procter & Gamble Company 1.36% International Business Machines Corp. 1.30%
Performance Relative to S&P 500 Index EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
INDEX 500 PORTFOLIO S&P 500 INDEX 12/31/87 $10,000 $10,000 12/31/88 $10,883 $11,660 12/31/89 $12,885 $15,356 12/31/90 $12,328 $14,880 12/31/91 $16,000 $19,419 12/31/92 $16,726 $20,894 12/31/93 $18,382 $23,005 12/31/94 $18,605 $23,281 12/31/95 $25,536 $31,988 12/31/96 $31,345 $39,281 12/31/97 $41,752 $52,362 Actively managed prior to 4/30/93 Indexed on 4/30/93 Average Annual Total Return For Periods Ended December 31, 1997 One Year Five Years Ten Years Index 500 Portfolio 33.20% 20.08% 15.36% S&P 500 Index 33.36% 20.18% 18.01%
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 12/31/87. 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, 1997
MARKET VALUE COMMON STOCK (95.34%) SHARES (000'S) - -------------------------------------------------------------- BASIC MATERIALS (4.37%) Air Products & Chemicals, Inc. 16,000 $ 1,316 Alcan Aluminum Limited 33,100 914 Allegheny Teledyne Inc. 25,635 663 Aluminum Co. of America 25,300 1,780 Archer-Daniels-Midland Company 81,548 1,769 *Armco Inc. 15,600 77 ASARCO, Inc. 6,100 137 Barrick Gold Corporation 54,300 1,011 Battle Mountain Gold Company 33,500 197 Bemis Company, Inc. 7,700 339 *Bethlehem Steel Corporation 16,400 141 B. F. Goodrich Company 7,900 327 Boise Cascade Corporation 8,100 245 Champion International 14,000 634 Cyprus Amax Minerals Co. 13,650 210 Dow Chemical Company 33,200 3,370 E.I. du Pont de Nemours & Co. 164,700 9,892 Eastman Chemical Company 11,425 681 *Echo Bay Mines Limited Co. 20,300 49 Ecolab, Inc. 9,400 521 Engelhard Corp. 21,000 365 *FMC Corporation 5,400 363 Freeport-McMoRan Copper & Gold, Inc. 29,000 457 Georgia Pacific Corp. 13,300 808 *Georgia Pacific Corp. (Timber Group) 12,900 293 Great Lakes Chemical 8,700 390 Hercules Incorporated 14,400 721 Homestake Mining Company 21,400 190 Inco Limited 24,300 413 Inland Steel Industries, Inc. 7,100 122 International Flavors & Fragrances, Inc. 15,900 819 International Paper Company 44,000 1,898 Louisiana Pacific Corporation 15,900 302 Mead Corp. 15,200 426 Monsanto Company 85,800 3,604 Morton International, Inc. 19,400 667 Nalco Chemical Company 9,700 384 Newmont Mining Corporation 22,780 669 Nucor Corp. 12,800 618 Phelps Dodge Corporation 8,800 548 Pioneer Hi-Bred International 9,600 1,030 Placer Dome Incorporated 34,900 443 Potlatch Corporation 4,200 181 PPG Industries Inc. 26,100 1,491 Praxair 23,000 1,035 Reynolds Metals Company 10,700 642 Rohm & Haas Company 9,000 862 Sigma-Aldrich Corp. 14,600 580 *Stone Container Corporation 14,500 151 MARKET VALUE COMMON STOCK (95.34%) SHARES (000'S) - -------------------------------------------------------------- BASIC MATERIALS (CONTINUED) Temple-Inland Inc. 8,300 $ 434 Union Camp Corporation 10,100 542 Union Carbide Corporation 18,100 777 USX-U.S. Steel Group, Inc. 12,500 391 W.R. Grace & Co. 10,600 853 Westvaco Corporation 14,850 467 Weyerhaeuser Company 29,000 1,423 Willamette Industries Inc. 16,200 521 Worthington Industries 14,050 232 ------------- TOTAL 50,385 ------------- CAPITAL GOODS (8.84%) Aeroquip-Vickers Inc. 4,100 201 Allied Signal Inc. 82,400 3,208 AMP Incorporated 31,972 1,343 Avery Dennison Corporation 15,000 671 Ball Corporation 4,400 155 Boeing Company 145,776 7,134 Briggs & Stratton Corporation 3,700 180 Browning-Ferris Industries Inc. 28,800 1,066 Case Corporation 10,900 659 Caterpillar Inc. 54,800 2,661 Cincinnati Milacron Inc. 5,800 150 Cooper Industries, Inc. 17,800 872 Corning Inc. 33,600 1,247 Crane Co. 6,650 288 Crown Cork & Seal Company, Inc. 18,700 937 Cummins Engine Company, Inc. 5,600 331 Deere & Company 36,700 2,140 Dover Corporation 32,400 1,170 Eaton Corporation 11,300 1,009 Emerson Electric Co. 64,600 3,646 Fluor Corporation 12,200 456 Foster Wheeler Corporation 5,900 160 General Dynamics Corporation 9,100 787 General Electric Company 476,800 34,985 General Signal Corporation 7,300 308 Harnischfeger Industries, Inc. 7,200 254 Honeywell Inc. 18,600 1,274 Illinois Tool Works Inc. 36,300 2,183 Ingersoll-Rand Company 24,200 980 Johnson Controls Inc. 12,200 583 Lockheed Martin Corporation 28,254 2,783 McDermott International, Inc. 8,100 297 Millipore Corp. 6,300 214 Minnesota Mining & Manufacturing Co. 60,500 4,965 Moore Corporation Ltd. 12,910 195 NACCO Industries, Inc. 1,200 129 National Service Industries, Inc. 6,600 327 *Navistar International Corporation 10,600 263 Northrop Grumman Corporation 9,700 1,116
--- 18 NORTHWESTERN MUTUAL SERIES FUND, INC. Schedule of Investments DECEMBER 31, 1997
MARKET VALUE COMMON STOCK (95.34%) SHARES (000'S) - -------------------------------------------------------------- CAPITAL GOODS (CONTINUED) *Owens-Illinois, Inc. 20,400 $ 774 Paccar Incorporated 11,370 597 *Pall Corporation 18,500 383 Parker-Hannifin Corporation 16,275 747 Pitney Bowes Inc. 21,000 1,889 Raychem Corp. 12,700 547 Raytheon Company--Class A 6,549 323 Raytheon Company--Class B 34,400 1,737 Rockwell International Corporation 30,400 1,588 Tenneco Inc. 24,800 980 Textron Inc. 24,000 1,500 *Thermo Electron Corporation 21,900 975 Thomas & Betts Corporation 8,000 378 Timken Company 9,200 316 Tyco International Ltd. 77,600 3,497 United Technologies Corp. 34,300 2,497 Waste Management Inc. 66,000 1,815 ------------- TOTAL 101,870 ------------- COMMUNICATION SERVICES (6.61%) *Airtouch Communications Inc. 73,400 3,051 ALLTEL Corporation 27,200 1,117 Ameritech Corporation 80,100 6,448 AT&T Corporation 236,600 14,492 Bell Atlantic Corporation 113,042 10,287 Bellsouth Corporation 144,400 8,132 Frontier Corporation 23,900 575 GTE Corporation 139,200 7,273 MCI Communications Corporation 100,800 4,316 SBC Communications Incorporated 133,049 9,746 Sprint Corporation 62,700 3,676 U S WEST Communications Group 69,800 3,150 *WorldCom Inc. 131,400 3,975 ------------- TOTAL 76,238 ------------- CONSUMER CYCLICAL (8.98%) American Greetings Corp. 11,000 430 Armstrong World Industries Inc. 5,900 441 *Autozone, Inc. 22,000 638 Black & Decker Corporation 13,700 535 Brunswick Corporation 14,500 440 *Cendant Corporation 113,454 3,900 Centex Corporation 4,200 264 *Charming Shoppes Incorporated 15,400 72 Chrysler Corporation 98,200 3,455 Circuit City Stores, Inc. 14,300 509 Cognizant Corporation 23,900 1,065 Cooper Tire & Rubber Company 11,500 280 *Costco Companies, Inc. 30,907 1,379 Dana Corporation 15,200 722 Dayton Hudson Corporation 31,700 2,140 Dillard Department Stores, Inc. 16,300 575 Dow Jones & Company, Inc. 14,000 752 MARKET VALUE COMMON STOCK (95.34%) SHARES (000'S) - -------------------------------------------------------------- CONSUMER CYCLICAL (CONTINUED) Dun & Bradstreet Corporation 24,800 $ 767 Echlin Inc. 9,200 333 *Federated Department Stores, Inc. 30,500 1,313 Fleetwood Enterprises, Inc. 5,200 221 Ford Motor Company 173,900 8,467 *Fruit of the Loom, Incorporated 10,700 274 Gannet Company Inc. 41,300 2,553 Gap, Inc. 58,500 2,073 General Motors Corp. 106,200 6,438 Genuine Parts Company 26,200 889 Giant Food Inc. 8,700 293 Goodyear Tire & Rubber Company 22,700 1,444 H & R Block, Inc. 15,200 681 Harcourt General 10,300 564 *Harrahs Entertainment 14,700 277 Hasbro Inc. 18,450 581 Hilton Hotels Corporation 36,400 1,083 Home Depot, Inc. 106,298 6,258 Interpublic Group of Cos. Inc. 18,100 902 *ITT Corp. 17,000 1,409 ITT Industries Inc. 17,200 540 J.C. Penney Company, Inc. 36,200 2,183 Jostens, Inc. 5,700 131 *K Mart Corporation 70,900 820 Kaufman & Broad Home Corp. 5,700 128 Knight-Ridder Inc. 12,700 660 Laidlaw Transportation Limited 47,900 653 The Limited Inc. 39,500 1,007 Liz Claiborne, Inc. 10,200 426 Lowe's Companies, Inc. 25,300 1,206 Marriott International 18,500 1,281 Masco Corporation 24,000 1,221 Mattel, Inc. 42,288 1,575 May Department Stores Company 33,900 1,786 Maytag Corporation 14,400 537 McGraw-Hill Companies Inc. 14,400 1,066 Mercantile Stores Company 5,400 329 Meredith Corporation 7,800 278 *Mirage Resorts, Incorporated 26,000 592 New York Times Company 14,000 926 Nike, Inc. 42,000 1,649 Nordstrom, Inc. 11,200 676 Owens Corning Fiberglass Corp. 7,800 266 Pep Boys - Manny, Moe & Jack 9,200 220 Pulte Corporation 3,100 130 *Reebok International Ltd. 8,200 236 Russell Corp. 5,300 141 Sears Roebuck & Co. 57,000 2,579 Service Corporation International 36,600 1,352 Sherwin-Williams Company 25,100 697 Snap-On Incorporated 8,950 390 Springs Industries, Inc. 2,900 151
--- 19 NORTHWESTERN MUTUAL SERIES FUND, INC. Schedule of Investments DECEMBER 31, 1997
MARKET VALUE COMMON STOCK (95.34%) SHARES (000'S) - -------------------------------------------------------------- CONSUMER CYCLICAL (CONTINUED) Stanley Works 13,000 $ 613 Tandy Corporation 15,400 594 Times Mirror Company 13,900 855 TJX Companies, Inc. 23,800 818 *Toys R Us 41,500 1,305 Tribune Company 17,900 1,114 TRW, Inc. 17,900 955 VF Corporation 18,300 841 *Viacom Incorporated 51,356 2,128 Wal-Mart Stores Inc. 329,800 13,006 Whirlpool Corporation 10,900 600 *Woolworth Corp. 19,600 399 ------------- TOTAL 103,477 ------------- CONSUMER STAPLES (14.64%) Adolph Coors Co. 5,400 180 Alberto-Culver Company 8,200 263 Albertson's, Inc. 35,800 1,696 American Stores Co. 39,700 816 Anheuser-Busch Companies, Inc. 71,600 3,150 Avon Products, Inc. 19,300 1,185 Campbell Soup Company 67,000 3,894 Cardinal Health Inc. 15,800 1,187 CBS Corporation 102,800 3,026 *Clear Channel Communications, Inc. 14,300 1,136 Clorox Company 15,100 1,194 The Coca-Cola Company 361,200 24,065 Colgate-Palmolive Co. 43,100 3,168 Comcast Corp. 50,850 1,605 Conagra Inc. 68,900 2,261 CPC International, Inc. 20,900 2,252 CVS Corporation 25,000 1,602 Darden Restaurant, Inc. 22,300 279 Deluxe Corp. 12,000 414 Fleming Companies, Inc. 5,500 74 Fort James Corporation 27,500 1,052 Fortune Brands, Inc. 25,000 927 General Mills, Inc. 23,300 1,669 Gillette Company 81,500 8,186 Great Atlantic & Pacific Tea Co., Inc. 5,600 166 H.J. Heinz Company 53,750 2,731 Hershey Foods Corp. 20,800 1,288 John H. Harland Company 4,500 95 Kellogg Company 60,100 2,982 Kimberly-Clark Corporation 81,044 3,996 *King World Productions, Inc. 5,400 312 *Kroger Company 37,000 1,367 Longs Drug Stores Corp. 5,700 183 McDonald's Corporation 100,200 4,785 Newell Company 23,200 986 Pepsico Inc. 222,900 8,122 MARKET VALUE COMMON STOCK (95.34%) SHARES (000'S) - -------------------------------------------------------------- CONSUMER STAPLES (CONTINUED) Philip Morris Companies, Inc. 352,900 $ 15,991 Procter & Gamble Company 196,700 15,699 Quaker Oats Company 20,000 1,055 R.R. Donnelley & Sons Company 21,300 793 Ralston Purina Group 15,500 1,441 Rite Aid Corporation 17,900 1,051 Rubbermaid, Inc. 21,800 545 Safety-Kleen Corp. 8,500 233 Sara Lee Corporation 69,900 3,936 Seagram Company Ltd. 54,000 1,745 Supervalue Inc. 8,800 369 Sysco Corporation 25,400 1,157 *Tele Communications, Inc. 73,776 2,061 Time Warner Inc. 81,500 5,053 *Tricon Global Restaurants, Inc. 22,290 648 Tupperware 8,900 248 *U S West Media Group 88,300 2,550 Unilever, N.V. 93,200 5,819 UST Incorporated 26,800 990 Walgreen Company 71,700 2,250 Walt Disney Company 98,269 9,735 Wendy's International, Inc. 19,200 462 Whitman Corp. 14,800 386 Winn-Dixie Stores, Inc. 21,700 948 Wm. Wrigley Jr. Company 16,900 1,345 ------------- TOTAL 168,804 ------------- ENERGY (7.97%) Amerada Hess Corporation 13,400 735 Amoco Company 71,500 6,086 Anadarko Petroleum Corporation 8,700 528 Apache Corporation 13,200 463 Ashland, Inc. 10,900 585 Atlantic Richfield Company 46,700 3,742 Baker Hughes Inc. 24,600 1,073 Burlington Resource Inc. 25,720 1,153 Chevron Corp. 95,300 7,338 Dresser Industries, Inc. 25,500 1,069 Exxon Corporation 360,300 22,046 Halliburton Company 36,900 1,916 Helmerich & Payne, Inc. 3,600 244 Kerr-McGee Corporation 6,900 437 Mobil Corporation 114,400 8,258 Occidental Petroleum Corporation 48,200 1,413 *ORYX Energy Company 15,400 393 Pennzoil Company 6,900 461 Phillips Petroleum Company 38,400 1,867 *Rowan Companies, Inc. 12,600 384 Royal Dutch Petroleum Co., ADR 312,300 16,923 Schlumberger Limited 72,100 5,804 Sun Company, Inc. 10,600 446 Texaco Inc. 76,900 4,181
--- 20 NORTHWESTERN MUTUAL SERIES FUND, INC. Schedule of Investments DECEMBER 31, 1997
MARKET VALUE COMMON STOCK (95.34%) SHARES (000'S) - -------------------------------------------------------------- ENERGY (CONTINUED) Union Pacific Resource Group 36,992 $ 897 Unocal Corp. 36,000 1,397 USX-Marathon Group 41,900 1,414 *Western Atlas International Inc. 7,900 585 ------------- TOTAL 91,838 ------------- FINANCE (16.37%) Aetna, Inc. 21,863 1,543 Allstate Corporation 63,314 5,754 American Express Company 68,300 6,096 American General Corporation 36,125 1,953 American International Group, Inc. 102,125 11,106 Aon Corporation 24,400 1,430 Banc One Corporation 84,845 4,608 Bank of New York Company, Inc. 55,300 3,197 BankAmerica Corporation 101,700 7,424 BankBoston Corporation 21,200 1,991 Bankers Trust New York Corporation 14,500 1,630 Barnett Banks Inc. 29,000 2,084 BB&T Corporation 11,900 762 Beneficial Corporation 7,700 640 Charles Schwab Corporation 38,500 1,615 Chase Manhattan Corporation 61,656 6,751 The Chubb Corporation 25,100 1,898 CIGNA Corporation 10,800 1,869 Cincinnati Financial Corporation 4,000 563 Citicorp 66,700 8,433 Comerica, Inc. 15,400 1,390 Conseco Inc. 27,400 1,245 Corestates Financial Corp. 29,500 2,362 Countrywide Credit Industries, Inc. 15,600 669 Federal Home Loan Mortgage Corp. 101,200 4,244 Federal National Mortgage Association 154,500 8,816 Fifth Third Bankcorp 22,450 1,835 First Chicago NBD Corporation 43,028 3,593 First Union Corporation 91,470 4,688 Fleet Financial Group Inc. 36,430 2,730 General Re Corporation 11,600 2,459 Golden West Financial Corporation 8,300 812 Green Tree Financial Corporation 19,800 519 H.F. Ahmanson & Company 14,200 951 Hartford Financial Services Group Inc. 17,200 1,609 Household International Inc. 15,600 1,990 Huntington Bancshares, Inc. 27,800 1,001 J.P. Morgan & Company, Inc. 26,100 2,946 Jefferson-Pilot Corp. 10,300 802 KeyCorp 31,600 2,238 Lincoln National Corporation 14,800 1,156 Loews Corp. 16,700 1,772 MARKET VALUE COMMON STOCK (95.34%) SHARES (000'S) - -------------------------------------------------------------- FINANCE (CONTINUED) Marsh & McLennan Companies Inc. 24,500 $ 1,827 MBIA Incorporated 13,000 869 MBNA Corp. 72,950 1,992 Mellon Bank Corporation 36,600 2,219 Merrill Lynch & Co. 48,300 3,523 MGIC Investment Corp. 16,600 1,104 Morgan Stanley, Dean Witter, Discover & Co. 85,505 5,055 National City Corp. 31,300 2,058 NationsBank Corp. 103,656 6,304 Norwest Corporation 109,200 4,218 PNC Bank Corp. 44,700 2,551 Progressive Corporation 10,500 1,259 Providian Financial Corporation 13,700 619 Republic New York Corporation 8,000 914 SAFECO Inc. 20,300 990 St. Paul Companies, Inc. 12,200 1,001 State Street Corporation 23,400 1,362 SunAmerica, Inc. 28,400 1,214 Suntrust Banks Inc. 31,100 2,220 Synovus Financial Corp. 25,500 835 Torchmark Corporation 20,200 850 Transamerica Corporation 9,200 980 Travelers Group Inc. 166,641 8,978 UNUM Corporation 20,300 1,104 US Bancorp of Oregon 35,677 3,994 USF&G Corp. 16,200 357 Wachovia Corporation 29,700 2,409 Washington Mutual, Inc. 36,440 2,325 Wells Fargo & Company 12,833 4,356 ------------- TOTAL 188,661 ------------- HEALTHCARE (10.60%) Abbott Laboratories Inc. 112,100 7,350 Allergan Incorporated 9,400 315 *Alza Corp. 12,400 394 American Home Products Corporation 94,500 7,229 *Amgen Inc. 38,600 2,089 Bausch & Lomb Inc. 8,100 321 Baxter International Inc. 40,700 2,053 Becton, Dickinson & Company 17,800 890 *Beverly Enterprises, Inc. 15,500 202 Biomet, Inc. 16,200 415 *Boston Scientific Corp. 28,300 1,298 Bristol-Myers Squibb Company 145,200 13,740 Brown-Forman Corporation 10,000 553 C.R. Bard, Inc. 8,400 263 Columbia/HCA Healthcare Corporation 95,200 2,820 Eli Lilly & Company 162,000 11,279 Guidant Corp. 21,600 1,345
--- 21 NORTHWESTERN MUTUAL SERIES FUND, INC. Schedule of Investments DECEMBER 31, 1997
MARKET VALUE COMMON STOCK (95.34%) SHARES (000'S) - -------------------------------------------------------------- HEALTHCARE (CONTINUED) *Healthsouth Corporation 56,400 $ 1,565 *Humana, Inc. 23,800 494 Johnson & Johnson 193,800 12,767 Mallinckrodt, Inc. 10,700 407 Manor Care, Inc. 9,300 326 Medtronic, Inc. 68,100 3,562 Merck & Co., Inc. 175,900 18,689 Pfizer Inc. 188,200 14,033 Pharmacia & Upjohn Inc. 73,905 2,707 *Pharmerica, Inc. 7,054 73 Schering-Plough Corporation 106,700 6,629 *St. Jude Medical, Inc. 13,400 409 *Tenet Healthcare Corp. 44,100 1,461 United Healthcare Corp. 27,300 1,356 U.S. Surgical Corporation 10,700 314 Warner-Lambert Company 39,500 4,898 ------------- TOTAL 122,246 ------------- TECHNOLOGY (12.49%) *3COM Corporation 50,200 1,754 Adobe Systems, Inc. 10,600 437 *Advanced Micro Devices, Inc. 20,500 368 *Andrew Corporation 13,137 315 *Apple Computer, Inc. 18,500 243 *Applied Materials Inc. 53,100 1,600 Autodesk, Inc. 7,000 259 Automatic Data Processing, Inc. 42,600 2,615 *Bay Networks 30,700 785 *Cabletron Systems Inc. 23,000 345 *Ceridian Corp. 11,100 509 *Cisco Systems Incorporated 146,150 8,148 Compaq Computer Corporation 110,140 6,216 Computer Associates International Inc. 79,512 4,204 *Computer Sciences Corp. 11,200 935 *Data General Corporation 7,000 122 *Dell Computer Corp. 48,200 4,049 *Digital Equipment Corporation 22,300 825 *DSC Communications Corp. 17,100 410 Eastman Kodak Company 47,400 2,883 EG&G, Inc. 6,700 139 *EMC Corporation 71,900 1,973 Equifax, Inc. 22,000 780 First Data Corporation 64,600 1,890 Harris Corporation 11,600 532 HBO & Company 28,800 1,382 Hewlett-Packard Company 151,500 9,469 Ikon Office Solutions 19,300 543 Intel Corp. 237,800 16,705 International Business Machines Corp. 143,000 14,952 *KLA-Tencor Corporation 12,200 471 MARKET VALUE COMMON STOCK (95.34%) SHARES (000'S) - -------------------------------------------------------------- TECHNOLOGY (CONTINUED) *LSI Logic Corp. 20,700 $ 409 Lucent Technologies Inc. 93,440 7,464 *Micron Technology 30,700 798 *Microsoft Corporation 174,500 22,554 Motorola, Inc. 86,700 4,947 *National Semiconductor Corporation 23,500 610 *NextLevel Systems, Inc. 21,500 384 Northern Telecom Limited 38,200 3,400 *Novell, Inc. 50,800 381 *Oracle Corporation 142,700 3,184 *Parametric Technology Company 18,500 876 Perkin-Elmer Corporation 6,400 455 Polaroid Corporation 6,600 321 Scientific-Atlanta, Inc. 11,300 189 *Seagate Technology Inc. 35,600 685 Shared Medical Systems Corp. 3,600 238 *Silicon Graphics 25,800 321 *Sun Microsystems Inc. 53,700 2,141 Tektronix, Inc. 7,250 288 *Tellabs Inc. 26,400 1,396 Texas Instruments Incorporated 55,800 2,511 *Unisys Corporation 25,500 354 W.W. Grainger, Inc. 7,200 700 Xerox Corporation 47,300 3,491 ------------- TOTAL 143,955 ------------- TRANSPORTATION (1.22%) *AMR Corporation 13,400 1,722 Burlington Northern Santa Fe 22,607 2,101 Caliber System, Inc. 5,700 278 CSX Corporation 31,700 1,712 Delta Air Lines Inc. 10,700 1,273 *Federal Express Corp. 16,700 1,020 Norfolk Southern Corporation 54,900 1,692 Ryder System, Inc. 11,300 370 Southwest Airlines Co. 31,900 786 Union Pacific Corporation 36,000 2,248 *USAir Group, Inc. 13,200 825 ------------- TOTAL 14,027 ------------- UTILITIES (3.25%) American Electric Power Co. Inc. 27,600 1,425 Baltimore Gas & Electric Co. 21,500 732 Carolina Power & Light Company 22,000 934 Central & South West Corporation 30,900 836 Cinergy Corporation 22,917 878 Coastal Corp. 15,400 954 Columbia Gas System Inc. 8,100 636 Consolidated Edison Co. of New York 34,200 1,402 Consolidated Natural Gas Company 13,900 841
