NML VARIABLE ANNUITY ACCOUNT B, 485BPOS, 1997-04-29

NML VARIABLE ANNUITY ACCOUNT B
485BPOS, 1997-04-29

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<PAGE>

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. 55 /X/
--
and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940 / /

Amendment No. 20 /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, 1997 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.

THE 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 18, 1997.

<PAGE>

NML VARIABLE ANNUITY ACCOUNT B

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

CROSS-REFERENCE SHEET

N-4, Part A Heading in
Item Prospectus
- --------------- ----------

1 . . . . . . . . . . . . . . Cover Page

2 . . . . . . . . . . . . . . Index of Special Terms [ ]

3 . . . . . . . . . . . . . . The Contracts, The Fund, Deductions
and Charges, Right to Examine Deferred
Contract, Penalty Tax on Premature
Payments, Expense Table

4 . . . . . . . . . . . . . . Accumulation Unit Values, Performance
Data, 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

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

N-4, Part B Heading in Statement
Item of Additional Information
- --------------- -------------------------

15 . . . . . . . . . . . . . . Cover Page
16 . . . . . . . . . . . . . . Table of Contents
17 . . . . . . . . . . . . . . Not Applicable
18 . . . . . . . . . . . . . . Experts
19 . . . . . . . . . . . . . . Not Applicable
20 . . . . . . . . . . . . . . Distribution of the Contracts
21 . . . . . . . . . . . . . . Performance Data
22 . . . . . . . . . . . . . . Determination of Annuity Payments
23 . . . . . . . . . . . . . . Financial Statements

<PAGE>

April 30, 1997

[LOGO NORTHWESTERN MUTUAL LIFE]
The Quiet Company-TM-

NML VARIABLE ANNUITY ACCOUNT B

Nontax - Qualified Annuities
Individual Retirement Annuities
Simplified Employee Pension Plan IRAs
SIMPLE IRAs
Tax Deferred Annuities
457 Deferred Compensation Plan Annuities

(PHOTO)

Northwestern Mutual
Series Fund, Inc.

The Northwestern Mutual
Life Insurance Company
720 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
(414) 271-1444

<PAGE>

LOGO The Northwestern Mutual Life Insurance Company April 30, 1997
NML Variable Annuity Account B

PROFILE
OF THE VARIABLE ANNUITY CONTRACT
THIS PROFILE IS A SUMMARY OF SOME OF THE MORE IMPORTANT POINTS THAT
YOU SHOULD CONSIDER AND KNOW BEFORE PURCHASING THE CONTRACT. THE
CONTRACT IS MORE FULLY DESCRIBED IN THE PROSPECTUS WHICH ACCOMPANIES
THIS PROFILE. PLEASE READ THE PROSPECTUS CAREFULLY.

1. THE ANNUITY CONTRACT The Contract provides a means for you, the owner, to
invest on a tax-deferred basis in your choice of nine investment portfolios.
The Contract also allows investment on a fixed basis in a guaranteed account.

The Contract is intended for retirement savings or other long-term
investment purposes. The Contract provides for a death benefit during the years
when funds are being accumulated and for a variety of income options following
retirement.

The nine investment portfolios are listed in Section 4 below. These
portfolios bear varying amounts of investment risk. Those with more risk are
designed to produce a better long-term return than those with less risk. But
this is not guaranteed. You can also lose your money.

The amounts invested on a fixed basis earn interest at a rate set once each
year. Both interest and principal are guaranteed by Northwestern Mutual Life.

You may invest in any or all of the nine investment portfolios. You may
move money among these portfolios without charge up to 12 times per year. After
that, a charge of $25 may apply. Transfers of amounts invested on a fixed basis
are subject to restrictions.

During the years when funds are being paid into your Contract, known as the
accumulation phase, the earnings accumulate on a tax-deferred basis. The
earnings are taxed as income if you make a withdrawal. The income phase begins
when you start receiving annuity payments from your Contract, usually at
retirement. Monthly annuity payments begin on the date you select.

The amount you accumulate in your Contract, including the results of
investment performance, will determine the amount of your monthly annuity
payments.

2. ANNUITY PAYMENTS If you decide to begin receiving monthly annuity payments
from your Contract, you may choose one of three payment plans: (1) monthly
payments for a specified period of five to thirty years, as you select; (2)
monthly payments for your life (assuming you are the annuitant), and you may
choose to have payments continue to your beneficiary for the balance of ten or
twenty years if you die sooner; or (3) monthly payments for your life and for
the life of another person (usually your spouse) selected by you. After you
begin receiving monthly annuity payments you cannot change your selection if the
payments depend on your life or the life of another.

These payment plans are available to you on a variable or fixed basis.
Variable means that the amount accumulated in your Contract will continue to be
invested in one or more of the nine investment portfolios as you choose. Your
monthly annuity payments will vary up or down to reflect continuing investment
performance. Or you may choose a fixed annuity payment plan which guarantees
the amount you will receive each month.

3. PURCHASE You may make purchase payments of $25 or more as you accumulate
funds in your Contract. The minimum initial purchase payment is $100, or $25
for Contracts used with some tax-qualified retirement plans. We offer Front
Load and Back Load Contracts, as briefly described in Section 5. For the Front
Load Contract the minimum initial purchase payment is $10,000. Your
Northwestern Mutual Life agent will help you complete a Contract application
form.

4. INVESTMENT CHOICES You may invest in any or all of the following
investment portfolios, which are described in the attached prospectus for
Northwestern Mutual Series Fund, Inc.:

1. Money Market Portfolio
2. Select Bond Portfolio
3. High Yield Bond Portfolio
4. Balanced Portfolio
5. Index 500 Stock Portfolio

<PAGE>

6. Growth and Income Stock Portfolio
7. Growth Stock Portfolio
8. International Equity Portfolio
9. Aggressive Growth Stock Portfolio

You may also invest all or part of your funds on a fixed basis.

5. EXPENSES The Contract has insurance and investment features, and there are
costs related to them. For the Front Load Contract we deduct a sales load of 4%
from your purchase payments. The percentage is lower when cumulative purchase
payments exceed $100,000. For the Back Load Contract there is no sales load
deducted from purchase payments but a withdrawal charge of 0% to 8% applies,
depending on the length of time the money you withdraw has been in the Contract
and the size of your Contract.

