<PAGE> 1
Registration No. 2-29240
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OF 1933 / /
Pre-Effective Amendment No. / /
--
Post-Effective Amendment No. 53 / X /
--
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940 / /
Amendment No. 18 / X /
--
(Check appropriate box or boxes.)
NML VARIABLE ANNUITY ACCOUNT B
- --------------------------------------------------------------------------------
(Exact Name of Registrant)
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
(Name of Depositor)
720 East Wisconsin Avenue, Milwaukee, Wisconsin 53202
- --------------------------------------------------------------------------------
(Address of Depositor's Principal Executive Offices) (Zip Code)
Depositor's Telephone Number, including Area Code 414-271-1444
JOHN M. BREMER, Senior Vice President, General Counsel and Secretary
720 East Wisconsin Avenue, Milwaukee, Wisconsin 53202
- --------------------------------------------------------------------------------
(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check appropriate
space)
immediately upon filing pursuant to paragraph (b) of Rule 485
- -----
X on April 30, 1996 pursuant to paragraph (b) of Rule 485
- -----
60 days after filing pursuant to paragraph (a)(1) of Rule 485
- -----
on (DATE) pursuant to paragraph (a)(1) of Rule 485
- -----
this post-effective amendment designates a new effective date for a
- ----- previously filed post-effective amendment.
ISSUER HAS REGISTERED AN INDEFINITE AMOUNT OF SECURITIES UNDER THE SECURITIES
ACT OF 1933 PURSUANT TO RULE 24f-2 UNDER THE INVESTMENT COMPANY ACT OF 1940.
THE RULE 24f-2 NOTICE FOR ISSUER'S MOST RECENT FISCAL YEAR WAS FILED ON
FEBRUARY 26, 1996.
<PAGE> 2
NML VARIABLE ANNUITY ACCOUNT B
CROSS-REFERENCE SHEET
<TABLE>
<CAPTION>
N-4, Part A Heading in
Item Prospectus
- ----------- ----------
<S> <C>
1 . . . . . . . . . . . . . . . . . Cover Page
2 . . . . . . . . . . . . . . . . . Index of Special Terms
3 . . . . . . . . . . . . . . . . . Synopsis, The Contracts, The Fund,
Deductions and Charges, Right to
Examine Deferred Contract, Penalty Tax
on Premature Payments, Expense Table
4 . . . . . . . . . . . . . . . . . Accumulation Unit Values, Financial
Statements
5 . . . . . . . . . . . . . . . . . The Company, NML Variable Annuity
Account B, The Fund, Voting Rights
6 . . . . . . . . . . . . . . . . . Deductions, Distribution of the
Contracts
7 . . . . . . . . . . . . . . . . . The Contracts, Owners of the
Contracts, Application of Purchase
Payments, Transfers Between Divisions
and Payment Plans, Substitution and
Change
8 . . . . . . . . . . . . . . . . . Variable Payment Plans, Description of
Payment Plans, Amount of Annuity
Payments, Maturity Benefit, Assumed
Investment Rate, Transfers Between
Divisions and Payment Plans
9 . . . . . . . . . . . . . . . . . Death Benefit
10 . . . . . . . . . . . . . . . . . Amount and Frequency, Application of
Purchase Payments, Net Investment
Factor, Distribution of the Contracts
11 . . . . . . . . . . . . . . . . . Withdrawal Amount, Deferment of
Benefit Payments, Right to Examine
Contract
12 . . . . . . . . . . . . . . . . . Federal Income Taxes
13 . . . . . . . . . . . . . . . . . Not Applicable
14 . . . . . . . . . . . . . . . . . Table of Contents for Statement of
Additional Information
<CAPTION>
N-4, Part B Heading in Statement
Item of Additional Information
- ----------- -------------------------
<S> <C>
15 . . . . . . . . . . . . . . . . . Cover Page
16 . . . . . . . . . . . . . . . . . Table of Contents
17 . . . . . . . . . . . . . . . . . Not Applicable
18 . . . . . . . . . . . . . . . . . Experts
19 . . . . . . . . . . . . . . . . . Not Applicable
20 . . . . . . . . . . . . . . . . . Distribution of the Contracts
21 . . . . . . . . . . . . . . . . . Not Applicable
22 . . . . . . . . . . . . . . . . . Determination of Annuity Payments
23 . . . . . . . . . . . . . . . . . Financial Statements
</TABLE>
<PAGE> 3
April 30, 1996
P R O S P E C T U S
NML
Variable
Annuity
Account B
- - I N D I V I D U A L R E T I R E M E N T A N N U I T I E S
- - T A X D E F E R R E D A N N U I T I E S
- - N O N T A X - Q U A L I F I E D A N N U I T I E S
[NORTHWESTERN MUTUAL LIFE LOGO]
720 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
(414) 271-1444
<PAGE> 4
P R O S P E C T U S
NML VARIABLE ANNUITY ACCOUNT B
This prospectus describes individual variable annuity contracts (the
"Contracts") offered by The Northwestern Mutual Life Insurance Company
("Northwestern Mutual Life"). The Contracts are offered for use in situations
which do not qualify for special treatment under the Internal Revenue Code of
1986, as amended (the "Code"). The Contracts are also offered as individual
retirement annuities pursuant to the provisions of Section 408 of the Code,
including those established by employer contributions under a simplified
employee pension arrangement, and as tax-deferred annuities, pursuant to
Section 403(b) of the Code, for employees of public school systems and
tax-exempt organizations described in Section 501(c)(3). The Contracts may also
be used to fund deferred compensation plans for public employees established
pursuant to Section 457 of the Code. In addition, the Contracts may be
purchased by individuals who have received fixed dollar annuities as
distributions of termination benefits from tax-qualified corporate or HR-10
plans or trusts and want to exchange their policies for the Contracts.
The Contracts contemplate periodic purchase payments until a selected
maturity date--usually retirement--after which the benefits under the Contracts
become payable. Purchase payments which are to be accumulated on a variable
basis or applied to provide variable benefits are credited by Northwestern
Mutual Life to NML Variable Annuity Account B (the "Account") and allocated
among one or more of the nine Divisions of the Account as directed by the
individual Contract owners. The Contracts also permit accumulation of funds on
a fixed basis, at rates of interest declared periodically by Northwestern
Mutual Life. This prospectus describes only the Account and the variable
provisions of the Contracts except where there are specific references to the
fixed provisions.
The assets of the Account are maintained separately from the general
assets of Northwestern Mutual Life. Assets of each Division of the Account are
invested entirely in shares of a corresponding Portfolio of Northwestern Mutual
Series Fund, Inc. (the "Fund"). The Fund is currently comprised of the Index
500 Stock, Select Bond, Money Market, Balanced, Growth and Income Stock, Growth
Stock, Aggressive Growth Stock, High Yield Bond and International Equity
Portfolios.
The value of interests in each Division before annuity benefits become
payable will vary continuously to reflect the investment performance of the
Portfolio selected by the Contract owner. When annuity benefits become payable
the Contracts provide lifetime annuity payments or other annuity payment plans
on either a variable or fixed basis. If a variable payment plan is selected the
annuity payments will continue to increase or decrease to reflect the
investment experience of the Portfolios for the Divisions to which Contract
values have been allocated. If a fixed payment plan is selected the amount of
annuity payments will remain fixed, except as they may be increased by
dividends.
Two versions of the Contracts are offered: Front Load Contracts and Back
Load Contracts. (See "Expense Table", p. 2, and "Deductions", p. 15.)
This prospectus sets forth concisely the information about the Contracts
that a prospective investor ought to know before investing. Additional
information about the Contracts and the Account has been filed with the
Securities and Exchange Commission in a Statement of Additional Information
which is incorporated herein by reference. The Statement of Additional
Information is available upon written or oral request and without charge from
The Northwestern Mutual Life Insurance Company, 720 East Wisconsin Avenue,
Milwaukee, Wisconsin, 53202, Telephone Number (414) 271-1444. The table of
contents for the Statement of Additional Information is found on page 18 of
this prospectus.
THIS PROSPECTUS IS VALID ONLY WHEN ACCOMPANIED BY THE CURRENT PROSPECTUS
FOR NORTHWESTERN MUTUAL SERIES FUND, INC. WHICH IS ATTACHED HERETO, AND
SHOULD BE RETAINED FOR FUTURE REFERENCE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT LAWFULLY BE MADE. NO PERSON IS AUTHORIZED TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS.
The Date of the Statement of Additional Information is April 30, 1996
<PAGE> 5
INDEX OF SPECIAL TERMS
The following special terms used in this prospectus are discussed at the pages
indicated.
TERM PAGE TERM PAGE
- ----------------------------- ---- ----------------- ----
ACCUMULATION UNIT ..................... 9 ANNUITANT .................. 11
ANNUITY (or ANNUITY PAYMENTS) ......... 10 MATURITY DATE .............. 10
NET INVESTMENT FACTOR ................. 9 OWNER ...................... 11
PAYMENT PLANS ......................... 10 WITHDRAWAL AMOUNT .......... 9
SYNOPSIS
THE CONTRACTS The Contracts are individual variable annuity contracts offered
for use under certain tax qualified plan and in non-tax qualified situations.
(See "Qualified and Non-Tax Qualified Plans", p. 13.) The Contracts provide
for accumulation of funds on a variable or fixed or combination basis until a
selected maturity date -- usually retirement -- and payment of annuity benefits
on either a variable or fixed basis. (See "Description of Payment Plans", p.
10.) Two versions of the Contracts are offered: Front Load Contracts and Back
Load Contracts. See the Expense Table below, and "Deductions", p. 15.
THE FUND The Account is comprised of nine Divisions which invest in the
corresponding Portfolios of Northwestern Mutual Series Fund, Inc. For more
information regarding the Fund and its Portfolios, including information about
their investment objectives and expenses, see "The Fund", p. 8 and the attached
Fund Prospectus.
DEDUCTIONS AND CHARGES For the Front Load Contract there is a maximum sales
load of 4% of purchase payments, reduced when cumulative purchase payments
exceed $100,000. For the Back Load Contract there is no deduction from
purchase payments for sales expenses, but a withdrawal charge of 0%-8% applies,
depending on the length of time funds have been held under the Contract and the
Contract size. The assets of the Account bear a charge for mortality and
expense risks assumed by Northwestern Mutual Life under the Contract. This
charge is at the annual rate of .40% for the Front Load Contract and 1.25% for
the Back Load Contract. In addition, the annual Contract fee is $30.00. For
more information about these and other expenses, see the Expense Table below
and "Deductions", p. 15. Expenses of the Fund are described in the attached
Prospectus for the Fund.
RIGHT TO EXAMINE DEFERRED CONTRACT During the 10 days following the delivery
of a Contract the Owner may return it to Northwestern Mutual Life, by mail or
in person, if for any reason the Owner has changed his mind. On return of the
Contract, Northwestern Mutual Life will pay to the Owner the value of
Accumulation Units credited to the Contract determined as of the valuation next
following receipt of a written request at the Home Office of Northwestern
Mutual Life.
PENALTY TAX ON PREMATURE PAYMENTS Premature payment of benefits under an
annuity contract may cause a penalty tax to be incurred. (See "Taxation of
Contract Benefits", p. 14.)
EXPENSE TABLE
<TABLE>
<CAPTION>
ANNUAL EXPENSES OF THE ACCOUNT
FRONT LOAD CONTRACT ------------------------------
TRANSACTION EXPENSES FOR CONTRACTOWNERS (AS A PERCENTAGE OF ASSETS)
- --------------------------------------- ---------------------------
<S> <C> <C> <C>
Maximum Sales Load (as a percentage
of purchase payments) ................. 4% Mortality Rate and Expense Guarantee
Withdrawal Charge ..................... None Charge ..................................... .40%
ANNUAL CONTRACT FEE
-------------------
$30; waived if the Contract Value equals
or exceeds $50,000
- ----------------------------------------------------------------------------------------------------
ANNUAL EXPENSES OF THE ACCOUNT
BACK LOAD CONTRACT ------------------------------
TRANSACTION EXPENSES FOR CONTRACTOWNERS (AS A PERCENTAGE OF ASSETS)
- --------------------------------------- ---------------------------
Sales Load (as a percentage of purchase Mortality Rate and Expense Guarantee
payments) ............................. None Charge ..................................... 1.25%
Withdrawal Charge for Sales Expenses
(as a percentage of amounts paid) ..... 0%-8% ANNUAL CONTRACT FEE
-------------------
$30; waived if the Contract Value equals
or exceeds $50,000
</TABLE>
2
<PAGE> 6
ANNUAL EXPENSES OF THE PORTFOLIOS
(AS A PERCENTAGE OF THE ASSETS)
<TABLE>
<CAPTION>
Total Annual
Management Fees Custody Fees Other Expenses Expenses
--------------- ------------ -------------- ------------
<S> <C> <C> <C> <C>
Index 500 Stock .20% .00% .01% .21%
Select Bond .30% .00% .00% .30%
Money Market .30% .00% .00% .30%
Balanced .30% .00% .00% .30%
Growth and Income Stock .65% .00% .04% .69%
Growth Stock .58% .00% .03% .61%
Aggressive Growth Stock .55% .00% .01% .56%
High Yield Bond .60% .00% .05% .65%
International Equity .68% .11% .06% .85%
</TABLE>
EXAMPLE
FRONT LOAD CONTRACT - You would pay the following expenses on each $1,000
investment, assuming 5% annual return:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Index 500 Stock $46 $63 $81 $134
Select Bond $47 $66 $86 $144
Money Market $47 $66 $86 $144
Balanced $47 $66 $86 $144
Growth and Income Stock $51 $77 $106 $187
Growth Stock $50 $75 $102 $178
Aggressive Growth Stock $49 $73 $99 $173
High Yield Bond $50 $76 $104 $183
International Equity $52 $82 $114 $204
</TABLE>
NOTE: THE MINIMUM INITIAL PURCHASE PAYMENT FOR A FRONT-LOAD CONTRACT IS
$10,000. THE NUMBERS ABOVE MUST BE MULTIPLIED BY 10 TO FIND THE EXPENSES FOR A
FRONT-LOAD CONTRACT OF MINIMUM SIZE.
EXAMPLE
BACK LOAD CONTRACT - You would pay the following expenses on a $1,000
investment, assuming (1) 5% annual return and (2) surrender at the end of each
time period:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Index 500 Stock $95 $110 $128 $194
Select Bond $96 $113 $133 $204
Money Market $96 $113 $133 $204
Balanced $96 $113 $133 $204
Growth and Income Stock $100 $125 $153 $245
Growth Stock $99 $123 $149 $237
Aggressive Growth Stock $98 $121 $146 $232
High Yield Bond $99 $124 $151 $241
International Equity $101 $130 $161 $261
</TABLE>
You would pay the following expenses on the same $1,000 investment, assuming no
surrender or annuitization:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Index 500 Stock $15 $50 $88 $194
Select Bond $16 $53 $93 $204
Money Market $16 $53 $93 $204
Balanced $16 $53 $93 $204
Growth and Income Stock $20 $65 $113 $245
Growth Stock $19 $63 $109 $237
Aggressive Growth Stock $18 $61 $106 $232
High Yield Bond $19 $64 $111 $241
International Equity $21 $70 $121 $261
</TABLE>
The purpose of the table above is to assist a Contract Owner in
understanding the expenses paid by the Account and the Portfolios and borne by
investors in the Contracts. The sales load for a Front Load Contract depends on
the
3
<PAGE> 7
amount of cumulative purchase payments. For the Back Load Contract the
withdrawal charge depends on the length of time funds have been held under the
Contract and the amounts held. The Contracts provide for charges for transfers
between the Divisions of the Account and for premium taxes, but no such charges
are currently being made. See "Transfers Between Divisions and Payment Plans",
p. 11 and "Deductions", p. 15, for additional information about expenses for
the Contracts. The expenses shown in the table for the Portfolios show the
annual expenses for each of the Portfolios, as a percentage of the average net
assets of the Portfolio, based on 1995 operations for the Portfolios and their
predecessors. For additional information about expenses of the Portfolios, see
the prospectus for the Fund attached hereto. THE EXAMPLE SHOULD NOT BE
CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE
GREATER OR LESS THAN THOSE SHOWN, SUBJECT TO THE GUARANTEES OF THE CONTRACTS.
The tables on the following pages present the accumulation unit values of
the nine Divisions of the Account for the Contracts, including Contracts issued
prior to the date of this prospectus. The Contracts issued prior to March 31,
1995 are different in certain material respects from Contracts offered
currently, but the values shown below for Contracts issued after December 16,
1981 and prior to March 31, 1995 are calculated on the same basis as those for
the Back Load Contracts described in this prospectus. The Front Load Contracts
described in this prospectus have a lower mortality rate and expense guarantee
charge than any of the Contracts issued prior to March 31, 1995.
4
<PAGE> 8
ACCUMULATION UNIT VALUES
CONTRACTS ISSUED ON OR AFTER MARCH 31, 1995
<TABLE>
<CAPTION>
FOR THE NINE
MONTHS ENDED
DECEMBER 31, 1995
-----------------
<S> <C>
Index 500 Stock Division
Accumulation Unit Value:
Front Load Version
Beginning of Period $1.00
End of Period $1.249
Back Load Version
Beginning of Period $1.637
End of Period $2.032
Number of Accumulation Units
Outstanding, End of Period
Front Load 4,355,530
Back Load 9,220,673
Select Bond Division
Accumulation Unit Value:
Front Load Version
Beginning of Period $1.00
End of Period $1.129
Back Load Version
Beginning of Period $5.471
End of Period $6.137
Number of Accumulation Units
Outstanding, End of Period
Front Load 1,883,453
Back Load 1,292,191
Money Market Division
Accumulation Unit Value:
Front Load Version
Beginning of Period $1.00
End of Period $1.040
Back Load Version
Beginning of Period $2.090
End of Period $2.161
Number of Accumulation Units
Outstanding, End of Period
Front Load 5,948,990
Back Load 5,318,088
Balanced Division
Accumulation Unit Value:
Front Load Version
Beginning of Period $1.00
End of Period $1.181
Back Load Version
Beginning of Period $3.673
End of Period $4.311
Number of Accumulation Units
Outstanding, End of Period
Front Load 6,896,744
Back Load 7,688,513
Growth and Income Stock Division
Accumulation Unit Value:
Front Load Version
Beginning of Period $1.00
End of Period $1.197
Back Load Version
Beginning of Period $1.083
End of Period $1.287
Number of Accumulation Units
Outstanding, End of Period
Front Load 3,530,232
Back Load 7,514,293
<CAPTION>
FOR THE NINE
MONTHS ENDED
DECEMBER 31, 1995
-----------------
<S> <C>
Growth Stock Division
Accumulation Unit Value:
Front Load Version
Beginning of Period $1.00
End of Period $1.209
Back Load Version
Beginning of Period $1.082
End of Period $1.300
Number of Accumulation Units
Outstanding, End of Period
Front Load 1,715,092
Back Load 3,952,191
Aggressive Growth Stock Division
Accumulation Unit Value:
Front Load Version
Beginning of Period $1.00
End of Period $1.305
Back Load Version
Beginning of Period $2.123
End of Period $2.753
Number of Accumulation Units
Outstanding, End of Period
Front Load 5,338,263
Back Load 8,294,210
High Yield Bond Division
Accumulation Unit Value:
Front Load Version
Beginning of Period $1.00
End of Period $1.112
Back Load Version
Beginning of Period $1.067
End of Period $1.178
Number of Accumulation Units
Outstanding, End of Period
Front Load 1,418,382
Back Load 2,700,647
International Equity Division
Accumulation Unit Value:
Front Load Version
Beginning of Period $1.00
End of Period $1.140
Back Load Version
Beginning of Period $1.218
End of Period $1.380
Number of Accumulation Units
Outstanding, End of Period
Front Load 2,784,309
Back Load 7,214,357
</TABLE>
5
<PAGE> 9
ACCUMULATION UNIT VALUES
CONTRACTS ISSUED AFTER DECEMBER 16, 1981 AND PRIOR TO MARCH 31, 1995
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31
1995 1994 1993 1992 1991 1990
----- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Index 500 Stock Division
Accumulation Unit Value:
Beginning of Period* $1.499 $1.500 $1.384 $1.306 $1.021 $1.000
End of Period $2.032 $1.499 $1.500 $1.384 $1.306 $1.021
Number of Accumulation Units
Outstanding, End of Period 134,818,674 119,845,898 105,795,927 32,924,088 12,058,133 189,751
Select Bond Division
Accumulation Unit Value:
Beginning of Period $5.217 $5.437 $4.990 $4.722 $4.091 $3.824
End of Period $6.137 $5.217 $5.437 $4.990 $4.722 $4.091
Number of Accumulation Units
Outstanding, End of Period 21,048,883 20,642,740 21,874,778 15,399,609 10,692,797 6,997,013
Money Market Division
Accumulation Unit Value:
Beginning of Period $2.067 $2.012 $1.980 $1.940 $1.859 $1.743
End of Period $2.161 $2.067 $2.012 $1.980 $1.940 $1.859
Number of Accumulation Units
Outstanding, End of Period 34,040,829 31,466,730 24,431,865 27,773,056 24,758,592 27,363,279
Balanced Division
Accumulation Unit Value:
Beginning of Period $3.453 $3.497 $3.232 $3.107 $2.538 $2.544
End of Period $4.311 $3.453 $3.497 $3.232 $3.107 $2.538
Number of Accumulation Units
Outstanding, End of Period 347,995,936 363,391,482 377,043,512 355,125,051 322,313,588 322,488,873
Growth and Income Stock Division
Accumulation Unit Value:
Beginning of Period** $0.994 $1.000 -- -- -- --
End of Period $1.287 $0.994 -- -- -- --
Number of Accumulation Units
Outstanding, End of Period 52,866,200 31,542,581 -- -- -- --
Growth Stock Division
Accumulation Unit Value:
Beginning of Period** $1.006 $1.000 -- -- -- --
End of Period $1.300 $1.006 -- -- -- --
Number of Accumulation Units
Outstanding, End of Period 24,827,801 12,213,322 -- -- -- --
Aggressive Growth Stock Division
Accumulation Unit Value:
Beginning of Period* $2.001 $1.922 $1.634 $1.562 $1.014 $1.000
End of Period $2.753 $2.001 $1.922 $1.634 $1.562 $1.014
Number of Accumulation Units
Outstanding, End of Period 147,960,662 123,249,312 77,246,018 53,918,035 19,966,511 205,590
High Yield Bond Division
Accumulation Unit Value:
Beginning of Period** $1.022 $1.000 -- -- -- --
End of Period $1.178 $1.022 -- -- -- --
Number of Accumulation Units
Outstanding, End of Period 13,474,146 7,229,418 -- -- -- --
International Equity Division
Accumulation Unit Value:
Beginning of Period*** $1.220 $1.236 $1.000 -- -- --
End of Period $1.380 $1.220 $1.236 -- -- --
Number of Accumulation Units
Outstanding, End of Period 179,261,185 186,097,279 74,174,799 -- -- --
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31
1989 1988 1987 1986
----- ---- ---- ----
<S> <C> <C> <C> <C>
Index 500 Stock Division
Accumulation Unit Value:
Beginning of Period* -- -- -- --
End of Period -- -- -- --
Number of Accumulation Units
Outstanding, End of Period -- -- -- --
Select Bond Division
Accumulation Unit Value:
Beginning of Period $3.401 $3.175 $3.245 $2.805
End of Period $3.824 $3.401 $3.175 $3.245
Number of Accumulation Units
Outstanding, End of Period 5,553,863 4,236,105 3,349,440 3,462,289
Money Market Division
Accumulation Unit Value:
Beginning of Period $1.619 $1.530 $1.457 $1.386
End of Period $1.743 $1.619 $1.530 $1.457
Number of Accumulation Units
Outstanding, End of Period 20,510,416 20,642,227 15,666,117 8,694,717
Balanced Division
Accumulation Unit Value:
Beginning of Period $2.228 $2.070 $1.988 $1.731
End of Period $2.544 $2.228 $2.070 $1.988
Number of Accumulation Units
Outstanding, End of Period 316,204,759 307,488,444 290,102,949 186,218,711
Growth and Income Stock Division
Accumulation Unit Value:
Beginning of Period** -- -- -- --
End of Period -- -- -- --
Number of Accumulation Units
Outstanding, End of Period -- -- -- --
Growth Stock Division
Accumulation Unit Value:
Beginning of Period** -- -- -- --
End of Period -- -- -- --
Number of Accumulation Units
Outstanding, End of Period -- -- -- --
Aggressive Growth Stock Division
Accumulation Unit Value:
Beginning of Period* -- -- -- --
End of Period -- -- -- --
Number of Accumulation Units
Outstanding, End of Period -- -- -- --
High Yield Bond Division
Accumulation Unit Value:
Beginning of Period** -- -- -- --
End of Period -- -- -- --
Number of Accumulation Units
Outstanding, End of Period -- -- -- --
International Equity Division
Accumulation Unit Value:
Beginning of Period*** -- -- -- --
End of Period -- -- -- --
Number of Accumulation Units
Outstanding, End of Period -- -- -- --
</TABLE>
* The initial investments in the Index 500 Stock Division and Aggressive
Growth Stock Division were made on December 12, 1990.