--- 22 NORTHWESTERN MUTUAL SERIES FUND, INC. Schedule of Investments DECEMBER 31, 1997
MARKET VALUE COMMON STOCK (95.34%) SHARES (000'S) - -------------------------------------------------------------- UTILITIES (CONTINUED) Dominion Resources Inc. 27,100 $ 1,153 DTE Energy Company 21,100 732 Duke Energy Corp. 52,365 2,900 Eastern Enterprises 3,000 135 Edison International 57,800 1,571 Enron Corp 44,600 1,854 Entergy Corporation 35,100 1,051 Firstenergy Corporation 33,500 972 FPL Group, Inc. 26,500 1,568 GPU, Inc. 17,600 741 Houston Industries Incorporated 41,562 1,109 *Niagara Mohawk Power Corporation 21,000 221 Nicor Inc. 7,100 300 Northern States Power Company 10,700 623 ONEOK, Inc. 4,600 186 P P & L Resources, Inc. 24,000 575 Pacific Enterprises 12,100 455 PacifiCorp 43,100 1,177 PECO Energy Company 32,400 786 Peoples Energy Corporation 5,100 201 PG&E Corp. 63,900 1,945 Public Service Enterprise Group, Inc. 33,800 1,071 Sonat Inc. 12,500 572 Southern Company 99,700 2,580 Texas Utilities Company 35,015 1,455 UNICOM Corp. 31,500 969 Union Electric Company 14,900 644 Williams Companies Inc. 46,200 1,301 ------------- TOTAL 37,485 ------------- TOTAL COMMON STOCK $ 1,098,986 -------------
MARKET VALUE MONEY MARKET INSTRUMENT (4.66%) PAR (000'S) - ------------------------------------------------------------- GOVERNMENT (0.46%) +FHLMC Discount Note, 5.61%, 2/13/98 $ 5,500,000 $ 5,463 ------------ FINANCE (1.30%) +Chrysler Financial Corporation, 5.74%, 1/23/98 15,000,000 14,948 ------------ PERSONAL CREDIT INSTITUTIONS (2.90%) +General Electric Capital Corp., 5.88%, 1/21/98 20,000,000 19,935 +General Electric Capital Corp., 5.65%, 1/28/98 10,300,000 10,256 +General Motors Acceptance Corp., 5.84%, 1/14/98 3,200,000 3,193 ------------ TOTAL 33,384 ------------ TOTAL MONEY MARKET INVESTMENTS 53,795 ------------ TOTAL INDEX 500 STOCK PORTFOLIO (COST $713,039)^ $ 1,152,781 ------------
ADR-American Depository Receipt *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, 1997 is summarized below:
UNREALIZED NUMBER OF EXPIRATION APPRECIATION ISSUER CONTRACTS DATE (000'S) - -------------------- ---------- ------------ ------------- S&P 500 Stock Index 214 March 1998 669
^At December 31, 1997, the aggregate cost of securities for federal income tax purposes was $713,085 and the net unrealized appreciation of investments based on that cost was $439,696 which is comprised of $449,824 aggregate gross unrealized appreciation and $10,128 aggregate gross unrealized depreciation. The Accompanying Notes are an Integral Part of the Financial Statements --- 23 BALANCED PORTFOLIO - -------------------------------------------------------------------------------- Objective: Portfolio Strategy: Invested Assets: A high level of current income Achieve consistent returns and low volatility $2,774,618,510 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. Liquidity is maintained by holding a portion of the Portfolio in money market investments, which are high quality short-term debt securities. The Portfolio benefited from continued emphasis on equities during 1997, as the stock market continued its climb. A portion of the equity position is held in S&P 500 Index futures to provide flexibility to move in and out of markets quickly. During the year the exposure to bonds was increased, in the belief that inflation and interest rates would continue to moderate. As anticipated, bond prices moved up, with particular strength in the latter part of the year. A moderate cash position at year end will make it possible to increase investments in equities or bonds, as market conditions indicate. Percentage Holdings 12/31/97 EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC Equities (including futures) 57% Bonds 34% Short-Term Investments 9%
Performance Relative to Relevant Indices EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
BALANCED PORTFOLIO MERRILL LYNCH DOMESTIC MASTER INDEX S&P 500 INDEX ML 91-DAY T-BILL 12/87 10,000 $10,000 $10,000 $10,000 12/88 10,808 $10,804 $11,660 $10,693 12/89 12,500 $12,336 $15,356 $11,654 12/90 12,691 $13,459 $14,880 $12,635 12/91 15,652 $15,593 $19,419 $13,442 12/92 16,531 $16,774 $20,894 $13,970 12/93 18,168 $18,456 $23,005 $14,415 12/94 18,198 $17,935 $23,281 $15,019 12/95 23,000 $21,256 $31,988 $15,925 12/96 26,094 $22,019 $39,281 $16,770 12/97 31,709 $24,146 $52,362 $17,663 Average Annual Total Return For Periods Ended December 31, 1997 One Year Five Years Ten Years Balanced Portfolio 21.52% 13.91% 12.23% S&P 500 Index 33.36% 20.18% 18.01% MLDM Index 9.66% 7.56% 9.22% ML 91-Day T-Bill 5.33% 4.80% 5.85%
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 12/31/87. 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. -- 24 Balanced Portfolio NORTHWESTERN MUTUAL SERIES FUND, INC. Schedule of Investments DECEMBER 31, 1997
MARKET VALUE BONDS (33.39%) SHARES/PAR (000'S) - ------------------------------------------------------------- CORPORATE BONDS (9.52%) AEROSPACE AND DEFENSE (0.27%) Lockheed Corporation, 6.75%, 3/15/03 3,000,000 $ 3,055 Northrop Grumman Corporation, 7.75%, 3/1/16 4,000,000 4,385 ------------ TOTAL 7,440 ------------ AUTO-RELATED (0.16%) Hertz Corp., 9.04%, 6/14/00 4,100,000 4,373 ------------ BANK HOLDING COMPANIES (0.74%) BT Institutional Capital Trust, 7.75%, 12/01/26 1,000,000 1,020 BT Preferred Capital Trust II, 7.875%, 2/25/27 6,000,000 6,228 First Union Institutional Capital II, 7.85%, 1/1/27 3,750,000 3,950 J.P. Morgan Capital Trust, 7.54%, 01/15/27 1,315,000 1,363 Security Capital Industrial Trust, 7.3%, 5/15/01 8,000,000 8,007 ------------ TOTAL 20,568 ------------ CHEMICALS AND ALLIED PRODUCTS (0.46%) Dow Cap B.V., 8.5%, 6/8/10 8,200,000 9,489 Nova Chemicals Ltd., 7.25%, 8/15/28 3,000,000 3,246 ------------ TOTAL 12,735 ------------ COMMUNICATIONS (0.75%) Panamasat, 0%, 08/01/03 2,100,000 2,119 Tele Communications, Inc., 7.375%, 2/15/00 8,000,000 8,155 U.S. West Capital Funding Inc., 7.9%, 2/1/27 4,000,000 4,335 WorldCom, Inc., 7.75%, 4/1/07 5,500,000 6,074 ------------ TOTAL 20,683 ------------ CONSTRUCTION MACHINERY (0.09%) Bufete Industrial SA ADS, 11.375%, 7/15/99 (144a) 2,500,000 2,575 ------------ DIVERSIFIED/CONGLOMERATE (0.15%) Hutchison Whampoa Finance (C) Limited, 6.988%, 08/01/37 (144A) 4,500,000 4,185 ------------ DURABLE GOODS (0.23%) Tata Engineering & Locomotive, 7.875%, 07/15/07 6,500,000 6,463 ------------ ELECTRIC SERVICES (2.48%) Columbia Gas System Inc., 7.32%, 11/28/10 7,571,000 7,864 Commonwealth Edison Co., 6.5%, 4/15/00 4,000,000 4,021 MARKET VALUE BONDS (33.39%) SHARES/PAR (000'S) - ------------------------------------------------------------- ELECTRIC SERVICES (CONTINUED) Dayton Power & Light Company, 8.15%, 1/15/26 5,750,000 $ 6,368 Long Island Lighting Co., 8.625%, 4/15/04 2,700,000 2,726 Long Island Lighting Co., 9.625%, 7/1/24 1,500,000 1,544 Ohio Edison Company, 7.375%, 9/15/02 3,665,000 3,795 Pacific Gas & Electric Co., 7.25%, 3/1/26 9,050,000 9,413 PECO Energy Company, 7.75%, 3/1/23 8,850,000 9,225 Public Service Electric And Gas Co., 6.875%, 1/1/03 9,000,000 9,235 Southern California Edison Co., 7.25%, 3/1/26 10,000,000 10,334 Texas Utilities Electric Co., 7.875%, 3/1/23 4,000,000 4,272 ------------ TOTAL 68,797 ------------ ENERGY (0.47%) Barrett Resources Corporation, 7.55%, 2/01/07 5,000,000 5,186 Camuzzi Gas, 9.25%, 12/15/01 3,750,000 3,797 YPF Sociedad , 7.75%, 08/27/07 4,000,000 4,081 ------------ TOTAL 13,064 ------------ FINANCE (0.68%) Associates Corp. of North America, 7.95%, 2/15/10 5,550,000 6,267 Crown Cork & Seal Finance Plc, 6.75%, 12/15/03 8,000,000 8,180 Industrial Credit & Investment Corporation (144A), 7.55%, 08/15/07 5,000,000 4,450 ------------ TOTAL 18,897 ------------ FOOD AND BEVERAGE (0.40%) Coca Cola Enterprises, Inc., 8%, 1/4/05 10,000,000 11,003 ------------ GENERAL MERCHANDISE STORES (0.35%) May Department Stores Company, 7.45%, 10/15/16 4,000,000 4,286 Polysindo International, 11.375%, 06/15/06 6,500,000 5,330 ------------ TOTAL 9,616 ------------ INSTRUMENTS AND RELATED PRODUCTS (0.06%) Raytheon Company, 7.2%, 08/15/27 1,500,000 1,550 ------------ MOTION PICTURE (1.01%) News America Holdings Inc., 7.5%, 3/1/00 6,500,000 6,651
--- 25 NORTHWESTERN MUTUAL SERIES FUND, INC. Schedule of Investments DECEMBER 31, 1997
MARKET VALUE BONDS (33.39%) SHARES/PAR (000'S) - ------------------------------------------------------------- MOTION PICTURE (CONTINUED) News America Holdings Inc., 8.45%, 8/1/34 10,000,000 $ 12,120 Time Warner Entertainment Inc., 7.25%, 9/1/08 4,000,000 4,157 Time Warner Entertainment Inc., 8.375%, 3/15/23 3,000,000 3,422 Time Warner Entertainment Inc., 8.375%, 7/15/33 1,500,000 1,717 ------------ TOTAL 28,067 ------------ MOTOR VEHICLES (0.47%) General Motors Acceptance Corp., 6.625%, 10/1/02 5,000,000 5,075 General Motors Corporation, 8.8%, 3/1/21 6,500,000 8,058 ------------ TOTAL 13,133 ------------ PAPER AND ALLIED PRODUCTS (0.12%) Grupo Industrial Durango, 12.625%, 8/1/03 3,000,000 3,368 ------------ TECHNOLOGY (0.11%) International Business Machines, 6.22%, 08/01/27 3,000,000 3,051 ------------ TOBACCO(0.38%) Philip Morris Companies, 9.25%, 2/15/00 1,000,000 1,059 Philip Morris Companies, 7.25%, 1/15/03 5,000,000 5,161 RJR Nabisco Inc., 8.625%, 12/1/02 4,000,000 4,255 ------------ TOTAL 10,475 ------------ UTILITY (0.14%) Atlantic City Electric Company, 6.625%, 8/1/13 4,000,000 3,974 ------------ TOTAL CORPORATE BONDS 264,017 ------------ GOVERNMENT AND AGENCY RELATED BONDS (15.96%) FOREIGN GOVERNMENT BONDS (1.55%) Bonos Del Tesoro, 8.75%, 05/09/02 1,000,000 948 Federal Home Loan Mortgage Corporation, 7%, 06/15/03 7,250,000 7,403 Fidiecomisco Petacalco, 10.16%, 12/23/09 5,000,000 5,113 Ministry Finance Russia, 10%, 06/26/07 5,000,000 4,633 Peru Flirb Reduction Bond, 3.25%, 03/07/17 2,100,000 1,244 Poland, 12%, 10/12/01 23,000,000 4,857 Poland, 12%, 02/12/03 11,000,000 2,264 Poland, 14%, 02/12/00 9,500,000 2,286 Poland - Bear- PDI, 4%, 10/27/14 3,000,000 2,591 MARKET VALUE BONDS (33.39%) SHARES/PAR (000'S) - ------------------------------------------------------------- FOREIGN GOVERNMENT BONDS (CONTINUED) Province of Quebec, 6.5%, 1/17/06 7,500,000 $ 7,534 Russian Interest Notes, 6.718%, 12/02/15 5,800,000 4,075 ------------ TOTAL 42,948 ------------ FEDERAL GOVERNMENT AND AGENCIES (14.41%) Federal Home Loan Mortgage Corp., 6.5%, 04/01/11 20,988,207 21,040 Federal Home Loan Mortgage Corp., 7.5%, 10/01/26 32,418,032 33,212 Federal National Mortgage Assoc., 6.24%, 02/01/06 4,960,703 4,936 Federal National Mortgage Assoc., 6.315%, 03/01/06 5,235,418 5,232 Federal National Mortgage Assoc., 6.5%, 09/25/05 6,342,982 6,402 Federal National Mortgage Assoc., 6.75%, 12/25/23 6,500,000 6,508 Federal National Mortgage Assoc., 6.75%, 11/01/07 3,122,685 3,206 Federal National Mortgage Assoc., 6.834%, 07/01/03 3,250,147 3,330 Federal National Mortgage Assoc., 6.895%, 05/01/06 6,113,540 6,334 Federal National Mortgage Assoc., 6.9%, 04/01/06 2,464,064 2,553 Federal National Mortgage Assoc., 6.96%, 10/01/07 4,493,767 4,678 Federal National Mortgage Assoc., 7%, 4/1/26 25,426,394 25,662 Federal National Mortgage Assoc., 7%, 6/1/03 6,054,193 6,141 Federal National Mortgage Assoc., 7%, 6/25/10 8,070,000 8,224 Federal National Mortgage Assoc., 7.025%, 09/01/05 1,961,198 2,035 Federal National Mortgage Assoc., 7.045%, 08/01/05 7,746,629 8,037 Federal National Mortgage Assoc., 7.12%, 11/01/03 991,264 1,031 Federal National Mortgage Assoc., 7.23%, 01/25/22 8,000,000 8,324 Federal National Mortgage Assoc., 7.25%, 05/01/04 1,581,604 1,659 Federal National Mortgage Assoc., 8.4%, 05/01/04 10,910,000 12,028 Federal National Mortgage Assoc., 11%, 09/01/17 2,631,261 2,987 Federal National Mortgage Assoc., 11%, 12/01/12 320,460 359
--- 26 NORTHWESTERN MUTUAL SERIES FUND, INC. Schedule of Investments DECEMBER 31, 1997
MARKET VALUE BONDS (33.39%) SHARES/PAR (000'S) - ------------------------------------------------------------- FEDERAL GOVERNMENT AND AGENCIES (CONTINUED) Federal National Mortgage Assoc., 11%, 12/01/17 427,702 $ 486 Federal National Mortgage Assoc., 12%, 09/01/17 886,015 1,031 Federal National Mortgage Assoc., 12%, 09/01/12 2,822,655 3,250 Federal National Mortgage Assoc., 12%, 10/01/17 1,304,464 1,518 Federal National Mortgage Assoc., 12%, 12/01/12 465,908 537 Federal National Mortgage Assoc., 12%, 12/01/17 665,138 774 Federal National Mortgage Assoc., 13%, 11/01/12 480,018 562 Federal National Mortgage Assoc., 13%, 11/01/17 901,559 1,067 Federal National Mortgage Assoc., 13%, 12/01/17 503,209 593 Federal National Mortgage Assoc., 14%, 12/01/17 353,763 420 Government National Mortgage Assoc., 7%, 10/15/23 502,565 509 Government National Mortgage Assoc., 7%, 11/15/23 1,799,663 1,820 Government National Mortgage Assoc., 7%, 5/15/23 13,915,346 14,069 Government National Mortgage Assoc., 7%, 6/15/23 912,800 923 Government National Mortgage Assoc., 7%, 7/15/23 1,373,633 1,389 Government National Mortgage Assoc., 7%, 8/15/23 25,972 26 Government National Mortgage Assoc., 7%, 9/15/23 693,574 701 Government National Mortgage Assoc., 7.5%, 1/15/24 1,080,658 1,109 Government National Mortgage Assoc., 7.5%, 11/15/24 890,253 914 Government National Mortgage Assoc., 7.5%, 2/15/24 1,366,102 1,402 Government National Mortgage Assoc., 7.5%, 3/15/24 1,348,240 1,384 Government National Mortgage Assoc., 7.5%, 4/15/24 799,316 821 Government National Mortgage Assoc., 7.5%, 5/15/24 3,099,297 3,182 Government National Mortgage Assoc., 7.5%, 6/15/24 1,321,928 1,357 Government National Mortgage Assoc., 7.5%, 8/15/24 3,545,164 3,640 Government National Mortgage Assoc., 8.5%, 1/15/25 163,742 173 MARKET VALUE BONDS (33.39%) SHARES/PAR (000'S) - ------------------------------------------------------------- FEDERAL GOVERNMENT AND AGENCIES (CONTINUED) Government National Mortgage Assoc., 8.5%, 12/15/22 42,227 $ 48 Government National Mortgage Assoc., 8.5%, 12/15/24 20,974 22 Government National Mortgage Assoc., 8.5%, 11/15/25 20,178 22 Government National Mortgage Assoc., 8.5%, 1/15/26 630,722 662 Government National Mortgage Assoc., 8.5%, 10/15/22 234,286 249 Government National Mortgage Assoc., 8.5%, 11/15/24 181,746 192 Government National Mortgage Assoc., 8.5%, 2/15/25 162,822 173 Government National Mortgage Assoc., 8.5%, 2/15/26 37,406 39 Government National Mortgage Assoc., 8.5%, 3/15/26 33,693 34 Government National Mortgage Assoc., 8.5%, 4/15/26 2,222,633 2,337 Government National Mortgage Assoc., 8.5%, 5/15/22 7,200 8 Government National Mortgage Assoc., 8.5%, 5/15/26 2,984,211 3,135 Government National Mortgage Assoc., 8.5%, 6/15/24 19,823 21 Government National Mortgage Assoc., 8.5%, 7/15/21 127,832 136 Government National Mortgage Assoc., 8.5%, 7/15/24 304,738 322 Government National Mortgage Assoc., 8.5%, 8/15/24 117,792 125 Government National Mortgage Assoc., 8.5%, 9/15/21 143,829 153 Government National Mortgage Assoc., 8.5%, 9/15/22 187,022 199 Government National Mortgage Assoc., 8.5%, 9/15/24 239,149 253 U.S. Treasury, 7.25%, 08/15/04 6,000,000 6,486 U.S. Treasury, 6.375%, 5/15/99 45,600,000 46,013 U.S. Treasury, 6.375%, 8/15/27 8,500,000 8,962 U.S. Treasury, 6.625%, 2/15/27 23,000,000 24,962 U.S. Treasury, 6.625%, 5/15/07 45,000,000 47,644 U.S. Treasury, 6.75%, 8/15/26 24,850,000 27,358 U.S. Treasury, 6.125%, 8/15/07 3,500,000 3,597 U.S. Treasury, 6%, 7/31/02 9,000,000 9,096 ------------ TOTAL 399,823 ------------ TOTAL GOVERNMENT BONDS 442,771 ------------
--- 27 NORTHWESTERN MUTUAL SERIES FUND, INC. Schedule of Investments DECEMBER 31, 1997
MARKET VALUE BONDS (33.39%) SHARES/PAR (000'S) - ------------------------------------------------------------- MORTGAGE/ASSET BACKED SECURITIES (7.66%) AUTO-RELATED (0.93%) Eaglemark Trust, 6.75%, 11/15/02 (144a) 5,093,956 $ 5,136 Team Fleet Financing Corporation, 6.65%, 12/15/02 (144a) 11,800,000 11,945 Team Fleet Financing Corporation, 7.35%, 5/15/03 (144a) 3,000,000 3,118 CIT RV Trust, 6.25%, 1/15/11 3,009,955 3,016 Daimler-Benz Vehicle Trust, 5.85%, 7/20/03 2,554,960 2,552 ------------ 25,767 ------------ CREDIT CARD (0.90%) Charming Shoppes Master Trust, 7%, 4/15/03 5,000,000 5,056 Iroquis Trust, 6.68%, 11/10/03 15,000,000 15,028 Iroquis Trust, 6.752%, 06/25/07 4,750,000 4,766 ------------ 24,850 ------------ MANUFACTURED HOUSING (0.09%) Vanderbilt Mortgage and Finance, Inc., 7.19%, 02/07/14 2,500,000 2,596 ------------ COMMERCIAL MORTGAGES (5.03%) Asset Securitization Corporation - Class CS1, 1.257%, 11/13/26 IO 28,051,849 1,162 Asset Securitization Corporation - Class PS1, 1.367%, 02/14/41 IO 22,708,826 2,466 BankBoston Marine Asset Backed Trust - Class A6, 6.64%, 08/15/10 7,000,000 7,127 Chase Commercial Mortgage Securities Corp. - Class B, 6.6%, 12/12/29 8,500,000 8,563 Chase Commercial Mortgage Securities Corp. - Class A2, 6.6%, 12/12/29 2,500,000 2,500 Chase Commercial Mortgage Securities Corp. - Class D, 7.37%, 6/19/29 2,000,000 2,053 Citibank Credit Card Master Trust I - Class A, 0%, 08/15/06 17,000,000 11,219 Commercial Mortgage Acceptance Corporation - Class B, 6.647%, 12/15/30 2,500,000 2,495 Credit Suisse First Boston Mortgage Securities Corp. - Class D, 9.5914%, 4/25/25 (144a) 2,047,000 2,368 Credit Suisse First Boston Mortgage Securities Corp. - Class B, 9.5914%, 4/25/25 (144a) 3,000,000 3,550 Credit Suisse First Boston Mortgage Securities Corp. - Class A2, 7.26%, 6/20/29 (144a) 3,224,865 3,340 MARKET VALUE BONDS (33.39%) SHARES/PAR (000'S) - ------------------------------------------------------------- COMMERCIAL MORTGAGES (CONTINUED) Credit Suisse First Boston Mortgage Securities Corp. - Class B, 7.28%, 6/20/29 (144a) 3,250,000 $ 3,304 Credit Suisse First Boston Mortgage Securities Corp. - Class D, 7.46%, 6/20/29 (144a) 6,000,000 6,015 DLJ Mortgage Acceptance Corporation - Class A1B, 7.29%, 11/12/21 5,500,000 5,760 First Union-Lehman Brothers Commercial Mortgage Trust - Class C2, 7.02%, 11/18/29 10,500,000 10,591 First Union-Lehman Brothers Commercial Mortgage Trust - Class C1, 7.44%, 4/18/29 2,500,000 2,657 First Union-Lehman Brothers Commercial Mortgage Trust - Class IO, 1.307%, 4/18/29 IO 37,374,508 2,920 Fleetwood Credit Corporation Grantor Trust - Class A, 6.4%, 05/15/13 3,305,852 3,330 GMAC Commercial Mortgage Securities, Inc. - Class C, 7.81%, 10/15/11 (144a) 7,000,000 7,346 Kmart CMBS Financing, Inc. - Class D, 6.725%, 03/01/07 (144a) 4,500,000 4,500 Kmart CMBS Financing, Inc. - Class C, 6.325%, 03/01/07 (144a) 3,500,000 3,491 LB Commercial Conduit Mortgage Trust, 1.248%, 10/25/26 IO 127,014,625 8,108 LB Commercial Conduit Mortgage Trust - Class A3, 8.396%, 01/20/17 8,575,201 9,809 Merrill Lynch Mortgage Investors, Inc. - Class C, 7.12%, 06/18/29 6,000,000 6,198 Merrill Lynch Mortgage Investors, Inc. - Class E, 8.097%, 06/25/22 2,000,000 2,110 Merrill Lynch Mortgage Investors, Inc. - Class C, 8.879%, 11/25/20 5,845,000 6,023 Midland Realty Acceptance Corp. - Class AEC, 1.389%, 1/25/29 (144a) IO 29,304,058 2,289 NationsBank Lease Pass Thru Trust - Class 1, 7.442%, 1/10/11 (144a) 2,000,000 2,089 Nations Credit Grantor Trust - Class A1, 6.35%, 12/15/04 2,859,385 2,865 Red Mountain Funding LLC - Class E, 7.365%, 01/15/19 1,500,000 1,533