Each year we deduct a $30 Contract fee. Currently this fee is waived if
the value of your Contract is $50,000 or more.

We also deduct mortality and expense risk charges for the guarantees
associated with your Contract. These charges are at the annual rate of .40% for
the Front Load Contract and 1.25% for the Back Load Contract.

The portfolios also bear investment charges that range from an annual rate
of .21% to .81% of the average daily value of the portfolio, depending on the
investment portfolio you select.

The following charts are designed to help you understand the charges for
the Front Load and Back Load Contracts. The column "Total Annual Expenses"
shows the total of the $30 annual Contract fee (represented as .20%), the risk
charges (.40% for the Front Load Contract and 1.25% for the Back Load Contract)
and the annual investment expenses for each portfolio. The last two columns
show you two examples of the charges, in dollars, you would pay. The examples
assume that you invested $1,000 in a Contract which earns 5% annually and that
you withdraw your money: (1) at the end of year one, and (2) at the end of year
ten. Both of these examples, for both Contracts, reflect aggregate charges on a
cumulative basis to the end of the 1 or 10-year period. For more detailed
information, see the Expense Table which begins on page 2 of the attached
prospectus for the Contracts.

FRONT LOAD CONTRACT

Annual Charges EXAMPLES:
for Mortality & Total Expenses
Expense Risks Annual Portfolio At End of
& Contract Fee Expenses Total Annual (1) (2)
Portfolio Expenses 1 Year 10 Years
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Money Market .60% .30% .90% $47 $144
Select Bond .60% .30 .90% $47 $144
Balanced .60% .30 .90 $47 $144
High Yield Bond .60% .60 1.20 $50 $177
Index 500 Stock .60% .21 .81 $46 $134
Growth and Income Stock .60% .62 1.22 $50 $180
Growth Stock .60% .57 1.17 $50 $174
International Equity .60% .81 1.41 $52 $200
Aggressive Growth Stock .60% .54 1.14 $49 $171
- ------------------------------------------------------------------------------------------------------------

</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.

<PAGE>

BACK LOAD CONTRACT

EXAMPLES:
Annual Charges Total Expenses
for Mortality & At End of
Expense Risks & Annual Portfolio Total Annual (1) (2)
Portfolio Contract Fee Expenses Expenses 1 Year 10 Years
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Money Market 1.45% .30% 1.75% $96 $204
Select Bond 1.45 .30 1.75 $96 $204
High Yield Bond 1.45 .60 2.05 $99 $236
Balanced 1.45 .30 1.75 $96 $204
Index 500 Stock 1.45 .21 1.66 $95 $194
Growth and Income Stock 1.45 .62 2.07 $99 $238
Growth Stock 1.45 .57 2.02 $98 $233
International Equity 1.45 .81 2.26 $101 $257
Aggressive Growth Stock 1.45 .54 1.99 $98 $230
- ---------------------------------------------------------------------------------------------------------------

</TABLE>

6. TAXES Earnings on your Contract are not taxed until you take them out. If
you withdraw money, earnings come out first and are taxed as income. During the
income phase, monthly annuity payments are considered partly a return of your
investment. That part of each payment is not taxed as income. A 10% federal
tax penalty may apply if you make withdrawals before you reach age 59 1/2. The
Contract may be purchased as an individual retirement annuity (IRA), tax
deferred annuity (TDA) or in other situations where purchase payments are
excluded from income. For these Contracts the entire amount of monthly annuity
payments, and any withdrawals, will generally be taxed as income.

7. ACCESS TO YOUR MONEY You may take money out of your Contract at any time
before monthly annuity payments begin. For the Front Load Contract there is no
charge for withdrawals. For the Back Load Contract there is a withdrawal charge
of 8% or less, depending on how much money has been paid into the Contract and
how long it has been held there. Each purchase payment has its own withdrawal
charge period. When you make a withdrawal, we use the oldest amounts first when
the charge is calculated. After the first year, part of any investment earnings
may be withdrawn without a withdrawal charge. For both Front Load and Back Load
Contracts, you may also have to pay income tax and a tax penalty on amounts you
take out.

8. PERFORMANCE The value of your Contract will vary up or down reflecting the
performance of the investment portfolios you select. The chart below shows
total returns for each of the investment portfolios for the years shown. These
numbers, for the Front Load Contract and the Back Load Contract, reflect charges
for mortality and expense risks, the annuity contract fee and investment
expenses for each portfolio. The numbers do not reflect deductions from
purchase payments for the Front Load Contract or any withdrawal charge for the
Back Load Contract. Those charges, if applied, would reduce the performance.
Past performance does not guarantee future results.

<PAGE>

<TABLE>
<CAPTION>
BACK LOAD CONTRACT

CALENDAR YEAR
PORTFOLIO 1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Money Market 3.97 4.51 2.77 1.58 2.05 4.38 6.69 7.63 5.85 4.98
Select Bond 2.02 17.62 (4.04) 8.97 5.66 15.43 6.98 12.46 7.10 (2.15)
High Yield Bond 18.27 15.33 NA NA NA NA NA NA NA NA
Balanced 12.04 24.83 (1.25) 8.22 4.01 22.40 (.21) 14.17 7.64 4.11
Index 500 Stock 21.22 35.56 (.06) 8.41 5.92 27.95 NA NA NA NA
Growth and Income Stock 18.47 29.50 NA NA NA NA NA NA NA NA
Growth Stock 19.40 29.20 NA NA NA NA NA NA NA NA
International Equity 19.50 13.16 (1.36) NA NA NA NA NA NA NA
Aggressive Growth Stock 16.23 37.57 4.10 17.63 4.63 54.06 NA NA NA NA
- -------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>

FRONT LOAD CONTRACT

CALENDAR YEAR
PORTFOLIO 1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Money Market 4.86 5.40 3.64 2.44 2.93 5.27 7.60 8.54 6.75 5.87
Select Bond 2.90 18.62 (3.22) 9.89 6.56 16.41 7.89 13.41 8.02 (1.32)
High Yield Bond 19.29 16.31 NA NA NA NA NA NA NA NA
Balanced 13.00 25.88 (.42) 9.14 4.90 23.44 .64 15.14 8.56 5.00
Index 500 Stock 22.25 36.70 .79 9.33 6.83 29.04 NA NA NA NA
Growth and Income Stock 19.49 30.60 NA NA NA NA NA NA NA NA
Growth Stock 20.42 30.30 NA NA NA NA NA NA NA NA
International Equity 20.53 14.12 (.50) NA NA NA NA NA NA NA
Aggressive Growth Stock 17.22 38.74 4.98 18.63 5.52 55.37 NA NA NA NA
- --------------------------------------------------------------------------------------------------

</TABLE>

9. DEATH BENEFIT If you die before age 65 or before monthly annuity
payments begin, your beneficiary will receive a death benefit. The amount
will be the value of your Contract or, if greater, the amount you have paid
in. The death benefit will be adjusted, of course, for any withdrawals you
have made. The death benefit will be paid as a lump sum or your beneficiary
may select a monthly annuity payment plan.