** The initial investments in the Growth and Income Stock Division, Growth
Stock Division and High Yield Bond Division were made on May 3, 1994.
*** The initial investment in the International Equity Division was made on
April 30, 1993.
6
<PAGE> 10
ACCUMULATION UNIT VALUES
CONTRACTS ISSUED PRIOR TO DECEMBER 17, 1981
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31
1995 1994 1993 1992 1991 1990
----- ---- ---- ---- ---- ---
<S> <C> <C> <C> <C> <C> <C>
Index 500 Stock Division
Accumulation Unit Value:
Beginning of Period* $1.530 $1.523 $1.398 $1.313 $1.021 $1.000
End of Period $2.084 $1.530 $1.523 $1.398 $1.313 $1.021
Number of Accumulation Units
Outstanding, End of Period 13,256,279 14,230,394 15,442,799 317,023 326,395 4
Select Bond Division
Accumulation Unit Value:
Beginning of Period $5.569 $5.774 $5.273 $4.965 $4.280 $3.981
End of Period $6.583 $5.569 $5.774 $5.273 $4.965 $4.280
Number of Accumulation Units
Outstanding, End of Period 1,364,416 1,492,775 1,701,121 1,808,558 1,979,936 2,041,191
Money Market Division
Accumulation Unit Value:
Beginning of Period $2.206 $2.136 $2.092 $2.040 $1.945 $1.814
End of Period $2.317 $2.206 $2.136 $2.092 $2.040 $1.945
Number of Accumulation Units
Outstanding, End of Period 1,358,156 1,458,463 1,331,457 1,787,440 2,059,962 2,574,527
Balanced Division
Accumulation Unit Value:
Beginning of Period $3.685 $3.713 $3.414 $3.266 $2.655 $2.647
End of Period $4.623 $3.685 $3.713 $3.414 $3.266 $2.655
Number of Accumulation Units
Outstanding, End of Period 7,327,654 8,155,713 9,324,132 10,125,067 10,652,114 11,655,303
Growth and Income Stock Division
Accumulation Unit Value:
Beginning of Period** $0.997 -- -- -- -- --
End of Period $1.298 -- -- -- -- --
Number of Accumulation Units
Outstanding, End of Period 32,681 -- -- -- -- --
Growth Stock Division
Accumulation Unit Value:
Beginning of Period** $1.009 -- -- -- -- --
End of Period $1.311 -- -- -- -- --
Number of Accumulation Units
Outstanding, End of Period 19,315 -- -- -- -- --
Aggressive Growth Stock Division
Accumulation Unit Value:
Beginning of Period* $2.042 $1.952 $1.651 $1.570 $1.014 $1.000
End of Period $2.824 $2.042 $1.952 $1.651 $1.570 $1.014
Number of Accumulation Units
Outstanding, End of Period 1,617,883 1,474,133 969,604 833,606 534,196 22,431
High Yield Bond Division
Accumulation Unit Value:
Beginning of Period** $1.025 -- -- -- -- --
End of Period $1.188 -- -- -- -- --
Number of Accumulation Units
Outstanding, End of Period 58,755 -- -- -- -- --
International Equity Division
Accumulation Unit Value:
Beginning of Period*** $1.230 $1.240 $1.000 -- -- --
End of Period $1.398 $1.230 $1.240 -- -- --
Number of Accumulation Units
Outstanding, End of Period 2,141,462 2,642,855 1,802,948 -- -- --
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31
1989 1988 1987 1986
---- ---- ---- ----
<S> <C> <C> <C> <C>
Index 500 Stock Division
Accumulation Unit Value:
Beginning of Period* -- -- -- --
End of Period -- -- -- --
Number of Accumulation Units
Outstanding, End of Period -- -- -- --
Select Bond Division
Accumulation Unit Value:
Beginning of Period $3.522 $3.272 $3.328 $2.863
End of Period $3.981 $3.522 $3.272 $3.328
Number of Accumulation Units
Outstanding, End of Period 2,293,077 2,426,254 2,524,235 2,886,855
Money Market Division
Accumulation Unit Value:
Beginning of Period $1.677 $1.576 $1.494 $1.414
End of Period $1.814 $1.677 $1.576 $1.494
Number of Accumulation Units
Outstanding, End of Period 2,285,388 2,680,348 3,054,691 1,867,702
Balanced Division
Accumulation Unit Value:
Beginning of Period $2.307 $2.133 $2.038 $1.765
End of Period $2.647 $2.307 $2.133 $2.038
Number of Accumulation Units
Outstanding, End of Period 12,655,382 14,097,822 15,526,997 7,534,399
Growth and Income Stock Division
Accumulation Unit Value:
Beginning of Period** -- -- -- --
End of Period -- -- -- --
Number of Accumulation Units
Outstanding, End of Period -- -- -- --
Growth Stock Division
Accumulation Unit Value:
Beginning of Period** -- -- -- --
End of Period -- -- -- --
Number of Accumulation Units
Outstanding, End of Period -- -- -- --
Aggressive Growth Stock Division
Accumulation Unit Value:
Beginning of Period* -- -- -- --
End of Period -- -- -- --
Number of Accumulation Units
Outstanding, End of Period -- -- -- --
High Yield Bond Division
Accumulation Unit Value:
Beginning of Period** -- -- -- --
End of Period -- -- -- --
Number of Accumulation Units
Outstanding, End of Period -- -- -- --
International Equity Division
Accumulation Unit Value:
Beginning of Period*** -- -- -- --
End of Period -- -- -- --
Number of Accumulation Units
Outstanding, End of Period -- -- -- --
</TABLE>
* The initial investments in the Index 500 Stock Division and Aggressive
Growth Stock Division and were made on December 3, 1990.
** The initial investments in the Growth and Income Stock Division, Growth
Stock Division and High Yield Bond Division were made on May 3, 1994.
*** The initial investment in the International Equity Division was made on
April 30, 1993.
THE COMPANY
The Northwestern Mutual Life Insurance Company was organized by a
special act of the Wisconsin Legislature in 1857. It is the nation's
sixth largest life insurance company, based on total assets in excess of
$54 billion on December 31, 1995, and is licensed to conduct a
conventional life insurance business in the District of Columbia and in
all states of the United States. Northwestern Mutual Life sells life and
disability income insurance policies and annuity contracts through its
own field force of approximately 6,000 full time producing agents. The
Home Office of Northwestern Mutual Life is located at 720 East Wisconsin
Avenue, Milwaukee, Wisconsin 53202.
7
<PAGE> 11
NML VARIABLE ANNUITY ACCOUNT B
The Account was established on February 14, 1968 by the Board of
Trustees of Northwestern Mutual Life in accordance with the provisions
of the Wisconsin insurance law to facilitate the issuance of the
Contracts and is registered as a unit investment trust under the
Investment Company Act of 1940.
The Account has nine Divisions. Considerations paid to Northwestern
Mutual Life to provide variable benefits under the Contracts are
allocated to one or more of the Divisions as directed by the Owner of
the Contract. Assets allocated to the Index 500 Stock, Select Bond,
Money Market, Balanced, Growth and Income Stock, Growth Stock,
Aggressive Growth Stock, High Yield Bond and International Equity
Divisions are simultaneously invested in shares of the corresponding
Portfolios of Northwestern Mutual Series Fund, Inc.
Under Wisconsin law, the income, gains or losses, realized or
unrealized, of the Account are credited to or charged against the
Account in accordance with the Contracts, without regard to other
income, gains or losses of Northwestern Mutual Life. The assets of the
Account are owned by Northwestern Mutual Life and it is not a trustee
with respect thereto. However, such assets are not chargeable with any
liabilities arising out of any other separate account or other business
of Northwestern Mutual Life. All obligations arising under the Contracts
are general obligations of Northwestern Mutual Life.
- --------------------------------------------------------------------------------
THE FUND
Northwestern Mutual Series Fund, Inc. is a mutual fund of the
series type registered under the Investment Company Act of 1940 as an
open-end diversified management investment company. The Fund is composed
of nine separate portfolios which operate as separate mutual funds. The
portfolios are the Index 500 Stock Portfolio, the Select Bond Portfolio,
the Money Market Portfolio, the Balanced Portfolio, the Growth and
Income Stock Portfolio, the Growth Stock Portfolio, the Aggressive
Growth Stock Portfolio, the High Yield Bond Portfolio and the
International Equity Portfolio. Shares of each Portfolio of the Fund
are purchased by the corresponding Division of the Account at net asset
value, that is, without any sales charge.
Northwestern Mutual Investment Services, Inc. ("NMIS"), a
wholly-owned subsidiary of Northwestern Mutual Life, is the investment
adviser to the Fund. Northwestern Mutual Life provides certain personnel
and facilities utilized by NMIS in performing its investment advisory
functions, and Northwestern Mutual Life is a party to the investment
advisory agreement. Northwestern Mutual Life and NMIS also perform
certain administrative functions and act as co-depositors of the
Account. J.P. Morgan Investment Management, Inc. and Templeton
Investment Counsel, Inc. have been retained under investment
sub-advisory agreements to provide investment advice to the Growth and
Income Stock Portfolio and the International Equity Portfolio,
respectively.
FOR MORE INFORMATION REGARDING THE FUND AND ITS PORTFOLIOS,
INCLUDING INFORMATION ABOUT THEIR INVESTMENT OBJECTIVES AND EXPENSES,
SEE THE PROSPECTUS FOR THE FUND ATTACHED HERETO. AN INVESTOR SHOULD READ
THE FUND'S PROSPECTUS CAREFULLY BEFORE INVESTING IN THE CONTRACTS.
- --------------------------------------------------------------------------------
THE CONTRACTS
PURCHASE PAYMENTS UNDER THE CONTRACTS
AMOUNT AND FREQUENCY Purchase payments may be paid monthly, quarterly,
semiannually, annually or on any other frequency acceptable to
Northwestern Mutual Life.
For Back Load Contracts the minimum amount for each purchase
payment is $25 for Contracts issued as tax-deferred annuities or for use
with either simplified employee pensions or deferred compensation plans
for public employees. For other Back Load Contracts, including
individual retirement annuities and nontax-qualified plans, the minimum
initial purchase payment is $100, or $3,500 for Back Load Contracts
purchased in exchange for fixed dollar annuities received as
distribution benefits from qualified plans or trusts. (See "Qualified
and Nontax-Qualified Plans", p. 13). For Front Load Contracts the
minimum initial purchase payment is $10,000. The minimum amount for
each subsequent purchase payment is $25 for all Contracts. Minimum
amounts for payments by preauthorized check depend on payment frequency.
Northwestern Mutual Life will accept larger purchase payments than due,
or payments at other times, but total purchase payments under any
Contract may not exceed $5,000,000 without the consent of Northwestern
Mutual Life.
Purchase payments may not exceed the applicable limits of the Code.
(See "Federal Income Taxes", p. 13.)
APPLICATION OF PURCHASE PAYMENTS Net purchase payments, after deduction
of any sales load, are credited by Northwestern Mutual Life to the
Account and allocated to one or more Divisions in accordance with the
direction of the Owner. Assets allocated to each Division will thereupon
be invested in shares of the Portfolio which corresponds to that
Division.
8
<PAGE> 12
Purchase payments are applied to provide "Accumulation Units" in
one or more Divisions. Accumulation Units represent the interest of an
Owner in the Account. The number of Accumulation Units provided by each
net purchase payment is determined by dividing the amount of the
purchase payment to be allocated to a Division by the value of an
Accumulation Unit in that Division, based upon the valuation of the
assets of the Division next following receipt of the purchase payment at
the Home Office of Northwestern Mutual Life. Receipt of purchase
payments at a lockbox facility designated by Northwestern Mutual Life
will be considered the same as receipt at the Home Office. Assets are
valued as of the close of trading on the New York Stock Exchange for
each day the Exchange is open, and at any other time required by the
Investment Company Act of 1940.
The number of an Owner's Accumulation Units will be increased by
additional purchase payments or transfers into the Account and decreased
by withdrawals or transfers out of the Account. The investment
experience of the Account does not change the number (as distinguished
from the value) of Accumulation Units.
The value of an Accumulation Unit in each Division varies with the
investment experience of the Division (which in turn is determined by
the investment experience of the corresponding Portfolio of the Fund),
and is determined by multiplying the value on the immediately preceding
valuation date by the net investment factor for the Division. (See "Net
Investment Factor", below.) Since the Owner bears the investment risk,
there is no guarantee as to the aggregate value of Accumulation Units;
such value may be less than, equal to or more than the cumulative net
purchase payments.
All or part of a purchase payment may be directed to the Guaranteed
Interest Fund and invested on a fixed basis. See "The Guaranteed
Interest Fund", p. 13.
NET INVESTMENT FACTOR
For each Division the net investment factor for any period ending
on a valuation date is 1.000000 plus the net investment rate for the
Division for that period. Under the Contract the net investment rate is
related to the assets of the Division. However, since all amounts are
simultaneously invested in shares of the corresponding Portfolio when
allocated to the Division, calculation of the net investment rate for
each of the Divisions may also be based upon the change in value of a
single share of the corresponding Portfolio.
Thus, for example, in the case of the Balanced Division the net
investment rate is equal to (a) the change in the net asset value of a
Balanced Portfolio share for the period from the immediately preceding
valuation date up to and including the current valuation date, plus the
per share amount of any dividends and other distributions made by the
Balanced Portfolio during the valuation period, less a deduction for any
applicable taxes or for any expenses resulting from a substitution of
securities, (b) divided by the net asset value of a Balanced Portfolio
share on the valuation date immediately preceding the current valuation
date, (c) less an adjustment to provide for the deduction for mortality
rate and expense risks assumed by Northwestern Mutual Life. (See
"Deductions", p. 15.)
Investment income and realized capital gains will be received in
the form of dividend and capital gain distributions upon Portfolio
shares held by each Division; such distributions will be reinvested in
additional shares of the same Portfolio. Unrealized capital gains and
realized and unrealized capital losses will be reflected by changes in
the value of the shares held by the Account.
BENEFITS PROVIDED UNDER THE CONTRACTS
The benefits provided under the Contracts consist of a withdrawal
amount, a death benefit and a maturity benefit. Subject to the
restrictions noted below, all of these benefits may be paid in a lump
sum or under the payment plans described below.
WITHDRAWAL AMOUNT On or prior to the maturity date the Owner is
entitled to withdraw the Accumulation Units credited to his Contract and
receive the value thereof less the applicable withdrawal charge. (See
"Withdrawal Charge", p. 15.) The value, which may be either greater or
less than the amount paid by the Owner, is determined as of the
valuation date coincident with or next following receipt by Northwestern
Mutual Life of a written request for withdrawal on a form provided by
Northwestern Mutual Life. The forms are available from the Home Office
and agents of Northwestern Mutual Life. A portion of the Accumulation
Units may be withdrawn on the same basis, except Northwestern Mutual
Life will not grant a partial withdrawal which would result in less than
100 Accumulation Units remaining; a request for such a partial
withdrawal will be treated as a request to surrender the entire
Contract. Amounts distributed to an Annuitant upon withdrawal of all or
a portion of Accumulation Units may be subject to federal income tax.
(See "Federal Income Taxes", p. 13.) A penalty tax will apply to
premature payments of Contract benefits. A penalty tax of 10% of the
amount of the payment which is includible in income will be imposed on
non-exempt withdrawals under individual retirement annuities, tax
deferred annuities, nontransferable annuity Contracts and nonqualified
deferred annuities. Payments which are exempt from the penalty tax
include payments upon disability, after age 59-1/2 or as substantially
equal periodic payments for life.
9
<PAGE> 13
If annuity payments are being made under Payment Plan 1 the payee
may surrender the Contract and receive the value of the Annuity Units
credited to his Contract, less the applicable withdrawal charge. (See
"Withdrawal Charge", p. 15.) Upon death during the certain period of the
payee under Plan 2 or both payees under Plan 3, the beneficiary may
surrender the Contract and receive the withdrawal value of the unpaid
payments for the certain period. The withdrawal value is based on the
Annuity Unit value on the withdrawal date, with the unpaid payments
discounted at the Assumed Investment Rate. (See "Description of Payment
Plans", below.)
DEATH BENEFIT Upon the death of the Annuitant prior to the maturity
date, Northwestern Mutual Life will pay to the direct beneficiary a
death benefit equal to the Contract value, as of the valuation date
coincident with or next following the date on which proof of death is
received at the Home Office of Northwestern Mutual Life or, if later,
the date on which a method of payment is elected. If death occurs prior
to the Annuitant's 65th birthday the death benefit, where permitted by
state law, will be not less than the amount of purchase payments
received by Northwestern Mutual Life under the Contract, less
withdrawals. The death benefit may be paid either in a lump sum or under
a payment plan.
MATURITY BENEFIT Purchase payments under the Contract are payable until
the maturity date specified in the Contract. Any date up to age 90 may
be selected as the maturity date, subject to applicable requirements of
the Code. On the maturity date, if no other permissible payment plan has
been elected, the maturity date will be changed to the Contract
anniversary nearest the Annuitant's 90th birthday. On that date, if no
other permissible payment plan has been elected, the value of the
Contract will be paid in monthly payments for life under a variable
payment plan with payments certain for ten years.
Variable Payment Plans
Part or all of the benefits under a Contract may be paid under a
variable payment plan. Under a variable plan the payee bears the entire
investment risk, since no guarantees of investment return are made.
Accordingly, there is no guarantee of the amount of the variable
payments, and the amount of such payments can be expected to change from
month to month.
For a discussion of tax considerations and limitations regarding
the election of payment plans, see "Federal Income Taxes", p. 13.
DESCRIPTION OF PAYMENT PLANS The following payment plans are available:
1. Payments for a Certain Period. An annuity payable monthly for
a specified period of five to 30 years.
2. Life Annuity with or without Certain Period. An annuity payable
monthly until the payee's death, or until the expiration of a selected
certain period, whichever is later. After the payee's death during the
certain period, if any, payments becoming due are paid to the designated
contingent beneficiary. A certain period of either 10 or 20 years may be
selected, or a plan with no certain period may be chosen.
3. Joint and Survivor Life Annuity with Certain Period. An annuity
payable monthly for a certain period of 10 years and thereafter to two
persons for their joint lives. On the death of either payee, payments
continue for the remainder of the 10 years certain or the remaining lifetime
of the survivor, whichever is longer.
Northwestern Mutual Life may limit the election of a payment plan to one
that results in payments of at least $20.
From time to time Northwestern Mutual Life may establish payment plan
rates with greater actuarial value than those stated in the Contract and make
them available at the time of settlement. Northwestern Mutual Life may also
make available other payment plans, with provisions and rates as published by
Northwestern Mutual Life for those plans.