--- 28 NORTHWESTERN MUTUAL SERIES FUND, INC. Schedule of Investments DECEMBER 31, 1997
MARKET VALUE BONDS (33.39%) SHARES/PAR (000'S) - ------------------------------------------------------------- COMMERCIAL MORTGAGES (CONTINUED) Red Mountain Funding LLC - Class F, 7.471%, 01/15/19 1,800,000 $ 1,771 ------------ 139,552 ------------ OTHER ASSET BACKED (0.28%) Greentree Recreation & Consumer Trust, 6.49%, 05/15/00 3,733,988 3,750 Newcourt Equipment, 6.764%, 09/20/04 2,238,561 2,248 Newcourt Equipment, 7.734%, 09/20/04 1,790,849 1,798 ------------ 7,796 ------------ RESIDENTIAL MORTGAGES(0.43%) BCF L L C Mortgage Pass Thru Certificate, 7.75%, 3/25/37 (144a) 4,946,885 4,993 Rural Housing Trust, 6.33%, 4/1/26 7,054,500 6,993 ------------ 11,986 ------------ TOTAL MORTGAGE/ASSET BACKED SECURITIES 212,547 ------------ MUNICIPAL BONDS(0.25%) New Jersey Economic Development Authority, 0.00%, 2/15/25 17,000,000 2,853 New Jersey Economic Development Authority, 0.00%, 2/15/26 11,000,000 1,724 New Jersey Economic Development Authority, 7.425%, 2/15/29 2,250,000 2,465 ------------ TOTAL MUNICIPAL BONDS 7,042 ------------ TOTAL BONDS 926,377 ------------ COMMON STOCK (55.04%) - ------------------------------------------------------------- BASIC MATERIALS (2.52%) Air Products & Chemicals, Inc. 22,200 $ 1,826 Alcan Aluminum Limited 45,900 1,268 Allegheny Teledyne, Inc 35,562 920 Aluminum Co. of America 35,200 2,477 Archer Daniels Midland Company 113,273 2,456 *Armco, Inc. 21,700 107 ASARCO, Inc. 8,500 191 B.F. Goodrich Company 10,900 452 Barrick Gold Corporation 75,400 1,404 Battle Mountain Gold Company 46,500 273 Bemis Company, Inc. 10,700 471 *Bethlehem Steel Corporation 22,800 196 Boise Cascade Corporation 11,300 342 Champion International 19,400 879 Cyprus Minerals Co. 18,900 291 Dow Chemical Company 46,100 4,679 MARKET VALUE COMMON STOCK (55.04%) SHARES/PAR (000'S) - ------------------------------------------------------------- BASIC MATERIALS (CONTINUED) E.I. du Pont de Nemours & Co. 228,800 $ 13,742 Eastman Chemical Company 15,875 945 *Echo Bay Mines Limited Co. 28,200 69 Ecolab, Inc. 13,100 726 Engelhard Corp. 29,200 507 *FMC Corporation 7,500 505 Freeport-McMoRan Copper & Gold, Inc. 40,200 633 *Georgia Pac Corp.(Timber Group) 18,600 422 Georgia Pacific Corp. 18,500 1,124 Great Lakes Chemical 12,100 543 Hercules, Inc. 20,000 1,001 Homestake Mining Company 29,700 264 Inco Limited 33,800 575 Inland Steel Industries, Inc. 9,900 170 International Flavors & Fragrances, Inc. 22,100 1,138 International Paper Company 61,200 2,639 Louisiana Pacific Corporation 22,100 420 Mead Corp. 21,200 594 Monsanto Company 119,300 5,011 Morton International, Inc. 26,900 925 Nalco Chemical Company 13,500 534 Newmont Mining Corporation 31,630 929 Nucor Corp. 17,800 860 Phelps Dodge Corporation 12,200 759 Pioneer Hi-Bred International 13,300 1,426 Placer Dome, Inc. 48,500 615 Potlatch Corporation 5,800 249 PPG Industries, Inc. 36,300 2,074 Praxair 32,000 1,440 Reynolds Metals Company 14,900 894 Rohm & Haas Company 12,500 1,197 Sigma-Aldrich Corp. 20,300 807 *Stone Container Corporation 20,100 210 Temple-Inland Inc. 11,500 602 Union Camp Corporation 14,000 752 Union Carbide Corporation 25,100 1,078 USX-US Steel, Inc. 17,300 541 W.R. Grace & Co. 14,700 1,182 Westvaco Corporation 20,650 649 Weyerhaeuser Company 40,300 1,977 Willamette Industries, Inc. 22,500 724 Worthington Industries 19,600 323 ------------ TOTAL 70,007 ------------ CAPITAL GOODS (5.10%) Aeroquip-Vickers, Inc. 5,700 280 AlliedSignal, Inc. 114,500 4,458 AMP, Inc. 44,436 1,866 Avery Dennison Corp. 20,900 935 Ball Corporation 6,100 215
--- 29 NORTHWESTERN MUTUAL SERIES FUND, INC. Schedule of Investments DECEMBER 31, 1997
MARKET VALUE COMMON STOCK (55.04%) SHARES/PAR (000'S) - ------------------------------------------------------------- CAPITAL GOODS (CONTINUED) Boeing Company 202,618 $ 9,916 Briggs & Stratton Corporation 5,100 248 Browning-Ferris Industries, Inc. 40,000 1,480 Case Corporation 15,100 913 Caterpillar, Inc. 76,200 3,700 Cincinnati Milacron, Inc. 8,100 210 Cooper Industries, Inc. 24,700 1,210 Corning, Inc. 46,700 1,734 Crane Co. 9,250 401 Crown Cork & Seal, Inc. 26,000 1,303 Cummins Engine Company, Inc. 7,700 455 Deere & Company 51,000 2,974 Dover Corporation 45,000 1,626 Eaton Corporation 15,600 1,392 Emerson Electric Company 89,700 5,062 Fluor Corporation 17,000 635 Foster Wheeler Corporation 8,200 222 General Dynamics Corporation 12,600 1,089 General Electric Company 662,400 48,604 General Signal Corporation 10,200 430 Harnischfeger Industries, Inc. 10,000 353 Honeywell, Inc. 25,800 1,767 Illinois Tool Works, Inc. 50,500 3,036 Ingersoll-Rand Company 33,550 1,359 Johnson Controls, Inc. 16,900 807 Lockheed Martin Corporation 39,261 3,867 McDermott International, Inc. 11,200 410 Millipore Corp. 8,800 299 Minnesota Mining & Manufacturing Co. 84,100 6,901 Moore Corporation Ltd. 17,873 270 NACCO Industries, Inc. 1,600 172 National Service Industries, Inc. 9,100 451 *Navistar International Corp. 14,770 366 Northrop Grumman Corporation 13,500 1,553 *Owens-Illinois, Inc. 28,400 1,077 PACCAR, Inc. 15,790 829 Pall Corporation 25,766 533 Parker-Hannifin Corporation 22,600 1,037 Pitney Bowes, Inc. 29,200 2,626 Raychem Corp. 17,700 762 Raytheon Company-Class A 9,437 465 Raytheon Company-Class B 47,800 2,414 Rockwell International Corporation 42,200 2,205 Tenneco, Inc. 34,400 1,359 Textron, Inc. 33,400 2,088 *Thermo Electron Corporation 30,400 1,353 Thomas & Betts Corporation 11,100 524 Timken Company 12,700 437 Tyco International Ltd. 107,800 4,858 United Technologies Corp. 47,600 3,466 MARKET VALUE COMMON STOCK (55.04%) SHARES/PAR (000'S) - ------------------------------------------------------------- CAPITAL GOODS (CONTINUED) Waste Management, Inc. 91,700 $ 2,522 ------------ TOTAL 141,524 ------------ COMMUNICATION SERVICES (3.82%) *Airtouch Communications, Inc. 101,900 4,235 ALLTEL Corporation 37,800 1,552 Ameritech Corporation 111,300 8,960 AT&T Corporation 328,700 20,133 Bell Atlantic Corporation 157,090 14,295 Bellsouth Corporation 200,600 11,296 Frontier Corporation 33,200 799 GTE Corporation 193,500 10,110 MCI Communications Corporation 140,000 5,994 SBC Communications, Inc. 184,887 13,543 Sprint Corporation 87,100 5,106 U S WEST Communications Group 97,000 4,377 *WorldCom, Inc. 182,500 5,521 ------------ TOTAL 105,921 ------------ CONSUMER CYCLICAL (5.19%) American Greetings Corp. 15,200 595 Armstrong World Industries, Inc. 8,200 613 *AutoZone, Inc. 30,600 887 Black & Decker Corporation 19,100 746 Brunswick Corporation 20,100 609 *Cendant Corporation 160,254 5,509 Centex Corporation 5,900 371 *Charming Shoppes, Inc. 21,400 100 Chrysler Corporation 136,500 4,803 Circuit City Stores, Inc. 19,900 708 Cognizant Corp. 33,200 1,479 Cooper Tire & Rubber Company 15,900 388 *Costco Companies, Inc. 42,951 1,917 Dana Corporation 21,100 1,002 Dayton Hudson Corporation 44,000 2,970 Dillard's, Inc. 22,600 797 Dow Jones & Company, Inc. 19,400 1,042 Dun & Bradstreet Corporation 34,500 1,067 Echlin, Inc. 12,800 463 *Federated Department Stores, Inc. 42,300 1,822 Fleetwood Enterprises, Inc. 7,300 310 Ford Motor Company 241,700 11,768 *Fruit of the Loom, Inc. 14,800 379 Gannett Company, Inc. 57,300 3,542 General Motors Corp. 147,500 8,942 Genuine Parts Company 36,475 1,238 Giant Food, Inc. 12,100 408 Goodyear Tire & Rubber Company 31,600 2,011 H & R Block, Inc. 21,100 946 Harcourt General 14,300 783
--- 30 NORTHWESTERN MUTUAL SERIES FUND, INC. Schedule of Investments DECEMBER 31, 1997
MARKET VALUE COMMON STOCK (55.04%) SHARES/PAR (000'S) - ------------------------------------------------------------- CONSUMER CYCLICAL (CONTINUED) *Harrahs Entertainment 20,400 $ 385 Hasbro, Inc. 25,650 808 Hilton Hotels Corporation 50,600 1,505 Home Depot, Inc. 147,699 8,696 Interpublic Group of Cos., Inc. 25,200 1,255 *ITT Corp. 23,600 1,956 ITT Industries, Inc. 24,000 753 J.C. Penney Company, Inc. 50,400 3,040 Jostens, Inc. 7,900 182 *K Mart Corporation 98,500 1,139 Kaufman & Broad Home Corp. 7,900 177 Knight-Ridder, Inc. 17,700 920 Laidlaw Transportation Limited 66,500 906 Liz Claiborne, Inc. 14,200 594 Lowe's Companies, Inc. 35,200 1,679 Marriott International 25,700 1,780 Masco Corporation 33,400 1,699 Mattel, Inc. 58,760 2,189 May Department Stores Company 47,100 2,482 Maytag Corporation 19,900 743 McGraw-Hill Companies, Inc. 20,000 1,480 Mercantile Stores Company 7,400 450 Meredith Corporation 10,800 385 *Mirage Resorts, Inc. 36,200 824 New York Times Company 19,400 1,283 Nike, Inc. 58,400 2,292 Nordstrom, Inc. 15,600 942 Owens Corning Fiberglass Corp. 10,800 369 Pep Boys - Manny, Moe & Jack 12,800 306 Pulte Corporation 4,300 180 *Reebok International Ltd. 11,400 328 Russell Corp. 7,400 197 Sears Roebuck & Co. 79,200 3,584 Service Corporation International 50,900 1,880 Sherwin-Williams Company 34,900 968 Snap-On, Inc. 12,350 539 Springs Industries, Inc. 4,100 213 Tandy Corporation 21,400 825 The Gap, Inc. 81,300 2,881 The Limited, Inc. 54,900 1,400 The Stanley Works 18,000 849 Times Mirror Company 19,400 1,193 TJX Companies, Inc. 33,000 1,134 *Toys R Us, Inc. 57,700 1,814 Tribune Company 24,800 1,544 TRW, Inc. 24,900 1,329 VF Corporation 25,400 1,166 Viacom Incorporated 71,356 2,956 Wal-Mart Stores, Inc. 458,200 18,070 Whirlpool Corporation 15,100 830 MARKET VALUE COMMON STOCK (55.04%) SHARES/PAR (000'S) - ------------------------------------------------------------- CONSUMER CYCLICAL (CONTINUED) *Woolworth Corp. 27,300 $ 556 ------------ TOTAL 143,870 ------------ CONSUMER STAPLES (8.45%) Adolph Coors Co. 7,500 249 Alberto-Culver Company 11,400 366 Albertson's, Inc. 49,700 2,355 American Stores Co. 55,100 1,133 Anheuser-Busch Companies, Inc. 99,500 4,378 Avon Products, Inc. 26,800 1,645 Campbell Soup Company 93,100 5,411 Cardinal Health, Inc. 22,000 1,653 CBS Corp. 142,800 4,204 *Clear Channel Communications, Inc. 19,800 1,573 Clorox Company 20,900 1,652 Colgate-Palmolive Co. 59,900 4,403 Comcast Corp. 70,550 2,227 Conagra, Inc. 95,700 3,140 CPC International Corp. 29,100 3,136 CVS Corporation 34,800 2,229 Darden Restaurant, Inc. 31,000 388 Deluxe Corp. 16,700 576 Fleming Companies, Inc. 7,600 102 Fort James Corporation 38,200 1,461 Fortune Brands, Inc. 34,700 1,286 General Mills, Inc. 32,400 2,321 Gillette Company 113,300 11,380 Great Atlantic & Pacific Tea Co., Inc. 7,700 229 H.J. Heinz Company 74,750 3,798 Hershey Foods Corp. 28,900 1,790 John H. Harland Company 6,300 132 Kellogg Company 83,500 4,144 Kimberly-Clark Corporation 112,632 5,554 *King World Productions, Inc. 7,400 427 Longs Drug Stores Corp. 7,900 254 McDonald's Corporation 139,200 6,647 Newell Co. 32,200 1,369 PepsiCo, Inc. 309,700 11,285 Philip Morris Companies, Inc. 490,200 22,212 Procter & Gamble Company 273,300 21,813 Quaker Oats Company 27,800 1,466 R.R. Donnelley & Sons Company 29,600 1,103 Ralston Purina Group 21,600 2,007 Rite Aid Corporation 24,900 1,461 Rubbermaid, Inc. 30,300 758 Safety-Kleen Corp. 11,800 324 Sara Lee Corporation 97,200 5,474 Seagram Company Ltd. 75,000 2,423 Supervalue, Inc. 12,300 515 Sysco Corporation 35,300 1,608
--- 31 NORTHWESTERN MUTUAL SERIES FUND, INC. Schedule of Investments DECEMBER 31, 1997
MARKET VALUE COMMON STOCK (55.04%) SHARES/PAR (000'S) - ------------------------------------------------------------- CONSUMER STAPLES (CONTINUED) *Tele Communications, Inc. 102,414 $ 2,861 The Coca Cola Company 501,800 33,432 *The Kroger Company 51,500 1,902 Time Warner, Inc. 113,300 7,025 *Tricon Global Restaurants 30,990 901 Tupperware 12,400 345 *U S West Media Group 122,700 3,543 Unilever N.V. 129,500 8,085 UST, Inc. 37,200 1,374 Walgreen Company 99,600 3,125 Walt Disney Company 136,636 13,536 Wendy's International, Inc. 26,600 640 Whitman Corp. 20,500 534 Winn-Dixie Stores, Inc. 30,100 1,315 Wm. Wrigley Jr. Company 23,500 1,869 ------------ TOTAL 234,548 ------------ ENERGY (4.60%) Amerada Hess Corporation 18,600 1,021 Amoco Company 99,300 8,453 Anadarko Petroleum Corporation 12,100 734 Apache Corporation 18,300 642 Ashland, Inc. 15,100 811 Atlantic Richfield Company 64,900 5,200 Baker Hughes, Inc. 34,100 1,488 Burlington Resource, Inc. 35,675 1,599 Chevron Corp. 132,500 10,203 Dresser Industries, Inc. 35,400 1,485 Exxon Corporation 500,600 30,630 Halliburton Company 51,300 2,664 Helmerich & Payne, Inc. 5,100 346 Kerr-McGee Corporation 9,600 608 Mobil Corporation 159,000 11,478 Occidental Petroleum Corporation 67,000 1,964 *ORYX Energy Company 21,300 543 Pennzoil Company 9,500 635 Phillips Petroleum Company 53,300 2,592 *Rowan Companies, Inc. 17,500 534 Royal Dutch Petroleum Co., ADR 433,800 23,507 Schlumberger Limited 100,200 8,066 Sun Company, Inc. 14,700 618 Texaco, Inc. 106,900 5,812 Union Pacific Resource Group 51,358 1,245 Unocal Corp. 50,000 1,940 USX-Marathon Group 58,300 1,967 *Western Atlas International, Inc. 10,900 806 ------------ TOTAL 127,591 ------------ FINANCE (9.45%) Aetna, Inc. 30,293 2,138 Allstate Corporation 88,047 8,001 American Express Company 94,900 8,470 American General Corporation 50,203 2,714 MARKET VALUE COMMON STOCK (55.04%) SHARES/PAR (000'S) - ------------------------------------------------------------- FINANCE (CONTINUED) American International Group, Inc. 141,875 $ 15,429 Aon Corporation 33,850 1,984 Banc One Corporation 117,910 6,404 Bank of New York Company, Inc. 76,800 4,440 BankAmerica Corporation 141,300 10,315 BankBoston Corporation 29,500 2,771 Bankers Trust New York Corporation 20,100 2,260 Barnett Banks, Inc. 40,200 2,889 BB&T Corporation 15,700 1,006 Beneficial Corporation 10,800 898 Charles Schwab Corporation 53,550 2,246 Chase Manhattan Corporation 85,724 9,387 CIGNA Corporation 15,000 2,596 Cincinnati Financial Corp. 6,100 859 Citicorp 92,700 11,721 Comerica, Inc. 21,300 1,922 Conseco, Inc. 38,000 1,727 Corestates Financial Corp. 41,000 3,283 Countrywide Credit Industries, Inc. 21,700 930 Fannie Mae 214,700 12,251 Federal Home Loan Mortgage Corp. 140,600 5,896 Fifth Third Bancorp 31,150 2,547 First Chicago NBD Corporation 59,805 4,994 First Union Corporation 127,010 6,509 Fleet Finl Group, Inc. 50,619 3,793 General Re Corporation 16,100 3,413 Golden West Financial Corporation 11,500 1,125 Green Tree Financial Corporation 27,500 720 H.F. Ahmanson & Company 19,700 1,319 Hartford Financial Services Group, Inc. 23,900 2,236 Household International, Inc. 21,600 2,755 Huntington Bancshares, Inc. 38,700 1,393 J.P. Morgan & Company, Inc. 36,200 4,086 Jefferson-Pilot Corp. 14,350 1,118 KeyCorp 43,900 3,109 Lincoln National Corporation 20,600 1,609 Loews Corp. 23,300 2,473 Marsh & McLennan Companies, Inc. 34,100 2,543 MBIA, Inc. 18,100 1,209 MBNA Corp. 101,355 2,768 Mellon Bank Corporation 50,900 3,086 Merrill Lynch & Co. 67,000 4,887 MGIC Investment Corp. 23,100 1,536 Morgan Stanley, Dean Witter, Discover & Co. 118,780 7,023
--- 32 NORTHWESTERN MUTUAL SERIES FUND, INC. Schedule of Investments DECEMBER 31, 1997
MARKET VALUE COMMON STOCK (55.04%) SHARES/PAR (000'S) - ------------------------------------------------------------- FINANCE (CONTINUED) National City Corp. 43,500 $ 2,860 NationsBank Corp. 144,022 8,758 Norwest Corporation 151,700 5,859 PNC Bank Corp. 62,100 3,544 Progressive Corporation 14,600 1,750 Providian Financial Corporation 19,000 859 Republic New York Corporation 11,100 1,267 SAFECO Corp. 28,200 1,375 St. Paul Companies, Inc. 17,000 1,395 State Street Corporation 32,500 1,891 SunAmerica, Inc. 39,500 1,689 SunTrust Banks, Inc. 43,300 3,091 Synovus Financial Corporation 35,400 1,159 The Chubb Corporation 34,900 2,639 Torchmark Corporation 28,000 1,178 Transamerica Corporation 12,800 1,363 Travelers Group, Inc. 231,438 12,469 U.S. Bancorp 49,529 5,544 UNUM Corporation 28,200 1,533 USF&G Corp. 22,400 494 Wachovia Corporation 41,300 3,350 Washington Mutual, Inc. 50,680 3,234 Wells Fargo & Company 17,766 6,030 ------------ TOTAL 262,119 ------------ HEALTHCARE (6.12%) Abbott Laboratories 155,700 10,208 Allergan, Inc. 13,100 440 *ALZA Corporation 17,200 547 American Home Products Corporation 131,200 10,037 *Amgen, Inc. 53,600 2,901 Bausch & Lomb, Inc. 11,200 444 Baxter International, Inc. 56,500 2,850 Becton, Dickinson & Company 24,700 1,235 *Beverly Enterprises, Inc. 22,400 291 Biomet, Inc. 22,500 577 *Boston Scientific Corp. 39,300 1,803 Bristol-Meyers Squibb Company 201,700 19,086 Brown-Forman Corp. 14,000 774 C.R. Bard, Inc. 11,600 363 Columbia/HCA Healthcare Corporation 132,350 3,921 Eli Lilly and Company 225,100 15,673 Guidant Corp. 30,000 1,868 *HEALTHSOUTH Corporation 78,400 2,176 *Humana, Inc. 33,100 687 Johnson & Johnson 269,200 17,734 Mallinckrodt, Inc. 14,800 562 Manor Care, Inc. 12,900 452 Medtronic, Inc. 94,600 4,949 Merck & Co., Inc. 244,400 25,967 MARKET VALUE COMMON STOCK (55.04%) SHARES/PAR (000'S) - ------------------------------------------------------------- HEALTHCARE (CONTINUED) Pfizer, Inc. 261,500 $ 19,498 Pharmacia & Upjohn, Inc. 102,730 3,762 *Pharmerica, Inc. 10,194 105 Schering-Plough Corporation 148,200 9,207 *St. Jude Medical, Inc. 18,550 566 *Tenet Healthcare Corp. 61,300 2,031 U.S. Surgical Corporation 14,800 433 United Healthcare Corp. 37,900 1,883 Warner-Lambert Company 54,900 6,808 ------------ TOTAL 169,838 ------------ TECHNOLOGY (7.21%) *3COM Corporation 69,700 2,435 Adobe Systems, Inc. 14,700 606 *Advanced Micro Devices, Inc. 28,500 511 *Andrew Corporation 18,262 438 *Apple Computer, Inc. 25,800 339 *Applied Materials, Inc. 73,800 2,223 Autodesk, Inc. 9,700 359 Automatic Data Processing, Inc. 59,200 3,633 *Bay Networks 42,600 1,089 *Cabletron Systems, Inc. 31,900 479 *Ceridian Corp. 15,500 710 *Cisco Systems, Inc. 203,100 11,323 Compaq Computer Corporation 152,990 8,634 Computer Associates International, Inc. 110,412 5,838 *Computer Sciences Corp. 15,600 1,303 *Data General Corporation 9,700 169 *Dell Computer Corp. 66,900 5,620 *Digital Equipment Corporation 30,900 1,143 *DSC Communications Corp. 23,800 571 Eastman Kodak Company 65,900 4,008 EG&G, Inc. 9,300 194 *EMC Corporation 99,800 2,738 Equifax, Inc. 30,500 1,081 First Data Corporation 89,800 2,627 Harris Corporation 16,100 739 HBO & Company 40,100 1,925 Hewlett-Packard Company 210,500 13,156 Ikon Office Solutions 26,900 757 Intel Corp. 330,400 23,211 International Business Machines Corporation 198,700 20,777 *KLA-Tencor Corporation 16,900 653 *LSI Logic Corp. 28,700 567 Lucent Technologies, Inc. 129,843 10,371 *Micron Technology 42,600 1,108 *Microsoft Corporation 242,500 31,343 Motorola, Inc. 120,400 6,870 *National Semiconductor Corporation 32,700 848