10. OTHER INFORMATION
FREE LOOK. If you return the Contract within ten days after you receive it
(or whatever period is required in your state), we will send your money back.
There is no charge for our expenses but the amount you receive may be more or
less than what you paid, based on actual investment experience following the
date we received your purchase payment.

AVOID PROBATE. In most cases, when you die, your beneficiary will receive
the full death benefit of your Contract without going through probate.

AUTOMATIC DOLLAR-COST AVERAGING. With our Dollar-Cost Averaging Plan, you
can arrange to have a regular amount of money ($100 minimum) automatically
transferred from the Money Market Portfolio into the portfolio or portfolios
you have chosen on a monthly or quarterly basis.

ELECTRONIC FUNDS TRANSFER (EFT). Another convenient way to invest using the
dollar-cost averaging approach is through our EFT Plan. These automatic
checkbook withdrawals allow you to add to your portfolio(s) on a regular
monthly basis through payments drawn directly on your checking account.

SYSTEMATIC WITHDRAWAL PLAN. You can arrange to have regular amounts of money
sent to you while your Contract is still in the accumulation phase. Our
Systematic Withdrawal Plan allows you to automatically redeem accumulation
units to generate monthly payments. Of course you will have to pay taxes on
certain amounts of money you receive.

AUTOMATIC REQUIRED MINIMUM DISTRIBUTIONS. For IRAs, Simplified Employee
Pension Plans, SIMPLE IRA Plans and 403(b) Plans, you can arrange for annual
required minimum distributions to be sent to you automatically once you turn
age 70 1/2.

DISABILITY PROVISION. Your Contract offers an optional disability benefit
under which the Company will continue to pay your purchase payments during
periods of total disability. This benefit is provided for at a specified
additional cost.

DIVIDENDS. We are paying dividends on approximately 13% of our inforce
variable annuity contracts in 1997, primarily older, larger contracts. The
dividends arise principally as a result of more favorable expense results
than assumed in determining deductions on these contracts.

NML EXPRESS. Get up-to-date information about your contract at your
convenience with NML Express, 800-519-4NML (800-519-4665). Call toll-free to
review contract values, transfer among portfolios, change the allocation and
obtain fund performance information.

THESE FEATURES MAY NOT BE AVAILABLE IN ALL STATES AND MAY NOT BE SUITABLE
FOR YOUR PARTICULAR SITUATION.

11. INQUIRIES If you need more information, please contact us at: THE
NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY, 720 EAST WISCONSIN AVENUE,
MILWAUKEE, WI 53202; (414) 271-1444.

<PAGE>

[LOGO] 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 Back Load Contracts will
also be offered as an individual retirement annuity under a SIMPLE IRA plan
("Savings Incentive Match Plan for Employees of Small Employers") established
pursuant to Section 408(p) of the Code.

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. 14.)

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 the inside
front cover 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, 1997

<PAGE>
INDEX OF SPECIAL TERMS

The following special terms used in this prospectus
are discussed at the pages indicated.

TERM PAGE TERM PAGE
ACCUMULATION UNIT. . . . . . . . . . .8 ANNUITANT . . . . . . . . . . 11
ANNUITY (or ANNUITY PAYMENTS). . . . .9 MATURITY DATE . . . . . . . . .9
NET INVESTMENT FACTOR. . . . . . . . .8 OWNER . . . . . . . . . . . . 11
PAYMENT PLANS. . . . . . . . . . . . .9 WITHDRAWAL AMOUNT . . . . . . .8

EXPENSE TABLE

FRONT LOAD CONTRACT
TRANSACTION EXPENSES FOR CONTRACTOWNERS
- ---------------------------------------
Maximum Sales Load (as a percentage
of purchase payments). . . . . . . . . . . . . . . . . .4%
Withdrawal Charge. . . . . . . . . . . . . . . . . . . None

ANNUAL EXPENSES OF THE ACCOUNT
- ------------------------------
(AS A PERCENTAGE OF ASSETS)
- ----------------------------
Mortality Rate and Expense Guarantee
Charge. . . . . . . . . . . . . . . . . . . . . . . .40%

ANNUAL CONTRACT FEE
- -------------------
$30; waived if the Contract Value equals or exceeds
$50,000

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

BACK LOAD CONTRACT
TRANSACTION EXPENSES FOR CONTRACTOWNERS
- ---------------------------------------
Sales Load (as a percentage of purchase
payments). . . . . . . . . . . . . . . . . . . . . . . None
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

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 .61% .00% .01% .62%
Growth Stock .52% .00% .05% .57%
Aggressive Growth Stock .53% .00% .01% .54%
High Yield Bond .57% .00% .03% .60%
International Equity .67% .11% .03% .81%

EXAMPLE

FRONT LOAD CONTRACT - You would pay the following expenses on each $1,000 investment, assuming 5% annual return:

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 $50 $75 $102 $180
Growth Stock $50 $74 $100 $174
Aggressive Growth Stock $49 $73 $ 98 $171
High Yield Bond $50 $75 $101 $177
International Equity $52 $81 $112 $200

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.

<CAPTION>
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:

<PAGE>

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 $ 99 $123 $149 $238
Growth Stock $ 98 $121 $147 $233
Aggressive Growth Stock $ 98 $120 $145 $230
High Yield Bond $ 99 $122 $148 $236
International Equity $101 $129 $159 $257

You would pay the following expenses on the same $1,000 investment, assuming NO SURRENDER OR ANNUITIZATION:

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 $19 $63 $109 $238
Growth Stock $18 $61 $107 $233
Aggressive Growth Stock $18 $60 $105 $230
High Yield Bond $19 $62 $108 $236
International Equity $21 $69 $119 $257

</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 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 $30 annual Contract fee is reflected as .2%
of the assets based on an average Contract size of $15,000. 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. 10 and "Deductions", p. 14, 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
1996 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.