AMOUNT OF ANNUITY PAYMENTS The amount of the first annuity payment will be
determined on the basis of the particular payment plan selected, the annuity
payment rate and, for plans involving life contingencies, the Annuitant's
adjusted age and sex. (A Contract with annuity payment rates that are not based
on sex is also available. See "Special Contract for Employers", p. 11.)
Variable annuity payments after the first will vary from month to month to
reflect the fluctuating value of the Annuity Units credited to the Contract.
Annuity Units represent the interest of the Contract in each Division of the
Account after annuity payments begin.
ASSUMED INVESTMENT RATE The variable annuity rate tables for the Contracts are
based upon an Assumed Investment Rate of 3 1/2%. Variable annuity rate tables
based upon an Assumed Investment Rate of 5% are also available where permitted
by state law.
The Assumed Investment Rate affects both the amount of the first variable
payment and the amount by which subsequent payments increase or decrease. The
Assumed Investment Rate does not affect the actuarial value of the future
payments as of the date when payments begin, though it does affect the actual
amount which may be received by an individual Annuitant.
Over a period of time, if each Division achieved a net investment result
exactly equal to the Assumed Investment Rate applicable to a particular payment
plan, the amount of annuity payments would be level. However, if the Division
10
<PAGE> 14
achieved a net investment result greater than the Assumed Investment Rate, the
amount of annuity payments would increase. Similarly, if the Division achieved
a net investment result smaller than the Assumed Investment Rate, the amount of
annuity payments would decrease.
A higher Assumed Investment Rate will result in a larger initial payment
but more slowly rising and more rapidly falling subsequent payments than a
lower Assumed Investment Rate.
ADDITIONAL INFORMATION
TRANSFERS BETWEEN DIVISIONS AND PAYMENT PLANS The Contracts provide
considerable flexibility for Owners to change the allocation of purchase
payments among the Divisions and to transfer values from one Division to
another both before and after annuity payments begin. In order to take full
advantage of these features Owners should carefully consider, on a continuing
basis, which Division or apportionment is best suited to their long-term
investment needs.
A Contract Owner may at any time change the allocation of purchase
payments among the Divisions by written notice to Northwestern Mutual Life.
Purchase payments received at the Home Office of Northwestern Mutual Life on
and after the date on which the notice is received will be applied to provide
Accumulation Units in one or more Divisions on the basis of the new allocation.
Before the effective date of a payment plan the owner may, upon written
request, transfer Accumulation Units from one Division to another. After the
effective date of a payment plan the payee may transfer Annuity Units from one
Division to another. The number of Accumulation or Annuity Units to be credited
will be adjusted to reflect the respective value of the Accumulation and
Annuity Units in each of the Divisions. For Accumulation Units the minimum
amount which may be transferred is the lesser of $100 or the entire value of
the Accumulation Units in the Division from which the transfer is being made.
For each transfer beginning with the thirteenth in any Contract year a transfer
fee of $25 may be deducted from the amount transferred. No charge is currently
being made for transfers.
Owners who contemplate the transfer of funds from one Division to another
should consider the risk inherent in a switch from one investment medium to
another. In general, frequent transfers based on short-term expectations for
the stock and bond markets, especially transfers of large sums, will tend to
accentuate the danger that a transfer will be made at an inopportune time.
Amounts which have been invested on a fixed basis may be transferred to
any Division of the Account, and the value of Accumulation Units in any
Division of the Account may be transferred to the Guaranteed Interest Fund for
investment on a fixed basis, subject to the restrictions described in the
Contract. See "The Guaranteed Interest Fund", p. 13.
After the effective date of a payment plan which does not involve a life
contingency (i.e., Plan 1) a payee may transfer to either form of life annuity
at no charge. The value of the remaining payments will be applied to the new
plan selected, with the amount of the first annuity payment under the new plan
being determined on the basis of the particular plan selected, the annuity
payment rate and the Annuitant's adjusted age and sex. Subsequent payments will
vary to reflect changes in the value of the Annuity Units credited.
Other transfers between payment plans are permitted subject to such
limitations as Northwestern Mutual Life may reasonably determine. Generally,
however, transfer is not permitted from a payment plan involving a life
contingency to a payment plan which does not involve the same life contingency.
Transfers from the Money Market Division may be made at any time while a
payment plan is in force. The Contracts provide that transfers between the
other Divisions and transfers between payment plans may be made after the
payment plan has been in force for at least 90 days and thereafter whenever at
least 90 days have elapsed since the date of the last transfer. At present
Northwestern Mutual Life permits transfers at any time but Northwestern Mutual
reserves the right to change this practice in the future. The transfer will be
made as of the close of business on the valuation date coincident with or next
following the date on which the request for transfer is received at the Home
Office of Northwestern Mutual Life, or at a later date if requested.
OWNERS OF THE CONTRACTS The Owner of the Contract has the sole right to
exercise all rights and privileges under the Contract, except as the Contract
otherwise provides. The Owner is ordinarily the Annuitant, but may be an
employer or other entity. The Annuitant is the person upon whose life the
Contract is issued and Contract benefits depend. Following the death of the
Annuitant any remaining Contract benefits are payable to a beneficiary or
contingent beneficiary named in the Contract.
SPECIAL CONTRACT FOR EMPLOYERS The annuity payment rates for payment plans
which involve a life contingency (i.e., Plans 2 and 3) are based, in part, on
the sex of the Annuitant. For certain situations where the Contracts are to be
used in connection with an employer sponsored benefit plan or arrangement,
federal law, and the laws of certain states, may require that purchase payments
and annuity payment rates be determined without regard to sex. A special
Contract is available for this purpose. Prospective purchasers of the Contracts
are urged to review any questions in this area with qualified counsel.
11
<PAGE> 15
DISABILITY PROVISION A Contract may include, as an optional benefit, a
provision under which Northwestern Mutual Life will continue to pay purchase
payments during the total disability of the Annuitant. Each Contract containing
this provision specifies the additional cost of such benefit.
DEFERMENT OF BENEFIT PAYMENTS Northwestern Mutual Life reserves the right to
defer determination of the withdrawal value of the Contracts, or the payment of
benefits under a variable payment plan, until after the end of any period
during which the right to redeem Fund shares is suspended, or payment of the
redemption value is postponed, pursuant to the provisions of the Investment
Company Act of 1940 because: (a) the New York Stock Exchange is closed, except
for holidays or weekends; (b) the Securities and Exchange Commission has
determined that trading on the New York Stock Exchange is restricted; (c) the
Securities and Exchange Commission permits suspension or postponement and so
orders; (d) an emergency exists, as defined by the Securities and Exchange
Commission, so that valuation of the assets of the Fund or disposal of
securities held by it is not reasonably practical; or (e) such suspension or
postponement is otherwise permitted by the Act.
DIVIDENDS The Contracts share in the divisible surplus of Northwestern Mutual
Life, except while payments are being made under a variable payment plan. The
divisible surplus of Northwestern Mutual Life is determined annually for the
following year. State law requires that the surplus be distributed equitably
among participating contracts. Distributions of divisible surplus are commonly
referred to as "dividends".
Northwestern Mutual Life is paying dividends on approximately 10% of its
inforce individual variable annuities in 1996. Dividends are not guaranteed to
be paid in future years. The dividend amount is volatile since it is based on
the average variable Contract value which is defined as the value of the
Accumulation units on the last Contract anniversary adjusted to reflect any
transactions since that date which increased or decreased the Contract's
interest in the Account.
Dividends on variable annuities arise principally as a result of more
favorable expense experience than that assumed in determining deductions. Such
favorable experience is generated primarily by older and/or larger Contracts.
In general, Contracts with an average variable Contract value of less than
$30,000 will not receive dividends, and only about half of those with a value
above $30,000 will receive them.
Any dividend for a Contract is paid on the anniversary date of that
Contract. The dividend is applied as a net purchase payment unless the Owner
elects to have the dividend paid in cash. In the case of a Contract purchased
as an individual retirement annuity pursuant to Section 408(b) of the Internal
Revenue Code, dividends cannot be paid in cash but must be applied as net
purchase payments under the Contract.
VOTING RIGHTS As long as the Account continues to be registered as a unit
investment trust under the Investment Company Act of 1940, and Account assets
are invested in shares of the Portfolios of the Fund, Northwestern Mutual Life
will vote such shares held in the Account in accordance with instructions
received from the Owners of Accumulation Units or payees receiving payments
under variable payment plans. Each such Owner or payee will receive periodic
reports relating to the Fund, proxy material and a form with which to give such
instructions with respect to the proportion of shares of each Portfolio of the
Fund held in the Account corresponding to the Accumulation Units credited to
his Contract, or the number of shares of each Portfolio of the Fund held in the
Account representing the actuarial liability under the variable annuity payment
plan, as the case may be. The number of shares will increase from year to year
as additional purchase payments are paid by the Contract Owner; after a
variable annuity payment plan is in effect the number of shares will decrease
from year to year as the remaining actuarial liability declines. Shares as to
which no instructions have been received will be voted in the same proportion
as the shares as to which instructions have been received.
SUBSTITUTION AND CHANGE Pursuant to a vote of the Owners of Contracts having
an interest in any of the Divisions or as otherwise may be permitted by
applicable insurance and securities laws, and with any required approval of the
Securities and Exchange Commission or other regulatory authority, (a) the
assets of the Division may be invested in securities other than Fund shares as
a substitute for such shares already purchased or as the securities to be
purchased in the future, (b) if deemed by the Board of Trustees of Northwestern
Mutual Life to be in the best interests of Contract owners, the Account or a
Division may be operated as a management company under the Investment Company
Act of 1940 or in any other form permitted by law, (c) the Account may be
deregistered under the Investment Company Act of 1940 in the event such
registration is no longer required, or (d) the provisions of such Contracts may
be modified to assure qualification for the benefits provided by the provisions
of the Internal Revenue Code relating to retirement annuity or variable annuity
contracts, or to comply with any other applicable federal or state laws. In the
event of any such substitution or change, Northwestern Mutual Life may make
appropriate endorsement on Contracts having an interest in the Account and take
such other action as may be necessary to effect the substitution or change.
12
<PAGE> 16
FIXED ANNUITY PAYMENT PLANS Contract benefits may also be paid under fixed
annuity payment plans which are not described in this Prospectus. If a fixed
annuity is selected the Accumulation Units credited to a Deferred Contract will
be cancelled, the withdrawal value of the Contract will be transferred to the
general account of Northwestern Mutual Life, and the payee will no longer have
any interest in the Account. A withdrawal charge may be applicable in
determining the withdrawal value. (See "Withdrawal Amount", p. 9, and
"Withdrawal Charge", p. 15.)
FINANCIAL STATEMENTS Financial statements of the Account and financial
statements of Northwestern Mutual Life appear in the Statement of Additional
Information.
THE GUARANTEED INTEREST FUND
Contract Owners may direct all or part of their purchase payments to the
Guaranteed Interest Fund for investment on a fixed basis. Amounts previously
invested in the Account Divisions may be transferred to the Guaranteed Interest
Fund, prior to the maturity date, and amounts in the Guaranteed Interest Fund
may be transferred to the Account Divisions subject, in each case, to the
restrictions described in the Contract.
Amounts invested in the Guaranteed Interest Fund become part of the
general assets of Northwestern Mutual Life. In reliance on certain exemptive
and exclusionary provisions, interests in the Guaranteed Interest Fund have not
been registered under the Securities Act of 1933 and the Guaranteed Interest
Fund has not been registered as an investment company under the Investment
Company Act of 1940. Accordingly, neither the Guaranteed Interest Fund nor any
interests therein are generally subject to these Acts. Northwestern Mutual
Life has been advised that the staff of the Securities and Exchange Commission
has not reviewed the disclosure in this prospectus relating to the Guaranteed
Interest Fund. This disclosure, however, may be subject to certain generally
applicable provisions of the federal securities laws relating to the accuracy
and completeness of statements made in prospectuses.
Amounts invested in the Guaranteed Interest Fund earn interest at rates
declared by Northwestern Mutual Life from time to time. The interest rate will
be guaranteed for each amount for at least one year and will be at an annual
effective rate of not less than 3%. At the expiration of the period for which
the interest rate is guaranteed a new interest rate may apply. Interest is
credited and compounded daily. The effective date for a transaction involving
the Guaranteed Interest Fund is determined in the same manner as the effective
date for a transaction involving a Division of the Account.
Investments in the Guaranteed Interest Fund are subject to a maximum of
$1,000,000 without prior consent of Northwestern Mutual Life. To the extent
that a purchase payment or transfer from a Division of the Account causes the
Contract's interest in the Guaranteed Interest Fund to exceed $1,000,000, the
amount of the excess will be placed in the Money Market Division and will
remain there until the Contract Owner instructs otherwise.
Transfers from the Guaranteed Interest Fund to the Account Divisions are
subject to strict limits described in the Contract. After a transfer from the
Guaranteed Interest Fund no further transfers either to or from the Guaranteed
Interest Fund will be allowed for a period of 365 days. The maximum amount
that maybe transferred from the Guaranteed Interest Fund in one transfer is the
greater of (1) 20% of the amount that was invested in the Guaranteed Interest
Fund as of the last Contract anniversary preceding the transfer and (2) the
amount of the most recent transfer from the Guaranteed Interest Fund. But in
no event will this maximum transfer amount be less than $1,000 or more than
$50,000.
The deduction for mortality rate and expense risks, as described below, is
not assessed against amounts in the Guaranteed Interest Fund, and amounts in
the Guaranteed Interest Fund do not bear any expenses of Northwestern Mutual
Series Fund, Inc. Other charges under the Contracts apply for amounts in the
Guaranteed Interest Fund as they are described in this prospectus for amounts
invested on a variable basis. See "Deductions", p. 15. For purposes of
allocating and deducting the annual Contract fee, any investment in the
Guaranteed Interest Fund is considered as though it were an investment of the
same amount in one of the Account Divisions.
FEDERAL INCOME TAXES
QUALIFIED AND NONTAX-QUALIFIED PLANS
The Contracts are offered for use under the tax-qualified plans (i.e.,
contributions are generally not taxable) identified below:
1. Individual retirement annuities pursuant to the provisions of
Section 408 of the Code, including simplified employee pensions
established under Section 408(j) and (k).
2. Tax-deferred annuities pursuant to the provisions of Section
403(b) of the Code for employees of public school systems and
tax-exempt organizations described in Section 501(c)(3).
3. Deferred compensation plans for public employees established
pursuant to Section 457 of the Code.
13
<PAGE> 17
4. Nontransferable annuity contracts issued in exchange for
fixed dollar annuities previously issued by Northwestern Mutual Life
or other insurance companies as distributions of termination
benefits from tax-qualified pension or profit-sharing plans or
trusts or annuity purchase plans.
The Contracts are also offered for use in non tax-qualified situations
(i.e., contributions are taxable).
TAXATION OF CONTRACT BENEFITS
For Contracts held by individuals, no tax is payable as a result of any
increase in the value of a Contract until benefits from the Contract are
received. Contract benefits will be taxable as ordinary income when received in
accordance with Section 72 of the Code.
Since purchase payments for Contracts purchased under tax-qualified plans
will ordinarily be paid with funds which have been excluded from the Owner's
gross income, benefits received as annuity payments or upon death or withdrawal
will be taxable as ordinary income when received.
Where nondeductible contributions are made to individual retirement
annuities and other tax-qualified plans, the Owner may exclude from income that
portion of each benefit payment which represents a return of the Owner's
"investment in the contract" as defined in Section 72 until the entire
"investment in the contract" is recovered. Benefits paid in a form other than
an annuity will be taxed as ordinary income when received except for that
portion of the payment which represents a return of the employee's "investment
in the contract." A 15% penalty may be imposed on aggregate payments from
individual retirement annuities, tax-deferred annuities and nontransferable
annuity Contracts in excess of certain annual limits and a 50% penalty may be
imposed on payments made from individual retirement annuities, tax-deferred
annuities, nontransferable annuity Contracts and Section 457 deferred
compensation plans to the extent the payments are less than certain required
minimum amounts. With certain limited exceptions, benefits from individual
retirement annuities, tax-deferred annuities and nontransferable annuity
Contracts are subject to the tax-free roll-over provisions of the Code.
Purchase payments for nontax-qualified Contracts will ordinarily be paid
with funds which have been included in the Owner's gross income. Therefore,
benefits received as annuity payments from these Contracts will be taxable as
ordinary income to the extent they exceed that portion of each payment which
represents a return of the "investment in the contract" as defined in Section
72 until the entire "investment in the contract" is recovered. Benefits
received in a lump sum from these Contracts will be taxable as ordinary income
to the extent they exceed the "investment in the contract." A partial
withdrawal or collateral assignment prior to the Maturity Date will result in
the receipt of gross income by the Owner to the extent that the amounts
withdrawn or assigned do not exceed the excess (if any) of the total value of
Accumulation Units over total purchase payments paid under the Contract less
any amounts previously withdrawn or assigned. Thus, any investment gains
reflected in the Contract values are considered to be withdrawn first and are
taxable as ordinary income. With respect to Contracts issued after October 21,
1988, investment gains will be determined by aggregating all nontax-qualified
deferred Contracts issued by Northwestern Mutual Life to the Owner during the
same calendar year.
A special rule applies to certain nonqualified Contracts not held by
individuals, such as Contracts purchased by corporate employers in connection
with deferred compensation plans. With respect to purchase payments paid after
February 28, 1986, these Contracts will not be taxed as annuity contracts and
increases in the value of the Contracts will be taxable in the year earned.
A penalty tax will apply to premature payments of Contract benefits. A
penalty tax of 10% of the amount of the payment which is includible in income
will be imposed on non-exempt withdrawals under individual retirement
annuities, tax deferred annuities, nontransferable annuity Contracts and
nonqualified deferred annuities. Payments which are exempt from the penalty tax
include payments upon disability, after age 59-1/2 or as substantially equal
periodic payments for life.
For a tax-deferred annuity (funded pursuant to a salary reduction
agreement) no amounts accruing after 1988 may be withdrawn before the Owner
attains age 59 1/2, separates from service, dies or becomes disabled. A limited
exception is provided for hardship. Benefit payments from tax-deferred
annuities and nontransferable annuity contracts will be subject to mandatory
20% withholding unless (1) the payments from the tax-deferred annuities are
rolled over directly to another tax-deferred annuity or an individual
retirement arrangement, or the payments from the nontransferable annuity
contracts are rolled over directly to another nontransferable annuity contract,
a tax-qualified plan or an individual retirement arrangement, (2) they are paid
in substantially equal installments over the life or life expectancy of the
employee (or of the employee and the employee's beneficiary) or over a period
of 10 years or more, or (3) they are "required minimum distributions" payable
after age 70 1/2.
A loan transaction, using a Contract purchased under a tax-qualified plan
as collateral, will generally have adverse tax consequences. For example, such
a transaction destroys the tax status of the individual retirement annuity and
results in taxable income equal to the Contract value.
14
<PAGE> 18
TAXATION OF NORTHWESTERN MUTUAL LIFE
Northwestern Mutual Life may charge the appropriate contracts with their
shares of any tax liability which may result from the maintenance or operation
of the Divisions of the Account. No charge is currently being made. (See "Net
Investment Factor", p. 9 and "Deductions", below.)
OTHER CONSIDERATIONS
It should be understood that the tax rules for annuities and qualified
plans are complex and cannot be readily summarized. The foregoing discussion
does not address special rules applicable in many situations, rules governing
Contracts issued or purchase payments made in past years, current legislative
proposals or state or other law. It is not intended as tax advice. Prospective
purchasers of the Contracts are advised to consult qualified tax counsel.
DEDUCTIONS
The following deductions will be made:
1. Sales Load. For the Front Load Contract a sales load is deducted
from all purchase payments received. The deduction is based on cumulative
purchase payments received and the rates in the table below:
<TABLE>
<CAPTION>
Cumulative Purchase Payments
Paid Under the Contract Rate
<S> <C>
First $100,000 . . . . . . . . . . . . . . . . . . . . . . . . . 4.0%
Next $400,000 . . . . . . . . . . . . . . . . . . . . . . . . . 2.0%
Next $500,000 . . . . . . . . . . . . . . . . . . . . . . . . . 1.0%
Balance over $1,000,000 . . . . . . . . . . . . . . . . . . . . 0.5%
</TABLE>
2. Deductions for Mortality Rate and Expense Risks. The net investment
factor (see "Net Investment Factor", p. 9) used in determining the value of
Accumulation and Annuity Units reflects a deduction on each valuation date
for mortality rate and expense risks assumed by Northwestern Mutual Life.
For the Front Load Contract, the deduction from Accumulation Units is at a
current annual rate of 0.4% of the assets of the Account, while the
deduction from Annuity Units is zero. For the Back Load Contract the
deduction is at a current annual rate of 1.25% of the assets of the Account.
The deduction may be increased or decreased by the Board of Trustees of
Northwestern Mutual Life, but in no event may the deduction exceed an annual
rate of .75% for the Front Load Contract and 1.50% for the Back Load
Contract. This deduction is the only expense item paid by the Account to
date. The Fund pays expenses which are described in the attached prospectus
for the Fund.
The risks assumed by Northwestern Mutual Life are (a) the risk that
annuity payments will continue for longer periods than anticipated because
the Annuitants as a group live longer than expected, and (b) the risk that
the charges made by Northwestern Mutual Life may be insufficient to cover
the actual costs incurred in connection with the Contracts. Northwestern
Mutual Life assumes these risks for the duration of the Contract.
The net investment factor also reflects the deduction of any reasonable
expenses which may result if there were a substitution of other securities
for shares of a Portfolio of the Fund as described under "Substitution and
Change", p. 12, and any applicable taxes, i.e., any tax liability paid or
reserved for by Northwestern Mutual Life resulting from the maintenance or
operation of a Division of the Account, other than applicable premium taxes
which may be deducted directly from considerations. It is not presently
anticipated that any deduction will be made for federal income taxes (see
"Federal Income Taxes", p. 13), nor is it anticipated that maintenance or
operation of the Account will give rise to any deduction for state or local
taxes. However, Northwestern Mutual Life reserves the right to charge the
appropriate Contracts with their shares of any tax liability which may
result under present or future tax laws from the maintenance or operation of
the Account or to deduct any such tax liability in the computation of the
net investment factor for such Contracts.