--- 33 NORTHWESTERN MUTUAL SERIES FUND, INC. Schedule of Investments DECEMBER 31, 1997
MARKET VALUE COMMON STOCK (55.04%) SHARES/PAR (000'S) - ------------------------------------------------------------- TECHNOLOGY (CONTINUED) *NextLevel Systems, inc. 29,800 $ 533 Northern Telecom Limited 53,000 4,717 *Novell, Inc. 70,600 530 *Oracle Corporation 198,250 4,423 *Parametric Technology Company 25,800 1,222 Perkin-Elmer Corporation 8,900 632 Polaroid Corporation 9,200 448 Scientific-Atlanta, Inc. 15,700 263 *Seagate Technology, Inc. 49,500 953 Shared Medical Systems Corp. 5,000 330 *Silicon Graphics 35,800 445 *Sun Microsystems, Inc. 74,600 2,975 Tektronix, Inc. 10,100 401 *Tellabs, Inc. 36,600 1,935 Texas Instruments, Inc. 77,600 3,492 *Unisys Corporation 35,400 491 W.W. Grainger, Inc. 10,100 982 Xerox Corporation 65,800 4,857 ------------ TOTAL 200,025 ------------ TRANSPORTATION (0.70%) *AMR Corporation 18,600 2,390 Burlington Northern Santa Fe 31,433 2,921 Caliber System, Inc. 7,900 385 CSX Corporation 44,100 2,381 Delta Air Lines, Inc. 14,900 1,773 *Federal Express Corp. 23,300 1,423 Norfolk Southern Corporation 76,300 2,351 Ryder System, Inc. 15,700 514 Southwest Airlines Co. 44,300 1,091 Union Pacific Corporation 50,000 3,122 *US Airways Group, Inc. 18,400 1,150 ------------ TOTAL 19,501 ------------ UTILITIES (1.88%) American Electric Power Co., Inc. 38,300 1,977 Baltimore Gas & Electric Co. 29,900 1,018 Carolina Power & Light Company 30,600 1,299 Central & South West Corporation 42,900 1,161 Cinergy Corporation 31,905 1,222 Coastal Corp. 21,400 1,325 Columbia Gas System, Inc. 11,200 880 Consolidated Edison Co. of New York 47,600 1,952 Consolidated Natural Gas Company 19,300 1,168 Dominion Resources, Inc. 37,600 1,600 DTE Energy Company 29,400 1,020 Duke Energy Corp. 72,771 4,030 Eastern Enterprises 4,100 185 Edison International 80,300 2,183 Enron Corp. 61,900 2,573 Entergy Corporation 48,800 1,461 MARKET VALUE COMMON STOCK (55.04%) SHARES/PAR (000'S) - ------------------------------------------------------------- UTILITIES (CONTINUED) Firstenergy Corporation 46,600 $ 1,351 FPL Group, Inc. 36,800 2,178 GPU, Inc. 24,400 1,028 Houston Industries, Inc. 57,726 1,541 *Niagara Mohawk Power Corporation 29,200 307 NICOR, Inc. 9,800 413 Northern States Power Company 14,900 868 ONEOK, Inc. 6,200 250 Pacific Enterprises 16,900 636 PacifiCorp 59,900 1,636 PECO Energy Company 45,000 1,091 Peoples Energy Corporation 7,100 280 PG&E Corp. 88,700 2,700 PP&L Resources, Inc. 33,400 800 Public Service Enterprise Group, Inc. 46,900 1,486 Sonat, Inc. 17,300 791 Southern Company 138,600 3,586 Texas Utilities Company 48,695 2,024 UNICOM Corp. 43,800 1,347 Union Electric Company 20,700 895 Williams Companies, Inc. 64,300 1,825 ------------ TOTAL 52,087 ------------ TOTAL COMMON STOCK 1,527,031 ------------ SHORT TERM INVESTMENTS (11.57%) - ------------------------------------------------------------- MONEY MARKET INVESTMENTS (7.81%) ELECTRIC SERVICES (0.18%) Pacific Gas & Electric Co., 5.375%, 8/1/98 5,000,000 $ 4,987 ------------ ENERGY (0.04%) Petroleos Mexicanos, 8%, 7/1/98 (144a) 1,000,000 1,005 ------------ FOREIGN GOVERNMENT (0.32%) Bonos Del Tesoro, 8%, 12/13/98 3,500,000 3,465 Lukoil, Moscow, 8.4125%, 01/21/98 5,000,000 4,974 Government Trust Credit of Greece, 8%, 05/15/98 308,940 311 ------------ TOTAL 8,750 ------------ FINANCE (1.79%) Chrysler Financial Corp., 5.8%, 02/13/98 25,000,000 24,827 CIT Group Holdings, 5.85%, 01/29/98 25,000,000 24,886 ------------ TOTAL 49,713 ------------ GOVERNMENT (0.18%) +FHLMC Discount Note, 5.61%, 02/13/98 5,000,000 4,966 ------------
--- 34 NORTHWESTERN MUTUAL SERIES FUND, INC. Schedule of Investments DECEMBER 31, 1997
MARKET VALUE SHORT-TERM INVESTMENTS (11.57%) SHARES/PAR (000'S) - ------------------------------------------------------------- PERSONAL CREDIT INSTITUTIONS (3.69%) Associates Corporation N/A, 6.74%, 01/02/98 $ 2,900,000 $ 2,899 Beneficial Corporation, 5.83%, 01/30/98 25,000,000 24,883 +Ford Motor Credit Company, 5.68%, 01/28/98 25,000,000 24,894 +General Electric Capital Corp., 5.6%, 02/11/98 25,000,000 24,841 +General Motors Acceptance Corp., 5.72%, 02/25/98 25,000,000 24,782 ------------ TOTAL 102,299 ------------ SHORT TERM BUSINESS CREDIT (1.61%) IBM Credit Corporation, 5.72%, 01/14/98 20,200,000 20,158 +Sears Roebuck Acceptance Corp., 5.88%, 01/28/98 25,000,000 24,890 ------------ TOTAL 45,048 ------------ TOTAL MONEY MARKET INVESTMENTS 216,768 ------------ ASSET-BACKED SECURITIES (3.76%) COMMERCIAL MORTGAGES (0.18%) BTC Mortgage Investors Trust - Class A, 6.255%, 09/01/98 5,000,000 5,000 ------------ FINANCE LESSORS (3.58%) Asset Securitization Corporation, 5.74%, 02/11/98 25,000,000 24,837 +CIESCO LP, 5.75%, 02/11/98 25,000,000 24,836 Preferred Receivable Fund, 5.93%, 01/28/98 25,000,000 24,889 MARKET VALUE SHORT-TERM INVESTMENTS (11.57%) SHARES/PAR (000'S) - ------------------------------------------------------------- FINANCE LESSORS (CONTINUED) Receivable Capital Trust, 5.91%, 01/30/98 $25,000,000 $ 24,881 ------------ TOTAL 99,443 ------------ TOTAL ASSET-BACKED SECURITIES 104,443 ------------ TOTAL SHORT TERM INVESTMENTS 321,211 ------------ TOTAL BALANCED PORTFOLIO (COST $1,960,305)^ $ 2,774,619 ------------ ADR-American Depository Receipts IO-Interest Only Security *Non-Income Producing. +Partially held by the custodian in segregated account as collateral for open futures postions. Information regarding open futures contracts as of December 31, 1997 is summarized below:
UNREALIZED NUMBER OF EXPIRATION (DEPRECIATION) ISSUERS CONTRACTS DATE (000'S) - -------------------- ---------- ------------ -------------- U.S. Treasury Bond 325 March 1998 (198) S&P 500 Stock Index 194 March 1998 (281) -------------- Total (479)
^At December 31, 1997, the aggregate cost of securities for federal income tax purposes was $1,960,613 and the net unrealized appreciation of investments based on that cost was $814,006 which is comprised of $836,528 aggregate gross unrealized appreciation and $22,522 aggregate gross unrealized depreciation. The Accompanying Notes are an Integral Part of the Financial Statements --- 35 HIGH YIELD BOND PORTFOLIO - -------------------------------------------------------------------------------- Objective: Portfolio Strategy: Invested Assets: High current income and capital Generate superior performance by investing in a $150,865,360 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 entities 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 and a high level of current income mitigate the impact of occasional defaults on the Portfolio over time. The high yield bond market continued to post higher returns than the investment-grade market during 1997, as declining interest rates led a broad range of investors to seek higher yields. The Portfolio significantly outperformed the Lehman Brothers High Yield Intermediate Market Index for the year. This strong performance can be attributed largely to careful selection of market sectors and individual securities, the opportunistic inclusion of several attractive preferred stocks, and the absence of any major negative credit developments. During the second half of the year, the Portfolio also benefited significantly from a number of major credit upgrades, most of which were driven by mergers that caused certain bonds to be repaid at high prices. Also in the second half, the portfolio experienced increasing volatility in foreign markets as international currency fluctuations became pronounced, particularly in Asia. In spite of some second half weakness, foreign investments were a source of diversification and made a positive contribution to 1997 results. The Portfolio remains committed to a continued presence in foreign markets. At the end of 1997, the Portfolio is positioned defensively relative to overall credit risk. Cyclical exposure has been significantly curtailed, limiting the potential impact of deflationary commodity and currency trends around the world. To the extent that the portfolio participates in the lower-rated segments of the market, emphasis has been placed on the subordinated debt and preferred stock of some of the largest and strongest companies in relatively stable industries such as cable television, telecommunications, broadcasting and leisure. Percentage Holdings by Industry Sector 12/31/97 EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC Cable TV 16% Broadcasting/Media 15% Leisure 14% Consumer Related 12% Transportation 8% Telecommunications 7% Finance 7% Basic Materials 6% Energy Related 5% Other Industries 3% Short-Term Investments 7%
Performance Relative to Lehman Brothers High Yield Index EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
LEHMAN BROTHERS HIGH YIELD HIGH YIELD BOND PORTFOLIO INTERMEDIATE MARKET INDEX 5/94 $10,000 $10,000 12/94 $10,302 $10,188 12/95 $12,030 $11,952 12/96 $14,409 $13,409 12/97 $16,693 $15,020 AVERAGE ANNUAL TOTAL RETURN FOR PERIODS ENDED DECEMBER 31, 1997 ONE YEAR SINCE INCEPTION High Yield Bond Portfolio 15.85% 15.01% Lehman Brothers Index 12.01% 11.75%
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 an appropriate measure of portfolio performance since it has a quality and maturity profile that 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. -- 36 High Yield Bond Portfolio NORTHWESTERN MUTUAL SERIES FUND, INC. Schedule of Investments DECEMBER 31, 1997
MARKET VALUE BONDS (72.80%) SHARES/PAR (000'S) - --------------------------------------------------------------- AIRLINES (1.50%) Kitty Hawks Inc., 9.95%, 11/15/04 (144a) $2,250,000 $ 2,261 ----------- BANKS (0.57%) First Nationwide Parent Holdings, 12.50%, 4/15/03 750,000 853 ----------- BROADCASTING (4.69%) Azteca Hldgs S.A. De C.V., 11.00%, 6/15/02 (144a) 2,250,000 2,318 +Fox Kids Worldwide, 10.25%, 11/1/07, (144a) 3,250,000 1,934 +Fox/Liberty Networks LLC, 9.75%, 8/15/07 (144a) 2,000,000 1,280 TV Azteca S.A. De C.V., 10.50%, 2/15/07 1,500,000 1,549 ----------- TOTAL 7,081 ----------- CABLE TELEVISION (10.55%) Adelphia Communications Corp., 9.50%, 2/15/04 (PIK) 2,668,506 2,709 Adelphia Communications Corp., 9.875%, 3/01/07 1,000,000 1,058 Falcon Holdings Group, 11%, 9/15/03 (PIK) 1,500,000 1,620 +Frontiervision Holdings Corp., LP 11.875%, 9/15/07 (144a) 4,625,000 3,399 +Marcus Cable, 14.25%, 12/15/05 3,750,000 3,244 +NTL Inc., 11.50%, 2/01/06 3,000,000 2,329 +Telewest PLC, 11.00%, 10/01/07 2,000,000 1,553 ----------- TOTAL 15,912 ----------- CHEMICALS (1.18%) Tri Polyta Finance B V, 11.375%, 12/01/03 3,250,000 1,788 ----------- CONSUMER PRODUCTS (1.02%) +Hedstrom Holdings Inc., 12.00%, 6/01/09 2,575,000 1,545 ----------- CONSUMER STAPLES (3.09%) Iowa Select Farms, 10.75%, 12/1/05 (144a) 2,250,000 2,309 North Atlantic Trading Inc., 11.00%, 6/15/04 2,250,000 2,351 ----------- TOTAL 4,660 ----------- FINANCE COMPANIES (2.68%) Olympic Financial Ltd., 11.50%, 3/15/07 4,000,000 4,040 ----------- INSURANCE (1.19%) Superior National Capital Inc., 10.75%, 12/1/17 (144a) 1,750,000 1,794 ----------- LEISURE RELATED (13.95%) Alliance Gaming Corp., 10.00%, 8/1/07 (144a) 2,250,000 2,253 Casino America Inc., 12.50%, 8/01/03 2,000,000 2,173 Cobblestone Holdings, Inc., 0.00%, 6/01/04 2,875,000 1,380 Hollywood Theatres, Inc., 10.625%, 8/1/07 (144a) 1,350,000 1,434 MARKET VALUE BONDS (72.80%) SHARES/PAR (000'S) - --------------------------------------------------------------- LEISURE RELATED (CONTINUED) Riviera Holdings, Inc., 10.00%, 8/15/04 (144a) $2,250,000 $ 2,233 Station Casinos Inc., 10.125%, 3/15/06 500,000 528 Station Casinos Inc., 9.75%, 4/15/07 2,500,000 2,588 Town Sport, 9.75%, 10/15/04 (144a) 1,000,000 1,000 Trump Atlantic, 11.25%, 5/01/06 3,000,000 2,925 Trump Hotels & Casino Resorts, 15.50%, 6/15/05 2,000,000 2,280 Venetain Casino, 12.25%, 11/15/04 (144a) 2,250,000 2,253 ----------- TOTAL 21,047 ----------- MISCELLANEOUS-BASIC MATERIALS (1.59%) Cemex S. A., 12.75%, 7/15/06 2,000,000 2,395 ----------- OIL-GAS PRODUCERS (1.51%) Belden & Blake Corp., 9.875%, 6/15/07 2,250,000 2,273 ----------- PAPER (4.53%) APP International Finance Company B.V. 11.75%, 10/1/05 2,250,000 2,070 Grupo Indl Durango S.A. De C.V., 12.625%, 8/01/03 2,000,000 2,245 Pindo Deli Fin Mauritius, 10.75%, 10/1/07 (144a) 2,925,000 2,516 ----------- TOTAL 6,831 ----------- PROFESSIONAL SERVICES (1.65%) +Decisionone Holdings Corp., 11.50%, 8/1/08 775,000 496 Kinder-care Learn Center, 9.50%, 2/15/09 2,000,000 1,990 ----------- TOTAL 2,486 ----------- RAILROAD (1.47%) +TFM S.A. De C. V., 11.75%, 6/15/09 (144a) 3,500,000 2,223 ----------- RETAIL-FOOD (3.49%) Fleming Companies, Inc., 10.625%, 7/31/07 (144a) 2,250,000 2,374 Jitney - Jungle Stores America, Inc., 10.375%, 9/15/07 2,000,000 2,075 +Pathmark Stores, Inc., 11.625%, 6/15/02 1,000,000 810 ----------- TOTAL 5,259 ----------- RETAIL-GENERAL (1.46%) Hollywood Entertainment Corp., 10.625%, 8/15/04 2,250,000 2,205 ----------- SOAPS AND TOILETRIES (2.52%) Revlon Worldwide Corp., 0.00%, 3/15/01 5,500,000 3,795 ----------- TELECOMMUNICATIONS (7.32%) Comtel Brasileira Ltda., 10.75%, 9/26/04 (144a) 2,000,000 1,960 ITC Deltacom Inc., 11.00%, 6/01/07 2,875,000 3,163 ++Mobilemedia Communications Inc., 10.50%, 12/01/03 2,000,000 175
--- 37 NORTHWESTERN MUTUAL SERIES FUND, INC. Schedule of Investments DECEMBER 31, 1997
MARKET VALUE BONDS (72.80%) SHARES/PAR (000'S) - --------------------------------------------------------------- TELECOMMUNICATIONS (CONTINUED) +Nextel Communications, Inc., 10.65%, 9/15/07 (144a) $2,375,000 $ 1,496 +Nextel Communications, Inc., 9.75%, 10/31/07 (144a) 4,000,000 2,440 Paging Network Inc., 10.00%, 10/15/08 1,750,000 1,813 ----------- TOTAL 11,047 ----------- TRUCKING AND SHIPPING (5.37%) Greyhound Lines Inc., 11.50%, 4/15/07 3,875,000 4,282 Navigator Gas Transport PLC, 10.50%, 6/30/07 (144a) 1,000,000 1,060 Navigator Gas Transport PLC, 12%, 6/30/07 (144a) 900,000 1,013 Ryder Trucks, Inc., 10.00%, 12/01/06 1,750,000 1,750 ----------- TOTAL 8,105 ----------- UTILITIES (1.47%) Companhia De Saneamento Basico, 10%, 7/28/05 (144a) 1,250,000 1,113 Espirito Santo Centrais Electricad, 10%, 7/15/07 (144a) 1,250,000 1,112 ----------- TOTAL 2,225 ----------- TOTAL BONDS 109,825 ----------- MARKET VALUE PREFERRED STOCK (19.65%) SHARES/PAR (000'S) - --------------------------------------------------------------- BANKS (2.19%) California Federated Capital Corp. 126,000 $ 3,308 ----------- BROADCASTING (7.39%) American Radio Systems Corp. (PIK) 18,769 2,231 Citadel Broadcasting Co. (144a) 13,331 1,553 Chancellor Radio (144a) 22,253 2,559 Sinclair Capital 43,500 4,807 ----------- TOTAL 11,150 ----------- CABLE TELEVISION (5.59%) Cablevision Systems Corp. (PIK) 52,798 $ 6,257 NTL Inc. (PIK) 18,823 2,174 ----------- TOTAL 8,431 ----------- PRINTING AND PUBLISHING (3.10%) Primedia Inc. 35,000 3,684 Primedia Inc. (PIK) 10,000 1,000 ----------- TOTAL 4,684 ----------- MARKET VALUE PREFERRED STOCK (19.65%) SHARES/PAR (000'S) - --------------------------------------------------------------- UTILITY-GAS (1.38%) Petroleum Heat & Power Inc. (144a) $ 103,750 $ 2,074 ----------- TOTAL PREFERRED STOCK 29,647 ----------- MARKET VALUE MONEY MARKET INVESTMENTS (7.02%) SHARES/PAR (000'S) - --------------------------------------------------------------- PERSONAL CREDIT INSTITUTIONS (7.02%) Associates Corp of N. A., 6.74%, 1/2/98 7,100,000 $ 7,099 Commerical Credit Company, 5.65%, 1/28/98 2,000,000 1,992 General Motors Acceptance Corp., 5.84, 1/14/98 1,500,000 1,496 ----------- TOTAL 10,587 ----------- TOTAL MONEY MARKET INVESTMENTS 10,587 ----------- MARKET VALUE COMMON STOCK AND WARRANTS (0.53%) SHARES/PAR (000'S) - --------------------------------------------------------------- APPAREL AND TEXTILE (0.30%) *Ithaca Industries Inc. 136,000 $ 451 ----------- FINANCE COMPANIES (0.04%) Olympic Financial Ltd., warrants 4,000 60 ----------- LEISURE RELATED (0.20%) Hedstrom Holdings 156,184 195 *Cobblestone Holdings Inc. 2,875 100 ----------- TOTAL 295 ----------- TOTAL COMMON STOCK 806 ----------- TOTAL HIGH YIELD BOND PORTFOLIO (COST $149,252)^ $ 150,865 -----------
*Non-Income Producing. +Deferred interest security that receives no coupon payments until a predetermined date at which the stated coupon rate becomes effective. ++Defaulted Security. PIK-Payment in Kind. ^At December 31, 1997, the aggregate cost of securities for federal income tax purposes was $149,252 and the net unrealized appreciation of investments based on that cost was $1,613 which is comprised of $7,108 aggregate gross unrealized appreciation and $5,495 aggregate gross unrealized depreciation. The Accompanying Notes are an Integral Part of the Financial Statements --- 38 SELECT BOND PORTFOLIO - -------------------------------------------------------------------------------- Objective: Portfolio Strategy: Invested Assets: A stable and relatively high Invest in high grade corporate bonds, U.S. $238,210,445 level of long-term total return government bonds and bonds of government and preservation of capital agencies.