<PAGE>

ACCUMULATION UNIT VALUES
CONTRACTS ISSUED ON OR AFTER MARCH 31, 1995
- --------------------------------------------------------------------------------

FOR THE NINE
FOR YEAR ENDED MONTHS ENDED
DECEMBER 31, 1996 DECEMBER 31, 1995
----------------- -----------------

Index 500 Stock Division
Accumulation Unit Value:
Front Load Version
Beginning of Period $1.249 $1.00
End of Period $1.527 $1.249
Back Load Version
Beginning of Period $2.032 $1.637
End of Period $2.463 $2.032

Number of Accumulation Units
Outstanding, End of Period
Front Load 17,301,664 4,355,530
Back Load 31,553,915 9,220,673

Select Bond Division
Accumulation Unit Value:
Front Load Version
Beginning of Period $1.129 $1.00
End of Period $1.161 $1.129
Back Load Version
Beginning of Period $6.137 $5.471
End of Period $6.261 $6.137

Number of Accumulation Units
Outstanding, End of Period
Front Load 6,391,221 1,883,453
Back Load 3,653,656 1,292,191

Money Market Division
Accumulation Unit Value:
Front Load Version
Beginning of Period $1.040 $1.00
End of Period $1.091 $1.040
Back Load Version
Beginning of Period $2.161 $2.090
End of Period $2.246 $2.161

Number of Accumulation Units
Outstanding, End of Period
Front Load 11,210,749 5,948,990
Back Load 12,209,698 5,318,088

Balanced Division
Accumulation Unit Value:
Front Load Version
Beginning of Period $1.181 $1.00
End of Period $1.334 $1.181
Back Load Version
Beginning of Period $4.311 $3.673
End of Period $4.830 $4.311

Number of Accumulation Units
Outstanding, End of Period
Front Load 24,916,332 6,896,744
Back Load 24,088,931 7,688,513

Growth and Income Stock Division
Accumulation Unit Value:
Front Load Version
Beginning of Period $1.197 $1.00
End of Period $1.430 $1.197
Back Load Version
Beginning of Period $1.287 $1.083
End of Period $1.525 $1.287

Number of Accumulation Units
Outstanding, End of Period
Front Load 9,882,138 3,530,232
Back Load 24,818,409 7,514,293

Growth Stock Division
Accumulation Unit Value:
Front Load Version
Beginning of Period $1.209 $1.00
End of Period $1.456 $1.209
Back Load Version
Beginning of Period $1.300 $1.082
End of Period $1.552 $1.300

Number of Accumulation Units
Outstanding, End of Period
Front Load 6,777,198 1,715,092
Back Load 17,808,617 3,952,191

Aggressive Growth Stock Division
Accumulation Unit Value:
Front Load Version
Beginning of Period $1.305 $1.00
End of Period $1.530 $1.305
Back Load Version
Beginning of Period $2.753 $2.123
End of Period $3.200 $2.753

Number of Accumulation Units
Outstanding, End of Period
Front Load 19,593,516 5,338,263
Back Load 29,722,778 8,294,210

High Yield Bond Division
Accumulation Unit Value:
Front Load Version
Beginning of Period $1.112 $1.00
End of Period $1.326 $1.112
Back Load Version
Beginning of Period $1.178 $1.067
End of Period $1.394 $1.178

Number of Accumulation Units
Outstanding, End of Period
Front Load 4,518,513 1,418,382
Back Load 10,288,680 2,700,647

International Equity Division
Accumulation Unit Value:
Front Load Version
Beginning of Period $1.140 $1.00
End of Period $1.374 $1.140
Back Load Version
Beginning of Period $1.380 $1.218
End of Period $1.649 $1.380

Number of Accumulation Units
Outstanding, End of Period
Front Load 12,485,204 2,784,309
Back Load 27,579,179 7,214,357

<PAGE>

ACCUMULATION UNIT VALUES
CONTRACTS ISSUED AFTER DECEMBER 16, 1981 AND PRIOR TO MARCH 31, 1995
- ------------------------------------------------------------------------------------------------------------------------------------
FOR THE YEARS ENDED DECEMBER 31

------------------------------------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----

<S> <C> <C> <C> <C> <C>
Index 500 Stock Division
Accumulation Unit Value:
Beginning of Period* $2.032 $1.499 $1.500 $1.384 $1.306
End of Period $2.463 $2.032 $1.499 $1.500 $1.384

Number of Accumulation Units
Outstanding, End of Period 146,945,069 134,818,674 119,845,898 105,795,927 32,924,088

Select Bond Division
Accumulation Unit Value:
Beginning of Period $6.137 $5.217 $5.437 $4.990 $4.722
End of Period $6.261 $6.137 $5.217 $5.437 $4.990

Number of Accumulation Units
Outstanding, End of Period 19,498,362 21,048,883 20,642,740 21,874,778 15,399,609

Money Market Division
Accumulation Unit Value:
Beginning of Period $2.161 $2.067 $2.012 $1.980 $1.940
End of Period $2.246 $2.161 $2.067 $2.012 $1.980

Number of Accumulation Units
Outstanding, End of Period 35,677,445 34,040,829 31,466,730 24,431,865 27,773,056

Balanced Division
Accumulation Unit Value:
Beginning of Period $4.311 $3.453 $3.497 $3.232 $3.107
End of Period $4.830 $4.311 $3.453 $3.497 $3.232

Number of Accumulation Units
Outstanding, End of Period 331,700,359 347,995,936 363,391,482 377,043,512 355,125,051

Growth and Income Stock Division
Accumulation Unit Value:
Beginning of Period** $1.287 $0.994 $1.000 -- --
End of Period $1.525 $1.287 $0.994 -- --

Number of Accumulation Units
Outstanding, End of Period 63,969,388 52,866,200 31,542,581 -- --

Growth Stock Division
Accumulation Unit Value:
Beginning of Period** $1.300 $1.006 $1.000 -- --
End of Period $1.552 $1.300 $1.006 -- --

Number of Accumulation Units
Outstanding, End of Period 37,212,487 24,827,801 12,213,322 -- --