3. Contract Fee. On each Contract anniversary prior to the maturity
date a deduction of $30 is made for administrative expenses relating to a
Deferred Contract during the prior year. The charge is made by reducing the
number of Accumulation Units credited to the Contract. For purposes of
allocating and deducting the annual Contract fee, any investment in the
Guaranteed Interest Fund is considered as though it were an investment of
the same amount in one of the Account Divisions. This charge may not be
increased, and is intended only to reimburse Northwestern Mutual Life for
its actual administrative expenses. The charge is currently being waived if
the Contract value on the Contract anniversary is $50,000 or more.
4. Withdrawal Charge. For the Back Load Contract if Accumulation Units
are withdrawn for cash a withdrawal charge for sales expenses will be
deducted. The withdrawal charge will be based on the Amount Categories and
the Rates in the table below. The amount in each Category is based on
cumulative purchase payments made and on the number of Contract
anniversaries that have occurred since each purchase payment was made.
15
<PAGE> 19
<TABLE>
<CAPTION>
AMOUNT AMOUNT
CATEGORY RATE CATEGORY RATE
- -------- ---- -------- ----
<S> <C> <C> <C>
Eight .............. 8% Three ............... 3%
Seven .............. 7 Two ................. 2
Six ................ 6 One ................. 1
Five ............... 5 Zero ................ 0
Four ............... 4
</TABLE>
The first $100,000 of total purchase payments paid over the life of the
Contract start out in Category Eight, the next $400,000 start out in
Category Four, the next $500,000 start out in Category Two, and all
additional purchase payments paid start out in Category One. As of each
Contract anniversary, any amount in a Category moves to the next lower
Category until the Contract anniversary on which that amount reaches
Category Zero. The total withdrawal charge will be the sum of all the
results calculated by multiplying the amount in each Category by the Rate
for that Category. The amounts used to calculate the withdrawal charge will
be limited to the value of the Contract benefits that are subject to the
withdrawal charge. The amounts used will be taken from those Categories that
produce the lowest withdrawal charge. However, any amounts used to determine
the charge for a partial withdrawal will not be used to determine subsequent
withdrawal charges. There is no withdrawal charge on the value of
Accumulation Units withdrawn in excess of the total purchase payments paid
under the Contract; but in the case of a partial withdrawal, the purchase
payments paid under the Contract are deemed to be withdrawn first, except
for amounts eligible for the withdrawal charge free amount described in the
next paragraph.
The withdrawal charge free amount is available on a Contract if the
Contract value is at least $10,000 on the Contract anniversary preceding a
withdrawal. For each Contract year, the withdrawal charge free amount is
equal to the lesser of 10% of the Contract value on the last Contract
anniversary, and the amount by which the Contract value exceeds cumulative
purchase payments as of the date of the withdrawal. Eligible amounts
withdrawn meeting these requirements will be taken first from the portion of
the Contract value that exceeds cumulative purchase payments. The
withdrawal charge for any amounts not included in the withdrawal charge free
amount will be based first on the purchase payments that have been paid.
No withdrawal charge will be made upon the selection of a variable
payment plan. However, the withdrawal charge will be made if a withdrawal,
or partial withdrawal, is made within five years after the beginning of a
variable payment plan which is not contingent on the payee's life (Plan 1).
For fixed payment plans the Contract provides for deduction of the
withdrawal charge when the payment plan is selected. By current
administrative practice Northwestern Mutual Life will waive the withdrawal
charge upon selection of a fixed payment plan for a certain period of 12
years or more (Plan 1) or any fixed payment plan which involves a life
contingency (Plans 2 or 3) if the payment plan is selected after the
Contract has been in force for at least one full year.
The amount of withdrawal charges collected by Northwestern Mutual Life
from the Back Load Contracts as a group will depend on the volume and timing
of withdrawal transactions. Northwestern Mutual Life is unable to determine
in advance whether this amount will be greater or less than the sales
expenses incurred in connection with those Contracts, but based on the
information presently available Northwestern Mutual Life believes it is more
likely than not that the sales expenses Northwestern Mutual Life incurs will
be greater than the withdrawal charges Northwestern Mutual Life receives.
Northwestern Mutual Life bears this risk for the duration of the Contracts.
Any excess of sales expenses over withdrawal charges will be paid from the
general assets of Northwestern Mutual Life. These assets may include
proceeds from the charge for annuity rate and expense risks described above.
5. Premium Taxes. The Contracts provide for the deduction of applicable
premium taxes, if any, from purchase payments or from Contract benefits.
Premium taxes are levied by various jurisdictions, and presently range from
0% to 3.5% of total purchase payments. Many jurisdictions presently exempt
from premium taxes annuities such as the Contracts. As a matter of current
practice, Northwestern Mutual Life does not deduct premium taxes from
purchase payments received under the Contracts or from Contract benefits.
However, Northwestern Mutual Life reserves the right to deduct premium taxes
in the future.
CONTRACTS ISSUED PRIOR TO MARCH 31, 1995 For Contracts issued prior to March
31, 1995 and after December 16, 1981 there is no front-end sales load but there
is a surrender charge of 8% on the first $25,000 of considerations, 4% on the
next $75,000 and 2% on considerations in excess of $100,000, based on total
cumulative considerations paid under the Contract. The surrender charge
applicable for each consideration reduces by 1% on each Contract anniversary.
A surrender charge free corridor is available on the same basis described above
for the current Contracts. The charge for mortality and expense risks for
those Contracts is 1.25% of the assets of the Account. The annual Contract fee
is the lesser of $30 or 1% of the Contract value.
16
<PAGE> 20
CONTRACTS ISSUED PRIOR TO DECEMBER 17, 1981 For Contracts issued prior to
December 17, 1981 there is no surrender charge, but considerations are subject
to a deduction of 8% for sales expenses. The deduction is reduced to 4% on
considerations in excess of $5,000 received during a single Contract year as
defined in the Contract, 2% on the next $75,000 and 1% on the excess over
$100,000. The charge for mortality rate and expense risks for those Contracts
is .75% of the assets of the Account, which may be raised to a maximum annual
rate of 1%. There is no annual Contract fee.
CERTAIN NONTAX-QUALIFIED CONTRACTS For nontax-qualified Contracts issued after
December 16, 1981 and prior to May 1, 1983 considerations paid under the
Contract are subject to a deduction of 3% on the first $25,000 of
considerations, 2% on the next $75,000 and 1% on amounts in excess of $100,000,
based on total cumulative considerations paid under the Contract. The charge
for annuity rate and expense risks for these Contracts is .75% of the assets of
the Account, which may be raised to a maximum annual rate of 1%.
REDUCED CHARGES FOR EXCHANGE TRANSACTIONS As a matter of current practice,
owners of fixed dollar annuities previously issued by Northwestern Mutual Life
are permitted to exchange those contracts for Front Load or Back Load Contracts
without paying a second charge for sales expenses. This rule is subject to a
number of exceptions and qualifications and may be changed or withdrawn at any
time.
In general, a $25 administrative charge is made on these exchange
transactions and only one such transaction may be effected in any 12-month
period. Transactions on this basis are subject to a limit of 20% of the amount
held under the fixed annuity contract in any 12-month period, but this limit is
presently being waived.
Amounts exchanged from a fixed contract which provides for a surrender
charge are not charged for sales expenses when the exchange is effected and are
placed in the same withdrawal charge category under the new Back Load Contract
as they were before.
Exchange proceeds from fixed contracts which have no surrender charge
provisions are placed in the 0% withdrawal charge category. As an alternative,
exchange proceeds from such a fixed contract may be added to a Front Load
Contract or to a Deferred Contract issued prior to December 17, 1981 without
any deduction for sales expenses.
Fixed annuity contracts (which are not described in this prospectus) are
available in exchange for the Contracts on a comparable basis.
DISTRIBUTION OF THE CONTRACTS
The Contracts will be sold through individuals who, in addition to being
licensed insurance agents of Northwestern Mutual Life, are registered
representatives of Northwestern Mutual Investment Services, Inc., a
wholly-owned subsidiary of Northwestern Mutual Life and a registered
broker-dealer under the Securities Exchange Act of 1934, and a member of the
National Association of Securities Dealers. Where state law requires, such
agents will also be licensed securities salesmen. Commissions paid to the
agents on sales of the Contracts will not exceed 4% of purchase payments.
17
<PAGE> 21
TABLE OF CONTENTS FOR THIS PROSPECTUS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
INDEX OF SPECIAL TERMS ................................................. 2
SYNOPSIS ............................................................... 2
The Contracts ......................................................... 2
The Fund .............................................................. 2
Deductions and Charges ................................................ 2
Right to Examine Deferred Contract .................................... 2
Penalty Tax on Premature Payments ..................................... 2
EXPENSE TABLE .......................................................... 2
ACCUMULATION UNIT VALUES ............................................... 5
THE COMPANY ............................................................ 7
NML VARIABLE ANNUITY ACCOUNT B ......................................... 8
THE FUND ............................................................... 8
THE CONTRACTS .......................................................... 8
Purchase Payments Under the Contracts ................................ 8
Amount and Frequency ................................................ 8
Application of Purchase Payments .................................... 8
Net Investment Factor ................................................ 9
Benefits Provided Under the Contracts ................................ 9
Withdrawal Amount .................................................. 9
Death Benefit ...................................................... 10
Maturity Benefit ................................................... 10
Variable Payment Plans .............................................. 10
Description of Payment Plans ....................................... 10
Amount of Annuity Payments ......................................... 10
Assumed Investment Rate ............................................. 10
Additional Information .............................................. 11
Transfers Between Divisions and Payment Plans ...................... 11
Owners of the Contracts ............................................ 11
Special Contract for Employers ..................................... 11
Disability Provision ............................................... 12
Deferment of Benefit Payments ...................................... 12
Dividends .......................................................... 12
Voting Rights ...................................................... 12
Substitution and Change ............................................ 12
Fixed Annuity Payment Plans ........................................ 12
Financial Statements ............................................... 13
THE GUARANTEED INTEREST FUND ........................................... 13
FEDERAL INCOME TAXES ................................................... 13
Qualified and Nontax-Qualified Plans ................................. 13
Taxation of Contract Benefits ........................................ 14
Taxation of Northwestern Mutual Life ................................. 15
Other Considerations ................................................. 15
DEDUCTIONS ............................................................. 15
Contracts Issued Prior to March 31, 1995 .............................. 16
Contracts Issued Prior to December 17, 1981 .......................... 17
Certain Nontax-Qualified Contracts ................................... 17
Reduced Charges for Exchange Transactions ............................ 17
DISTRIBUTION OF THE CONTRACTS .......................................... 17
</TABLE>
TABLE OF CONTENTS FOR STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
DISTRIBUTION OF THE CONTRACTS .......................................... B-2
DETERMINATION OF ANNUITY PAYMENTS ...................................... B-2
Amount of Annuity Payments ........................................... B-2
Annuity Unit Value ................................................... B-3
Illustrations of Variable Annuity Payments ........................... B-3
VALUATION OF ASSETS OF THE ACCOUNT ..................................... B-4
TRANSFERABILITY RESTRICTIONS ........................................... B-4
EXPERTS ................................................................ B-4
FINANCIAL STATEMENTS OF THE ACCOUNT
(for the year ended December 31, 1995) ............................... B-5
REPORT OF INDEPENDENT ACCOUNTANTS
(for year ended December 31, 1995) ................................... B-11
FINANCIAL STATEMENTS OF NORTHWESTERN MUTUAL LIFE
(for the three years ended December 31, 1995) ........................ B-12
REPORT OF INDEPENDENT ACCOUNTANTS
(for the three years ended December 31, 1995) ........................ B-28
</TABLE>
18
<PAGE> 22
This Prospectus sets forth concisely the information about NML Variable
Annuity Account B that a prospective investor ought to know before investing.
Additional information about Account B has been filed with the Securities and
Exchange Commission in a Statement of Additional Information which is
incorporated herein by reference. The Statement of Additional Information is
available upon request and without charge from The Northwestern Mutual Life
Insurance Company. To receive a copy, return the request form to the address
listed below, or telephone (414) 271-1444.
TO: The Northwestern Mutual Life Insurance Company
Equity Compliance Division/Compliance and Sales Practices Department
720 East Wisconsin Avenue
Milwaukee, WI 53202
Please send a Statement of Additional Information for NML Variable
Annuity Account B to:
Name
----------------------------------------------------------------
Address
-------------------------------------------------------------
---------------------------------------------------------------------
19
<PAGE> 23
N O R T H W E S T E R N M U T U A L L I F E
VARIABLE ANNUITY CONTRACTS
For Individual Retirement Annuities, Tax-Deferred Annuities, and
Nontax-Qualified Annuities
NML VARIABLE ANNUITY ACCOUNT B
NORTHWESTERN MUTUAL SERIES FUND, INC.
P R O S P E C T U S
<PAGE> 24
STATEMENT OF ADDITIONAL INFORMATION
VARIABLE ANNUITY CONTRACTS
(for Individual Retirement Annuities, Tax-Deferred Annuities
and Non-Qualified Plans)
NML VARIABLE ANNUITY ACCOUNT B
(the "Account"),
a separate investment account of
The Northwestern Mutual Life Insurance Company
("Northwestern Mutual Life")
This Statement of Additional Information is not a prospectus but
supplements and should be read in conjunction with the prospectus
for the Contracts. A copy of the prospectus may be obtained from
The Northwestern Mutual Life Insurance Company, 720 East Wisconsin
Avenue, Milwaukee, Wisconsin 53202, telephone number (414)
271-1444.
The Date of the Prospectus to which this Statement of
Additional Information Relates is April 30, 1996.
The Date of this Statement of Additional Information
is April 30, 1996.
B-1
<PAGE> 25
DISTRIBUTION OF THE CONTRACTS
The Contracts are offered on a continuous basis exclusively through
individuals who, in addition to being life insurance agents of Northwestern
Mutual Life, are registered representatives of Northwestern Mutual Investment
Services, Inc. ("NMIS").
NMIS may be considered the underwriter of the Contracts for purposes of
the federal securities laws. The following amounts of commissions were paid on
sales of the Contracts during each of the last three years:
<TABLE>
<CAPTION>
Year Amount
---- ------
<S> <C>
1995 $8,794,356
1994 $6,815,893
1993 $7,638,503
</TABLE>
DETERMINATION OF ANNUITY PAYMENTS
The following discussion of the method for determining the amount of
monthly annuity payments under a variable payment plan is intended to be read
in conjunction with these sections of the prospectus for the Contracts:
"Variable Payment Plans", p. 10, including "Description of Payment Plans", p.
10, "Amount of Annuity Payments", p. 10, and "Assumed Investment Rate", p. 10;
"Dividends", p. 12; "Net Investment Factor", p. 9; and "Deductions", p. 15.
AMOUNT OF ANNUITY PAYMENTS The amount of the first annuity payment under
a variable Payment Plan will be determined on the basis of the particular
Payment Plan selected, the annuity payment rate and, for plans involving life
contingencies, the Annuitant's adjusted age and sex. The amount of the first
payment is the sum of the payments from each Division of the Account determined
by applying the appropriate annuity payment rate to the product of the number
of Accumulation Units in the Division on the effective date of the Payment Plan
and the Accumulation Unit value for the Division on that date. Annuity rates
currently in use are based on the 1983 a Table with Projection Scale G and age
adjustment.
Variable annuity payments after the first will vary from month to month
and will depend upon the number and value of Annuity Units credited to the
Annuitant. After the effective date of a Payment Plan a Contract will not
share in the divisible surplus of Northwestern Mutual Life.
The number of Annuity Units in each Division is determined by dividing the
amount of the first annuity payment from the Division by the value of an
Annuity Unit on the effective date of the Payment Plan. The number of Annuity
Units thus credited to the Annuitant in each Division remains constant
throughout the annuity period. However, the value of Annuity Units in each
Division will fluctuate with the investment experience of the Division.
The amount of each variable annuity payment after the first is the sum of
payments from each Division determined by multiplying this fixed number of
Annuity Units each month by the value of an Annuity Unit for the Division on
(a) the fifth valuation date prior to the payment due date if the payment due
date is a valuation date, or (b) the sixth valuation date prior to the payment
due date if the payment due date is not a valuation date. To illustrate, if a
payment due date falls on a Friday, Saturday or Sunday, the amount of the
payment will normally be based upon the Annuity Unit value calculated on the
preceding Friday. The preceding Friday would be the fifth valuation date prior
to the
B-2
<PAGE> 26
Friday due date, and the sixth valuation date prior to the Saturday or Sunday
due dates.
ANNUITY UNIT VALUE The value of an Annuity Unit for each Division was
established at $1.00 as of the date operations began for that Division. The
value of an Annuity Unit on any later date varies to reflect the investment
experience of the Division, the Assumed Investment Rate on which the annuity
rate tables are based, and the deduction for mortality rate and expense risks
assumed by Northwestern Mutual Life.
The Annuity Unit value for each Division on any valuation date is
determined by multiplying the Annuity Unit value on the immediately preceding
valuation date by two factors: (a) the net investment factor for the current
period for the Division; and (b) an adjustment factor to neutralize the Assumed
Investment Rate used in calculating the annuity rate tables.
ILLUSTRATIONS OF VARIABLE ANNUITY PAYMENTS To illustrate the manner in
which variable annuity payments are determined consider this example. Item (4)
in the example shows the applicable monthly payment rate for a male, adjusted
age 65, who has elected a life annuity Payment Plan with a certain period of 10
years with an Assumed Investment Rate of 3-1/2% (Plan 2, as described in the
prospectus).
(1) Assumed number of Accumulation Units in
Balanced Division on maturity date. . . . . . . . .25,000
(2) Assumed Value of an Accumulation Unit in
Balanced Division at maturity . . . . . . . . . . .$2.000000
(3) Cash Value of Contract at maturity, (1) X (2) . . .$50,000
(4) Assumed applicable monthly payment rate per
$1,000 from annuity rate table. . . . . . . . . . .$5.44
(5) Amount of first payment from Balanced Division,
(3) X (4) divided by $1,000 . . . . . . . . . . . .$272.00
(6) Assumed Value of Annuity Unit in
Balanced Division at maturity . . . . . . . . . . .$1.500000
(7) Number of Annuity Units credited in
Balanced Division, (5) divided by (6) . . . . . . .181.33
The $50,000 value at maturity provides a first payment from the Balanced
Division of $272.00, and payments thereafter of the varying dollar value of
181.33 Annuity Units. The amount of subsequent payments from the Balanced
Division is determined by multiplying 181.33 units by the value of an Annuity
Unit in the Balanced Division on the applicable valuation date. For example,
if that unit value is $1.501000, the monthly payment from the Division will be
181.33 multiplied by $1.501000, or $272.18.
However, the value of the Annuity Unit depends entirely on the investment
performance of the Division. Thus in the example above, if the net investment
rate for the following month was less than the Assumed Investment Rate of
3-1/2%, the Annuity Unit would decline in value. If the Annuity Unit value
declined to $1.499000 the succeeding monthly payment would then be 181.33 X
$1.499000, or $271.81.
B-3
<PAGE> 27
For the sake of simplicity the foregoing example assumes that all of the
Annuity Units are in the Balanced Division. If there are Annuity Units in two
or more Divisions, the annuity payment from each Division is calculated
separately, in the manner illustrated, and the total monthly payment is the sum
of the payments from the Divisions.
VALUATION OF ASSETS OF THE ACCOUNT
The value of Portfolio shares of the Fund held in each Division of the
Account at the time of each valuation is the redemption value of such shares at
such time. If the right to redeem shares of the Fund has been suspended, or
payment of redemption value has been postponed, for the sole purpose of
computing annuity payments the shares held in the Account (and Annuity Units)
may be valued at fair value as determined in good faith by the Board of
Trustees of Northwestern Mutual Life.
TRANSFERABILITY RESTRICTIONS
Ownership of a Contract purchased as a tax-deferred annuity pursuant to
Section 403(b) of the Internal Revenue Code of 1954, as amended (the "Code")
cannot be changed and the Contract cannot be sold, assigned or pledged as
collateral for a loan, or for any other purpose, to any person other than
Northwestern Mutual Life. Similar restrictions are applicable to Contracts
purchased in exchange transactions by persons who have received fixed dollar
policies as distributions of termination benefits from tax-qualified corporate
or HR-10 plans or trusts. Ownership of a Contract purchased as an individual
retirement annuity pursuant to Section 408(b) of the Code cannot be transferred
except in limited circumstances involving divorce.
EXPERTS
The financial statements of the Account as of December 31, 1995 and for
each of the two years in the period ended December 31, 1995 and of Northwestern
Mutual Life as of December 31, 1995 and 1994 and for each of the three years in
the period ended December 31, 1995 included in this Statement of Additional
Information have been so included in reliance on the reports of Price
Waterhouse LLP, independent accountants, given on the authority of said firm as
experts in auditing and accounting. Price Waterhouse LLP provides audit
services for the Account. The address of Price Waterhouse LLP is 100 East
Wisconsin Avenue, Suite 1500, Milwaukee, Wisconsin 53202.
B-4
<PAGE> 28
NML VARIABLE ANNUITY ACCOUNT B
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1995
(IN THOUSANDS)
<TABLE>
<S> <C> <C>
ASSETS
Investments at Market Value:
Northwestern Mutual Series Fund, Inc.