SELECT BOND PORTFOLIO The Select Bond Portfolio invests in high quality debt securities, primarily government bonds, corporate bonds and mortgage-backed securities. Exposure to market sectors is adjusted as yield spreads change among the various classes of securities. Duration and maturities are altered with moderate adjustments in recognition or anticipation of interest rate changes. In 1997, the Select Bond Fund benefited from overall strength in the bond market, achieving total return of 9.46%. In managing the Portfolio, the decision was made to increase the quality of holdings, in anticipation that a slowing economy could result in poor earnings and therefore higher default rates. Accordingly, the proportion of the Fund held in corporate bonds was decreased during the year, while positions in U.S. government and agency bonds were increased. The increased prepayment risk created by investing in mortgage-backed securities was tempered by careful selection of individual securities, in an effort to hold those that are least likely to experience substantial prepayments. Percentage Holdings 12/31/97 EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC Corporate Bonds 24% Mortgage-Backed and Asset-Backed Securities 47% Government and Government Agencies 26% Short-Term Investments 3%
The Corporate Bonds sector includes bonds of companies headquartered outside the United States. The Government and Government Agencies category includes taxable bonds of domestic and foreign governments and a small position in municipal bonds. Consistent with the Portfolio's stated parameters, no more than 20% of the Portfolio is invested in foreign securities, and no more than 10% is invested in high-yield securities. Performance Relative to Merrill Lynch Domestic Master Index EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC Select Bond Portfolio MLDM Index 12/87 $10,000 $10,000 12/88 $10,822 $10,804 12/89 $12,354 $12,336 12/90 $13,355 $13,459 12/91 $15,669 $15,593 12/92 $16,882 $16,774 12/93 $18,707 $18,456 12/94 $18,280 $17,935 12/95 $21,770 $21,256 12/96 $22,491 $22,019 12/97 $24,620 $24,146 Average Annual Total Return For Periods Ended December 31, 1997 One Year Five Years Ten Years Select Bond Portfolio 9.46% 7.84% 9.43% MLDM Index 9.66% 7.56% 9.22%
Since the Portfolio invests broadly in U.S. Government, mortgage and corporate bonds, a useful basis for comparing returns is 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 12/31/87. 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, 1997
MARKET VALUE BONDS (96.82%) PAR (000'S) - -------------------------------------------------------------- CORPORATE BONDS (23.39%) AUTO-RELATED (0.40%) Hertz Corp., 9.04%, 6/14/00 $ 900,000 $ 960 ----------- BANK HOLDING COMPANIES (4.33%) BT Institutional Capital Trust, 7.75%, 12/1/26 4,000,000 4,079 BT Preferred Capital Trust II, 7.875%, 2/25/27 6,000,000 6,228 ----------- TOTAL 10,307 ----------- CHEMICALS AND ALLIED PRODUCTS (0.87%) Dow Capital B.V., 8.5%, 6/8/10 1,800,000 2,083 ----------- COMMUNICATIONS (3.58%) Panamsat, 0%, 8/1/03 3,000,000 3,027 U.S. West Capital Funding Inc., 7.9%, 2/1/27 1,000,000 1,084 WorldCom, Inc., 7.75%, 4/1/27 4,000,000 4,417 ----------- TOTAL 8,528 ----------- CONSTRUCTION MACHINERY (0.43%) Bufete Industrial SA ADS, 11.375%, 7/15/99 (144a) 1,000,000 1,030 ----------- ENERGY (1.06%) Camuzzi Gas, 9.25%, 12/15/01 2,500,000 2,531 ----------- ELECTRIC SERVICES (5.38%) Commonwealth Edison Co., 6.5%, 4/15/00 1,000,000 1,005 Long Island Lighting Co., 8.625%, 4/15/04 1,000,000 1,009 Long Island Lighting Co., 9.625%, 7/1/24 1,500,000 1,544 Ohio Edison Company, 7.375%, 9/15/02 1,000,000 1,036 ++Pacific Gas & Electric Co., 7.25%, 3/1/26 3,500,000 3,641 Peco Energy Company, 7.75%, 3/1/23 1,150,000 1,199 ++Public Service Electric And Gas Co., 6.875%, 1/1/03 2,250,000 2,309 Texas Utilities Electric Co., 7.875%, 3/1/23 1,000,000 1,068 ----------- TOTAL 12,811 ----------- FINANCE (1.83%) Associates Corp. of North America, 7.95%, 2/15/10 1,500,000 1,694 Industrial Credit and Investment Corp of India, 7.55%, 8/15/07, (144a) 3,000,000 2,670 ----------- 4,364 ----------- GENERAL MERCHANDISE STORES (0.45%) May Dept Stores Company, 7.45%, 10/15/16 1,000,000 1,072 ----------- MOTION PICTURE (1.33%) News America Holdings Inc., 8.25%, 8/10/18 1,000,000 1,085 MARKET VALUE BONDS (96.82%) PAR (000'S) - -------------------------------------------------------------- MOTION PICTURE (CONTINUED) Time Warner Entertainment Inc., 7.25%, 9/1/08 $2,000,000 $ 2,078 ----------- TOTAL 3,163 ----------- MOTOR VEHICLES (0.65%) General Motors Corporation, 8.8%, 3/1/21 1,250,000 1,550 ----------- PAPER AND ALLIED PRODUCTS (0.94%) Grupo Industrial Durango, 12.625%, 8/1/03 2,000,000 2,245 ----------- TEXTILES (1.03%) Polysindo International Finance, 11.375%, 6/15/06 3,000,000 2,460 ----------- TOBACCO (1.11%) Philip Morris Companies, 7.25%, 1/15/03 1,000,000 1,032 Philip Morris Companies, 9.25%, 2/15/00 500,000 529 ++RJR Nabisco Inc., 8.625%, 12/1/02 1,000,000 1,064 ----------- TOTAL 2,625 ----------- TOTAL CORPORATE BONDS 55,729 ----------- GOVERNMENT BONDS (DOMESTIC AND FOREIGN) AND AGENCY BONDS (26.33%) FOREIGN GOVERNMENT BONDS (5.11%) Peru Flirb Reduction, 3.25%, 3/7/17 2,100,000 1,244 Poland - Bear - PDI, 4%, 10/27/14 1,500,000 1,296 +Poland Government, 12%, 10/12/01 15,000,000 3,168 +Poland Government, 12%, 2/12/03 10,000,000 2,058 Poland Government, 14%, 2/12/00 9,000,000 2,166 Vnesheconomban, 6.718%, 12/2/15 3,200,000 2,248 ----------- TOTAL 12,180 ----------- FEDERAL GOVERNMENT AND AGENCIES (21.22%) Federal National Mortgage Assoc., 6.22%, 2/1/06 1,938,793 1,927 Federal National Mortgage Assoc., 6.24%, 1/1/06 5,467,070 5,440 Federal National Mortgage Assoc., 6.32%, 2/1/06 3,928,808 3,936 Federal National Mortgage Assoc., 6.5%, 9/25/05 2,718,958 2,744 Federal National Mortgage Assoc., 6.75%, 12/25/23 3,500,000 3,505 Federal National Mortgage Assoc., 6.96%, 10/1/07 3,295,429 3,431 Federal National Mortgage Assoc., 7.0%, 6/1/03 788,654 800 Federal National Mortgage Assoc., 7.23%, 1/25/22 5,000,000 5,202 Federal National Mortgage Assoc., 7.36%, 4/1/11 3,444,763 3,690 Federal National Mortgage Assoc., 8.4%, 2/25/09 2,500,000 2,756 Federal National Mortgage Assoc., 10%, 10/1/17 141,853 156 Federal National Mortgage Assoc., 11%, 9/1/17 $2,102,536 $ 2,387
--- 40 NORTHWESTERN MUTUAL SERIES FUND, INC. Schedule of Investments DECEMBER 31, 1997
MARKET VALUE BONDS (96.82%) PAR (000'S) - -------------------------------------------------------------- FEDERAL GOVERNMENT AND AGENCIES (CONTINUED) Federal National Mortgage Assoc., 11%, 12/1/12 $ 255,000 $ 285 Federal National Mortgage Assoc., 11%, 12/1/17 614,098 698 Federal National Mortgage Assoc., 12%, 9/1/17 708,812 825 Federal National Mortgage Assoc., 12%, 9/1/12 2,260,972 2,603 Federal National Mortgage Assoc., 12%, 10/1/17 1,040,443 1,211 Federal National Mortgage Assoc., 12%, 12/1/12 373,000 430 Federal National Mortgage Assoc., 12%, 12/1/17 532,000 619 Federal National Mortgage Assoc., 12.25%, 12/01/17 442,000 523 Federal National Mortgage Assoc., 13%, 11/1/12 383,414 449 Federal National Mortgage Assoc., 13%, 11/1/17 721,502 854 Federal National Mortgage Assoc., 13%, 12/1/17 403,000 475 Federal National Mortgage Assoc., 14%, 12/1/17 283,000 336 Government National Mortgage Assoc., 7%, 5/15/23 422,708 427 Government National Mortgage Assoc., 7.5%, 1/15/24 1,508,484 1,549 Government National Mortgage Assoc., 7.5%, 2/15/24 1,602,195 1,645 Government National Mortgage Assoc., 8.5%, 11/15/24 923,811 977 Government National Mortgage Assoc., 8.5%, 2/15/25 118,027 124 Government National Mortgage Assoc., 8.5%, 3/15/23 10,367 11 Government National Mortgage Assoc., 8.5%, 6/15/23 14,456 15 Government National Mortgage Assoc., 8.5%, 6/15/24 260,063 275 Government National Mortgage Assoc., 8.5%, 7/15/24 64,949 69 Government National Mortgage Assoc., 8.5%, 9/15/21 148,346 158 Government National Mortgage Assoc., 8.5%, 9/15/24 12,523 13 ----------- TOTAL 50,545 ----------- TOTAL GOVERNMENT BONDS 62,725 ----------- MORTGAGE BACKED AND ASSET BACKED SECURITIES (47.10%) AUTO-RELATED (3.15%) Daimler-Benz Vehicle Trust, Class A, 5.85%, 7/20/03 1,064,567 1,063 CIT RV Owner Trust, Class A, 6.25%, 1/15/11 1,003,318 1,005 Eaglemark Trust,Class A,6.75%, 11/15/02 (144a) 1,018,791 1,027 MARKET VALUE BONDS (96.82%) PAR (000'S) - -------------------------------------------------------------- AUTO-RELATED (CONTINUED) Team Fleet Financing Corporation,Class A, 6.65%, 12/15/02 (144a) $3,200,000 $ 3,239 Team Fleet Financing Corporation, Class A, 7.35%, 5/15/03 (144a) 1,125,000 1,169 ----------- TOTAL 7,503 ----------- COMMERCIAL MORTGAGES (37.16%) +Kmart CMBS Financing, Inc.,Class C, 6.391%, 03/01/07 (144a) 1,500,000 1,496 +Kmart CMBS Financing, Inc., Class D, 6.791%, 03/01/07 (144a) 2,000,000 2,000 Asset Securitization Corporation, Class CS2, 1.097%, 11/13/26 IO 52,000,000 3,429 Asset Securitization Corporation, Class CS1, 1.257%, 11/13/26 IO 22,210,492 920 Asset Securitization Corporation, Class PS1, 1.36707%, 2/14/41 IO 12,227,830 1,328 Chase Commercial Mortgage Securities Corp., Class B, 6.6%, 12/12/29 5,000,000 5,037 Chase Commercial Mortgage Securities Corp., Class A2, 6.6%, 12/12/29 2,000,000 2,000 Chase Commercial Mortgage Securities Corp., Class B,7.37%, 6/19/29 1,000,000 1,058 Chase Commercial Mortgage Securities Corp., Class D, 7.37%, 6/19/29 1,750,000 1,796 Commercial Mortgage Acceptance Corporation, Class B, 6.647%, 12/15/30 2,000,000 1,996 Credit Suisse First Boston Mortgage Securities Corp., Class D, 9.5914%, 4/25/25 (144a) 682,000 789 Credit Suisse First Boston Mortgage Securities Corp., Class B, 9.5914%, 4/25/25 (144a) 2,000,000 2,367 Credit Suisse First Boston Mortgage Securities Corp., Class C1, 7.26%, 6/20/29 (144a) 1,488,399 1,542 Credit Suisse First Boston Mortgage Securities Corp., Class C1, 7.28%, 6/20/29 (144a) 1,500,000 1,525 Credit Suisse First Boston Mortgage Securities Corp., Class D, 7.46%, 6/20/29 (144a) 3,500,000 3,509 DLJ Mortgage Acceptance Corporation, Class S,.3751%, 10/15/17 IO 89,862,718 2,408 DLJ Mortgage Acceptance Corporation, Class A1B, 7.29%, 11/12/21 2,250,000 2,356 The Equitable Life Insurance Society of the U S, Class C1, 7.52%, 5/15/06 2,000,000 2,100
--- 41 NORTHWESTERN MUTUAL SERIES FUND, INC. Schedule of Investments DECEMBER 31, 1997
MARKET VALUE BONDS (96.82%) PAR (000'S) - -------------------------------------------------------------- COMMERCIAL MORTGAGES (CONTINUED) First Union-Lehman Brothers Commercial Mortgage Trust, Class C2, 7.02%, 11/18/29 4,000,000 4,035 First Union-Lehman Brothers Commercial Mortgage Trust, Class C1, 7.44%, 4/18/07 2,500,000 2,657 First Union-Lehman Brothers Commercial Mortgage Trust, IO, 1.307%, 4/18/27 36,440,146 2,847 Fleetwood Credit Corporation Grantor Trust, Class A, 6.4%, 5/15/13 1,416,794 1,427 GMAC Commercial Mortgage Securities, Inc., Class C2, 7.81%, 10/15/06 (144a) 5,000,000 5,247 LB Commercial Conduit Mortgage Trust, Class IO, 1.248%, 10/25/26 68,392,491 4,366 LB Commercial Conduit Mortgage Trust, Class A3, 8.396%, 1/20/17 4,840,838 5,538 Malan Mortgage Securities Trust, Class A3, 7.8%, 8/15/05 (144a) 3,000,000 3,076 Merrill Lynch Mortgage Investors, Inc., Class C1, 7.12%, 6/18/29 2,500,000 2,583 Merrill Lynch Mortgage Investors, Inc., Class E, 7.12%, 6/18/29 4,500,000 4,519 Merrill Lynch Mortgage Investors, Inc., Class C, 8.154% , 6/18/29 1,950,000 2,009 Merrill Lynch Mortgage Investors, Inc., Class E, 8.858%, 6/18/29 2,000,000 2,110 Midland Realty Acceptance Corp., Class AEC, 1.389%, 1/25/29 (144a) IO 14,652,029 1,145 NationsBank Lease Pass Thru Trust, Class 1, 7.442%, 1/10/11 (144a) 3,000,000 3,133 Nations Credit Grantor Trust, Class A1, 6.35%, 4/15/14 2,859,386 2,865 Red Mountain Funding LLC, Class E, 7.365%, 1/15/19 1,500,000 1,533 Red Mountain Funding LLC, Class F, 7.471%, 1/15/19 1,800,000 1,771 ----------- TOTAL 88,517 ----------- CREDIT CARD ASSET BACKED (0.84%) Iroquois Trust, Class A, 6.752%, 6/25/07 2,000,000 2,007 ----------- MANUFACTURED HOUSING (1.64%) Mid-State Trust VI, Class A3, 7.54%, 7/1/35 $1,256,650 $ 1,317 Vanderbilt Mortgage and Finance, Inc., Class 1A4, 7.19%, 2/7/14 2,500,000 2,596 ----------- TOTAL 3,913 ----------- MARKET VALUE BONDS (96.82%) PAR (000'S) - -------------------------------------------------------------- OTHER ASSET BACKED (1.84%) Greentree Recreation & Consumer Trust, Class A1, 6.49%, 2/15/18 2,567,117 2,578 Newcourt Equipment, Class B, 6.764%, 9/20/04 1,790,849 1,798 ----------- TOTAL 4,376 ----------- RESIDENTIAL MORTGAGES (2.47%) BCF L L C Mortgage Pass Thru Certificate, Class B3, 7.75%, 3/25/37 (144a) 3,957,508 3,995 Rural Housing Trust, Class D, 6.33%, 4/1/26 1,903,595 1,883 ----------- TOTAL 5,878 ----------- TOTAL MORTGAGE BACKED AND ASSET BACKED SECURITIES 112,194 ----------- TOTAL BONDS 230,648 ----------- MARKET VALUE MONEY MARKET INVESTMENTS (3.18%) PAR (000'S) - -------------------------------------------------------------- GOVERNMENT (0.29%) ++Federal Home Loan Mortgage Company, 5.610%, 2/13/98 $ 700,000 $ 695 ----------- PERSONAL CREDIT INSTITUTIONS (1.30%) Associates Corporation of N A, 6.74%, 1/02/98 3,100,000 3,099 ----------- TOBACCO (0.74%) Phillip Morris Companies, 9.00%, 5/15/98 1,750,000 1,767 ----------- TOTAL MONEY MARKET INSTRUMENTS 5,561 ----------- COMMERCIAL MORTGAGES (0.85%) BTC Mortgage Investors Trust, Class A, 6.255%, 9/1/98 2,000,000 2,001 ----------- TOTAL SHORT TERM INVESTMENTS 7,562 ----------- TOTAL SELECT BOND PORTFOLIO (COST $234,165)^ $ 238,210 ----------- IO-Interest Only Security +Floating rate security. ++Partially held by the custodian in segregated account as collateral for open futures postions. Information regarding open futures contracts as of December 31, 1997 is summarized below:
UNREALIZED NUMBER OF EXPIRATION (DEPRECIATION) ISSUER CONTRACTS DATE (000'S) - -------------------------------- ---------- ------------ -------------- U.S. Treasury Bond Future 325 March 1998 (431)
^At December 31, 1997, the aggregate cost of securities for federal income tax purposes was $234,165 and the net unrealized appreciation of investments based on that cost was $4,046 which is comprised of $5,873 aggregate gross unrealized appreciation and $1,827 aggregate gross unrealized depreciation. The Accompanying Notes are an Integral Part of the Financial Statements --- 42 MONEY MARKET PORTFOLIO - -------------------------------------------------------------------------------- Objective: Portfolio Strategy: Invested Assets: Maximum current income Achieve stability of capital by investing in $193,629,712 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 1997, money market rates were quite stable, with the only notable change a modest increase in March after the Federal Reserve increased the Federal funds rate from 5.25 percent to 5.5 percent. Following this rate increase, maturities were lengthened somewhat to lock in the higher rates. In the fall, the Fund's maturities were lengthened once again when market conditions suggested the possibility of further tightening by the Fed. By year end, the Fed had taken no further action, and a reduction in rates seemed at least as likely as an increase. Accordingly, the Fund's average maturity was relatively short because securities with longer maturities carried minimal premiums. 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. AN INVESTMENT IN THE MONEY MARKET PORTFOLIO IS NEITHER INSURED NOR GUARANTEED BY THE U.S. GOVERNMENT AND THERE CAN BE NO ASSURANCE THAT THE PORTFOLIO WILL BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE. -- 43 Money Market Portfolio NORTHWESTERN MUTUAL SERIES FUND, INC. Schedule of Investments DECEMBER 31, 1997
MARKET VALUE MONEY MARKET INVESTMENTS (77.05%) PAR (000'S) - -------------------------------------------------------------- AUTOMOBILE REPAIR, SERVICES & PARKING (4.65%) PHH Corporation, 6.00%, 10/27/1998 $9,000,000 $ 8,997 ----------- CHEMICALS & ALLIED PRODUCTS (4.80%) American Home Product Co, 5.55%, 01/23/1998 9,300,000 9,268 ----------- COMMUNICATIONS (10.53%) Ameritech Corporation, 5.85%, 01/28/1998 10,000,000 9,956 Southern California Edison Co., 6.250%, 01/13/1998 3,800,000 3,792 U.S. West Communications, 6.07%, 01/08/1998 6,655,000 6,647 ----------- TOTAL 20,395 ----------- GOVERNMENT (2.54%) Federal National Mortgage Assoc., 5.750%, 01/26/1998 2,700,000 2,689 Federal National Mortgage Assoc., 5.730%, 01/30/1998 2,248,000 2,238 ----------- TOTAL 4,927 ----------- FINANCE (9.76%) Chrysler Financial Corp., 5.85%, 01/28/1998 9,600,000 9,558 CIT Group, 5.56%, 02/11/1998 9,400,000 9,341 ----------- TOTAL 18,899 ----------- PERSONAL CREDIT INSTITUTIONS (19.93%) Beneficial Corp, 5.74%, 02/25/1998 10,000,000 9,912 Ford Motor Credit Company, 5.74%, 01/28/1998 9,600,000 9,559 General Electric Capital Corp., 5.60%, 2/25/1998 9,600,000 9,518 General Motors Acceptance Corp., 5.85%, 01/16/1998 5,000,000 4,988 GMAC, 7.125%, 05/11/1998 4,600,000 4,611 ----------- TOTAL 38,588 ----------- PETROLEUM AND COAL PRODUCTS (1.64%) E. I. Dupont De Nemours, 6.250%, 01/14/1998 3,189,000 3,182 ----------- SHORT TERM BUSINESS CREDIT (14.76%) IBM Credit Corporation, 5.77%, 01/14/1998 6,100,000 6,087 IBM Credit Corporation, 5.779%, 01/14/1998 3,400,000 3,393 MARKET VALUE MONEY MARKET INVESTMENTS (77.05%) PAR (000'S) - -------------------------------------------------------------- SHORT TERM BUSINESS CREDIT (CONTINUED) Sears Roebuck Acceptance Corp., 5.79%, 02/06/1998 $9,700,000 $ 9,644 Transamerica Financial Corp., 5.70%, 01/28/1998 9,500,000 9,459 ----------- TOTAL 28,583 ----------- TOBACCO PRODUCTS (4.84%) Phillip Morris Companies Inc, 6.375%, 01/15/1998 6,850,000 6,850 Phillip Morris Companies Inc, 9.00%, 05/15/1998 2,500,000 2,528 ----------- TOTAL 9,378 ----------- UTILITY-ELECTRIC (3.60%) National Rural Utility Co., 5.55%, 01/22/1998 7,000,000 6,977 ----------- TOTAL MONEY MARKET INVESTMENTS $ 149,194 ----------- MARKET VALUE ASSET-BACKED SECURITIES (22.95%) PAR (000'S) - -------------------------------------------------------------- AUTO RELATED (2.35%) Carco Auto Loan Master Trust, 5.625%, 11/15/1998 (Variable rate; putable; coupon indexed to one month Commercial Paper rate plus 7.5 basis points; reset monthly) $4,550,000 $ 4,550 ----------- FINANCE LESSORS (20.60%) Asset Securitization, 5.74%, 02/11/1998 9,600,000 9,537 Receivable Capital Trust, 5.75%, 01/05/1998 9,500,000 9,494 Receivable Capital Trust, 5.76%, 01/23/1998 1,885,000 1,879 Ciesco LP, 5.75%, 02/11/1998 9,500,000 9,438 Preferred Receivable Funding, 5.82%, 02/10/1998 9,600,000 9,538 ----------- TOTAL 39,886 ----------- TOTAL ASSET-BACKED SECURITIES 44,436 ----------- TOTAL MONEY MARKET PORTFOLIO (COST $193,630)^ $ 193,630 ----------- ^Also represents cost for federal income tax purposes.