Aggressive Growth Stock Division
Accumulation Unit Value:
Beginning of Period* $2.753 $2.001 $1.922 $1.634 $1.562
End of Period $3.200 $2.753 $2.001 $1.922 $1.634

Number of Accumulation Units
Outstanding, End of Period 162,837,073 147,960,662 123,249,312 77,246,018 53,918,035

High Yield Bond Division
Accumulation Unit Value:
Beginning of Period** $1.178 $1.022 $1.000 --
End of Period $1.394 $1.178 $1.022 --

Number of Accumulation Units
Outstanding, End of Period 18,022,623 13,474,146 7,229,418 --

International Equity Division
Accumulation Unit Value:
Beginning of Period*** $1.380 $1.220 $1.236 $1.000 --
End of Period $1.649 $1.380 $1.220 $1.236 --

Number of Accumulation Units
Outstanding, End of Period 190,864,716 179,261,185 186,097,279 74,174,799 --

<CAPTION>
1991 1990 1989 1988 1987
---- ---- ---- ---- ----

<S> <C> <C> <C> <C> <C>
Index 500 Stock Division
Accumulation Unit Value:
Beginning of Period* $1.021 $1.000 -- -- --
End of Period $1.306 $1.021 -- -- --

Number of Accumulation Units
Outstanding, End of Period 12,058,133 189,751 -- -- --

Select Bond Division
Accumulation Unit Value:
Beginning of Period $4.091 $3.824 $3.401 $3.175 $3.245
End of Period $4.722 $4.091 $3.824 $3.401 $3.175

Number of Accumulation Units
Outstanding, End of Period 10,692,797 6,997,013 5,553,863 4,236,105 3,349,440

Money Market Division
Accumulation Unit Value:
Beginning of Period $1.859 $1.743 $1.619 $1.530 $1.457
End of Period $1.940 $1.859 $1.743 $1.619 $1.530

Number of Accumulation Units
Outstanding, End of Period 24,758,592 27,363,279 20,510,416 20,642,227 15,666,117

Balanced Division
Accumulation Unit Value:
Beginning of Period $2.538 $2.544 $2.228 $2.070 $1.988
End of Period $3.107 $2.538 $2.544 $2.228 $2.070

Number of Accumulation Units
Outstanding, End of Period 322,313,588 322,488,873 316,204,759 307,488,444 290,102,949

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* $1.014 $1.000 -- -- --
End of Period $1.562 $1.014 -- -- --

Number of Accumulation Units
Outstanding, End of Period 19,966,511 205,590 -- -- --

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.

<PAGE>

ACCUMULATION UNIT VALUES
CONTRACTS ISSUED PRIOR TO DECEMBER 17, 1981
- --------------------------------------------------------------------------------------------------
FOR THE YEARS ENDED DECEMBER 31

------------------------------------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----

Index 500 Stock Division
Accumulation Unit Value:
Beginning of Period* $2.084 $1.530 $1.523 $1.398 $1.313
End of Period $2.539 $2.084 $1.530 $1.523 $1.398

Number of Accumulation Units
Outstanding, End of Period 12,234,934 13,256,279 14,230,394 15,442,799 317,023

Select Bond Division
Accumulation Unit Value:
Beginning of Period $6.583 $5.569 $5.774 $5.273 $4.965
End of Period $6.750 $6.583 $5.569 $5.774 $5.273

Number of Accumulation Units
Outstanding, End of Period 1,151,998 1,364,416 1,492,775 1,701,121 1,808,558

Money Market Division
Accumulation Unit Value:
Beginning of Period $2.317 $2.206 $2.136 $2.092 $2.040
End of Period $2.421 $2.317 $2.206 $2.136 $2.092

Number of Accumulation Units
Outstanding, End of Period 1,377,051 1,358,156 1,458,463 1,331,457 1,787,440

Balanced Division
Accumulation Unit Value: $4.623 $3.685 $3.713 $3.414 $3.266
Beginning of Period $5.205 $4.623 $3.685 $3.713 $3.414
End of Period

Number of Accumulation Units
Outstanding, End of Period 6,695,097 7,327,654 8,155,713 9,324,132 10,125,067

Growth and Income Stock Division
Accumulation Unit Value:
Beginning of Period** $1.298 $0.997 -- -- --
End of Period $1.546 $1.298 -- -- --

Number of Accumulation Units
Outstanding, End of Period 221,275 32,681 -- -- --

Growth Stock Division
Accumulation Unit Value:
Beginning of Period** $1.311 $1.009 -- -- --
End of Period $1.573 $1.311 -- -- --

Number of Accumulation Units
Outstanding, End of Period 239,460 19,315 -- -- --

Aggressive Growth Stock Division
Accumulation Unit Value:
Beginning of Period* $2.824 $2.042 $1.952 $1.651 $1.570
End of Period $3.299 $2.824 $2.042 $1.952 $1.651

Number of Accumulation Units
Outstanding, End of Period 1,697,195 1,617,883 1,474,133 969,604 833,606

High Yield Bond Division
Accumulation Unit Value:
Beginning of Period** $1.188 $1.025 -- -- --
End of Period $1.412 $1.188 -- -- --

Number of Accumulation Units
Outstanding, End of Period 125,053 58,755 -- -- --

International Equity Division
Accumulation Unit
Value:
Beginning of Period*** $1.398 $1.230 $1.240 $1.000 --
End of Period $1.680 $1.398 $1.230 $1.240 --

Number of Accumulation Units
Outstanding, End of Period 2,276,960 2,141,462 2,642,855 1,802,948 --

<CAPTION>
1991 1990 1989 1988 1987
---- ---- ---- ---- ----

<S> <C> <C> <C> <C> <C>
Index 500 Stock Division
Accumulation Unit Value:
Beginning of Period* $1.021 $1.000 -- -- --
End of Period $1.313 $1.021 -- -- --

Number of Accumulation Units
Outstanding, End of Period 326,395 4 -- -- --

Select Bond Division
Accumulation Unit Value:
Beginning of Period $4.280 $3.981 $3.522 $3.272 $3.328
End of Period $4.965 $4.280 $3.981 $3.522 $3.272

Number of Accumulation Units
Outstanding, End of Period 1,979,936 2,041,191 2,293,077 2,426,254 2,524,235

Money Market Division
Accumulation Unit Value:
Beginning of Period $1.945 $1.814 $1.677 $1.576 $1.494
End of Period $2.040 $1.945 $1.814 $1.677 $1.576

Number of Accumulation Units
Outstanding, End of Period 2,059,962 2,574,527 2,285,388 2,680,348 3,054,691

Balanced Division
Accumulation Unit Value:
Beginning of Period $2.655 $2.647 $2.307 $2.133 $2.038
End of Period $3.266 $2.655 $2.647 $2.307 $2.133

Number of Accumulation Units
Outstanding, End of Period 10,652,114 11,655,303 12,655,382 14,097,822 15,526,997

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* $1.014 $1.000 -- -- --
End of Period $1.570 $1.014 -- -- --

Number of Accumulation Units
Outstanding, End of Period 534,196 22,431 -- -- --

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.