Index 500 Stock
192,606 shares (cost $235,821)................................................. $ 331,668
Growth Stock
31,686 shares (cost $34,812)................................................... 40,020
Growth and Income Stock
68,480 shares (cost $73,990)................................................... 82,930
Aggressive Growth Stock
160,593 shares (cost $292,831)................................................. 444,521
International Equity
196,171 shares (cost $236,830)................................................. 265,812
Select Bond
123,243 shares (cost $142,109)................................................. 151,342
High Yield Bond
20,490 shares (cost $21,289)................................................... 21,023
Money Market
94,788 shares (cost $94,788)................................................... 94,788
Balanced
1,000,506 shares (cost $1,314,318)............................................. 1,604,811 $3,036,915
----------
Due from Sale of Fund Shares...................................................................... 1,597
Due from Northwestern Mutual Life Insurance Company............................................... 42
----------
Total Assets............................................................................... $3,038,554
=========
LIABILITIES
Due to Participants............................................................................... $ 2,315
Due to Northwestern Mutual Life Insurance Company................................................. 1,597
Due on Purchase of Fund Shares.................................................................... 42
----------
Total Liabilities.......................................................................... 3,954
----------
EQUITY (NOTE 8)
Contracts Issued Prior to December 17, 1981....................................................... 84,729
Contracts Issued On or After December 17, 1981 and Before March 31, 1995.......................... 2,785,432
Contracts Issued On or After March 31, 1995:
Front Load Version.............................................................................. 41,147
Back Load Version............................................................................... 123,292
----------
Total Equity............................................................................... 3,034,600
----------
Total Liabilities and Equity............................................................... $3,038,554
=========
</TABLE>
B-5
The Accompanying Notes are an Integral Part of the Financial Statements
<PAGE> 29
NML VARIABLE ANNUITY ACCOUNT B
STATEMENT OF OPERATIONS AND CHANGES IN EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
INDEX 500
COMBINED STOCK DIVISION GROWTH STOCK DIVISION#
--------------------------- ----------------------- ----------------------------
EIGHT MONTHS
YEAR ENDED YEAR ENDED YEAR ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
--------------------------- ----------------------- ------------ ------------
1995 1994 1995 1994 1995 1994
---------- ---------- -------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividend Income........................ $ 68,372 $ 219,223 $ 2,545 $ 9,672 $ 1,227 $ 165
Annuity Rate and Expense Guarantees.... 31,745 26,109 3,096 2,324 297 52
---------- ---------- -------- -------- ------- -------
Net Investment Income (Loss)........... 36,627 193,114 (551) 7,348 930 113
---------- ---------- -------- -------- ------- -------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Realized Gain on Investments........... 6,751 17,722 432 534 45 --
Unrealized Appreciation (Depreciation)
of Investments During the Year....... 541,786 (226,913) 78,497 (7,574) 5,346 (138)
---------- ---------- -------- -------- ------- -------
Net Gain (Loss) on Investments......... 548,537 (209,191) 78,929 (7,040) 5,391 (138)
---------- ---------- -------- -------- ------- -------
Increase (Decrease) in Equity Derived
from Investment Activity............. 585,164 (16,077) 78,378 308 6,321 (25)
---------- ---------- -------- -------- ------- -------
EQUITY TRANSACTIONS
Contract Owners' Net Payments.......... 376,570 389,478 46,603 37,543 12,987 4,757
Annuity Payments....................... (5,967) (4,241) (530) (476) (21) (1)
Surrenders and Other (net)............. (155,370) (121,978) (12,558) (8,669) (588) (85)
Transfers from Other Divisions......... 223,928 254,710 28,379 16,836 10,958 7,898
Transfers to Other Divisions........... (223,928) (254,710) (13,997) (26,080) (2,028) (187)
---------- ---------- -------- -------- ------- -------
Increase (Decrease) in Equity Derived
from Equity Transactions............... 215,233 263,259 47,897 19,154 21,308 12,382
---------- ---------- -------- -------- ------- -------
Net Increase (Decrease) in Equity........ 800,397 247,182 126,275 19,462 27,629 12,357
Equity
Beginning of Year...................... 2,234,203 1,987,021 205,214 185,752 12,357 0
---------- ---------- -------- -------- ------- -------
End of Year............................ $3,034,600 $2,234,203 $331,489 $205,214 $39,986 $12,357
========== ========== ======== ======== ======= =======
</TABLE>
# The initial investments in the Growth Stock and Growth and Income Stock
Divisions were made on May 3, 1994.
B-6
The Accompanying Notes are an Integral Part of the Financial Statements
<PAGE> 30
NML VARIABLE ANNUITY ACCOUNT B
STATEMENT OF OPERATIONS AND CHANGES IN EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
GROWTH & INCOME AGGRESSIVE GROWTH INTERNATIONAL EQUITY
STOCK DIVISION# STOCK DIVISION DIVISION SELECT BOND DIVISION
----------------------------- --------------------- --------------------- ---------------------
EIGHT MONTHS
YEAR ENDED ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
------------ ------------ --------------------- --------------------- ---------------------
1995 1994 1995 1994 1995 1994 1995 1994
------------ ------------ -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 4,879 $ 513 $ 1,785 $ 1,607 $ 1,696 $ 6,775 $ 3,550 $ 16,145
672 132 4,157 2,503 3,029 2,224 1,593 1,513
------- ------- -------- -------- -------- -------- -------- --------
4,207 381 (2,372) (896) (1,333) 4,551 1,957 14,632
------- ------- -------- -------- -------- -------- -------- --------
33 -- 1,461 297 3,333 96 437 1,449
9,759 (820) 111,310 10,133 28,381 (9,711) 19,053 (21,331)
------- ------- -------- -------- -------- -------- -------- --------
9,792 (820) 112,771 10,430 31,714 (9,615) 19,490 (19,882)
------- ------- -------- -------- -------- -------- -------- --------
13,999 (439) 110,399 9,534 30,381 (5,064) 21,447 (5,250)
------- ------- -------- -------- -------- -------- -------- --------
25,211 12,083 66,252 61,047 39,604 76,394 20,089 25,069
(53) (5) (236) (114) (214) (120) (297) (382)
(1,653) (579) (14,041) (6,864) (12,919) (5,559) (9,328) (9,838)
18,619 21,072 54,585 51,753 21,883 86,072 11,189 7,671
(4,649) (534) (23,879) (15,127) (45,059) (14,282) (10,352) (30,044)
------- ------- -------- -------- -------- -------- -------- --------
37,475 32,037 82,681 90,695 3,295 142,505 11,301 (7,524)
------- ------- -------- -------- -------- -------- -------- --------
51,474 31,598 193,080 100,229 33,676 137,441 32,748 (12,774)
31,598 0 251,206 150,977 231,900 94,459 118,116 130,890
------- ------- -------- -------- -------- -------- -------- --------
$ 83,072 $ 31,598 $444,286 $251,206 $265,576 $231,900 $150,864 $118,116
======= ======= ======== ======== ======== ======== ======== ========
</TABLE>
B-7
The Accompanying Notes are an Integral Part of the Financial Statements
<PAGE> 31
NML VARIABLE ANNUITY ACCOUNT B
STATEMENT OF OPERATIONS AND CHANGES IN EQUITY (CONTINUED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
MONEY MARKET
HIGH YIELD BOND DIVISION# DIVISION BALANCED DIVISION
-------------------------- ------------------- -----------------------
EIGHT MONTHS
YEAR ENDED ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
------------ ------------ ------------------- -----------------------
1995 1994 1995 1994 1995 1994
------------ ------------ -------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividend Income........................... $ 1,763 $ 408 $ 4,468 2,486 $ 46,459 $ 181,452
Annuity Rate and Expense Guarantees....... 160 35 920 750 17,821 16,576
------- ------ ------- ------- ---------- ----------
Net Investment Income..................... 1,603 373 3,548 1,736 28,638 164,876
------- ------ ------- ------- ---------- ----------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Realized Gain on Investments.............. 27 14 -- -- 983 15,332
Unrealized Appreciation (Depreciation) of
Investments During the Year............. 67 (333) -- -- 289,373 (197,139)
------- ------ ------- ------- ---------- ----------
Net Gain (Loss) on Investments............ 94 (319) 0 0 290,356 (181,807)
------- ------ ------- ------- ---------- ----------
Increase (Decrease) in Equity Derived from
Investment Activity..................... 1,697 54 3,548 1,736 318,994 (16,931)
------- ------ ------- ------- ---------- ----------
EQUITY TRANSACTIONS
Contract Owners' Net Payments............. 8,070 3,137 43,673 35,360 114,081 134,088
Annuity Payments.......................... (10) (2) (55) (54) (4,551) (3,087)
Surrenders and Other (net)................ (495) (245) (14,173) (11,859) (89,615) (78,280)
Transfers from Other Divisions............ 7,206 5,400 44,923 37,145 26,186 20,863
Transfers to Other Divisions.............. (2,984) (882) (51,807) (46,086) (69,173) (121,488)
------- ------ ------- ------- ---------- ----------
Increase (Decrease) in Equity Derived from
Equity Transactions....................... 11,787 7,408 22,561 14,506 (23,072) (47,904)
------- ------ ------- ------- ---------- ----------
Net Increase (Decrease) in Equity........... 13,484 7,462 26,109 16,242 295,922 (64,835)
Equity
Beginning of Year......................... 7,462 0 68,690 52,448 1,307,660 1,372,495
------- ------ ------- ------- ---------- ----------
End of Year............................... $ 20,946 $7,462 $ 94,799 $ 68,690 $1,603,582 $1,307,660
======= ====== ======= ======= ========== ==========
</TABLE>
# The initial investment in the High Yield Bond Division was made on May 3,
1994.
B-8
The Accompanying Notes are an Integral Part of the Financial Statements
<PAGE> 32
NML VARIABLE ANNUITY ACCOUNT B
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
Note 1 -- NML Variable Annuity Account B (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 annuity contracts ("contracts") for
tax-deferred annuities, individual retirement annuities and non-qualified plans.
Beginning March 31, 1995, two versions of the contract are offered: Front Load
contracts with a sales charge up to 4% of purchase payments and Back Load
contracts with a withdrawal charge of 0-8%.
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 an open-end investment company registered under the Investment
Company Act of 1940.
Note 4 -- Annuity reserves are based on published annuity tables with age
adjustment and benefit payments which reflect actual investment experience. For
variable payment plans issued prior to January 1, 1974, annuity reserves are
based on the 1955 American Annuity Table with assumed interest rates of 3%,
3 1/2% or 5%. For variable payment plans issued on or after January 1, 1974 and
before January 1, 1985, annuity reserves are based on the 1971 Individual
Annuity Table with assumed interest rates of 3 1/2% or 5%. For variable payment
plans issued on or after January 1, 1985, annuity reserves are based on the 1983
Table a with assumed interest rates of 3 1/2% or 5%.
Note 5 -- 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, 1995 by each Division
are shown below:
<TABLE>
<CAPTION>
PURCHASES SALES
----------- -----------
<S> <C> <C>
Index 500 Stock
Division................ $50,922,535 $ 3,468,239
Growth Stock Division..... 22,485,739 226,562
Growth & Income Stock
Division................ 41,821,280 248,160
Aggressive Growth
Division................ 83,439,869 3,039,573
International Equity
Division................ 20,603,579 18,479,409
Select Bond Division...... 18,844,321 5,365,077
High Yield Bond
Division................ 14,337,033 880,429
Money Market Division..... 50,987,420 24,992,483
Balanced Division......... 77,356,455 71,676,703
</TABLE>
Note 6 -- A deduction for annuity rate and expense guarantees is determined
daily and paid to Northwestern Mutual Life as compensation for assuming the risk
that annuity payments will continue for longer periods than anticipated because
the annuitants as a group live longer than expected, and the risk that the
charges made by Northwestern Mutual Life may be insufficient to cover the actual
costs incurred in connection with the contracts.
For contracts issued on or after March 31, 1995, for the Front Load version and
the Back Load version, the deduction for annuity rate and expense guarantees is
determined daily at annual rates of 4/10 of 1% and 1 1/4%, respectively, of the
net assets of each Division attributable to these contracts and is paid to
Northwestern Mutual Life. For these contracts, the rates may be increased or
decreased by the Board of Trustees of Northwestern Mutual Life not to exceed
3/4 of 1% and 1 1/2%, respectively.
Generally, for contracts issued on or after December 17, 1981, and before March
31, 1995, the deduction is at an annual rate of 1 1/4% of the net assets of each
Division attributable to these contracts. For these contracts, the rate may be
increased or decreased by the Board of Trustees of Northwestern Mutual Life not
to exceed a 1 1/2% annual rate.
Generally, for contracts issued prior to December 17, 1981, the deduction is at
an annual rate of 3/4 of 1% of the net assets of each Division attributable to
these contracts. For these contracts, the rate may be increased or decreased by
the Board of Trustees of Northwestern Mutual Life not to exceed a 1% annual
rate.
Beginning in 1995, Northwestern Mutual Life paid a dividend to certain
contracts. The dividend was reinvested in the Account and has been reflected as
a Contract Owners' Net Payment in the accompanying financial statements.
Note 7 -- Northwestern Mutual Life is taxed as a "life insurance company" under
the Internal Revenue Code and the operations of the Account form a part of and
are taxed with those of Northwestern Mutual Life. Currently, no charges for
taxes have been made by Northwestern Mutual Life to the Account. Accordingly, no
provision for any such liability has been made.
B-9
<PAGE> 33
NML VARIABLE ANNUITY ACCOUNT B
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1995
(IN THOUSANDS)
Note 8 -- Equity Values by Division are shown below:
<TABLE>
<CAPTION>
CONTRACTS ISSUED:
CONTRACTS ISSUED: ON OR AFTER DECEMBER 17, 1981 AND
BEFORE DECEMBER 17, 1981 BEFORE MARCH 31, 1995
---------------------------------- ---------------------------------------
ACCUMULATION UNITS ACCUMULATION UNITS
DIVISION UNIT VALUE OUTSTANDING EQUITY UNIT VALUE OUTSTANDING EQUITY
- ------------------------------------ ------------ ----------- ------- ------------ ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Index 500 Stock..................... $ 2.084065 13,256 $27,626 $ 2.031929 134,819 $ 273,941
Growth Stock........................ 1.310823 19 25 1.299976 24,828 32,276
Growth and Income Stock............. 1.298065 33 42 1.287355 52,866 68,058
Aggressive Growth Stock............. 2.823905 1,618 4,569 2.753170 147,961 407,361
International Equity................ 1.398467 2,141 2,995 1.379966 179,261 247,374
Select Bond......................... 6.583140 1,364 8,983 6.136911 21,049 129,175
High Yield Bond..................... 1.188188 59 70 1.178371 13,474 15,878
Money Market........................ 2.317213 1,358 3,147 2.160533 34,041 73,546
Balanced............................ 4.622931 7,328 33,872 4.310821 347,996 1,500,148
------- ----------
Equity............................ 81,329 2,747,757
Annuity Reserves.................. 3,400 37,675
------- ----------
Total Equity...................... $84,729 $2,785,432
======== ==========
</TABLE>
<TABLE>
<CAPTION>
CONTRACTS ISSUED: CONTRACTS ISSUED:
ON OR AFTER MARCH 31, 1995 ON OR AFTER MARCH 31, 1995
FRONT LOAD VERSION BACK LOAD VERSION
---------------------------------- ---------------------------------------
ACCUMULATION UNITS ACCUMULATION UNITS
DIVISION UNIT VALUE OUTSTANDING EQUITY UNIT VALUE OUTSTANDING EQUITY
- ------------------------------------ ------------ ----------- ------- ------------ ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Index 500 Stock..................... $ 1.249114 4,356 $ 5,441 $ 2.031929 9,221 $ 18,736
Growth Stock........................ 1.208718 1,715 2,073 1.299976 3,952 5,138
Growth and Income Stock............. 1.196596 3,530 4,224 1.287355 7,514 9,674
Aggressive Growth Stock............. 1.305186 5,338 6,967 2.753170 8,294 22,835
International Equity................ 1.140398 2,784 3,175 1.379966 7,214 9,956
Select Bond......................... 1.128765 1,883 2,126 6.136911 1,292 7,930
High Yield Bond..................... 1.111614 1,418 1,577 1.178371 2,701 3,182
Money Market........................ 1.040089 5,949 6,187 2.160533 5,318 11,490
Balanced............................ 1.180953 6,897 8,145 4.310821 7,689 33,144
------- ----------
Equity............................ 39,915 122,085
Annuity Reserves.................. 1,232 1,207
------- ----------
Total Equity...................... $41,147 $ 123,292
======== ==========
</TABLE>
B-10
<PAGE> 34
[PRICE WATERHOUSE LLP LETTERHEAD]
REPORT OF INDEPENDENT ACCOUNTANTS
To The Northwestern Mutual-Life Insurance Company and
Contract Owners of NML Variable Annuity Account B
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 NML
Variable Annuity Account B and the Index 500 Stock Division, Growth Stock
Division, Growth and Income Stock Division, Aggressive Growth Stock Division,
International Equity Division, Select Bond Division, High Yield Bond Division,
Money Market Division and the Balanced Division thereof at December 31, 1995,
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, 1995 with
Northwestern Mutual Series Fund, Inc., provide a reasonable basis for the
opinion expressed above.
Price Waterhouse LLP
Milwaukee, Wisconsin
January 24, 1996
B-11
<PAGE> 35
FINANCIAL STATEMENTS OF NORTHWESTERN MUTUAL LIFE
The following financial statements of Northwestern Mutual Life should be
considered only as bearing upon the ability of Northwestern Mutual Life to meet
its obligations under the Contracts.
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(In millions)
ASSETS
<TABLE>
<CAPTION>
December 31,
----------------
1995 1994
------ -------
<S> <C> <C>
BONDS
United States Government $ 3,282 $ 3,501
Industrial and other 22,236 19,232
------- -------
25,518 22,733
------- -------
STOCKS
Common 2,894 2,192
Unconsolidated subsidiaries 531 504
Preferred 546 511
------- -------
3,971 3,207
------- -------
MORTGAGE LOANS 8,429 7,099
REAL ESTATE
Investment 1,294 1,072
Home office 135 141
------- -------
1,429 1,213
------- -------
LOANS ON POLICIES 6,476 6,144
OTHER INVESTMENTS 1,341 1,301
CASH AND TEMPORARY INVESTMENTS 544 803
DUE AND ACCRUED INVESTMENT
INCOME 721 650
------- -------
Total invested assets 48,429 43,150
------- -------
SEPARATE ACCOUNT BUSINESS 5,000 3,806
OTHER ASSETS 1,447 1,156
------- -------
Total Assets $54,876 $48,112
======= =======
</TABLE>
The accompanying notes are an integral
part of the financial statements
B-12
<PAGE> 36
FINANCIAL STATEMENTS OF NORTHWESTERN MUTUAL LIFE
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(In millions)
LIABILITIES AND RESERVES
<TABLE>
<CAPTION>
December 31,
----------------
1995 1994
------- -------
<S> <C> <C>
LIABILITY FOR POLICY BENEFITS
Insurance and annuity reserves $39,545 $36,124
Policy benefits left
for future payments 972 866
Premium deposits 427 419
Policy benefits in
process of payment 137 138
Policyowner dividends
payable 2,115 1,950
------- -------
43,196 39,497
------- -------
OTHER LIABILITIES
Interest maintenance reserve 281 11
Income taxes 895 561
Miscellaneous 1,336 822
------- -------
2,512 1,394
------- -------
SEPARATE ACCOUNT BUSINESS 5,000 3,806
------- -------
ASSET VALUATION RESERVE 1,382 1,190
------- -------
Total liabilities and
asset valuation reserve 52,090 45,887
------- -------
GENERAL CONTINGENCY RESERVE 2,786 2,225
------- -------
Total Liabilities and
Contingency Reserves $54,876 $48,112
======= =======
</TABLE>
The accompanying notes are an integral
part of the financial statements
B-13
<PAGE> 37
FINANCIAL STATEMENTS OF NORTHWESTERN MUTUAL LIFE
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
CONSOLIDATED SUMMARY OF OPERATIONS
(In millions)
<TABLE>
<CAPTION>
For the year ended
December 31,
-----------------------
1995 1994 1993
------- ------ ------
<S> <C> <C> <C>
INCOME
PREMIUMS $ 6,196 $5,743 $5,295
NET INVESTMENT INCOME 3,673 3,106 2,913
POLICY BENEFITS LEFT WITH COMPANY
AND OTHER INCOME 733 636 570
------- ------ ------
Total income 10,602 9,485 8,778
------- ------ ------
DISPOSITION OF INCOME
COSTS
Agents' compensation 508 492 487
Other insurance costs 398 334 361
Premium and other taxes or assessments 120 120 116
------- ------ ------
1,026 946 964
------- ------ ------
BENEFITS TO POLICYOWNERS AND BENEFICIARIES
Death benefits 655 609 526
Matured endowments 48 54 44
Annuity benefits 92 94 85
Disability benefits 174 151 126
Surrender benefits 1,375 904 837
Payments from policy benefits
left with Company 590 568 498
Net transfers to separate accounts 236 344 302
Net additions to policy reserves 3,506 3,313 3,078
------- ------ ------
6,676 6,037 5,496
------- ------ ------
Total disposition of income 7,702 6,983 6,460
------- ------ ------
SAVINGS FROM OPERATIONS BEFORE
INCOME TAXES AND DIVIDENDS 2,900 2,502 2,318
INCOME TAX EXPENSE 467 281 208
------- ------ ------
SAVINGS FROM OPERATIONS BEFORE DIVIDENDS 2,433 2,221 2,110
POLICYOWNER DIVIDENDS 2,111 1,942 1,780
------- ------ ------
NET SAVINGS FROM OPERATIONS 322 279 330
NET REALIZED CAPITAL GAINS, LESS TAX
EXPENSE OF $98, $85 AND $82, RESPECTIVELY 137 119 180
------- ------ ------
CONTRIBUTION TO GENERAL CONTINGENCY
RESERVE FROM OPERATIONS $ 459 $ 398 $ 510
======= ====== ======
</TABLE>
The accompanying notes are an integral
part of the financial statements
B-14
<PAGE> 38
FINANCIAL STATEMENTS OF NORTHWESTERN MUTUAL LIFE
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENT OF GENERAL CONTINGENCY RESERVE
(In millions)
<TABLE>
<CAPTION>
For the year ended
December 31,
----------------------
1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
BEGINNING OF YEAR BALANCE $2,225 $2,030 $1,850
Contribution to general contingency
reserve from operations 459 398 510
Net unrealized capital gains (losses) 373 (242) (89)
Change in asset valuation reserve (192) 37 (157)
Other - net (79) 2 (84)
------ ------ ------
END OF YEAR BALANCE $2,786 $2,225 $2,030
====== ====== ======
</TABLE>
The accompanying notes are an integral
part of the financial statements
B-15
<PAGE> 39
FINANCIAL STATEMENTS OF NORTHWESTERN MUTUAL LIFE
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS
(In millions)
<TABLE>
<CAPTION>
For the year ended
December 31,
-------------------------
1995 1994 1993
------- ------- -------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Insurance premiums, annuities and other
considerations $ 6,864 $ 6,299 $ 5,777
Net investment income received 3,480 3,013 2,813
Net loans on policies (331) (297) (143)
Benefits paid to policyholders and
beneficiaries (2,939) (2,357) (2,116)
Net transfers to separate accounts (236) (344) (302)
Policyowner dividends paid (1,945) (1,777) (1,759)
Expenses and taxes (1,279) (1,033) (1,135)
Other - net 381 89 (81)
------- ------- -------
NET CASH PROVIDED BY OPERATING
ACTIVITIES 3,995 3,593 3,054
CASH FLOWS FROM INVESTING ACTIVITIES
PROCEEDS FROM INVESTMENTS SOLD OR MATURED
Bonds 25,317 27,096 20,221
Stocks 2,465 1,469 1,122
Mortgage loans 431 512 394
Real estate 48 164 43
Other invested assets 149 213 132
Capital gain (tax) benefit (85) 28 (124)
------- ------- -------
28,325 29,482 21,788
COST OF INVESTMENTS ACQUIRED
Bonds 27,596 29,674 22,393
Stocks 2,562 1,606 1,288
Mortgage loans 1,883 1,356 970
Real estate 202 6 46
Other invested assets 336 413 152
------- ------- -------
32,579 33,055 24,849
NET CASH USED IN INVESTING ACTIVITIES (4,254) (3,573) (3,061)
------- ------- -------
NET (DECREASE) INCREASE IN CASH AND
TEMPORARY INVESTMENTS (259) 20 (7)
CASH AND TEMPORARY INVESTMENTS, BEGINNING
OF YEAR 803 783 790
------- ------- -------
CASH AND TEMPORARY INVESTMENTS, END OF YEAR $ 544 $ 803 $ 783
======= ======= =======
</TABLE>
The accompanying notes are an integral
part of the financial statements
B-16
<PAGE> 40
FINANCIAL STATEMENTS OF NORTHWESTERN MUTUAL LIFE
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
NOTE 1 - PRINCIPAL ACCOUNTING POLICIES
The accompanying consolidated financial statements include the accounts of The
Northwestern Mutual Life Insurance Company (the "Company") and its wholly-owned
life insurance subsidiary. The Company offers life, annuity and disability
income products to the personal, business, estate and tax-qualified markets.