The Accompanying Notes are an Integral Part of the Financial Statements --- 44 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 Aggressive Growth Stock Portfolio, International Equity Portfolio, Growth Stock Portfolio, Growth and Income Stock Portfolio, Index 500 Stock Portfolio, Balanced Portfolio, High Yield Bond Portfolio, Select Bond Portfolio and Money Market Portfolio (constituting Northwestern Mutual Series Fund, Inc., hereafter referred to as the "Fund") at December 31, 1997, 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, 1997, 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, 1997 by correspondence with the custodian and brokers and the application of alternative auditing procedures where confirmations from brokers were not received, provide a reasonable basis for the opinion expressed above. [SIGNATURE] Milwaukee, Wisconsin January 27, 1998 --- 45 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, 1997 ASSETS Common Stocks (cost $651,278)......... $973,021 Money Market Investments (cost $93,922)............................. 93,922 --------- 1,066,943 Cash.................................. 94 Due from Sale of Securities........... 2,631 Dividends and Interest Receivable..... 89 Due from Sale of Fund Shares.......... 7 --------- Total Assets........................ 1,069,764 --------- LIABILITIES Due on Redemption of Fund Shares...... 2,147 Due to Investment Advisor............. 484 Accrued Expenses...................... 60 Futures Variation Margin.............. 5 --------- Total Liabilities................... 2,696 --------- NET ASSETS.............................. $1,067,068 --------- --------- REPRESENTED BY: Aggregate Paid in Capital (700,000 shares authorized, $.01 par value; 319,739 shares outstanding).......... $705,539 Undistributed Net Investment Income... 390 Undistributed Accumulated Net Realized Gain on Investments.................. 39,778 Net Unrealized Appreciation (Depreciation) of: Investment Securities................ 321,743 Index Futures Contracts.............. (382) --------- Net Assets for 319,739 Shares Outstanding.......................... $1,067,068 --------- --------- Net Asset Value, Offering and Redemption Price per Share........... $ 3.34 --------- ---------
STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1997 INVESTMENT INCOME Income Interest $ 4,707 Dividends (less foreign dividend tax of $9)............................. 897 --------- Total Income...................... 5,604 --------- Expenses Management Fees..................... 4,963 Custodian Fees...................... 30 Other Expenses...................... 41 --------- Total Expenses.................... 5,034 --------- Less Custodian Fees: Paid by Affiliate............ (26) Paid Indirectly.............. (4) --------- Total Net Expenses................ 5,004 --------- Net Investment Income................. 600 --------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net Realized Gain on Investments: Investment Securities............... 42,777 Index Futures Contracts............. 2,191 --------- Net Realized Gain on Investments for the Period................... 44,968 --------- Net Change in Unrealized Appreciation (Depreciation) of: Investment Securities............... 83,083 Index Futures Contracts............. (382) --------- Net Change in Unrealized Appreciation of Investments for the Period 82,701 --------- Net Gain on Investments............... 127,669 --------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.............. $128,269 --------- ---------
The Accompanying Notes are an Integral Part of the Financial Statements --- 46 NORTHWESTERN MUTUAL SERIES FUND, INC. Aggressive Growth Stock Portfolio Statement of Changes in Net Assets (IN THOUSANDS)
FOR THE YEAR ENDED DECEMBER 31, ---------------------- 1997 1996 ---------- --------- INCREASE IN NET ASSETS Operations Net Investment Income (Loss)........ $ 600 $ (210) Net Realized Gain on Investments.... 44,968 52,175 Net Change in Unrealized Appreciation of Investments for the Period............................. 82,701 56,387 ---------- --------- Net Increase in Net Assets Resulting from Operations......... 128,269 108,352 ---------- --------- Distributions to Shareholders from: Net Investment Income............... 0 (572) Net Realized Gain on Investments.... (57,365) (24,986) ---------- --------- Net Decrease in Net Assets Resulting from Distributions to Shareholders...................... (57,365) (25,558) ---------- --------- Fund Share Transactions Proceeds from Sale of 35,663 and 64,691 Shares...................... 110,666 198,427 Proceeds from Shares Issued on Reinvestment of Distributions Paid (20,913 and 8,276 shares, respectively)...................... 57,365 25,558 Payments for 14,059 and 3,953 Shares Redeemed........................... (43,793) (11,867) ---------- --------- Net Increase in Net Assets Resulting from Fund Share Transactions (42,517 and 69,014 shares, respectively)..................... 124,238 212,118 ---------- --------- Total Increase in Net Assets.......... 195,142 294,912 NET ASSETS Beginning of Period................... 871,926 577,014 ---------- --------- End of Period (includes undistributed net investment income/(loss) of $390 and $(210), respectively)........................ $1,067,068 $871,926 ---------- --------- ---------- ---------
The Accompanying Notes are an Integral Part of the Financial Statements --- 47 NORTHWESTERN MUTUAL SERIES FUND, INC. Aggressive Growth Stock Portfolio Financial Highlights (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
FOR THE PERIOD MAY 3, 1994* FOR THE YEAR THROUGH ENDED DECEMBER 31, DECEMBER 31, ---------------------------------- --------------- 1997 1996 1995 1994 ---------- --------- --------- --------------- SELECTED PER SHARE DATA Net Asset Value, Beginning of Period............................... $ 3.15 $ 2.77 $ 2.00 $ 1.91 Income from Investment Operations: Net Investment Income............... -- -- -- -- Net Realized and Unrealized Gain on Investments........................ 0.39 0.49 0.78 0.09 ---------- --------- --------- --------------- Total from Investment Operations....................... 0.39 0.49 0.78 0.09 ---------- --------- --------- --------------- Less Distributions: Distributions from Net Investment Income............................. -- -- -- -- Distributions from Realized Gains on Investments........................ (0.20) (0.11) (0.01) -- ---------- --------- --------- --------------- Total Distributions............... (0.20) (0.11) (0.01) -- ---------- --------- --------- --------------- Net Asset Value, End of Period.......... $ 3.34 $ 3.15 $ 2.77 $ 2.00 ---------- --------- --------- --------------- ---------- --------- --------- --------------- Total Return+........................... 13.86% 17.70% 39.29% 4.47%++ ---------- --------- --------- --------------- ---------- --------- --------- --------------- RATIOS AND SUPPLEMENTAL DATA Net Assets, End of Period (in thousands)............................. $1,067,068 $871,926 $577,014 $327,096 ---------- --------- --------- --------------- ---------- --------- --------- --------------- Ratio of Expenses to Average Net Assets................................. 0.53% 0.54% 0.56% 0.58%** ---------- --------- --------- --------------- ---------- --------- --------- --------------- Ratio of Net Investment Income/(Loss) to Average Net Assets..................... 0.06% (0.03%) 0.13% 0.29%** ---------- --------- --------- --------------- ---------- --------- --------- --------------- Portfolio Turnover Rate................. 57.27% 47.25% 37.84% 21.54% ---------- --------- --------- --------------- ---------- --------- --------- --------------- Average Commission Rate #............... $ 0.0499 $ 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 --- 48 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, 1997 ASSETS Common Stocks (cost $519,145)......... $631,175 Money Market Investments (cost $22,294)............................. 24,439 Bonds (cost $2,302)................... 2,104 --------- 657,718 Cash.................................. 1,814 Dividends and Interest Receivable..... 2,684 Due from Sale of Securities........... 47 --------- Total Assets........................ 662,263 --------- LIABILITIES Due on Sale of Fund Shares............ 1,048 Due on Purchase of Securities......... 802 Due to Investment Advisor............. 372 Accrued Expenses...................... 191 --------- Total Liabilities................... 2,413 --------- NET ASSETS.............................. $659,850 --------- --------- REPRESENTED BY: Aggregate Paid in Capital (700,000 shares authorized, $.01 par value; 390,790 shares outstanding).......... $507,045 Undistributed Net Investment Income... 16,682 Undistributed Accumulated Net Realized Gain on Investments.................. 22,191 Net Unrealized Appreciation (Depreciation) of: Investment Securities............... 113,977 Foreign Currency Transactions....... (45) --------- Net Assets for 390,790 Shares Outstanding.......................... $659,850 --------- --------- Net Asset Value, Offering and Redemption Price per Share........... $ 1.69 --------- ---------
STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1997 INVESTMENT INCOME Income Dividends (less foreign dividend tax of $707)........................... $ 18,717 Interest............................ 2,883 --------- Total Income...................... 21,600 --------- Expenses Management Fees..................... 4,108 Custodian Fees...................... 494 Other Expenses...................... 153 --------- Total Expenses.................... 4,755 --------- Net Investment Income................. 16,845 --------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCIES Net Realized Gain (Loss) on: Investment Securities............... 23,527 Foreign Currency Transactions....... (891) --------- Net Realized Gain For the Period........................... 22,636 Net Change in Unrealized Appreciation (Depreciation) of: Investment Securities............... 25,407 Foreign Currency Transactions....... (48) --------- Net Change in Unrealized Appreciation for the Period...... 25,359 --------- Net Gain on Investments............... 47,995 --------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................ $ 64,840 --------- ---------
The Accompanying Notes are an Integral Part of the Financial Statements --- 49 NORTHWESTERN MUTUAL SERIES FUND, INC. International Equity Portfolio Statement of Changes in Net Assets (IN THOUSANDS)
FOR THE YEAR ENDED DECEMBER 31, --------------------- 1997 1996 --------- --------- INCREASE IN NET ASSETS Operations Net Investment Income............... $ 16,845 $ 12,614 Net Realized Gain on Investments.... 22,636 7,391 Net Unrealized Appreciation of Investments for the Period......... 25,359 61,490 --------- --------- Net Increase in Net Assets Resulting from Operations......... 64,840 81,495 --------- --------- Distributions to Shareholders from: Net Investment Income............... (12,704) (8,311) Net Realized Gain on Investments.... (7,542) (11,653) --------- --------- Net Decrease in Net Assets Resulting from Distributions to Shareholders...................... (20,246) (19,964) --------- --------- Fund Share Transactions Proceeds from Sale of 66,307 and 64,977 Shares...................... 110,618 92,514 Proceeds from Shares Issued on Reinvestment of Dividends Paid (12,598 and 14,362 shares, respectively)...................... 20,246 19,964 Payments for 12,361 and 7,589 Shares Redeemed........................... (20,797) (10,947) --------- --------- Net Increase in Net Assets Resulting from Fund Share Transactions (66,544 and 71,750 shares, respectively)............. 110,067 101,531 --------- --------- Total Increase in Net Assets.......... 154,661 163,062 NET ASSETS Beginning of Period................... 505,189 342,127 --------- --------- End of Period (includes undistributed net investment income of $16,682 and $12,699 respectively)................ $659,850 $505,189 --------- --------- --------- ---------
The Accompanying Notes are an Integral Part of the Financial Statements --- 50 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, 1997 1996 1995 1994 --------- --------- --------- --------------- SELECTED PER SHARE DATA Net Asset Value, Beginning of Period............................... $ 1.56 $ 1.35 $ 1.19 $ 1.22 Income from Investment Operations: Net Investment Income............. 0.04 0.04 0.04 0.02 Net Realized and Unrealized Gains on Investments................... 0.15 0.24 0.13 (0.02) --------- --------- --------- --------------- Total from Investment Operations..................... 0.19 0.28 0.17 0.00 --------- --------- --------- --------------- Less Distributions: Distributions from Net Investment Income........................... (0.04) (0.03) -- (0.02) Distributions from Realized Gains on Investments................... (0.02) (0.04) (0.01) (0.01) --------- --------- --------- --------------- Total Distributions............. (0.06) (0.07) (0.01) (0.03) --------- --------- --------- --------------- Net Asset Value, End of Period.......... $ 1.69 $ 1.56 $ 1.35 $ 1.19 --------- --------- --------- --------------- --------- --------- --------- --------------- Total Return+........................... 12.28% 21.01% 14.57% 0.11%++ --------- --------- --------- --------------- --------- --------- --------- --------------- RATIOS AND SUPPLEMENTAL DATA Net Assets, End of Period (in thousands)............................. $659,850 $505,189 $342,127 $292,533 --------- --------- --------- --------------- --------- --------- --------- --------------- Ratio of Expenses to Average Net Assets................................. 0.77% 0.81% 0.85% 0.87%** --------- --------- --------- --------------- --------- --------- --------- --------------- Ratio of Net Investment Income to Average Net Assets..................... 2.75% 3.02% 2.68% 2.28%** --------- --------- --------- --------------- --------- --------- --------- --------------- Portfolio Turnover Rate................. 16.74% 17.07% 26.71% 10.97% --------- --------- --------- --------------- --------- --------- --------- --------------- Average Commission Rate #............... $ 0.0009 $ 0.0151 --------- --------- --------- ---------
* 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 --- 51 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, 1997 ASSETS Common Stocks (cost $160,419)......... $232,915 Money Market Investments (cost $9,771).............................. 9,771 --------- 242,686 Cash.................................. 51 Due from Sale of Securities........... 447 Dividends and Interest Receivable..... 244 Due from Sale of Fund Shares.......... 239 --------- Total Assets........................ 243,667 --------- LIABILITIES Due on Purchase of Securities......... 446 Due to Investment Advisor............. 102 Accrued Expenses...................... 33 Due on Redemption of Fund Shares...... 15 --------- Total Liabilities................... 596 --------- NET ASSETS.............................. $243,071 --------- --------- REPRESENTED BY: Aggregate Paid in Capital (400,000 shares authorized, $.01 par value; 134,273 shares outstanding).......... $166,515 Undistributed Accumulated Net Realized Gain on Investments.................. 4,060 Net Unrealized Appreciation of: Investment Securities............... 72,496 --------- Net Assets for 134,273 Shares Outstanding.......................... $243,071 --------- --------- Net Asset Value, Offering and Redemption Price per Share........... $ 1.81 --------- ---------
STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1997 INVESTMENT INCOME Income Dividends (less foreign dividend tax of $30)............................ $ 2,558 Interest............................ 1,160 -------- Total Income...................... 3,718 -------- Expenses Management Fees..................... 1,022 Other Expenses...................... 27 Custodian Fees...................... 17 -------- Total Expenses.................... 1,066 -------- Less Custodian Fees: Paid by Affiliate............ (12) Paid Indirectly.............. (5) -------- Total Net Expenses................ 1,049 -------- Net Investment Income................. 2,669 -------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net Realized Gain on Investments: Investment Securities............... 9,290 Index Futures Contracts............. 2,652 -------- Net Realized Gain on Investments for the Period................... 11,942 -------- Net Change in Unrealized Appreciation (Depreciation) of: Investments Securities.............. 42,658 Index Futures Contracts............. (157) -------- Net Change in Unrealized Appreciation of Investments for the Period....................... 42,501 -------- Net Gain on Investments............... 54,443 -------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.............. $57,112 -------- --------
The Accompanying Notes are an Integral Part of the Financial Statements --- 52 NORTHWESTERN MUTUAL SERIES FUND, INC. Growth Stock Portfolio Statement of Changes in Net Assets (IN THOUSANDS)
FOR THE YEAR ENDED DECEMBER 31, --------------------- 1997 1996 --------- --------- INCREASE IN NET ASSETS Operations Net Investment Income............... $ 2,669 $ 1,767 Net Realized Gain on Investments.... 11,942 5,039 Net Change in Unrealized Appreciation of Investments for the Period............................. 42,501 17,013 --------- --------- Net Increase in Net Assets Resulting from Operations......... 57,112 23,819 --------- --------- Distributions to Shareholders from: Net Investment Income............... (2,685) (1,749) Net Realized Gain on Investments.... (8,527) (5,031) --------- --------- Net Decrease in Net Assets Resulting from Distributions to Shareholders...................... (11,212) (6,780) --------- --------- Fund Share Transactions Proceeds from Sale of 42,594 and 45,246 Shares...................... 70,967 62,709 Proceeds from Shares Issued on Reinvestment of Distributions Paid (6,422 and 4,630 shares, respectively)...................... 11,212 6,780 Payments for 31,206 and 1,147 Shares Redeemed........................... (55,490) (1,603) --------- --------- Net Increase in Net Assets Resulting from Fund Share Transactions (17,810 and 48,729 shares, respectively)............. 26,689 67,886 --------- --------- Total Increase in Net Assets.......... 72,589 84,925 NET ASSETS Beginning of Period................... 170,482 85,557 --------- --------- End of Period (includes undistributed net investment income of $0 and $32, respectively)........................ $243,071 $170,482 --------- --------- --------- ---------
The Accompanying Notes are an Integral Part of the Financial Statements --- 53 NORTHWESTERN MUTUAL SERIES FUND, INC. 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 1997 1996 1995 31, 1994 --------- --------- --------- -------- SELECTED PER SHARE DATA Net Asset Value, Beginning of Period............................... $ 1.46 $ 1.26 $ 1.00 $ 1.00 Income from Investment Operations: Net Investment Income............. 0.02 0.02 0.02 0.01 Net Realized and Unrealized Gain on Investments................... 0.42 0.25 0.28 -- --------- --------- --------- -------- Total from Investment Operations..................... 0.44 0.27 0.30 0.01 --------- --------- --------- -------- Less Distributions: Distributions from Net Investment Income........................... (0.02) (0.02) (0.02) (0.01) Distributions from Realized Gains on Investments................... (0.07) (0.05) (0.02) -- --------- --------- --------- -------- Total Distributions............. (0.09) (0.07) (0.04) (0.01) --------- --------- --------- -------- Net Asset Value, End of Period.......... $ 1.81 $ 1.46 $ 1.26 $ 1.00 --------- --------- --------- -------- --------- --------- --------- -------- Total Return+........................... 29.85% 20.91% 30.82% 1.55%++ --------- --------- --------- -------- --------- --------- --------- -------- RATIOS AND SUPPLEMENTAL DATA Net Assets, End of Period (in thousands)............................. $243,071 $170,482 $ 85,557 $41,868 --------- --------- --------- -------- --------- --------- --------- -------- Ratio of Expenses to Average Net Assets................................. 0.49% 0.57% 0.61% 0.71%** --------- --------- --------- -------- --------- --------- --------- -------- Ratio of Net Investment Income to Average Net Assets..................... 1.24% 1.41% 1.77% 2.30%** --------- --------- --------- -------- --------- --------- --------- -------- Portfolio Turnover Rate................. 33.20% 37.61% 46.83% 16.51% --------- --------- --------- -------- --------- --------- --------- -------- Average Commission Rate #............... $ 0.0559 $ 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 --- 54 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, 1997 ASSETS Common Stocks (cost $337,350)......... $364,525 Money Market Investments (cost $5,489).............................. 5,489 --------- 370,014 Cash.................................. 82 Due from Sale of Securities........... 4,763 Dividends and Interest Receivable..... 563 Due from Sale of Fund Shares.......... 174 --------- Total Assets........................ 375,596 --------- LIABILITIES Due on Purchase of Securities......... 3,215 Due on Redemption of Fund Shares...... 226 Due to Investment Advisor............. 186 Accrued Expenses...................... 34 --------- Total Liabilities................... 3,661 --------- NET ASSETS.............................. $371,935 --------- --------- REPRESENTED BY: Aggregate Paid in Capital (400,000 shares authorized, $.01 par value; 279,536 shares outstanding).......... $344,245 Undistributed Accumulated Net Realized Gain on Investments.................. 515 Net Unrealized Appreciation of Investments.......................... 27,175 --------- Net Assets for 279,536 Shares Outstanding.......................... $371,935 --------- --------- Net Asset Value, Offering and Redemption Price per Share........... $ 1.33 --------- ---------
STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1997 INVESTMENT INCOME Income Dividends (less foreign dividend tax of $19)............................ $ 4,542 Interest............................ 450 --------- Total Income...................... 4,992 --------- Expenses Management Fees..................... 1,799 Custodian Fees...................... 31 Other Expenses...................... 19 --------- Total Expenses.................... 1,849 --------- Less Custodian Fees: Paid by Affiliate............ (24) Paid Indirectly.............. (7) --------- Total Net Expenses................ 1,818 --------- Net Investment Income................. 3,174 --------- REALIZED AND UNREALIZED GAIN ON INVESTMENTS Net Realized Gain on Investments...... 72,633 Net Change in Unrealized Appreciation of Investments for the Period........ 2,850 --------- Net Gain on Investments............... 75,483 --------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................ $ 78,657 --------- ---------
The Accompanying Notes are an Integral Part of the Financial Statements --- 55 NORTHWESTERN MUTUAL SERIES FUND, INC. Growth and Income Stock Portfolio Statement of Changes in Net Assets (IN THOUSANDS)
FOR THE YEAR ENDED DECEMBER 31, --------------------- 1997 1996 --------- --------- INCREASE IN NET ASSETS Operations Net Investment Income............... $ 3,174 $ 2,654 Net Realized Gain on Investments.... 72,633 21,066 Net Change in Unrealized Appreciation of Investments for the Period............................. 2,850 11,131 --------- --------- Net Increase in Net Assets Resulting from Operations......... 78,657 34,851 --------- --------- Distributions to Shareholders from: Net Investment Income............... (3,200) (2,646) Net Realized Gain on Investments.... (78,180) (18,392) --------- --------- Net Decrease in Net Assets Resulting from Distributions to Shareholders...................... (81,380) (21,038) --------- --------- Fund Share Transactions Proceeds from Sale of 75,470 and 51,364 Shares...................... 116,134 65,912 Proceeds from Shares Issued on Reinvestment of Distributions Paid (61,873 and 15,944 shares, respectively)...................... 81,380 21,038 Payments for 35,535 and 2,670 Shares Redeemed........................... (57,040) (3,502) --------- --------- Net Increase in Net Assets Resulting from Fund Share Transactions (101,808 and 64,638 shares, respectively)............. 140,474 83,448 --------- --------- Total Increase in Net Assets.......... 137,751 97,261 NET ASSETS Beginning of Period................... 234,184 136,923 --------- --------- End of Period (includes undistributed net investment income of $0 and $25, respectively)........................ $371,935 $234,184 --------- --------- --------- ---------
The Accompanying Notes are an Integral Part of the Financial Statements --- 56 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, 1997 1996 1995 1994 --------- --------- --------- --------------- SELECTED PER SHARE DATA Net Asset Value, Beginning of Period............................... $ 1.32 $ 1.21 $ 0.98 $ 1.00 Income from Investment Operations: Net Investment Income............... 0.01 0.02 0.02 0.01 Net Realized and Unrealized Gain (Loss) on Investments.............. 0.37 0.23 0.29 (0.01) --------- --------- --------- --------------- Total from Investment Operations....................... 0.38 0.25 0.31 (0.00) --------- --------- --------- --------------- Less Distributions: Distributions from Net Investment Income............................. (0.01) (0.02) (0.02) (0.01) Distributions from Realized Gains on Investments........................ (0.36) (0.12) (0.06) (0.01) --------- --------- --------- --------------- Total Distributions............... (0.37) (0.14) (0.08) (0.02) --------- --------- --------- --------------- Net Asset Value, End of Period.......... $ 1.33 $ 1.32 $ 1.21 $ 0.98 --------- --------- --------- --------------- --------- --------- --------- --------------- Total Return+........................... 30.03% 19.97% 31.12% 0.34%++ --------- --------- --------- --------------- --------- --------- --------- --------------- RATIOS AND SUPPLEMENTAL DATA Net Assets, End of Period (in thousands)............................. $371,935 $234,184 $136,923 $ 64,700 --------- --------- --------- --------------- --------- --------- --------- --------------- Ratio of Expenses to Average Net Assets................................. 0.60% 0.62% 0.69% 0.78%** --------- --------- --------- --------------- --------- --------- --------- --------------- Ratio of Net Investment Income to Average Net Assets..................... 1.04% 1.44% 1.68% 1.93%** --------- --------- --------- --------------- --------- --------- --------- --------------- Portfolio Turnover Rate................. 144.52% 93.92% 80.00% 54.18% --------- --------- --------- --------------- --------- --------- --------- --------------- Average Commission Rate #............... $ 0.0453 $ 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 --- 57 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, 1997 ASSETS Common Stocks (cost $659,244)............................. $1,098,986 Money Market Investments (cost $53,795)................... 53,795 ----------- 1,152,781 Cash...................................................... 50 Dividends and Interest Receivable......................... 1,559 Due from Sale of Fund Shares.............................. 167 ----------- Total Assets............................................ 1,154,557 ----------- LIABILITIES Due on Redemption of Fund Shares.......................... 1,416 Due to Investment Advisor................................. 204 Accrued Expenses.......................................... 69 Futures Variation Margin.................................. 11 ----------- Total Liabilities......................................... 1,700 ----------- NET ASSETS.................................................. $1,152,857 ----------- ----------- REPRESENTED BY: Aggregate Paid in Capital (600,000 shares authorized, $.01 par value; 436,104 shares outstanding)................... $ 667,337 Undistributed Net Investment Income....................... 17,811 Undistributed Accumulated Net Realized Gain on Investments.............................................. 27,298 Net Unrealized Appreciation of: Investment Securities................................... 439,742 Index Futures Contracts................................. 669 ----------- Net Assets for 436,104 Shares Outstanding................. $1,152,857 ----------- ----------- Net Asset Value, Offering and Redemption Price per Share.................................................... $ 2.64 ----------- -----------
STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1997 INVESTMENT INCOME Income Dividends (less foreign dividend tax of $129)........... $ 16,013 Interest................................................ 3,795 --------- Total Income.......................................... 19,808 --------- Expenses Management Fees......................................... 1,927 Custodian Fees.......................................... 48 Other Expenses.......................................... 70 --------- Total Expenses........................................ 2,045 --------- Less Custodian Fees: Paid by Affiliate................................ (44) Paid Indirectly.................................. (4) --------- Total Net Expenses.................................... 1,997 --------- Net Investment Income..................................... 17,811 --------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net Realized Gain on Investments: Investment Securities................................... 11,844 Index Futures Contracts................................. 15,796 --------- Net Realized Gain on Investments for the Period....... 27,640 --------- Net Change in Unrealized Appreciation (Depreciation) of: Investment Securities................................... 220,032 Index Futures Contracts................................. (60) --------- Net Change in Unrealized Appreciation of Investments for the Period....................................... 219,972 --------- Net Gain on Investments................................. 247,612 --------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $265,423 --------- ---------
The Accompanying Notes are an Integral Part of the Financial Statements --- 58 NORTHWESTERN MUTUAL SERIES FUND, INC. Index 500 Stock Porttfolio Statement of Changes in Net Assets (IN THOUSANDS)
FOR THE YEAR ENDED DECEMBER 31, --------------------- 1997 1996 --------- --------- INCREASE IN NET ASSETS Operations Net Investment Income............... $ 17,811 $ 13,866 Net Realized Gain on Investments.... 27,640 17,014 Net Change in Unrealized Appreciation of Investments for the Period............................. 219,972 96,274 --------- --------- Net Increase in Net Assets Resulting from Operations......... 265,423 127,154 --------- --------- Disributions to Shareholders from: Net Investment Income............... (13,866) (6,192) Net Realized Gain on Investments.... (16,994) (9,632) --------- --------- Net Decrease in Net Assets Resulting from Distributions to Shareholders...................... (30,860) (15,824) --------- --------- Fund Share Transactions Proceeds from Sale of 75,307 and 72,277 Shares...................... 178,554 134,034 Proceeds from Shares Issued on Reinvestment of Distributions Paid (13,655 and 9,021 shares, respectively)...................... 30,860 15,824 Payments for 12,917 and 8,757 Shares Redeemed........................... (31,186) (16,255) --------- --------- Net Increase in Net Assets Resulting from Fund Share Transactions (76,045 and 72,541 shares, respectively)............. 178,228 133,603 --------- --------- Total Increase in Net Assets.......... 412,791 244,933 NET ASSETS Beginning of Period................... 740,066 495,133 --------- --------- End of Period (includes undistributed net investment income of $17,811 and $13,866 respectively)................ $1,152,857 $740,066 --------- --------- --------- ---------
The Accompanying Notes are an Integral Part of the Financial Statements --- 59 NORTHWESTERN MUTUAL SERIES FUND, INC. Index 500 Stock Porttfolio Financial Highlights (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
FOR THE YEAR ENDED DECEMBER 31, ---------------------------------------------------------- 1997 1996 1995 1994 1993 ----------- --------- --------- --------- -------- SELECTED PER SHARE DATA Net Asset Value, Beginning of Period............................... $ 2.06 $ 1.72 $ 1.27 $ 1.29 $ 1.33 Income from Investment Operations: Net Investment Income............. 0.04 0.04 0.04 0.03 0.04 Net Realized and Unrealized Gain (Loss) on Investments............ 0.62 0.35 0.42 (0.01) 0.09 ----------- --------- --------- --------- -------- Total from Investment Operations..................... 0.66 0.39 0.46 0.02 0.13 ----------- --------- --------- --------- -------- Less Distributions: Distributions from Net Investment Income........................... (0.04) (0.02) (0.01) (0.03) (0.03) Distributions from Realized Gains on Investments................... (0.04) (0.03) -- (0.01) (0.14) ----------- --------- --------- --------- -------- Total Distributions............. (0.08) (0.05) (0.01) (0.04) (0.17) ----------- --------- --------- --------- -------- Net Asset Value, End of Period.......... $ 2.64 $ 2.06 $ 1.72 $ 1.27 $ 1.29 ----------- --------- --------- --------- -------- ----------- --------- --------- --------- -------- Total Return+........................... 33.20% 22.75% 37.25% 1.21% 9.90% ----------- --------- --------- --------- -------- ----------- --------- --------- --------- -------- RATIOS AND SUPPLEMENTAL DATA Net Assets, End of Period (in thousands)............................. $1,152,857 $740,066 $495,133 $316,123 $25,479 ----------- --------- --------- --------- -------- ----------- --------- --------- --------- -------- Ratio of Expenses to Average Net Assets................................. 0.21% 0.21% 0.21% 0.24% 0.30% ----------- --------- --------- --------- -------- ----------- --------- --------- --------- -------- Ratio of Net Investment Income to Average Net Assets..................... 1.86% 2.27% 2.51% 3.10% 2.55% ----------- --------- --------- --------- -------- ----------- --------- --------- --------- -------- Portfolio Turnover Rate................. 3.15% 3.45% 3.19% 5.59% 62.69% ----------- --------- --------- --------- -------- ----------- --------- --------- --------- -------- Average Commission Rate #............... $ 0.0304 $ 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 --- 60 Balanced Portfolio NORTHWESTERN MUTUAL SERIES FUND, INC. Balanced Portfolio Financial Statements (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 1997 ASSETS Common Stock (cost $740,139).............................. $1,527,031 Bonds (cost $899,185)..................................... 926,377 Money Market Investments (cost $320,981).................. 321,211 ----------- 2,774,619 Cash...................................................... 3,616 Dividends and Interest Receivable......................... 15,005 Due from Sale of Foreign Currency......................... 14,425 Due from Sale of Securities............................... 6,000 ----------- Total Assets............................................ 2,813,665 ----------- LIABILITIES Due on Purchase of Foreign Currency....................... 14,842 Due on Purchase of Securities............................. 6,648 Due on Redemption of Fund Shares.......................... 2,728 Due to Investment Advisor................................. 750 Due on Futures Variation Margin........................... 203 ----------- Total Liabilities....................................... 25,171 ----------- NET ASSETS.................................................. $2,788,494 ----------- REPRESENTED BY: Aggregate Paid in Capital (2,000,000 shares authorized, $.01 par value; 1,400,746 shares outstanding)...................................... $1,794,233 Undistributed Net Investment Income....................... 94,962 Undistributed Accumulated Net Realized Gain on Investments.............................................. 85,588 Net Unrealized Appreciation (Depreciation) of: Investment Securities................................... 814,314 Index Futures Contracts................................. (479) Foreign Currency Transactions........................... (124) ----------- Net Assets for 1,400,746 Shares Outstanding............. $2,788,494 ----------- ----------- Net Asset Value, Offering and Redemption Price per Share.................................................... $ 1.99 ----------- -----------
STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1997 INVESTMENT INCOME Income Interest................................................ $ 77,592 Dividends (less foreign dividend tax of $205)........... 25,121 ----------- Total Income.......................................... 102,713 ----------- Expenses Management Fees......................................... 7,727 ----------- Net Investment Income..................................... 94,986 ----------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net Realized Gain (Loss) on Investments: Investment Securities................................... 67,229 Index Futures Contracts................................. 16,153 Foreign Currency Transactions........................... (26) ----------- Net Realized Gain on Investments for the Period....... 83,356 ----------- Net Change In Unrealized Appreciation (Depreciation) of: Investment Securities................................... 318,955 Index Futures Contracts................................. (480) Foreign Currency Transactions........................... (124) ----------- Net Change in Unrealized Appreciation of Investments for the Period....................................... 318,351 ----------- Net Gain on Investments................................... 401,707 ----------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $ 496,693 ----------- -----------
The Accompanying Notes are an Integral Part of the Financial Statements --- 61 NORTHWESTERN MUTUAL SERIES FUND, INC. Balanced Portfolio Statement of Changes in Net Assets (IN THOUSANDS)
FOR THE YEAR ENDED DECEMBER 31, ------------------------- 1997 1996 ----------- ----------- INCREASE IN NET ASSETS Operations Net Investment Income............... $ 94,986 $ 86,649 Net Realized Gain on Investments.... 83,356 27,969 Net Change in Unrealized Appreciation of Investments for the Period............................. 318,351 164,495 ----------- ----------- Net Increase in Net Assets Resulting from Operations......... 496,693 279,113 ----------- ----------- Distributions to Shareholders from: Net Investment Income............... (86,698) (83,501) Net Realized Gain on Investments.... (29,228) (35,154) ----------- ----------- Net Decrease in Net Assets Resulting from Distributions to Shareholders...................... (115,926) (118,655) Fund Share Transactions Proceeds from Sale of 42,694 and 51,923 Shares...................... 79,608 84,008 Proceeds from Shares Issued on Reinvestment of Distributions Paid (65,384 and 77,149 shares, respectively)...................... 115,926 118,655 Payments for 61,284 and 73,638 Shares Redeemed.................... (114,041) (120,176) ----------- ----------- Net Increase in Net Assets Resulting from Fund Share Transactions (46,794 and 55,434 shares, respectively)..................... 81,493 82,487 ----------- ----------- Total Increase in Net Assets.......... 462,260 242,945 ----------- ----------- NET ASSETS Beginning of Period................. 2,326,234 2,083,289 ----------- ----------- End of Period (includes undistributed net investment income of $94,962 and $86,699 respectively)...................... $2,788,494 $2,326,234 ----------- ----------- ----------- -----------
The Accompanying Notes are an Integral Part of the Financial Statements --- 62 NORTHWESTERN MUTUAL SERIES FUND, INC. Balanced Portfolio Financial Highlights (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
FOR THE YEAR ENDED DECEMBER 31, ---------------------------------------------------------------- 1997 1996 1995 1994 1993 ----------- ----------- ----------- ----------- -------- SELECTED PER SHARE DATA Net Asset Value, Beginning of Period............................... $ 1.72 $ 1.60 $ 1.31 $ 1.33 $ 1.39 Income from Investment Operations: Net Investment Income............. 0.07 0.06 0.07 0.04 0.06 Net Realized and Unrealized Gain(Loss) on Investments........ 0.28 0.15 0.27 (0.05) 0.09 ----------- ----------- ----------- ----------- -------- Total from Investment Operations..................... 0.35 0.21 0.34 (0.01) 0.15 ----------- ----------- ----------- ----------- -------- Less Distributions: Distributions from Net Investment Income........................... (0.06) (0.06) (0.04) (0.00) (0.07) Distributions from Realized Gains on Investments................... (0.02) (0.03) (0.01) (0.01) (0.14) ----------- ----------- ----------- ----------- -------- Total Distributions............. (0.08) (0.09) (0.05) (0.01) (0.21) ----------- ----------- ----------- ----------- -------- Net Asset Value, End of Period.......... $ 1.99 $ 1.72 $ 1.60 $ 1.31 $ 1.33 ----------- ----------- ----------- ----------- -------- ----------- ----------- ----------- ----------- -------- Total Return+........................... 21.52% 13.45% 26.39% 0.16% 9.91% ----------- ----------- ----------- ----------- -------- ----------- ----------- ----------- ----------- -------- RATIOS AND SUPPLEMENTAL DATA Net Assets, End of Period (in thousands)............................. $2,788,494 $2,326,234 $2,083,289 $1,727,127 $68,910 ----------- ----------- ----------- ----------- -------- ----------- ----------- ----------- ----------- -------- 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..................... 3.70% 3.95% 4.40% 4.78% 4.24% ----------- ----------- ----------- ----------- -------- ----------- ----------- ----------- ----------- -------- Portfolio Turnover Rate................. 29.94% 67.66% 37.28% 42.35% 70.91% ----------- ----------- ----------- ----------- -------- ----------- ----------- ----------- ----------- -------- Average Commission Rate #............... $ 0.0310 $ 0.0320 ----------- ----------- ----------- -----------
+ 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 --- 63 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, 1997 ASSETS Bonds (cost $109,759)..................................... $109,825 Preferred Stock (cost $27,457)............................ 29,647 Money Market Investments (cost $10,587)................... 10,587 Common Stock (cost $1,449)................................ 806 --------- 150,865 Dividends and Interest Receivable......................... 2,647 Due from Sale of Fund Shares.............................. 74 --------- Total Assets............................................ 153,586 --------- LIABILITIES Due on Purchase of Securities............................. 440 Due to Investment Advisor................................. 68 Accrued Expenses.......................................... 40 --------- Total Liabilities....................................... 548 --------- NET ASSETS.................................................. $153,038 --------- --------- REPRESENTED BY: Aggregate Paid in Capital (400,000 shares authorized, $.01 par value; 143,917 shares outstanding)................... $151,568 Overdistributed Net Investment Income..................... (143) Net Unrealized Appreciation of Investments................ 1,613 --------- Net Assets for 143,917 Shares Outstanding................. $153,038 --------- --------- Net Asset Value, Offering and Redemption Price per Share.................................................... $ 1.06 --------- ---------
STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1997 INVESTMENT INCOME Income Interest................................................ $ 10,660 Dividends............................................... 2,593 --------- Total Income.......................................... 13,253 --------- Expenses Management Fees......................................... 658 Other Expenses.......................................... 34 Custodian Fees.......................................... 14 --------- Total Expenses........................................ 706 --------- Less Custodian Fees: Paid Indirectly.................................. (14) --------- Total Net Expenses.................................... 692 --------- Net Investment Income..................................... 12,561 --------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net Realized Gain on Investments.......................... 7,437 Net Change in Unrealized Depreciation of Investments for the Period............................................... (1,416) --------- Net Gain on Investments................................... 6,021 --------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $ 18,582 --------- ---------
The Accompanying Notes are an Integral Part of the Financial Statements --- 64 NORTHWESTERN MUTUAL SERIES FUND, INC. High Yield Bond Portfolio Statement of Changes in Net Assets (IN THOUSANDS)
FOR THE YEAR ENDED DECEMBER 31, ------------------- 1997 1996 -------- -------- INCREASE IN NET ASSETS Operations Net Investment Income............... $12,561 $ 6,867 Net Realized Gain on Investments.... 7,437 3,638 Net Change in Unrealized Appreciation (Depreciation) of Investments for the Period......... (1,416) 2,795 -------- -------- Net Increase in Net Assets Resulting from Operations......... 18,582 13,300 -------- -------- Distributions to Shareholders from: Net Investment Income............... (16,554) (7,126) Net Realized Gain on Investments and Capital............................ (8,429) (2,541) -------- -------- Net Decrease in Net Assets Resulting from Distributions to Shareholders...................... (24,983) (9,667) -------- -------- Fund Share Transactions Proceeds from Sale of 48,820 and 23,742 Shares...................... 56,788 26,454 Proceeds from Shares Issued on Reinvestment of Distributions Paid (23,165 and 8,840 shares, respectively)...................... 24,983 9,667 Payments for 13,489 and1,697 Shares Redeemed........................... (16,210) (1,850) -------- -------- Net Increase in Net Assets Resulting from Fund Share Transactions (58,496 and 30,885 shares, respectively)............. 65,561 34,271 -------- -------- Total Increase in Net Assets.......... 59,160 37,904 NET ASSETS Beginning of Period................... 93,878 55,974 -------- -------- End of Period (includes overdistributed net investment income of ($143) and ($297), respectively)........................ $153,038 $93,878 -------- -------- -------- --------
The Accompanying Notes are an Integral Part of the Financial Statements --- 65 NORTHWESTERN MUTUAL SERIES FUND, INC. High Yield Bond Portfolio Financial Highlights (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
FOR THE PERIOD FOR THE YEAR MAY 3, 1994* ENDED DECEMBER 31, THROUGH ------------------------------- DECEMBER 31, 1997 1996 1995 1994 --------- -------- -------- --------------- SELECTED PER SHARE DATA Net Asset Value, Beginning of Period............................... $ 1.10 $ 1.03 $ 0.97 $ 1.00 Income from Investment Operations: Net Investment Income............. 0.11 0.09 0.10 0.06 Net Realized and Unrealized Gain (Loss) on Investments............ 0.06 0.10 0.07 (0.03) --------- -------- -------- --------------- Total from Investment Operations..................... 0.17 0.19 0.17 0.03 --------- -------- -------- --------------- Less Distributions: Distributions from Net Investment Income........................... (0.14) (0.09) (0.10) (0.06) Distributions from Realized Gains on Investments and Capital....... (0.07) (0.03) (0.01) -- --------- -------- -------- --------------- Total Distributions............. (0.21) (0.12) (0.11) (0.06) --------- -------- -------- --------------- Net Asset Value, End of Period.......... $ 1.06 $ 1.10 $ 1.03 $ 0.97 --------- -------- -------- --------------- --------- -------- -------- --------------- Total Return+........................... 15.85% 19.77% 16.78% 3.02%++ --------- -------- -------- --------------- --------- -------- -------- --------------- RATIOS AND SUPPLEMENTAL DATA Net Assets, End of Period (in thousands)............................. $153,038 $93,878 $55,974 $35,537 --------- -------- -------- --------------- --------- -------- -------- --------------- Ratio of Expenses to Average Net Assets................................. 0.55% 0.60% 0.65% 0.73%** --------- -------- -------- --------------- --------- -------- -------- --------------- Ratio of Net Investment Income to Average Net Assets..................... 9.95% 9.54% 9.90% 9.40%** --------- -------- -------- --------------- --------- -------- -------- --------------- Portfolio Turnover Rate................. 129.49% 143.91% 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 --- 66 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, 1997 ASSETS Bonds (cost $226,607)................. $230,648 Money Market Investments (cost $7,558).............................. 7,562 --------- 238,210 Cash.................................. 786 Due from Foreign Currency Contracts... 11,015 Due from Sale of Fund Shares.......... 5,276 Interest Receivable................... 2,806 --------- Total Assets........................ 258,093 --------- LIABILITIES Due on Foreign Currency Contracts..... 11,262 Due on Purchase of Securities......... 1,171 Due on Redemption of Fund Shares...... 566 Futures Variation Margin.............. 193 Due to Investment Advisor............. 66 --------- Total Liabilities................... 13,258 --------- NET ASSETS.............................. $244,835 --------- --------- REPRESENTED BY: Aggregate Paid in Capital (400,000 shares authorized, $.01 par value; 194,772 shares outstanding)... $223,542 Undistributed Net Investment Income... 15,722 Undistributed Accumulated Net Realized Gain on Investments.................. 2,050 Net Unrealized Appreciation(Depreciation) of: Investments Securities.............. 4,046 Futures Contracts................... (431) Foreign Currency Transactions....... (94) --------- Net Assets for 194,772 Shares Outstanding.......................... $244,835 --------- --------- Net Asset Value, Offering and Redemption Price per Share........... $ 1.26 --------- ---------
STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1997 INVESTMENT INCOME Income Interest............................ $16,343 -------- Expenses Management Fees..................... 667 -------- Net Investment Income................. 15,676 -------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net Realized Gain (Loss) on Investments: Investment Securities............... 2,945 Foreign Currency Transactions....... 46 Futures Contracts................... (126) -------- Net Realized Gain on Investments for the Period................... 2,865 -------- Net Change in Unrealized Appreciation (Depreciation) of: Investment Securities............... 2,261 Futures Contracts................... (431) Foreign Currency Transactions....... (94) -------- Net Change in Unrealized Appreciation for the Period...... 1,736 -------- Net Gain on Investments............... 4,601 -------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................ $20,277 -------- --------
The Accompanying Notes are an Integral Part of the Financial Statements --- 67 NORTHWESTERN MUTUAL SERIES FUND, INC. Select Bond Portfolio Statement of Changes in Net Assets (IN THOUSANDS)
FOR THE YEAR ENDED DECEMBER 31, --------------------- 1997 1996 --------- --------- INCREASE IN NET ASSETS Operations Net Investment Income............... $ 15,676 $ 13,288 Net Realized Gain on Investments.... 2,865 569 Net Change in Unrealized Appreciation (Depreciation) of Investments for the Period......... 1,736 (6,987) --------- --------- Net Increase in Net Assets Resulting from Operations......... 20,277 6,870 --------- --------- Distributions to Shareholders from: Net Investment Income............... (13,300) (7,025) Net Realized Gain on Investments.... -- -- --------- --------- Net Decrease in Net Assets Resulting from Distributions to Shareholders...................... (13,300) (7,025) --------- --------- Fund Share Transactions Proceeds from Sale of 26,095 and 23,808 Shares...................... 32,098 28,507 Proceeds from Shares Issued on Reinvestment of Distributions Paid (11,396 and 6,130 shares, respectively)...................... 13,300 7,025 Payments for 17,885 and 16,109 Shares Redeemed.................... (21,873) (19,186) --------- --------- Net Increase in Net Assets Resulting from Fund Share Transactions (19,606 and 13,829 shares, respectively)............. 23,526 16,346 --------- --------- Total Increase in Net Assets.......... 30,502 16,191 NET ASSETS Beginning of Period................... 214,333 198,142 --------- --------- End of Period (includes undistributed net investment income of $15,722 and $13,300 respectively)................ $244,835 $214,333 --------- --------- --------- ---------
The Accompanying Notes are an Integral Part of the Financial Statements --- 68 NORTHWESTERN MUTUAL SERIES FUND, INC. Select Bond Portfolio Financial Highlights (FOR A SHARE OUTSTANDING THROUGHOUT THE YEAR)
FOR THE YEAR ENDED DECEMBER 31, ------------------------------------------------------- 1997 1996 1995 1994 1993 --------- --------- --------- -------- -------- SELECTED PER SHARE DATA Net Asset Value, Beginning of Period............................... $ 1.22 $ 1.23 $ 1.06 $ 1.15 $ 1.14 Income from Investment Operations: Net Investment Income............. 0.08 0.07 0.07 0.06 0.08 Net Realized and Unrealized Gain (Loss) on Investments............ 0.04 (0.04) 0.13 (0.09) 0.05 --------- --------- --------- -------- -------- Total from Investment Operations..................... 0.12 0.03 0.20 (0.03) 0.13 --------- --------- --------- -------- -------- Less Distributions: Dividends from Net Investment Income........................... (0.08) (0.04) (0.03) (0.06) (0.08) Distributions from Realized Gains on Investments................... -- -- -- -- (0.04) --------- --------- --------- -------- -------- Total Distributions............. (0.08) (0.04) (0.03) (0.06) (0.12) --------- --------- --------- -------- -------- Net Asset Value, End of Period.......... $ 1.26 $ 1.22 $ 1.23 $ 1.06 $ 1.15 --------- --------- --------- -------- -------- --------- --------- --------- -------- -------- Total Return+........................... 9.46% 3.31% 19.10% (2.28%) 10.81% --------- --------- --------- -------- -------- --------- --------- --------- -------- -------- RATIOS AND SUPPLEMENTAL DATA Net Assets, End of Period (in thousands)............................. $244,835 $214,333 $198,142 $158,508 $17,485 --------- --------- --------- -------- -------- --------- --------- --------- -------- -------- 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..................... 7.03% 6.48% 6.61% 7.02% 6.40% --------- --------- --------- -------- -------- --------- --------- --------- -------- -------- Portfolio Turnover Rate................. 184.93% 195.98% 69.06% 108.00% 67.69% --------- --------- --------- -------- -------- --------- --------- --------- -------- --------
+ Total Return includes deductions for management and other fund expenses; excludes deductions for sales loads and account fees. The Accompanying Notes are an Integral Part of the Financial Statements --- 69 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, 1997 ASSETS Money Market Investments (cost $193,630)...................... $193,630 Cash.................................. 2 Due from Sale of Fund Shares.......... 582 Interest Receivable................... 424 --------- Total Assets........................ 194,638 --------- LIABILITIES Due on Redemption of Fund Shares...... 116 Due to Investment Advisor............. 52 --------- Total Liabilities................... 168 --------- NET ASSETS.............................. $194,470 --------- --------- REPRESENTED BY: Aggregate Paid in Capital (400,000 shares authorized, $.01 par value; 194,494 shares outstanding).......... $194,470 --------- Net Assets for 194,494 Shares Outstanding.......................... $194,470 --------- --------- Net Asset Value, Offering and Redemption Price per Share........... $ 1.00 --------- ---------
STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1997 INVESTMENT INCOME Income Interest............................ $ 10,433 --------- Expenses Management Fees..................... 555 --------- Net Investment Income................. 9,878 --------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.............. $ 9,878 --------- ---------