<PAGE>

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 $62 billion on
December 31, 1996, 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.

- --------------------------------------------------------------------------------
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 SIMPLE IRA plans,
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.

<PAGE>

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.
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. 12.
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
8

<PAGE>

payments of Contract benefits. A penalty tax of 10% (or 25% during the first 2
years the owner participates in a SIMPLE IRA plan) 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, for certain
large medical expenses and for reimbursement of certain health insurance
premiums and certain substantially equal periodic payments for life.

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 and state
law. 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.
9

<PAGE>

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
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. 12.
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.

<PAGE>

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.
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 13% of its
inforce individual annuity contracts in 1997. 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,
which have a mortality rate and expense risk charge of at least 0.75%. 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. The expected total dividend payout for 1997 is
about 0.18% of the total separate account assets that support individual
variable annuities. The maximum dividend payable on a specific contract is
about 0.70%.

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

<PAGE>

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.
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. 8, and
"Withdrawal Charge", p. 15.)

PERFORMANCE DATA Advertisements containing performance data for the Divisions
of the Account may be published from time to time. These performance data may
include both standardized and non-standardized total return figures, although
standardized figures will always accompany non-standardized figures.
Standardized performance data will consist of quarterly return quotations,
which will always include quotations for recent periods of one, five and ten
years or, if less, the entire life of a Division. These quotations will be the
average annual rates of return based on a $1,000 initial purchase payment for a
Back Load Contract, or the minimum $10,000 initial purchase payment for a Front
Load Contract. The standardized performance data will reflect all applicable
charges, including the initial sales load of 4% for the Front Load Contract and
the withdrawal charge that would apply assuming surrender of the Back Load
Contract at the end of the period.
Non-standardized performance data may not reflect the 4% sales load for the
Front Load Contract and may assume that the Back Load Contract remains in force
at the end of the period. These data may also not reflect the annual Contract
fee of $30, since the impact of the fee varies by Contract size. The non-
standardized data may also be for other time periods.
All of the performance data are based on actual historical investment
results for the Portfolios of the Fund, including all expenses borne by the
Portfolios. The data are not intended to indicate future performance. Some of
the data may be constructed hypothetically to reflect expense factors for the
Contracts currently being offered.
Additional information about the performance data is included in the
Statement of Additional Information.

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.

<PAGE>

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. 14. 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) and SIMPLE IRAs
established under Section 408(p).

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.
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 after 1999 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. However,
rollovers of SIMPLE IRAs to individual retirement arrangements within 2 years
after the Owner first participates in the SIMPLE IRA plan are fully taxable.

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.

<PAGE>

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. The penalty tax increases to 25% for non-exempt withdrawals
from SIMPLE IRAs within 2 years after the Owner first participates in the SIMPLE
IRA plan. Payments which are exempt from the penalty tax include payments upon
disability, after age 59-1/2, for certain large medical expenses or for
reimbursement of health insurance premiums paid while the Owner was unemployed
and certain 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."

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.
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. 8 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:

Cumulative Purchase Payments
Paid Under the Contract Rate

First $100,000 . . . . . . . . . . . . . . . . . . . 4.0%
Next $400,000 . . . . . . . . . . . . . . . . . . . 2.0%
Next $500,000 . . . . . . . . . . . . . . . . . . . 1.0%
Balance over $1,000,000 . . . . . . . . . . . . . . 0.5%

2. DEDUCTIONS FOR MORTALITY RATE AND EXPENSE RISKS. The net
investment factor (see "Net Investment Factor", p. 8) 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

<PAGE>

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. 11, 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.

AMOUNT AMOUNT
CATEGORY RATE CATEGORY RATE
-------- ---- -------- ----
Eight. . . . . . . . 8% Three. . . . . . . . 3%
Seven. . . . . . . . 7 Two. . . . . . . . . 2
Six. . . . . . . . . 6 One. . . . . . . . . 1
Five . . . . . . . . 5 Zero . . . . . . . . 0
Four . . . . . . . . 4
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

<PAGE>
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.
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.

<PAGE>

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.