The consolidated financial statements have been prepared using accounting
policies prescribed or permitted by the Insurance Departments of the states in
which the Company and its subsidiary are domiciled. These policies are
considered generally accepted accounting principles for mutual life insurance
companies. The preparation of 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.
In April 1993, the Financial Accounting Standards Board issued Interpretation
No. 40, "Applicability of Generally Accepted Accounting Principles to Mutual
Life Insurance and Other Enterprises," which establishes a different definition
of generally accepted accounting principles for mutual life insurance
companies. Under the Interpretation, financial statements of mutual life
insurance companies for periods beginning after December 15, 1995 which are
prepared on the basis of statutory accounting will no longer be characterized
as in conformity with generally accepted accounting principles.
In order to continue to present financial statements in accordance with
generally accepted accounting principles for general purpose distribution in
1996, the Company is considering presenting its financial statements in
accordance with the requirements of the Interpretation. Management believes
that financial statements prepared on this basis would result in an increase to
its general contingency reserve. The effects of this change in accounting
basis would be reported retroactively through restatement beginning with the
earliest year presented.
INVESTMENTS
The Company's investments are valued on the following bases:
Bonds - Amortized cost using the interest method;
loan-backed and structured securities are
amortized using estimated prepayment rates
and the propsective adjustment method.
Common Stocks - Market value
B-17
<PAGE> 41
FINANCIAL STATEMENTS OF NORTHWESTERN MUTUAL LIFE
Preferred Stocks - Cost
Unconsolidated Subsidiaries - Equity in subsidiaries' net assets
Mortgage Loans - Amortized cost
Investment Real Estate - Lower of cost, less depreciation and
encumbrances, or estimated net
realizable value
Home Office Real Estate - Cost, less depreciation
Loans on Policies - Cost
Other Investments - Joint Ventures - Lower of equity in or market value of
ventures' net assets
SEPARATE ACCOUNT BUSINESS
This business consists of annuities funded by specific assets held in separate
accounts. The assets in these accounts are carried at market value. The
policy values reflect the investment performance of the respective accounts.
INSURANCE, ANNUITY AND DISABILITY INCOME RESERVES
Life insurance reserves on substantially all policies issued since 1978 are
based on the Commissioner's Reserve Valuation Method with interest rates
ranging from 3-1/2% to 5-1/2%. Other policy reserves are based primarily on
the net level premium method employing various mortality tables at interest
rates ranging from 2% to 4-1/2%.
Deferred annuity reserves on policies issued since 1985 are valued using the
Commissioner's Annuity Reserve Valuation Method with interest rates ranging
from 3-1/2% to 6-1/4%. Other deferred annuity reserves are based on the
contract value. Immediate annuity reserves are present values of expected
benefit payments at interest rates ranging from 3-1/2% to 7-1/2%.
Active life reserves for disability income ("DI") policies issued since 1987
are primarily based on the two-year preliminary term method using a 4% interest
rate and the 1985 Commissioner's Individual Disability Table A ("CIDA") for
morbidity. Previous DI business used the net level premium method, using a 3%
or 4% interest rate and the 1964 Commissioner's Disability Table for morbidity.
Disabled life reserves for DI policies are based on the present values of
expected benefit payments using primarily the 1985 CIDA (modified for Company
experience in first two years of disability) with interest rates ranging from
3% to 5 1/2%.
Use of these actuarial tables and methods involves estimation of future
mortality and morbidity based on past experience. Actual future experience
could differ from these estimates.
INTEREST MAINTENANCE RESERVE
The Company is required to maintain an interest maintenance reserve ("IMR").
The IMR establishes a reserve for realized gains and losses, net of tax,
resulting from changes in interest
B-18
<PAGE> 42
FINANCIAL STATEMENTS OF NORTHWESTERN MUTUAL LIFE
rates on short and long-term fixed income investments. Net realized gains and
losses charged to the IMR are amortized into investment income over the
approximate remaining life of the investment sold.
ASSET VALUATION RESERVE
The Company is also required to maintain an asset valuation reserve ("AVR").
The AVR establishes a reserve for certain invested assets held by the Company.
In the aggregate, AVR was 82% and 84% of the allowable maximum at December 31,
1995 and 1994, respectively.
PREMIUM INCOME
Life insurance premiums are recognized as income at the beginning of each
policy year.
REINSURANCE
In the normal course of business, the Company seeks to limit its exposure to
loss on any single insured and to recover a portion of benefits paid by ceding
business to other insurance enterprises or reinsurers under excess coverage and
co-insurance contracts. As of December 31, 1995 and 1994, total life insurance
inforce approximated $380 billion and $347 billion, respectively, of which
approximately $113 billion and $104 billion, respectively, comprised
principally of term insurance, had been ceded to various reinsurers. The
Company retains a maximum of $10 million of coverage per individual life.
OPERATING COSTS
Operating costs, including costs of acquiring new policies, are charged to
operations as incurred.
INCOME TAXES
Provisions for income taxes are based on current income tax returns without
recognition of deferred taxes due to timing differences. The portion of the
federal income tax based on mutual life insurance company equity is reflected
as a component of income tax expense, including related adjustments for prior
years.
The Company files a consolidated life-nonlife federal income tax return.
Federal income tax returns for years through 1988 are closed as to further
assessment of taxes. Adequate provision has been made in the financial
statements for any additional taxes which may become due with respect to the
open years.
The Company's effective tax rate on savings from operations before income tax
expense (after dividends) in 1995, 1994 and 1993 was approximately 60%, 50% and
39%, respectively. Two significant factors cause the Company's effective rate
to exceed the federal corporate rate of 35%. First, the Company pays a tax
that is assessed only on mutual life insurance companies, which is
B-19
<PAGE> 43
FINANCIAL STATEMENTS OF NORTHWESTERN MUTUAL LIFE
an amount that purports to equate a portion of policyholder dividends with
nondeductible dividends paid to shareholders of stock companies. Second, the
Company must capitalize and amortize (as opposed to immediately deducting) an
amount deemed to represent the cost of acquiring new business ("DAC tax").
POLICYOWNER DIVIDENDS
Dividends payable in the following year on participating policies are charged
to current operations. All life insurance policies issued by the Company are
participating.
NOTE 2 - DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The following summarizes the bases used by the Company in estimating its fair
value disclosures for financial instruments:
Bonds and preferred stocks - Fair values are based upon quoted
market prices, if available. For securities not actively traded,
fair values are estimated using independent pricing services or
internally developed pricing models.
Mortgage loans - Fair values are derived by discounting the future
estimated cash flows using current interest rates for debt
securities with similar credit risk and maturities, or utilizing
net realizable values.
Loans on policies - The carrying amount reported in the statement
of financial position approximates fair value since loans on
policies reduce the amount payable at death or at surrender of the
contract.
Cash and temporary investments and due and accrued investment
income - The carrying amounts reported in the statement of
financial position approximate fair value.
Annuity reserves (without mortality/morbidity features) - Fair
values are derived by discounting the future estimated cash flows
using current interest rates with similar maturities.
Other deposit liabilities - The carrying amounts reported in the
statement of financial position approximate fair value.
B-20
<PAGE> 44
FINANCIAL STATEMENTS OF NORTHWESTERN MUTUAL LIFE
NOTE 3 - INVESTMENTS
NET INVESTMENT INCOME
The Company's net investment income for the years ended December 31, 1995, 1994
and 1993 consists of the following:
<TABLE>
<CAPTION>
1995 1994 1993
------- ------- ------
(In millions)
<S> <C> <C> <C>
Interest, dividends, rents, equity
in unconsolidated subsidiaries'
earnings and joint venture income $ 3,952 $ 3,395 $3,215
Less: Investment expenses and
depreciation (279) (289) (302)
------- ------- ------
Net investment income $ 3,673 $ 3,106 $2,913
======= ======= ======
</TABLE>
REALIZED GAINS AND LOSSES
During 1995, 1994 and 1993, the Company, in its normal course of business, sold
certain invested assets realizing gains and losses before transfer to the IMR
and capital gains tax from such sales as follows:
<TABLE>
<CAPTION>
For the year ended For the year ended For the year ended
December 31, 1995 December 31, 1994 December 31, 1993
------------------------------ ------------------------------ ----------------------------
Net Net Net
Realized Realized Realized
Realized Realized Gains Realized Realized Gains Realized Realized Gains
Gains Losses (Losses) Gains Losses (Losses) Gains Losses (Losses)
-------- -------- ---------- ---------- -------- -------- -------- -------- --------
(In millions)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Bonds $ 576 $ (130) $ 446 $ 171 $ (535) $ (364) $ 438 $ (133) $ 305
Stocks 574 (429) 145 499 (291) 208 297 (36) 261
Mortgage loans 2 (32) (30) - (37) (37) 1 (12) (11)
Real estate 14 (3) 11 16 (7) 9 13 (2) 11
Other invested assets 188 (95) 93 110 (98) 12 100 (54) 46
-------- -------- ------ ----- ------ ------- ------ ------- ------
$ 1,354 $ (689) $ 665 $ 796 $ (968) $ (172) $ 849 $ (237) $ 612
======== ======== ====== ===== ======= ======= ====== ======= ======
</TABLE>
DEBT SECURITIES
Debt securities consist of all bonds, fixed maturity preferred stocks and short
term fixed income investments.
B-21
<PAGE> 45
FINANCIAL STATEMENTS OF NORTHWESTERN MUTUAL LIFE
The statement values, which principally represent amortized cost, and estimated
market values of the Company's debt securities at December 31, 1995 and 1994
are as follows:
<TABLE>
<CAPTION>
December 31, 1995 RECONCILIATION TO ESTIMATED MARKET VALUE
----------------------------------------------
Gross Gross Estimated
Statement Unrealized Unrealized Market
Value Appreciation Depreciation Value
--------- -------------- -------------- --------------
(In millions)
<S> <C> <C> <C> <C>
US Government and
political obligations $ 3,267 $ 296 $ (1) $ 3,562
Mortgage-backed
securities 6,734 336 (12) 7,058
Corporate and other
debt securities 15,999 1,250 (47) 17,202
--------- ------------- ------------ -------------
26,000 1,882 (60) 27,822
Preferred stocks 108 3 (2) 109
--------- ------------- ------------ -------------
Total $ 26,108 $ 1,885 $ (62) $ 27,931
========= ============= ============ =============
<CAPTION>
December 31, 1994 RECONCILIATION TO ESTIMATED MARKET VALUE
----------------------------------------------
Gross Gross Estimated
Statement Unrealized Unrealized Market
Value Appreciation Depreciation Value
--------- -------------- -------------- --------------
(In millions)
<S> <C> <C> <C> <C>
US Government and
political obligations $ 3,334 $ 61 $ (41) $ 3,354
Mortgage-backed
securities 5,652 53 (321) 5,384
Corporate and other
debt securities 14,488 203 (515) 14,176
--------- ------------- ------------ -------------
23,474 317 (877) 22,914
Preferred stocks 71 1 (7) 65
--------- ------------- ------------ -------------
Total $ 23,545 $ 318 $ (884) $ 22,979
========= ============= ============ =============
</TABLE>
B-22
<PAGE> 46
FINANCIAL STATEMENTS OF NORTHWESTERN MUTUAL LIFE
The amortized cost and estimated market value of debt securities at December
31, 1995 and 1994, by contractual maturity, are shown below. Expected
maturities may differ from contractual maturities because borrowers may have
the right to call or prepay obligations with or without call or prepayment
penalties.
<TABLE>
<CAPTION>
December 31, 1995 December 31, 1994
-------------------- --------------------
Estimated Estimated
Statement Market Statement Market
Value Value Value Value
--------- --------- --------- ---------
(In millions)
<S> <C> <C> <C> <C>
Due in one year or less $ 977 $ 979 $ 1,102 $ 1,100
Due after one year
through five years 3,658 3,879 4,491 4,444
Due after five years
through ten years 6,879 7,347 5,787 5,711
Due after ten years 7,860 8,668 6,513 6,340
--------- --------- --------- ---------
19,374 20,873 17,893 17,595
Mortgage-backed securities 6,734 7,058 5,652 5,384
--------- --------- --------- ---------
$ 26,108 $ 27,931 $ 23,545 $ 22,979
========= ========= ========= =========
</TABLE>
The fair value of perpetual preferred stocks as of December 31, 1995 and 1994
approximates $578 million and $440 million, respectively, compared to the
statement values of $439 million and $440 million, respectively.
B-23
<PAGE> 47
FINANCIAL STATEMENTS OF NORTHWESTERN MUTUAL LIFE
MORTGAGE LOANS
As of December 31, 1995 and 1994, the mortgage loan portfolio was distributed
as follows:
<TABLE>
<CAPTION>
December 31, 1995 December 31, 1994
----------------------- ------------------------
% of % of
GEOGRAPHIC LOCATION Statement Value Total Statement Value Total
--------------- ------ ---------------- ------
(In millions) (In millions)
<S> <C> <C> <C> <C>
Middle Atlantic $ 945 11.2% $ 738 10.4%
South Atlantic 2,346 27.8 1,943 27.4
North Central 1,560 18.5 1,289 18.2
South Central 1,018 12.1 921 13.0
Pacific Northwest 454 5.4 355 5.0
Pacific 1,803 21.4 1,531 21.5
Canada 303 3.6 322 4.5
------ ----- ------ -----
$8,429 100.0% $7,099 100.0%
====== ===== ====== =====
PROPERTY TYPE
Retail $2,897 34.4% $2,475 34.9%
Office Building 2,677 31.8 2,176 30.6
Residential 1,804 21.4 1,526 21.5
Commercial 792 9.4 745 10.5
Other 259 3.0 177 2.5
------ ----- ------ -----
$8,429 100.0% $7,099 100.0%
====== ===== ====== =====
</TABLE>
The fair value of mortgage loans as of December 31, 1995 and 1994 approximates
$8,983 million and $6,879 million, respectively. Decreases in current interest
rates were a major reason for the increase in fair value relative to statement
value in 1995.
B-24
<PAGE> 48
FINANCIAL STATEMENTS OF NORTHWESTERN MUTUAL LIFE
AFFILIATES
The Company has a 19.87% investment in MGIC Investment Corporation ("MGIC"), an
affiliate. At December 31, 1995, the Company's investment in MGIC (11.7
million shares) exceeded the statement value by $420 million.
In July 1995, the Company entered into a forward contract with a brokerage firm
to deliver 4.4 million to 5.4 million shares of MGIC (or cash) in August 1998
for a price determined by the market value of the MGIC shares at that time in
exchange for a fixed cash payment of $247 million ($48 per share). The
Company's objective in entering into the forward contract is to hedge against
depreciation in the value of its MGIC holdings during the contract period below
the initial spot price of $48, while partially participating in appreciation,
if any, during the forward contract's duration.
REAL ESTATE
For real estate and joint venture properties acquired subsequent to December
1990, the Company calculates depreciation using the straight-line method in
accordance with guidelines established by the National Association of Insurance
Commissioners. For properties acquired prior to December 1990, the Company
calculates depreciation using either the straight-line method or the
constant-yield method. Home office real estate is depreciated using the
straight-line method.
At December 31, 1995 and 1994, investment real estate includes $175 million and
$146 million, respectively, of real estate acquired through foreclosure. In
1995, the Company recorded writedowns of $8 million and $28 million for the
excess of carrying value over fair value of certain real estate investments and
mortgage loans, respectively. Valuation allowances for real estate and
mortgage loans with fair values that are less than statement values are
adequately covered by normal AVR reserves and by a $90 million special
investment reserve established by the Company for real estate, mortgage loans
and other invested assets.
DERIVATIVE FINANCIAL INSTRUMENTS
The Company's current utilization of derivative financial instruments is
limited. Most of the Company's derivative transactions are used to reduce or
modify risks of volatility related to currency or interest rate movements.
These hedging strategies use forwards, futures and swaps. At December 31, 1995
and 1994, the Company held foreign currency forward contracts with a notional
value of $889 million and $605 million, respectively, as a partial hedge
against foreign currency exposure of foreign denominated investments. Changes
in the market value of these contracts offset currency gains and losses on the
hedged investments. The capital gains or losses are unrealized before contract
settlement and realized on settlement. These currency hedges and the MGIC
forward contract described above represent most of the Company's derivative
positions. The effect of derivative transactions is not significant to the
Company's results from operations or financial position.
B-25
<PAGE> 49
FINANCIAL STATEMENTS OF NORTHWESTERN MUTUAL LIFE
NOTE 4 - ANNUITIES AND OTHER DEPOSIT LIABILITIES
The fair value of annuities and other deposit liabilities as of December 31,
1995 and 1994 are as follows:
<TABLE>
<CAPTION>
December 31, 1995 December 31, 1994
----------------- -----------------
Statement Fair Statement Fair
Value Value Value Value
--------- ------ --------- ------
(In millions)
<S> <C> <C> <C> <C>
Annuities $ 2,631 $ 2,437 $ 2,474 $ 2,203
Other deposit liabilities 783 783 727 727
</TABLE>
NOTE 5 - BENEFIT PLANS
The Company maintains non-contributory defined benefit retirement plans for all
eligible employees and agents as well as a 401(k) plan for eligible employees
and a non-contributory defined contribution plan for all full-time agents.
These plans are funded currently and plan assets of $1,152 million at December
31, 1995 are primarily included in the separate accounts of the Company. In
1995, the Company made a contribution of $13 million to the employee retirement
plan; as of January 1, 1995, the most recent actuarial valuation date
available, the defined benefit plans were fully funded.
In addition to pension benefits, the Company provides certain health care and
life insurance benefits ("postretirement benefits") for retired employees.
Substantially all employees may become eligible for these benefits if they
reach retirement age while working for the Company.
Postretirement benefit expenses, which includes the expected cost of
postretirement benefits for newly eligible and vested employees and interest
costs, were $7 million, $7 million and $9 million for the years ended December
31, 1995, 1994 and 1993, respectively. At December 31, 1995 and 1994, the
unfunded postretirement benefit obligation for retirees and other fully
eligible or vested employees was $49 million and $47 million, respectively.
The estimated postretirement benefit obligation for active non-vested employees
was $46 million and $44 million at December 31, 1995 and 1994, respectively.
The discount rate used to determine the postretirement benefit obligation was
7% and the health care cost trend rate was 12% in 1995, declining by 1% per
year to an ultimate rate of 5% over 7 years. If the health care cost trend
rate assumptions were increased by 1%, the postretirement benefit obligation as
of December 31, 1995 would be increased by $6 million.
At December 31, 1995 and 1994, plan assets attributable to postretirement
health care benefits totaled $31 million and $25 million, respectively.