The Accompanying Notes are an Integral Part of the Financial Statements --- 70 NORTHWESTERN MUTUAL SERIES FUND, INC. Money Market Portfolio Statement of Changes in Net Assets (IN THOUSANDS)
FOR THE YEAR ENDED DECEMBER 31, --------------------- 1997 1996 --------- --------- INCREASE IN NET ASSETS Operations Net Investment Income............... $ 9,878 $ 7,576 --------- --------- Net Increase in Net Assets Resulting from Operations......... 9,878 7,576 --------- --------- Distributions to Shareholders from: Net Investment Income............... (9,885) (7,576) --------- --------- Net Decrease in Net Assets Resulting from Distributions to Shareholders...................... (9,885) (7,576) --------- --------- Fund Share Transactions Proceeds from Sale of 130,864 and 122,068 Shares..................... 130,863 122,068 Proceeds from Shares Issued on Reinvestment of Distributions Paid (9,878 and 7,576 shares, respectively)...................... 9,878 7,576 Payments for 122,562 and 85,918 Shares Redeemed.................... (122,562) (85,918) --------- --------- Net Increase in Net Assets Resulting from Fund Share Transactions 18,180 and 43,726) shares, respectively)..................... 18,179 43,726 --------- --------- Total Increase in Net Assets.......... 18,172 43,726 NET ASSETS Beginning of Period................... 176,298 132,572 --------- --------- End of Period (includes no undistributed net investment income).............................. $194,470 $176,298 --------- --------- --------- ---------
The Accompanying Notes are an Integral Part of the Financial Statements --- 71 NORTHWESTERN MUTUAL SERIES FUND, INC. Money Market Portfolio Financial Highlights (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
FOR THE YEAR ENDED DECEMBER 31, --------------------------------------------------------- 1997 1996 1995 1994 1993 --------- --------- --------- --------- --------- SELECTED PER SHARE DATA Net Asset Value, Beginning of Period............................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 Net Investment Income............... 0.05 0.05 0.06 0.05 0.03 Less Distributions from Net Investment Income.................. (0.05) (0.05) (0.06) (0.05) (0.03) --------- --------- --------- --------- --------- Net Asset Value, End of Period.......... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- Total Return+........................... 5.47% 5.29% 5.82% 4.06% 2.88% --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- RATIOS AND SUPPLEMENTAL DATA Net Assets, End of Period (in thousands)............................. $194,470 $176,298 $132,572 $104,217 $ 12,657 --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- 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..................... 5.33% 5.13% 5.61% 4.64% 2.87% --------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
+ Total Return includes deductions for management and other fund expenses; excludes deductions for sales loads and account fees. The Accompanying Notes are an Integral Part of the Financial Statements --- 72 Notes to Financial Statements NORTHWESTERN MUTUAL SERIES FUND, INC. Notes to Financial Statements DECEMBER 31, 1997 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 Aggressive Growth Stock Portfolio, International Equity Portfolio, Growth Stock Portfolio, Growth and Income Stock Portfolio, Index 500 Stock Portfolio, Balanced Portfolio, High Yield Bond Portfolio, Select Bond Portfolio and the Money Market 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 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, Balanced Portfolio, and Select Bond 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, Balanced Portfolio, and the Select Bond Portfolio do 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 the 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 Aggressive Growth Stock, Growth Stock, Index 500 Stock, Balanced and Select Bond Portfolios invest in futures contracts as an alternative to investing in individual securities. The Aggressive Growth Stock, Growth Stock, Index 500 Stock, Balanced, and Select Bond, could be exposed to market risk due to charges 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. --- 73 NORTHWESTERN MUTUAL SERIES FUND, INC. Notes to Financial Statements DECEMBER 31, 1997 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, 1997, transactions in securities other than money market investments were:
TOTAL U.S. GOVT U.S. GOVT SECURITY SECURITY TOTAL SECURITY SECURITY SALES/ PORTFOLIOS PURCHASES PURCHASES SALES/MATURITIES MATURITIES - --------------------------------------------------------- ------------- ------------- ----------------- ----------------- Aggressive Growth Stock.................................. $ 546,707,728 $ -- $ 493,422,739 $ -- International Equity..................................... 222,548,513 21,296,687 94,881,656 31,300,000 Growth Stock............................................. 94,826,433 -- 64,993,295 -- Growth and Income Stock.................................. 490,930,645 -- 431,230,508 -- Index 500 Stock.......................................... 199,135,836 -- 28,135,152 -- Balanced................................................. 782,098,926 490,678,618 661,481,224 435,901,340 High Yield Bond.......................................... 197,495,897 -- 153,093,698 -- Select Bond.............................................. 417,760,490 155,767,760 391,615,427 212,654,062
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 NEXT $50 $50 PORTFOLIOS MILLION MILLION EXCESS - ----------------------------------- ------- ------- ------- Aggressive Growth Stock............ .80% .65% .50% International Equity............... .85% .65% .65% Growth Stock....................... .60% .50% .40% 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, 1997, the amounts paid through expense offset arrangements are $4,119 in the Aggressive Growth Stock Portfolio, $4,529 in the Growth Stock Portfolio, $6,985 in the Growth and Income Stock Portfolio, $3,641 in the Index 500 Stock Portfolio, and $14,005 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. NMIS pays J.P. Morgan .45% on the first $100 million of the combined net assets for all funds managed for Northwestern Mutual Life by J.P. Morgan, .40% on the next $100 million, .35% on the next $200 million and .30% in excess of $400 million. NMIS pays Templeton Counsel .50% on the first $100 million of the combined net assets for all funds managed for Northwestern Mutual Life by Templeton Counsel and .40% in excess of $100 million. The Aggressive Growth Stock Portfolio paid commissions on Portfolio transactions to an affiliated broker in the amount of $21,869. 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. --- 74 NORTHWESTERN MUTUAL SERIES FUND, INC. Notes to Financial Statements DECEMBER 31, 1997 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 (depreciation) on open futures contracts is required to be treated as realized gains (losses). Note 9 -- Dividends from net investment income and net realized capital gains are declared each year for the Aggressive Growth Stock Portfolios, International Equity, Growth Stock, Growth and Income Stock, Index 500 Stock, Balanced, High Yield Bond, Select Bond, and each business day for the Money Market Portfolio. Dividend distributions are described below. A dividend was declared on May 12, 1997, payable to shareholders of record on May 12, 1997. Dividends paid from 1996 net investment income and 1996 net capital gains were as follows:
NET INVESTMENT NET CAPITAL PORTFOLIOS INCOME GAINS - -------------------------------------------------------------------------------------------------- ----------- ----------- Aggressive Growth Stock........................................................................... $ -- $57,364,645 International Equity.............................................................................. 12,704,098 7,541,567 Growth Stock...................................................................................... 14,615 799,017 Growth and Income Stock........................................................................... 26,286 6,062,555 Index 500 Stock................................................................................... 13,865,506 16,994,473 Balanced.......................................................................................... 86,698,498 29,228,140 High Yield Bond................................................................................... 160,082 992,215 Select Bond....................................................................................... 13,298,619 --
A dividend was declared on June 26, 1997, payable to shareholders of record on June 26, 1997. Dividends paid from 1997 net investment income:
NET INVESTMENT PORTFOLIOS INCOME - --------------------------------------------------------------------------------------------------------------- ----------- Growth Stock................................................................................................... $1,203,768 Growth and Income Stock........................................................................................ 1,262,918 High Yield Bond................................................................................................ 3,943,225
A dividend was declared on December 29, 1997, payable to shareholders of record on December 29, 1997. Dividends paid from 1997 net investment income and 1997 net capital gains were as follows:
NET INVESTMENT NET CAPITAL PORTFOLIOS INCOME GAINS - -------------------------------------------------------------------------------------------------- ----------- ------------- Growth Stock...................................................................................... $1,466,320 $ 7,728,372 Growth and Income Stock........................................................................... 1,910,414 72,117,342 High Yield Bond................................................................................... 8,732,262 7,439,124
A tax return of capital in the amount of $3,716,193 was paid in the High Yield Bond Portfolio for the year ended December 31, 1997. Note 10 -- Effective April 1, 1996, NML voluntarily reimburses the International Equity Portfolio for the income tax benefit NML receives from foreign dividend taxes paid by the Portfolio and passed through to NML as tax credits. 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 as of December 31, 1997 was $1,313,579 and for the period April 1, 1996 through December 31, 1996 was $921,386. --- 75 VARIABLE LIFE 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 Aggressive Growth Stock Division, International Equity Division, Growth Stock Division, Growth and Income Stock Division, the Index 500 Stock Division, the Balanced Division, High Yield Bond Division, Select Bond Division, and Money Market Division thereof at December 31, 1997, 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, 1997 with Northwestern Mutual Series Fund, Inc., provide a reasonable basis for the opinion expressed above. [SIG] Milwaukee, Wisconsin January 27, 1998 -- 76 NOTES -- 77 VARIABLE LIFE FINANCIAL STATEMENTS NORTHWESTERN MUTUAL VARIABLE LIFE ACCOUNT Financial Statements DECEMBER 31, 1997 STATEMENT OF ASSETS AND LIABILITIES (IN THOUSANDS) ASSETS Investments at Market Value: Northwestern Mutual Series Fund, Inc. Aggressive Growth Stock 23,568 shares (cost $66,748)............... $ 78,645 International Equity 31,449 shares (cost $46,440)............... 53,117 Growth Stock 17,809 shares (cost $26,009)............... 32,234 Growth and Income Stock 27,339 shares (cost $36,512)............... 36,389 Index 500 Stock 40,734 shares (cost $74,358)............... 107,700 Balanced 63,446 shares (cost $90,745)............... 126,320 High Yield Bond 8,280 shares (cost $9,262)................. 8,802 Select Bond 7,233 shares (cost $8,546)................. 9,092 Money Market 21,899 shares (cost $21,899)............... 21,899 $ 474,198 --------- Due from Sale of Fund Shares.................................. 978 Due from Northwestern Mutual Life Insurance Company........... 382 --------- Total Assets............................................ $ 475,558 --------- --------- LIABILITIES Due to Northwestern Mutual Life Insurance Company........... $ 978 Due on Purchase of Fund Shares.............................. 382 --------- Total Liabilities....................................... 1,360 --------- EQUITY (NOTE 8) Policies Issued Before October 11, 1995..................... 315,462 Policies Issued On or After October 11, 1995................ 158,736 --------- Total Equity............................................ 474,198 --------- Total Liabilities and Equity............................ $ 475,558 --------- ---------
The Accompanying Notes are an Integral Part of the Financial Statements -- 78 VARIABLE LIFE FINANCIAL STATEMENTS NORTHWESTERN MUTUAL VARIABLE LIFE ACCOUNT Statement of Operations and Changes in Equity (IN THOUSANDS)
AGGRESSIVE GROWTH STOCK COMBINED DIVISION INTERNATIONAL EQUITY 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, 1997 1996 1997 1996 1997 1996 -------------- -------------- ------------- ------------- ------------- ------------- INVESTMENT INCOME Dividend Income............. $ 24,262 $ 11,085 $ 3,345 $ 892 $ 1,286 $ 924 Mortality and Expense Risks..................... 1,788 1,102 271 139 197 100 Taxes....................... 767 461 116 57 85 42 -------------- -------------- ------------- ------------- ------------- ------------- Net Investment Income....... 21,707 9,522 2,958 696 1,004 782 -------------- -------------- ------------- ------------- ------------- ------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Realized Gain on Investments............... 4,871 2,405 231 301 203 49 Unrealized Appreciation (Depreciation) of Investments During the Period.................... 42,532 21,398 5,109 2,690 2,358 3,197 -------------- -------------- ------------- ------------- ------------- ------------- Net Gain (Loss) on Investments............... 47,403 23,803 5,340 2,991 2,561 3,246 -------------- -------------- ------------- ------------- ------------- ------------- Increase in Equity Derived from Investment Activity.................. 69,110 33,325 8,298 3,687 3,565 4,028 -------------- -------------- ------------- ------------- ------------- ------------- EQUITY TRANSACTIONS Policyowners' Net Payments.................. 170,672 101,055 21,502 11,065 12,656 8,006 Policy Loans, Surrenders, and Death Benefits........ (23,728) (16,316) (4,003) (2,117) (2,787) (1,566) Mortality and Other (net)... (28,427) (16,382) (3,791) (1,943) (2,368) (1,529) Transfers from Other Divisions................. 86,366 45,652 19,008 14,807 14,866 6,728 Transfers to Other Divisions................. (86,366) (45,652) (4,091) (1,660) (2,149) (827) -------------- -------------- ------------- ------------- ------------- ------------- Increase in Equity Derived from Equity Transactions.... 118,517 68,357 28,625 20,152 20,218 10,812 -------------- -------------- ------------- ------------- ------------- ------------- Net Increase in Equity........ 187,627 101,682 36,923 23,839 23,783 14,840 EQUITY Beginning of Period......... 286,571 184,889 41,724 17,885 29,333 14,493 -------------- -------------- ------------- ------------- ------------- ------------- End of Period............... $ 474,198 $ 286,571 $ 78,647 $ 41,724 $ 53,116 $ 29,333 -------------- -------------- ------------- ------------- ------------- ------------- -------------- -------------- ------------- ------------- ------------- -------------
The Accompanying Notes are an Integral Part of the Financial Statements --- 79 VARIABLE LIFE FINANCIAL STATEMENTS NORTHWESTERN MUTUAL VARIABLE LIFE ACCOUNT Statement of Operations and Changes in Equity (IN THOUSANDS)
GROWTH & INCOME STOCK DIVISION GROWTH STOCK DIVISION INDEX 500 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, 1997 1996 1997 1996 1997 1996 ------------- ------------- -------------- -------------- --------------- -------------- INVESTMENT INCOME Dividend Income............. $ 1,413 $ 564 $ 7,776 $ 1,458 $ 2,579 $ 1,153 Mortality and Expense Risks..................... 105 46 120 58 395 221 Taxes....................... 45 19 52 24 169 93 ------------- ------------- -------------- -------------- --------------- -------------- Net Investment Income....... 1,263 499 7,604 1,376 2,015 839 ------------- ------------- -------------- -------------- --------------- -------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Realized Gain on Investments............... 172 88 173 117 2,375 359 Unrealized Appreciation (Depreciation) of Investments During the Period.................... 4,151 1,191 (1,823) 728 17,772 8,074 ------------- ------------- -------------- -------------- --------------- -------------- Net Gain (Loss) on Investments............... 4,323 1,279 (1,650) 845 20,147 8,433 ------------- ------------- -------------- -------------- --------------- -------------- Increase in Equity Derived from Investment Activity.................. 5,586 1,778 5,954 2,221 22,162 9,272 ------------- ------------- -------------- -------------- --------------- -------------- EQUITY TRANSACTIONS Policyowners' Net Payments.................. 7,334 3,397 7,537 4,523 19,733 12,626 Policy Loans, Surrenders, and Death Benefits........ (1,314) (436) (1,842) (692) (5,039) (3,465) Mortality and Other (net)... (1,329) (665) (1,457) (867) (4,127) (2,351) Transfers from Other Divisions................. 8,851 4,758 10,673 3,950 20,024 8,372 Transfers to Other Divisions................. (1,341) (447) (1,104) (974) (3,783) (2,211) ------------- ------------- -------------- -------------- --------------- -------------- Increase in Equity Derived from Equity Transactions.... 12,201 6,607 13,807 5,940 26,808 12,971 ------------- ------------- -------------- -------------- --------------- -------------- Net Increase in Equity........ 17,787 8,385 19,761 8,161 48,970 22,243 EQUITY Beginning of Period......... 14,446 6,061 16,628 8,467 58,729 36,486 ------------- ------------- -------------- -------------- --------------- -------------- End of Period............... $ 32,233 $ 14,446 $ 36,389 $ 16,628 $ 107,699 $ 58,729 ------------- ------------- -------------- -------------- --------------- -------------- ------------- ------------- -------------- -------------- --------------- --------------
The Accompanying Notes are an Integral Part of the Financial Statements --- 80 NORTHWESTERN MUTUAL VARIABLE LIFE ACCOUNT Statement of Operations and Changes in Equity (IN THOUSANDS)
BALANCED DIVISION HIGH YIELD BOND DIVISION ------------------------------- ----------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, 1997 1996 1997 1996 -------------- -------------- ------------- ------------- INVESTMENT INCOME Dividend Income............. $ 5,105 $ 5,010 $ 1,370 $ 400 Mortality and Expense Risks..................... 558 452 29 13 Taxes....................... 239 193 12 5 -------------- -------------- ------------- ------------- Net Investment Income....... 4,308 4,365 1,329 382 -------------- -------------- ------------- ------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Realized Gain on Investments............... 1,655 1,462 26 21 Unrealized Appreciation (Depreciation) of Investments During the Period.................... 15,262 5,413 (531) 83 -------------- -------------- ------------- ------------- Net Gain (Loss) on Investments............... 16,917 6,875 (505) 104 -------------- -------------- ------------- ------------- Increase in Equity Derived from Investment Activity.................. 21,225 11,240 824 486 -------------- -------------- ------------- ------------- EQUITY TRANSACTIONS Policyowners' Net Payments.................. 15,394 15,417 1,922 1,101 Policy Loans, Surrenders, and Death Benefits........ (7,260) (7,030) (349) (243) Mortality and Other (net)... (3,395) (3,034) (339) (193) Transfers from Other Divisions................. 4,266 2,467 3,276 1,043 Transfers to Other Divisions................. (4,734) (5,909) (425) (449) -------------- -------------- ------------- ------------- Increase in Equity Derived from Equity Transactions.... 4,271 1,911 4,085 1,259 -------------- -------------- ------------- ------------- Net Increase in Equity........ 25,496 13,151 4,909 1,745 EQUITY Beginning of Period......... 100,826 87,675 3,892 2,147 -------------- -------------- ------------- ------------- End of Period............... $126,322 $100,826 $ 8,801 $ 3,892 -------------- -------------- ------------- ------------- -------------- -------------- ------------- ------------- SELECT BOND DIVISION MONEY MARKET DIVISION --------------------------- ----------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, 1997 1996 1997 1996 ------------ ------------ ------------- ------------- INVESTMENT INCOME Dividend Income............. $ 436 $ 176 $ 952 $ 508 Mortality and Expense Risks..................... 35 26 78 47 Taxes....................... 15 11 34 17 ------------ ------------ ------------- ------------- Net Investment Income....... 386 139 840 444 ------------ ------------ ------------- ------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Realized Gain on Investments............... 36 8 -- -- Unrealized Appreciation (Depreciation) of Investments During the Period.................... 234 22 -- -- ------------ ------------ ------------- ------------- Net Gain (Loss) on Investments............... 270 30 0 0 ------------ ------------ ------------- ------------- Increase in Equity Derived from Investment Activity.................. 656 169 840 444 ------------ ------------ ------------- ------------- EQUITY TRANSACTIONS Policyowners' Net Payments.................. 1,820 1,356 82,774 43,564 Policy Loans, Surrenders, and Death Benefits........ (311) (191) (823) (576) Mortality and Other (net)... (560) (248) (11,061) (5,552) Transfers from Other Divisions................. 2,000 954 3,402 2,573 Transfers to Other Divisions................. (756) (553) (67,983) (32,622) ------------ ------------ ------------- ------------- Increase in Equity Derived from Equity Transactions.... 2,193 1,318 6,309 7,387 ------------ ------------ ------------- ------------- Net Increase in Equity........ 2,849 1,487 7,149 7,831 EQUITY Beginning of Period......... 6,243 4,756 14,750 6,919 ------------ ------------ ------------- ------------- End of Period............... $ 9,092 $ 6,243 $ 21,899 $ 14,750 ------------ ------------ ------------- ------------- ------------ ------------ ------------- -------------
The Accompanying Notes are an Integral Part of the Financial Statements --- 81 NOTES TO FINANCIAL STATEMENTS NORTHWESTERN MUTUAL VARIABLE LIFE ACCOUNT Notes to Financial Statements DECEMBER 31, 1997 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 Fund 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, 1997 by each Division are shown below:
PURCHASES SALES -------------- -------------- Aggressive Growth Division.............. $ 32,148,589 $ 564,378 International Equity Division........... 22,025,927 803,101 Growth Stock Division................... 13,899,147 435,326 Growth & Income Stock Division................................ 21,933,009 522,627 Index 500 Stock Division................ 33,585,092 4,761,393 Balanced Division....................... 13,206,373 4,627,540 High Yield Bond Division................ 5,627,863 213,319 Select Bond Division.................... 3,269,526 691,055 Money Market Division................... 31,100,613 23,952,747
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 accounts 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 paid their premiums. Northwestern Mutual Life's equity represents any unpaid portion of net annual premiums. -- 82 NORTHWESTERN MUTUAL VARIABLE LIFE ACCOUNT Notes to Financial Statements DECEMBER 31, 1997 NOTE 8 -- Equity Values by Division are shown below:
POLICIES ISSUED BEFORE OCTOBER 11, 1995 EQUITY OF: ------------------------ TOTAL POLICYOWNERS NML EQUITY ------------- --------- ---------- Aggressive Growth Stock Division....................................................... $ 35,423 $ 4,027 $ 39,450 International Equity Division.......................................................... 28,405 3,253 31,658 Growth Stock Division.................................................................. 14,641 1,420 16,061 Growth and Income Stock Division....................................................... 19,349 1,808 21,157 Index 500 Stock Division............................................................... 67,754 4,993 72,747 Balanced Division...................................................................... 113,340 5,378 118,718 High Yield Bond Division............................................................... 4,331 427 4,758 Select Bond Division................................................................... 5,969 449 6,418 Money Market Division.................................................................. 4,274 221 4,495 ------------- --------- ---------- $ 293,486 $ 21,976 $ 315,462 ------------- --------- ---------- ------------- --------- ----------
POLICIES ISSUED ON OR AFTER OCTOBER 11, 1995 EQUITY OF: ------------------------ TOTAL POLICYOWNERS NML EQUITY ------------- --------- ---------- Aggressive Growth Stock Division....................................................... $ 26,389 $ 12,807 $ 39,196 International Equity Division.......................................................... 14,079 7,381 21,460 Growth Stock Division.................................................................. 10,886 5,287 16,173 Growth and Income Stock Division....................................................... 9,982 5,249 15,231 Index 500 Stock Division............................................................... 23,177 11,775 34,952 Balanced Division...................................................................... 5,155 2,448 7,603 High Yield Bond Division............................................................... 2,798 1,245 4,043 Select Bond Division................................................................... 2,034 640 2,674 Money Market Division.................................................................. 5,841 11,563 17,404 ------------- --------- ---------- $ 100,341 $ 58,395 $ 158,736 ------------- --------- ---------- ------------- --------- ----------
-- 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: Option One: / / Transfer in monthly installments so that at year end, Money Market valance will be zero. Option Two: / / 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 allocation of future investments shall be effective on the date it is received (complete and signed) at NML's Home Office. Forms received prior to 3:00 p.m. Central time will be effective on the day of receipt. 7. SIGNATURE OF OWNER(S)/TRUSTEE REQUIRED (TITLE MUST BE INCLUDED): - ------ Date signed ------ - ------ Date signed ------ 18-1425 (2/96) WORD 6 -- 85 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 414-299-4982 South 414-299-4268 ABS 414-299-5735
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 it appears 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. -- 86 NOTES -- 87 NOTES -- 88 Directors and Officers NORTHWESTERN MUTUAL SERIES FUND, INC. DIRECTORS James D. Ericson .... President and Chief Executive Officer, Northwestern Mutual Life, ..................................................................... Milwaukee Martin F. Stein ................ Chairman 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 William A. McIntosh .......... Retired Division Head--U.S. Fixed Income, Salomon Brothers, ....................................................................... Chicago OFFICERS James D. Ericson ..................................................... President Mark G. Doll ........................................ Vice President & Treasurer Merrill C. Lundberg .................................................. Secretary Barbara E. Courtney ................................................. Controller --- 89 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 Act of 1934 and a member of the National Association of Securities Dealers, Inc. 90-1899 (12-97) -------------- NORTHWESTERN BULK RATE MUTUAL LIFE-C- U.S. POSTAGE PAID PO Box 3095 MILWAUKEE, WI Milwaukee, WI 53201-3095 PERMIT NO. 426 -------------- Change Service Requested -----END PRIVACY-ENHANCED MESSAGE-----