<PAGE>

TABLE OF CONTENTS FOR THIS PROSPECTUS

PAGE
----

INDEX OF SPECIAL TERMS . . . . . . . . . . . . . . . . . . . . . . . . . . 2
EXPENSE TABLE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ACCUMULATION UNIT VALUES . . . . . . . . . . . . . . . . . . . . . . . . . 4
THE COMPANY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
NML VARIABLE ANNUITY ACCOUNT B . . . . . . . . . . . . . . . . . . . . . . 7
THE FUND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
THE CONTRACTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Purchase Payments Under the Contracts . . . . . . . . . . . . . . . . . 7
Amount and Frequency . . . . . . . . . . . . . . . . . . . . . . . . 7
Application of Purchase Payments . . . . . . . . . . . . . . . . . . 8
Net Investment Factor . . . . . . . . . . . . . . . . . . . . . . . . . 8
Benefits Provided Under the Contracts . . . . . . . . . . . . . . . . . 8
Withdrawal Amount. . . . . . . . . . . . . . . . . . . . . . . . . 8
Death Benefit. . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Maturity Benefit . . . . . . . . . . . . . . . . . . . . . . . . . 9
Variable Payment Plans . . . . . . . . . . . . . . . . . . . . . . . 9
Description of Payment Plans . . . . . . . . . . . . . . . . . . . 9
Amount of Annuity Payments . . . . . . . . . . . . . . . . . . . . 9
Assumed Investment Rate. . . . . . . . . . . . . . . . . . . . . . . . . . 10
Additional Information . . . . . . . . . . . . . . . . . . . . . . . 10
Transfers Between Divisions and Payment Plans. . . . . . . . . . . 10
Owners of the Contracts. . . . . . . . . . . . . . . . . . . . . . 11
Special Contract for Employers . . . . . . . . . . . . . . . . . . . . . . 11
Disability Provision . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Deferment of Benefit Payments. . . . . . . . . . . . . . . . . . . 11
Dividends. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Voting Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Substitution and Change. . . . . . . . . . . . . . . . . . . . . . 11
Fixed Annuity Payment Plans. . . . . . . . . . . . . . . . . . . . 12
Performance Data . . . . . . . . . . . . . . . . . . . . . . . . . 12
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . 12
THE GUARANTEED INTEREST FUND . . . . . . . . . . . . . . . . . . . . . . . 12
FEDERAL INCOME TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Qualified and Nontax-Qualified Plans . . . . . . . . . . . . . . . . . 13
Taxation of Contract Benefits. . . . . . . . . . . . . . . . . . . . . 12
Taxation of Northwestern Mutual Life . . . . . . . . . . . . . . . . . 14
Other Considerations . . . . . . . . . . . . . . . . . . . . . . . . . 14
DEDUCTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Contracts Issued Prior to March 31, 1995. . . . . . . . . . . . . . . . 16
Contracts Issued Prior to December 17, 1981 . . . . . . . . . . . . . . 16
Certain Nontax-Qualified Contracts. . . . . . . . . . . . . . . . . . . 16
Reduced Charges for Exchange Transactions . . . . . . . . . . . . . . . 16
DISTRIBUTION OF THE CONTRACTS. . . . . . . . . . . . . . . . . . . . . . . 17

TABLE OF CONTENTS FOR STATEMENT OF ADDITIONAL INFORMATION

PAGE
----

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
PERFORMANCE DATA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-4
EXPERTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-6
FINANCIAL STATEMENTS OF THE ACCOUNT (for the year ended
December 31, 1996). . . . . . . . . . . . . . . . . . . . . . . . . . . B-7
REPORT OF INDEPENDENT ACCOUNTANTS (for year ended December 31, 1996) . . .B-13
FINANCIAL STATEMENTS OF NORTHWESTERN MUTUAL LIFE (for the three years
ended December 31, 1996). . . . . . . . . . . . . . . . . . . . . . . .B-14
REPORT OF INDEPENDENT ACCOUNTANTS (for the three years ended
December 31, 1996). . . . . . . . . . . . . . . . . . . . . . . . . . .B-27

<PAGE>

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

Annuity and Accumulation Marketing
Department, Room E12J
720 East Wisconsin Avenue
Milwaukee, WI 53202

Please send a Statement of Additional Information for NML Variable
Annuity Account B to:

Name
-----------------------------------------------------------------------

Address
--------------------------------------------------------------------

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

City State Zip
-------------------------------------------- -------- -----------

<PAGE>

NORTHWESTERN MUTUAL LIFE

VARIABLE ANNUITY CONTRACTS FOR
Nontax-Qualified Annuities
Individual Retirement Annuities
Simplified Employee Pension Plan IRAs
SIMPLE IRAs
Tax-Deferred Annuities
457 Deferred Compensation Plan Annuities

NML VARIABLE ANNUITY ACCOUNT B

NORTHWESTERN MUTUAL SERIES FUND, INC.

P R O S P E C T U S

NORTHWESTERN

MUTUAL LIFE-Registered Trademark-

PO Box 3095

Milwaukee WI 53201-3095

<PAGE>

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, 1997.

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

B-1
<PAGE>
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:

Year Amount
---- -------
1996 $ 14,128,993
1995 $ 8,794,356
1994 $ 6,815,893

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. 9, including "Description of Payment Plans", p. 9, "Amount of
Annuity Payments", p. 9, and "Assumed Investment Rate", p. 10; "Dividends", p.
11; "Net Investment Factor", p. 8; and "Deductions", p. 14.

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 Friday due date, and the sixth valuation date prior to the Saturday or
Sunday due dates.

B-2
<PAGE>

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.

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

B-3
<PAGE>

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.

PERFORMANCE DATA

Standardized performance data in advertisements will show the average
annual total return for each Division of the Account, according to the following
formula prescribed by the Securities and Exchange Commission:

n
P(1 + T) = ERV
Where:
P = a hypothetical initial payment of $1000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1000 payment made
at the beginning of the 1, 5 or 10 year periods at the end
of the 1, 5, or 10 year periods (or fractional portion
thereof)

Average annual total return is the annual compounded rate of return that would
have produced the ending surrender value under a Contract if the owner had
invested in a specified Division over the stated period and investment
performance had remained constant throughout the period. The calculation
assumes a single $1,000 purchase payment made at the beginning of the period
and surrender of the Contract at the end of the period. It reflects a
deduction for all Account, Fund and Contract level charges, including the 4%
initial sales load for the Front Load Contract and the withdrawal charge for
the Back Load Contract. The $30 annual Contract fee is reflected as .2% of the
assets based on an average Contract size of $15,000. For the Front Load
Contract the data will assume a minimum initial purchase payment of $10,000
and the amounts will be divided by 10 to conform the presentation to the
$1,000 purchase payment assumption required by the prescribed formula.

The following table shows the standardized average annual total return data
for each Division of the Account for the period ended December 31, 1996:

B-4
<PAGE>

FRONT LOAD CONTRACT

DIVISION 1-YEAR 5-YEAR 10-YEAR INCEPTION*
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Money Market .67 2.84 4.69 NA
Select Bond -1.22 5.67 7.08 NA
High Yield Bond 14.52 NA NA 12.33
Balanced 8.48 9.08 9.58 NA
Index 500 Stock 17.36 13.38 NA 15.97
Growth and Income Stock 14.71 NA NA 16.24
Growth Stock 15.60 NA NA 17.01
International Equity 15.71 NA NA 14.11
Aggressive Growth Stock 12.54 15.28 NA 21.11

BACK LOAD CONTRACT

DIVISION 1-YEAR 5-YEAR 10-YEAR INCEPTION*
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Money Market -4.03 2.08 4.24 NA
Select Bond -5.98 4.98 6.60 NA
High Yield Bond 10.27 NA NA 11.25
Balanced 4.04 8.48 9.08 NA
Index 500 Stock 13.22 12.85 NA 15.60
Growth and Income Stock 10.47 NA NA 15.29
Growth Stock 11.40 NA NA 16.08
International Equity 11.50 NA NA 13.45
Aggressive Growth Stock 8.23 14.78 NA 20.73
</TABLE>

* INDEX 500 STOCK AND AGGRESSIVE GROWTH STOCK DIVISIONS BEGAN DECEMBER 1990;
INTERNATIONAL EQUITY DIVISION BEGAN APRIL 1993; GROWTH STOCK, GROWTH AND
INCOME STOCK AND HIGH YIELD BOND DIVISIONS BEGAN MAY 1994.