B-26
<PAGE> 50
FINANCIAL STATEMENTS OF NORTHWESTERN MUTUAL LIFE
NOTE 6 - REINSURANCE
The amounts shown in the accompanying consolidated financial statements are net
of reinsurance activity. The effect of reinsurance on premiums and benefits
for the years ended December 31, 1995, 1994 and 1993 are as follows (in
millions):
<TABLE>
<CAPTION>
1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
Direct premiums $6,452 $5,977 $5,508
Reinsurance ceded (256) (234) (213)
------ ------ ------
Net premiums $6,196 $5,743 $5,295
====== ====== ======
Benefits to policyholders and beneficiaries $6,818 $6,178 $5,600
Reinsurance recoveries (142) (141) (104)
------ ------ ------
Net benefits to policyholders and beneficiaries $6,676 $6,037 $5,496
====== ====== ======
</TABLE>
In addition, during 1995, 1994 and 1993, the Company received credits of $67
million, $63 million and $59 million, respectively, from reinsurers
representing reimbursements of commissions and other expenses. These credits
are included in other income in the consolidated summary of operations.
Reinsurance contracts do not relieve the Company from its obligations to
policyholders. Failure of reinsurers to honor their obligations could result
in losses to the Company; consequently, allowances are established for amounts
deemed uncollectible. The Company evaluates the financial condition of its
reinsurers and monitors concentrations of credit risk arising from similar
geographic regions, activities, or economic characteristics of the reinsurers
to minimize its exposure to significant losses from reinsurer insolvencies.
NOTE 7 - CONTINGENCIES
In the normal course of business, the Company enters into transactions to
reduce its exposure to fluctuations in interest rates and market volatility.
These instruments may involve credit risk and may also be subject to risk of
loss due to interest rate fluctuations.
The Company has guaranteed certain obligations of its affiliates. These
guarantees totaled approximately $126 million and $83 million at December 31,
1995 and 1994, respectively, and are generally supported by the underlying net
asset values of the affiliates.
The Company is engaged in various legal actions in the normal course of its
investment and insurance operations. In the opinion of management, any losses
resulting from such actions would not have a material effect on the Company's
financial condition.
B-27
<PAGE> 51
FINANCIAL STATEMENTS OF NORTHWESTERN MUTUAL LIFE
Price Waterhouse LLP
100 East Wisconsin Avenue
Suite 1500
Milwaukee, WI 53202
Telephone: 414-276-9500
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Trustees and Policyowners of
The Northwestern Mutual Life Insurance Company
In our opinion, the accompanying consolidated statement of financial position
and the related consolidated summary of operations, statement of general
contingency reserve and statement of cash flows present fairly, in all material
respects, the financial position of The Northwestern Mutual Life Insurance
Company and its subsidiary at December 31, 1995 and 1994, and the results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1995, in conformity with generally accepted accounting
principles (practices prescribed or permitted by insurance regulatory
authorities - see Note 1). These financial statements are the responsibility
of the Company's management; our responsibility is to express an opinion on
these financial statements based on our audits. We conducted our audits of
these 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 provide a
reasonable basis for the opinion expressed above.
Price Waterhouse LLP
January 24, 1996
B-28
<PAGE> 52
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
DISTRIBUTION OF THE CONTRACTS . . . . . . . . . . . . . . . . . . . . . . B-2
DETERMINATION OF ANNUITY PAYMENTS . . . . . . . . . . . . . . . . . . . . B-2
Amount of Annuity Payments . . . . . . . . . . . . . . . . . . . . . B-2
Annuity Unit Value . . . . . . . . . . . . . . . . . . . . . . . . . B-3
Illustrations of Variable Annuity Payments . . . . . . . . . . . . . B-3
VALUATION OF ASSETS OF THE ACCOUNT . . . . . . . . . . . . . . . . . . . B-4
TRANSFERABILITY RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . B-4
EXPERTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-4
FINANCIAL STATEMENTS OF THE ACCOUNT . . . . . . . . . . . . . . . . . . . B-5
(for year ended December 31, 1995)
REPORT OF INDEPENDENT ACCOUNTANTS . . . . . . . . . . . . . . . . . . . B-11
(for year ended December 31, 1995)
FINANCIAL STATEMENTS OF NORTHWESTERN MUTUAL LIFE . . . . . . . . . . . . B-12
(for the three years ended December 31, 1995)
REPORT OF INDEPENDENT ACCOUNTANTS . . . . . . . . . . . . . . . . . . . B-28
(for the three years ended December 31, 1995)
</TABLE>
B-29
<PAGE> 53
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements
The financial statements of NML Variable Annuity Account
B and The Northwestern Mutual Life Insurance Company are
included in the Statement of Additional Information.
NML Variable Annuity Account B
(for year ended December 31, 1995)
Statement of Assets and Liabilities
Statement of Operations and Changes in Equity
Notes to Financial Statements
Report of Independent Accountants
The Northwestern Mutual Life Insurance Company
(for the three years ended December 31, 1995)
Consolidated Statement of Financial Position
Consolidated Summary of Operations
Consolidated Statement of General Contingency Reserve
Consolidated Statement of Cash Flows
Notes to Consolidated Financial Statements
Report of Independent Accountants
(b) Exhibits
EX-99.B11 Consent of Price Waterhouse LLP.
EX-27 Financial Data Schedule for the period ended
December 31, 1995.
Item 25. Directors and Officers of the Depositor
The following lists include all of the Trustees, executive officers and
other officers of The Northwestern Mutual Life Insurance Company as of February
1, 1996, without regard to their activities relating to variable annuity
contracts or their authority to act or their status as "officers" as that term
is used for certain purposes of the federal securities laws and rules
thereunder.
TRUSTEES
Name Business Address
- ---- ----------------
R. Quintus Anderson The Aarque Companies
111 West Second Street
Jamestown, NY 14701
Edward E. Barr Sun Chemical Corporation
222 Bridge Plaza South
Fort Lee, NJ 07024
Gordon T. Beaham III Faultless Starch/Bon Ami Co.
1025 West Eighth Street
Kansas City, MO 64101
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Frank H. Bertsch Flexsteel Industries, Inc.
P.O. Box 877
Dubuque, IA 52001
Robert C. Buchanan Fox Valley Corporation
P.O. Box 727
Appleton, WI 54912
Robert E. Carlson The Northwestern Mutual Life
Insurance Company
720 East Wisconsin Avenue
Milwaukee, WI 53202
George A. Dickerman Spalding Sports Worldwide
425 Meadow Street
P.O. Box 901
Chicopee, MA 01021-0901
Thomas I. Dolan A.O. Smith Corporation
P.O. Box 23971
Milwaukee, WI 53223-0971
Pierre S. du Pont Richards, Layton and Finger
1 Rodney Square
Wilmington, DE 19801
James D. Ericson The Northwestern Mutual Life
Insurance Company
720 East Wisconsin Avenue
Milwaukee, WI 53202
J. E. Gallegos Gallegos Law Firm
460 St. Michaels Drive
Building 300
Santa Fe, NM 87501
Patricia Albjerg Graham 420 Gutman
Graduate School of Education
Harvard University
Cambridge, MA 02138
Richard H. Holton Haas School of Business
350 Barrows Hall
University of California
Berkeley, CA 94720
Stephen F. Keller The Santa Anita Companies
P.O. Box 60014
Arcadia, CA 91066-6014
J. Thomas Lewis Monroe & Lemann
Suite 3300
210 St. Charles Avenue
New Orleans, LA 70170
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Fred G. Luber Super Steel Products Corp.
P.O. Box 23418
Milwaukee, WI 53223
Daniel F. McKeithan, Jr. Tamarack Petroleum Company, Inc.
Suite 1920
777 East Wisconsin Avenue
Milwaukee, WI 53202
Guy A. Osborn Universal Foods Corp.
433 East Michigan Street
Milwaukee, WI 53202
Donald J. Schuenke The Northwestern Mutual
Life Insurance Company
720 East Wisconsin Avenue
Milwaukee, WI 53202
H. Mason Sizemore, Jr. The Seattle Times
P.O. Box 70
Seattle, WA 98111
Harold Byron Smith, Jr. Illinois Tool Works, Inc.
3600 West Lake Avenue
Glenview, IL 60625-5811
Sherwood H. Smith, Jr. Carolina Power & Light Company
P.O. Box 1551
Raleigh, NC 27602
John E. Steuri ALLTEL Information
Services, Inc.
4001 Rodney Parham Road
Little Rock, AR 72212-2496
John J. Stollenwerk Allen-Edmonds Shoe Corporation
201 East Seven Hills Road
P.O. Box 998
Port Washington, WI 53074-0998
Barry L. Williams Williams Pacific Ventures, Inc.
1200 Bayhill Drive, Suite 300
San Bruno, CA 94066
Kathryn D. Wriston 870 United Nations Plaza
Apartment 23-A
New York, NY 10017
EXECUTIVE OFFICERS
Name Title
- ---- -----
Deborah A. Beck Senior Vice President
William H. Beckley Vice President
John M. Bremer Senior Vice President, General Counsel
and Secretary
Peter W. Bruce Executive Vice President
Robert E. Carlson Executive Vice President and Trustee
C-3
<PAGE> 56
Steven T. Catlett Vice President
Mark G. Doll Senior Vice President
Thomas E. Dyer Vice President
James W. Ehrenstrom Senior Vice President
James D. Ericson President and Chief Executive Officer,
Trustee
Richard L. Hall Senior Vice President
William C. Koenig, FSA Senior Vice President and Chief Actuary
Gary E. Long Vice President and Controller
Susan A. Lueger Vice President
Meridee J. Maynard Vice President
Donald L. Mellish Vice President
Gregory C. Oberland Vice President
Ralph A. Pelton Vice President
Barbara F. Piehler Vice President
James F. Reiskytl Vice President
Virgil L. Renne, Jr. Vice President - Employer Product Marketing
Mason G. Ross Senior Vice President
Leonard F. Stecklein Vice President - Policyowner Services
Frederic H. Sweet Senior Vice President
Dennis Tamcsin Senior Vice President
Martha M. Valerio Vice President
W. Ward White Vice President
Walt J. Wojcik Senior Vice President
Edward J. Zore Executive Vice President
OTHER OFFICERS
Name Title
- ---- -----
John M. Abbott Associate Director - Benefits
Research
Ronald C. Alberts Investment Officer
Thomas R. Anderson Assistant Director - Advanced
Marketing
Maria J. Avila Assistant Controller
Michael J. Backus Associate Director of Information
Systems
Jerome R. Baier Director - Securities
John E. Bailey Senior Actuary
Nicholas H. Bandow Assistant Director-Information
Systems
Lynn F. Bardele Director - Corporate Services
Walter L. Barlow Assistant Director of Education
David A. Barras Associate Director
Bradford P. Bauer Assistant Director-Advanced Marketing
James M. Baumgartner Officer - Underwriting Standards &
Services
Robert J. Berdan Assistant General Counsel &
Assistant Secretary
Beth M. Berger Assistant General Counsel &
Assistant Secretary
James L. Bergschneider Director - Underwriting Services
Frederick W. Bessette Assistant General Counsel & Asst.
Secretary
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<PAGE> 57
Erik E. Bieck Director - Individual Annuity
Marketing
D. Rodney Bluhm Assistant General Counsel
Donald T. Bobbs Investment Officer
Timothy J. Bohannon Vice President
Margaret Bowe Bonvicini Associate Director - Employment &
Affirmative Action
Willette Bowie Employee Relations Director
Mark C. Boyle Assistant General Counsel & Asst.
Secretary
Martin R. Braasch Director - Underwriting Standards &
Services
Patricia R. Braeger Assistant Director - Information
Systems
Melissa C. Brooks Assistant Director - Advanced
Marketing
Mary P. Buczynski Assistant Director
William J. Buholzer Employee Relations Director
Michael S. Bula Assistant General Counsel
Jerry C. Burg Associate Director - Field Benefits
Gregory B. Bynan Director - Corporate Services
Kim M. Cafaro Assistant General Counsel & Asst.
Secretary
Shanklin B. Cannon, M.D. Medical Director - Life
Products/Research
Terese J. Capizzi Actuarial Products Officer
Kurt P. Carbon Assistant Regional Director
Thomas A. Carroll Director - Common Stock Division
Michael G. Carter Assistant General Counsel & Asst.
Secretary
William W. Carter Associate Actuary
John E. Caspari Assistant Director - Advertising &
Corporate Information
Walter J. Chossek Associate Controller
Thomas R. Christenson Director - Employer Product Services
J. Thomas Christofferson Vice President
David D. Clark Director - Real Estate Investments
Alan E. Close Associate Controller
Carolyn M. Colbert Assistant Director - New
Business
Timothy S. Collins Associate Director
Margaret Winter Combe Assistant Director - Process
and Project Management
Virginia A. Corwin Assistant Director - New Business
Barbara E. Courtney Assistant Controller
Larry A. Curran Actuarial Administrative Officer
Daniel G. Cuske Associate Director - Fixed Income
Brian H. Davidson Associate Director
Thomas H. Davis Associate Director - Information
Systems
Jefferson V. De Angelis Vice President - Fixed Income
Nicholas De Fino Assistant Director
David J. Derfus Assistant Controller
Carol A. Detlaf Associate Director - Human Resources
John Diliberti Assistant Director - New Business
Joseph Dobering, III Director - Underwriting Standards &
Services
Timothy Doubek Director - Fixed Income
C-5
<PAGE> 58
Daniel C. Dougherty Director - Individual Product
Marketing
Margaret T. Dougherty Assistant Director - Information
Systems
William O. Drehfal Assistant Director - Media Services
Jeffrey S. Dunn Vice President
Somayajulu Durvasula Assistant Director - Field Financial
James R. Eben Assistant General Counsel and
Assistant Secretary
Christina H. Fiasca Director - Policyowner Services
Zenia J. Fieldbinder Assistant Director - Employer
Product Services
Richard F. Fisher Senior Actuary
Dennis J. Fitzpatrick Director - Advanced Marketing
Jon T. Flaschner Director - Policyowner Services
Elfa O. Foldi Associate Director - Facilities
Planning
Donald Forecki Investment Officer
Stephen H. Frankel Vice President
H. Daniel Gardner Vice President & Insurance Counsel
Richard R. Garthwait Vice President - Field Financial
David L. Georgenson Director - Agent Development
Paulette A. Getschman Assistant Director - Policyowner
Services
George Ghanem Assistant Regional Director - Agency
James W. Gillespie Vice President
Walter M. Givler Director - Corporate Services
Robert K. Gleeson, M.D. Vice President - Medical Director
Mark J. Gmach Assistant Regional Director - Agency
John W. Gordon Assistant Director - Information
Systems
Linda J. Gorens-Levey Associate Director
David Lee Gosse Assistant Director - Disability
Benefits
William F. Grady Associate Director of Field Finances
Francis A. Grandelis Assistant Director
John M. Grogan Assistant General Counsel and
Assistant Secretary
Jill M. Grueninger Investment Officer
Thomas C. Guay Associate Actuary
Colleen M. Gunther Investment Officer
Gerald A. Haas Assistant Director - Information
Systems
Carol A. Haiar Communications Coordinator
Stanley K. Hall Director - Policyowner Services
Thomas P. Hamilton Associate Director - Information
Systems
William M. Harris Assistant Regional Director - South
Dennis R. Hart Assistant Director - Agent
Development
James C. Hartwig Vice President - Advanced Marketing
Paul F. Heaton Assistant General Counsel and
Assistant Secretary
William L. Hegge Associate Director of
Telecommunications
Wayne F. Heidenreich Assistant Medical Director
Jacquelyn F. Heise Assistant Director - Information
Systems
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<PAGE> 59
Robert L. Hellrood Director - New Business
Herbert F. Hellwig Assistant Director - Individual
Annuity Marketing
Jane A. Herman Assistant Director - Term Upgrade
Gary M. Hewitt Vice President & Treasurer
Donna R. Higgins Assistant Director - Information
Systems
Susan G. Hill Assistant Director
Hugh L. Hoffman Assistant Director - Information
Systems
Richard S. Hoffmann Director - Audit
Susan M. Hoffmann Life Product Officer
Bruce Holmes Assistant Actuary
Cindy L. Jackson Investment Officer
Meg E. Jansky Human Resources - Training
Development Officer
Michael D. Jaquint Assistant Actuary
Michael P. Johnson Investment Officer
Dolores A. Juergens Associate Director of Restaurant
Operations
Marilyn J. Katz Assistant Director - Medical
Consultants
John W. Keller Managing Actuary
Kevin C. Kennedy Investment Officer - Architecture
James B. Kern Regional Director - Central Region
David R. Keuler Investment Officer
Carson D. Keyes Vice President
Donald C. Kiefer Vice President
Mark E. Kishler Investment Officer
Allen B. Kluz Director - Field Financial
Beatrice C. Kmiec Assistant Regional Director - East
Kent Knudsen Associate Director
Daniel C. Knuth Investment Officer
William S. Koch Assistant Regional Director - Agency
A. Kipp Koester Vice President
John L. Kordsmeier Human Resources Officer
Dennis Korjenek, Jr. Director - Fixed Income
Robert J. Kowalsky Assistant Director - Information
Systems
Carol L. Kracht Assistant General Counsel & Asst.
Secretary
Todd L. Laszewski Assistant Actuary
Patrick J. Lavin Director - Life & Disability
Benefits
Patrick W. Lavin Assistant Treasurer & Assistant
Secretary
James L. Lavold Associate Director - Meetings
Russell M. Lemken Assistant Director - Consumer
Research
Sally Jo Lewis Assistant General Counsel & Asst.
Secretary
Mark P. Lichtenberger Assistant Director - LINK Technical
Planning
Steven M. Lindstedt Assistant Director - Information
Systems
James Lodermeier Assistant Director - Tax Planning
James G. Loduha Assistant Director - Asset
Management
C-7
<PAGE> 60
George R. Loxton Assistant General Counsel &
Assistant Secretary
Mary M. Lucci Director - New Business
Mark J. Lucius Corporate Information Officer
Jeffrey J. Lueken Associate Director
Merrill C. Lundberg Assistant General Counsel & Asst.
Secretary
Jon K. Magalska Assistant Director - Policyowner
Services
Jean M. Maier Director - New Business
Joseph Maniscalco Associate Director - Information
Systems
Jeffrey S. Marks Multi Life, Research & Reinsurance
Officer
Steve Martinie Assistant General Counsel & Asst.
Secretary
Ted A. Matchulat Actuarial Products Officer
Margaret McCabe Associate Director - Policy Benefits
Systems
Richard A. McComb Director - Human Resources
William L. McCown Vice President & Investment Counsel
Paul E. McElwee Assistant General Counsel & Asst.
Secretary
Mary C. McIntosh Assistant Director - Field Financial
Daniel E. McGinley Assistant Director - Management
Development
Mark J. McLennon Assistant Director - Advanced
Marketing
Robert J. Meiers Ad Valorem Tax Manager
Larry S. Meihsner Assistant General Counsel &
Assistant Secretary
Robert G. Meilander Vice President
Kelly H. Mess Investment Officer
Charles L. Messler Director - Natural Gas Sales
Richard E. Meyers Assistant General Counsel
Jay W. Miller Vice President & Tax Counsel
Sara K. Miller Vice President
Tom M. Mohr Director of Policyowner Services -
South
Richard C. Moore Associate Actuary
Scott J. Morris Assistant General Counsel and
Assistant Secretary
Sharon A. Morton Investment Officer
Adrian J. Mullin Assistant Director - Individual
Product Marketing
Randolph J. Musil Assistant Director - Advanced
Marketing
David K. Nelson Assistant General Counsel
Ronald C. Nelson Actuary
Karen M. Niessing Assistant Director - Policyowner
Services
Donald L. O'Dell Vice President
Daniel J. O'Meara Director - Field Financial
John K. O'Meara Assistant Director - Advanced
Marketing
Mary Joy O'Meara Assistant Director - Advanced
Marketing
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<PAGE> 61
Kathleen A. Oman Associate Director - Information
Systems
Thomas A. Pajewski Investment Research Officer
Arthur V. Panighetti Director - Tax Planning
Christen L. Partleton Assistant Director - Policyowner
Services
Dennis L. Paul Assistant General Counsel
David W. Perez Assistant General Counsel
Judith L. Perkins Assistant General Counsel & Asst.
Secretary
Wilson D. Perry Assistant General Counsel & Asst.
Secretary
Gary N. Peterson Actuary
John C. Peterson Assistant Director of Policyowner
Services - West
Harvey W. Pogoriler Assistant General Counsel
Gary A. Poliner Vice President
Randolph R. Powell, M.D. Medical Director
Mark A. Prange Associate Director - Information
Systems
Thomas M. Price Investment Officer
David R. Remstad Actuary
David R. Retherford Assistant Director of New Business -
Central
Stephen M. Rhode Assistant Director - Qualified
Benefits
Robert C. Richardson Investment Officer
Richard R. Richter Vice President
Marcia Rimai Vice President - Litigation Counsel
Kathleen M. Rivera Vice President - Insurance Counsel
Faith B. Rodenkirk Assistant Director - Group Marketing
Ramona Windson-Rogers Financial Officer
James S. Rolfsmeyer Assistant Director - Information
Systems
Larry R. Roscoe Assistant Director - Compliance
Lora A. Rosenbaum Assistant Director - Compliance
Robert K. Roska Associate Director - Information
Systems
Sue M. Roska Director - Systems and
Services
Robert M. Ruess Vice President
Harry L. Ruppenthal Director of Policyowner Services -
East
Stephen G. Ruys Assistant Director - Information
Systems
Santo Saliture Associate Director of Advertising &
Corporate Information
Rose Kordich Sasich Assistant Director of Systems
Mary Ann Schachtner Assistant Director - Life Insurance
Marketing
Thomas F. Scheer Assistant General Counsel & Asst.
Secretary
Carlen A. Schenk Assistant Director
Jane A. Schiltz Director - Individual Product
Emily K. Schleinz Investment Officer
John E. Schlifske Director
Kathleen H. Schluter Assistant General Counsel &
Secretary
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Calvin R. Schmidt Assistant Director - Information
Systems
Richard A. Schnell Assistant Director - Asset
Management
John O. Schnorr Director - Annuity Tax & Title
Services
Margaret R. Schoewe Vice President - Information Systems
Todd M. Schoon Assistant Regional Director - Agency
Jeffrey G. Schragin Associate Medical Director
John F. Schroeder Associate Director of Field Office
Real Estate
Melva T. Seabron Associate Director - Human Resources
& Budget
Norman W. Seguin, II Investment Officer - Ad Valorem
Taxes
Catherine L. Shaw Assistant General Counsel & Asst.
Secretary
John E. Sheaffer, Jr. Assistant Director - Agent
Development
William Shinkwin Director of Tax Planning
Janet Z. Silverman Assistant Director - New Business
Stephen M. Silverman Assistant General Counsel
David W. Simbro Actuary
Eugene R. Skaggs Vice President
Paul W. Skalecki Assistant Actuary
Cynthia S. Slavik Investment Officer - Environmental
Engineer
Ignatius L. Smetek Director - Common Stocks
Lois A. Smith Director - Asset Management
Mark W. Smith Assistant General Counsel & Asst.
Secretary
Warren L. Smith, Jr. Investment Officer - Architecture
Steven W. Speer Director - Individual Product
Marketing
Robert J. Spellman, M.D. Vice President & Chief Medical Director
Barbara J. Stansberry Director - Administrative
Services/Medical Studies
Jason Steigman Investment Product Officer
Bonnie L. Steindorf Director - Department Operations
Colleen J. Stenholt Director - Organization Development
Karen J. Stevens Assistant General Counsel &
Assistant Secretary
Richard A. Strait Director
Linda L. Streifender Associate Director - Training &
Communications
Steven J. Stribling Associate Actuary
Stephen J. Strommen Associate Director - Financial
Planning
Theodore H. Strupp Assistant Director
Daniel J. Suprenant Director - Group Disability
Marketing
Christopher P. Swain Investment Officer
Steven P. Swanson Vice President
Rachel L. Taknint Assistant General Counsel & Asst.
Secretary
Thomas Talajkowski Assistant Director - Tax
Compliance
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<PAGE> 63
William H. Taylor Associate Director - Advanced Marketing
Paul B. Tews Associate Director - Investment
Planning
Susan M. Tompkins Director - Recruitment & Management
Thomas W. Towers Associate Director - Public
Relations
Linda K. Tredupp Assistant Director - Information
Systems
Chris G. Trost Associate Actuary
Julie Van Cleave Director - Common Stock
Mark J. Van Cleave Assistant Director of Marketing
Research
Michael T. Van Grinsven Assistant Director - Management
Development
Mary Beth Van Groll Vice President - Information Systems
Patricia L. Van Kampen Vice President - Common Stocks
Glen J. Vanic Investment Research Officer
Gloria J. Venski Assistant Director - Disability
Benefits
Richard F. Von Haden Director - Real Estate Production
Margaret A. Wainer Assistant Director - Corporate
Planning & Information
William R. Walker Director - Common Stock
Scott E. Wallace Assistant Director - Operations
Hal W. Walter Vice President
Robert J. Waltos Assistant Regional Director -
Agency
P. Andrew Ware Vice President
Kathleen S. Warner Assistant Director - Asset
Management
Mary L. Wehrle-Schnell Associate Director - Information
Systems
Daniel T. Weidner Assistant Director - Information
Systems
Ronald J. Weir Associate Director - Information
Systems
Kenneth D. Weiser Assistant Director - Sales Services
Karen J. Weiss Senior Actuary
Kenneth R. Wentland Assistant Director of Policyowner
Services - East
Sandra D. Wesley Assistant Director of Special
Projects
Charles D. Whittier Assistant Director - Disability
Income Marketing
Catherine A. Wilbert Assistant General Counsel &
Secretary
David L. Wild Director - Corporate Services
Jeffrey B. Williams Risk Manager
John K. Wilson Assistant Director - Individual
Product Marketing
Debra C. Wing Investment Officer
Penelope A. Woodcock Associate Director - Benefit Systems
Stanford A. Wynn Assistant Director - Advanced
Marketing
Catherine M. Young Assistant General Counsel &
Secretary
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<PAGE> 64
Michael L. Youngman Vice President - Legislative
Representative
James A. Youngquist Associate Actuary
Richard S. Zakrzewski Associate Research Officer
John Zao Assistant Director - Information
Systems
Rick T. Zehner Director - Corporate Planning
Patricia A. Zimmermann Investment Officer - Real Estate
Systems
Ray Zimmermann Director - LINK Information Network
Philip R. Zweig Director - Technical Support
Robert E. Zysk Director - Tax Compliance
The business addresses for all of the executive officers and other officers is
720 East Wisconsin Avenue, Milwaukee, Wisconsin 53202.
Item 26. Persons Controlled By or Under Common Control with the Depositor or
Registrant
The subsidiaries of The Northwestern Mutual Life Insurance Company
("Northwestern Mutual Life"), as of March 1, 1996, are set forth on pages C-13
and C-14. In addition to the subsidiaries set forth on pages C-13 and C-14,
the following separate investment accounts (which include the Registrant) may
be deemed to be either controlled by, or under common control with,
Northwestern Mutual Life:
1. NML Variable Annuity Account A
2. NML Variable Annuity Account B
3. NML Variable Annuity Account C
4. Northwestern Mutual Variable Life Account
Northwestern Mutual Series Fund, Inc. (the "Fund"), shown on page C-13 as
a subsidiary of Northwestern Mutual Life, is an investment company, registered
under the Investment Company Act of 1940, offering its shares to the separate
accounts identified above; and the shares of the Fund held in connection with
certain of the accounts are voted by Northwestern Mutual Life in accordance
with voting instructions obtained from the persons who own, or are receiving
payments under, variable annuity contracts or variable life insurance policies
issued in connection with the accounts, or in the same proportions as the
shares which are so voted.
C-12
<PAGE> 65
NML CORPORATE STRUCTURE CHART*
The Northwestern Mutual Life Insurance Company
General Account
NML Variable Annuity Account A
NML Variable Annuity Account B
NML Variable Annuity Account C
NML Group Annuity Separate Account
NML Variable Life Account
Eiger Corporation - 100%
Northwestern Mutual Life Foundation, Inc. - 100%
NML Corporation - 100%
Standard of America Life Insurance Company - 100%
Saskatoon Centre, Limited (inactive) - 100%
Northwestern Mutual Series Fund, Inc. (and its 9 portfolios) - 100%
MGIC Investment Corporation - 20%. MGIC holds 100% of the voting stock of the
following: Mortgage Guaranty Reinsurance Corporation, MGIC, MGIC
Reinsurance Corporation, MGIC Mortgage Insurance Corporation, and various
subsidiaries.
Baird Financial Corporation - 92.22%. Baird Financial Corporation holds 100%
of the voting stock of Robert W. Baird & Co., Incorporated and various
subsidiaries.
Northwestern Mutual Investment Services, Inc. - 100%
The Grand Avenue Corporation - 98.54%
Marina Pacific, Ltd. - 100%
NW Pipeline, Inc. - 100%
NML - Bellevue Corporation - 100%
Solar Resources, Inc. - 100%
NH Corporation (inactive) - 100%
Rocket Sports, Inc. - 100%
Summit Sports, Inc. - 100%
Greenway Sports, Inc. - 100%
Painted Rock Development Corporation - 100%
NML Development Corporation - 100%
Stadium and Arena Management, Inc. - 100%
RE Corporation - 100%
Carlisle Ventures, Inc. - 100%
INV Corp. - 100%
Buffalo Promotions, Inc. - 100%
Park Forest Northeast, Inc. - 100%
NW Greenway #1 - 100%
NW Greenway #9 - 100%
Travers International Sales, Inc. - 100%
Highbrook International Sales, Inc. - 100%
Elderwood International Sales, Inc. - 100%
Mallon International Sales, Inc. - 100%
Higgins, Inc. - 100%
Hobby, Inc. - 100%
Logan, Inc. - 100%
Baraboo, Inc. - 100%
Mitchell, Inc. - 100%
Elizabeth International Sales, Inc. - 100% *Includes all NML mutual
Sean International Sales, Inc. - 100% funds and other corpor-
Alexandra International Sales, Inc. - 100% ations of which 50% or
Brian International Sales, Inc. - 100% more voting power con-
Jack International Sales, Inc. - 100% trolled by NML.
Brendan International Sales, Inc. - 100%
Justin International FSC, Inc. - 100% 3-1-96
C-13
<PAGE> 66
NML CORPORATE STRUCTURE, CONTINUED*
Cass Corporation - 100%
Mason & Marshall, Inc. - 100%
North Van Buren, Inc. - 100%
Northwestern Mutual Life International, Inc. - 100%
White Oaks, Inc. - 100%
Burgundy, Inc. - 100%
Hazel, Inc. - 100%
Maroon, Inc. - 100%
Coral, Inc. - 100%
Russet, Inc. - 100%
Amber, Inc. - 100%
*Includes all NML
mutual funds and other
corporations of which 50%
or more of voting power
controlled by NML
3-1-96
C-14
<PAGE> 67
Item 27. Number of Contract Owners
As of March 31, 1996, 163,352 variable annuity contracts issued in
connection with NML Variable Annuity Account B were outstanding. 135,514 such
contracts were issued as contracts for plans qualifying for special treatment
under various provisions of the Internal Revenue Code. 27,838 such contracts
were not so issued.
Item 28. Indemnification
That portion of the By-laws of Northwestern Mutual Life relating to
indemnification of Trustees and officers is set forth in full in Article VII of
the By-laws of Northwestern Mutual Life, amended by resolution and previously
filed as an exhibit to the Registration Statement.
Item 29. Principal Underwriters
(a) Northwestern Mutual Investment Services, Inc. ("NMIS"), the
co-depositor of the Registrant, may be considered the principal underwriter
currently distributing securities of the Registrant. NMIS is also
co-depositor, and may be considered the principal underwriter, for Northwestern
Mutual Variable Life Account, a separate investment account of Northwestern
Mutual Life registered under the Investment Company Act of 1940 as a unit
investment trust. In addition NMIS is the investment adviser for Northwestern
Mutual Series Fund, Inc.
(b) The directors and officers of NMIS are as follows:
NAME POSITION
- ---- --------
Susan M. Achtenhagen Assistant Superintendent-New
Business
Edwin R. Ahrenhoerster Superintendent-Policy Benefits
Thomas A. Carroll Vice President-Common Stocks
Walter J. Chossek Treasurer
Thomas R. Christenson Superintendent-Policyowner Service
Carolyn M. Colbert Superintendent-Underwriting
Standards and New Business
Barbara E. Courtney Assistant Treasurer
Jefferson V. De Angelis Vice President-Fixed Income
Securities
Carol A. Detlef Superintendent-Underwriting
Standards and New Business
Mark G. Doll President and Director
Timothy Doubek Vice President
James R. Eben Assistant Secretary
James D. Ericson Director
Zenia J. Fieldbinder Superintendent-Policyowner Service
Loraine Garner Superintendent-Underwriting
Standards and New Business
Daniel R. Hernday Superintendent-Underwriting
Standards and New Business
Susan G. Hill Superintendent - Underwriting
Standards & New Business
Steven M. Kien Superintendent - Underwriting
Standards & New Business
C-15
<PAGE> 68
Beatrice C. Kmiec Superintendent - Underwriting
Standards & New Business
Sharon J. Kraft Superintendent-Policyowner
Services
Patricia A. Krueger Superintendent - Policy Benefits
Patrick J. Lavin Superintendent - Underwriting
Standards & New Business
Patrick W. Lavin Assistant Treasurer
Merrill C. Lundberg Secretary
Meridee J. Maynard Superintendent - Sales
Standards/Compliance
Susan A. Milbeck Superintendent-Policy Benefits
Christine A. Milewski Superintendent-Policy Benefits
Johnny L. Miller Superintendent-Policy Benefits
Suzanne M. Mueller Superintendent-Underwriting
Standards and New Business
Elizabeth D. Pitterle Superintendent-Underwriting
Standards and New Business
Virgil L. Renne, Jr. Vice President
David R. Retherford Superintendent - Underwriting
Standards & New Business
Larry R. Roscoe Superintendent-Compliance and
Training
Donna B. Saltz Superintendent-Underwriting
Standards and New Business
John O. Schnorr Superintendent-Policy Benefits
Judith A. Shelton Superintendent - Policy Benefits
Ignatius L. Smetek Vice President - Common Stocks
Leonard F. Stecklein Vice President
Bonnie L. Steindorf Vice President
Steven P. Swanson Vice President
Carla A. Thoke Assistant Superintendent-Compliance
Patricia A. Valoe Superintendent-Underwriting
Standards and New Business
Julie Van Cleave Vice President - Common Stocks
Patricia L. Van Kampen Vice President-Common Stocks
Patrick J. Venuti Superintendent-Policy Benefits
William R. Walker Vice President
Evenly G. Werra Superintendent - Underwriting
Standards & New Business
Edward J. Zore Director
The address for each director and officer of NMIS is 720 East Wisconsin Avenue,
Milwaukee, Wisconsin 53202.
(c) During 1995 life insurance agents of Northwestern Mutual Life who are
also registered representatives of NMIS received commissions, including general
agent overrides, in the aggregate amount of $10,954,169 for sales of variable
annuity contracts, and interests therein, issued in connection with the
Registrant. NMIS received compensation for its investment advisory services
from Northwestern Mutual Series Fund, Inc., the investment company in which
assets of the Registrant are invested.
Item 30. Location of Accounts and Records
All accounts, books or other documents required to be maintained in
connection with the Registrant's operations are maintained in the physical
C-16
<PAGE> 69
possession of Northwestern Mutual Life at 720 East Wisconsin Avenue, Milwaukee,
Wisconsin 53202.
Item 31. Management Services
There are no contracts, other than those referred to in Part A or Part B
of this Registration Statement, under which management-related services are
provided to the Registrant and pursuant to which total payments of $5,000 or
more were made during any of the last three fiscal years.
Item 32. Undertakings
(a) The Registrant undertakes to file a post-effective amendment to this
Registration Statement as frequently as is necessary to ensure that the audited
financial statements in the Registration Statement are never more than 16
months old for so long as payments under the variable annuity contracts may be
accepted.
(b) The Registrant undertakes to include either (1) as part of any
application to purchase a contract offered by the prospectus, a space that an
applicant can check to request a Statement of Additional Information, or (2) a
post card or similar written communication affixed to or included in the
prospectus that the applicant can remove to send for a Statement of Additional
Information.
(c) The Registrant undertakes to deliver any Statement of Additional
Information and any financial statements required to be made available under
this Form promptly upon written or oral request.
(d) Reference is made to the indemnification provisions disclosed in
response to Item 28. Insofar as indemnification for liabilities arising under
the Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer
or controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the registered securities, the Registrant
will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
REPRESENTATION REGARDING TAX-DEFERRED ANNUITIES
Reference is made to a no-action letter dated November 28, 1988 from the
staff of the Securities and Exchange Commission and addressed to the American
Council of Life Insurance (the "no-action letter"). In accordance with the
requirements of paragraph (5) on page 4 of the no-action letter, the Registrant
represents that the no-action letter is being relied upon and that the
provisions of paragraphs (1)-(4) thereof have been complied with.
C-17
<PAGE> 70
SIGNATURES
As required by the Securities Act of 1933, and the Investment Company Act
of 1940, the Registrant, NML Variable Annuity Account B, certifies that it
meets all the requirements for effectiveness of this Amended Registration
Statement pursuant to Rule 485(b) under the Securities Act of 1933 and has duly
caused this Amended Registration Statement to be signed on its behalf, in the
City of Milwaukee, and State of Wisconsin, on the 26th day of April, 1996.
NML VARIABLE ANNUITY ACCOUNT B
(Registrant)
By THE NORTHWESTERN MUTUAL LIFE
INSURANCE COMPANY
(Depositor)
Attest: JOHN M. BREMER By: JAMES D. ERICSON
-------------------------- ------------------------------
John M. Bremer James D. Ericson, President
Senior Vice President, and Chief Executive Officer
General Counsel and Secretary
By NORTHWESTERN MUTUAL
INVESTMENT SERVICES, INC.
(Depositor)
Attest: MERRILL C. LUNDBERG By: MARK G. DOLL
-------------------------- ------------------------------
Merrill C. Lundberg, Secretary Mark G. Doll
President
As required by the Securities Act of 1933, this Amended Registration
Statement has been signed by the depositors on the 26th day of April, 1996.
THE NORTHWESTERN MUTUAL LIFE
INSURANCE COMPANY
(Depositor)
Attest: JOHN M. BREMER By: JAMES D. ERICSON
-------------------------- ------------------------------
John M. Bremer James D. Ericson
Senior Vice President, President and Chief
General Counsel and Secretary Executive Officer
NORTHWESTERN MUTUAL INVESTMENT
SERVICES, INC.
(Depositor)
Attest: MERRILL C. LUNDBERG By: MARK G. DOLL
-------------------------- ------------------------------
Merrill C. Lundberg, Secretary Mark G. Doll
President
As required by the Securities Act of 1933, this Amended Registration
Statement has been signed by the following persons in the capacities with the
depositor and on the dates indicated:
Signature Title
- --------- -----
Trustee, President and
JAMES D. ERICSON Principal Executive and Dated April
- ---------------------------- Financial Officer 26, 1996
James D. Ericson
C-18
<PAGE> 71
GARY E. LONG Vice President, Controller
- ---------------------------- and Principal Accounting
Gary E. Long Officer
RICHARD H. HOLTON* Trustee
- ----------------------------
Richard H. Holton
HAROLD B. SMITH* Trustee
- ----------------------------
Harold B. Smith
J. THOMAS LEWIS* Trustee
- ----------------------------
J. Thomas Lewis
FRANK H. BERTSCH* Trustee
- ----------------------------
Frank H. Bertsch
PATRICIA ALBJERG GRAHAM* Trustee
- ----------------------------
Patricia Albjerg Graham
DONALD J. SCHUENKE* Trustee Dated April
- ---------------------------- 26, 1996
Donald J. Schuenke
FRED G. LUBER* Trustee
- ----------------------------
Fred G. Luber
R. QUINTUS ANDERSON* Trustee
- ----------------------------
R. Quintus Anderson
STEPHEN F. KELLER* Trustee
- ----------------------------
Stephen F. Keller
PIERRE S. du PONT* Trustee
- ----------------------------
Pierre S. du Pont
J. E. GALLEGOS* Trustee
- ----------------------------
J. E. Gallegos
THOMAS I. DOLAN* Trustee
- ----------------------------
Thomas I. Dolan
KATHRYN D. WRISTON* Trustee
- ----------------------------
Kathryn D. Wriston
C-19
<PAGE> 72
BARRY L. WILLIAMS* Trustee
- ----------------------------
Barry L. Williams
GORDON T. BEAHAM III* Trustee
- ----------------------------
Gordon T. Beaham III
DANIEL F. McKEITHAN, JR.* Trustee
- ----------------------------
Daniel F. McKeithan, Jr.
ROBERT E. CARLSON* Trustee
- ----------------------------
Robert E. Carlson
Trustee
- ----------------------------
Edward E. Barr
ROBERT C. BUCHANAN* Trustee
- ----------------------------
Robert C. Buchanan
SHERWOOD H. SMITH, JR.* Trustee Dated April
- ---------------------------- 26, 1996
Sherwood H. Smith, Jr.
H. MASON SIZEMORE* Trustee
- ----------------------------
H. Mason Sizemore, Jr.
JOHN J. STOLLENWERK* Trustee
- ----------------------------
John J. Stollenwerk
GEORGE A. DICKERMAN* Trustee
- ----------------------------
George A. Dickerman
GUY A. OSBORN* Trustee
- ----------------------------
Guy A. Osborn
JOHN E. STEURI* Trustee
- ----------------------------
John E. Steuri
*By: JAMES D. ERICSON
----------------------------
James D. Ericson, Attorney in Fact
pursuant to the Power of Attorney
filed on November 13, 1995
C-20
<PAGE> 73
EXHIBIT INDEX
EXHIBITS FILED WITH FORM N-4
POST-EFFECTIVE AMENDMENT NO. 53 TO
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
FOR
NML VARIABLE ANNUITY ACCOUNT B
Exhibit Number Exhibit Name
- -------------- ------------
EX-99.B11 Consent of Price Waterhouse LLP.
EX-27 Financial Data Schedule for period
ended December 31, 1995.
<PAGE> 1
EX-99.B11
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Statement of Additional Information
constituting part of this Post-Effective Amendment No. 53 to the registration
statement on Form N-4 (the "Registration Statement") of our report dated
January 24, 1996, relating to the financial statements of The Northwestern
Mutual Life Insurance Company, and of our report dated January 24, 1996,
relating to the financial statements of NML Variable Annuity Account B, which
appear in such Statement of Additional Information, and to the incorporation by
reference of such reports into the Prospectus which constitutes part of this
Registration Statement. We also consent to the reference to us under the
heading "Experts" in such Statement of Additional Information.
PRICE WATERHOUSE LLP
Milwaukee, Wisconsin
April 24, 1996
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A)
NORTHWESTERN MUTUAL LIFE VARIABLE ANNUITY ACCOUNT B, DECEMBER 31, 1995 FINANCIAL
STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH (B)
POST-EFFECTIVE AMENDMENT #53.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 2,446,758
<INVESTMENTS-AT-VALUE> 3,036,915
<RECEIVABLES> 1,639
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 3,038,554
<PAYABLE-FOR-SECURITIES> 42
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 3,912
<TOTAL-LIABILITIES> 3,954
<SENIOR-EQUITY> 3,034,600
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 1,070,536
<SHARES-COMMON-PRIOR> 925,132
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 3,034,600
<DIVIDEND-INCOME> 68,372
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 31,745
<NET-INVESTMENT-INCOME> 36,627
<REALIZED-GAINS-CURRENT> 6,791
<APPREC-INCREASE-CURRENT> 541,786
<NET-CHANGE-FROM-OPS> 585,164
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