Non-standardized performance data are calculated on the same basis as the
standardized total return data, except that the 4% initial sales load for the
Front Load Contract is not reflected and it is assumed that the Back Load
Contract remains in force at the end of the period. The annual Contract fee of
$30 is also not reflected.
The following table shows the non-standardized average annual total return
data for each Division of the Account for the period ended December 31, 1996:

FRONT LOAD CONTRACT

DIVISION 1-YEAR 5-YEAR 10-YEAR INCEPTION*
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Money Market 4.86 3.85 5.31 NA
Select Bond 2.90 6.70 7.70 NA
High Yield Bond 19.29 NA NA 14.24
Balanced 13.00 10.15 10.21 NA
Index 500 Stock 22.25 14.49 NA 16.98
Growth and Income Stock 19.49 NA NA 18.22
Growth Stock 20.42 NA NA 19.00
International Equity 20.53 NA NA 15.57
Aggressive Growth Stock 17.22 16.41 NA 22.13
</TABLE>

B-5
<PAGE>

BACK LOAD CONTRACT

DIVISION 1-YEAR 5-YEAR 10-YEAR INCEPTION*
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Money Market 3.97 2.97 4.42 NA
Select Bond 2.02 5.80 6.79 NA
High Yield Bond 18.27 NA NA 13.28
Balanced 12.04 9.05 9.08 NA
Index 500 Stock 21.22 13.53 NA 15.99
Growth and Income Stock 18.47 NA NA 17.22
Growth Stock 19.40 NA NA 18.00
International Equity 19.50 NA NA 14.60
Aggressive Growth Stock 16.23 15.42 NA 21.10
</TABLE>

Advertisements with performance data may compare the average annualized
total return figures for one or more of the Divisions to (1) the Standard &
Poor's 500 Composite Stock Price Index, Wilshire Index, 1750 Index, EAFE Index,
Merrill Lynch Domestic Master Index, Lehman Brothers High Yield Intermediate
Market Index or other indices measuring performance of a relevant group of
securities; (2) other variable annuity separate account tracked by Lipper
Analytical Services or other ratings services; or (3) the Consumer Price Index.

EXPERTS

The financial statements of the Account as of December 31, 1996 and for
each of the two years in the period ended December 31, 1996 and of
Northwestern Mutual Life as of December 31, 1996 and 1995 and for each of the
three years in the period ended December 31, 1996 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-6
<PAGE>
NML VARIABLE ANNUITY ACCOUNT B
Financial Statements
(IN THOUSANDS)

STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1996

<TABLE>
<S> <C> <C>
ASSETS
Investments at Market Value:
Northwestern Mutual Series Fund, Inc.
Growth Stock
66,106 shares (cost $82,760)............................................................... $ 96,780
Aggressive Growth Stock
208,832 shares (cost $444,218)............................................................. 656,777
International Equity
247,036 shares (cost $310,301)............................................................. 384,882
Growth and Income Stock
115,374 shares (cost $134,637)............................................................. 152,062
Index 500 Stock
246,728 shares (cost $336,878)............................................................. 507,026
Money Market
124,398 shares (cost $124,398)............................................................. 124,398
Balanced
1,061,231 shares (cost $1,416,734)......................................................... 1,823,195
Select Bond
133,749 shares (cost $155,528)............................................................. 163,709
High Yield Bond
42,017 shares (cost $45,249)............................................................... 46,177 $3,955,006
-----------
Due from Sale of Fund Shares.................................................................................... 5,296
Due from Northwestern Mutual Life Insurance Company............................................................. 1,167
-----------
Total Assets.............................................................................................. $3,961,469
-----------
-----------

LIABILITIES
Due to Participants........................................................................................... $ 3,020
Due to Northwestern Mutual Life Insurance Company............................................................. 5,296
Due on Purchase of Fund Shares................................................................................ 1,167
-----------
Total Liabilities......................................................................................... 9,483
-----------

EQUITY (NOTE 8)
Contracts Issued Prior to December 17, 1981................................................................... 91,249
Contracts Issued After December 16, 1981 and Prior to March 31, 1995.......................................... 3,229,059
Contracts Issued On or After March 31, 1995:
Front Load Version.......................................................................................... 158,760
Back Load Version........................................................................................... 472,918
-----------
Total Equity.............................................................................................. 3,951,986
-----------
Total Liabilities and Equity.............................................................................. $3,961,469
-----------
-----------
</TABLE>

The Accompanying Notes are an Integral Part of the Financial Statements

---
B-7
<PAGE>
NML VARIABLE ANNUITY ACCOUNT B
Statement of Operations and Changes in Equity
(IN THOUSANDS)

<TABLE>
<CAPTION>
AGGRESSIVE
GROWTH
COMBINED GROWTH STOCK DIVISION STOCK DIVISION
-------------------------------------- -------------------------------- ---------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1995 1996 1995 1996
----------------- ----------------- -------------- -------------- ---------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividend Income............. $ 170,431 $ 68,372 $ 3,822 $ 1,227 $ 19,634
Annuity Rate and Expense
Guarantees................ 39,297 31,745 644 297 6,327
----------------- ----------------- -------------- -------------- ---------------
Net Investment Income
(Loss).................... 131,134 36,627 3,178 930 13,307
----------------- ----------------- -------------- -------------- ---------------
REALIZED AND UNREALIZED GAIN
ON INVESTMENTS
Realized Gain on
Investments............... 17,426 6,751 141 45 3,323
Unrealized Appreciation of
Investments During the
Year...................... 314,176 541,786 8,812 5,346 60,869
----------------- ----------------- -------------- -------------- ---------------
Net Gain on Investments..... 331,602 548,537 8,953 5,391 64,192
----------------- ----------------- -------------- -------------- ---------------
Increase in Equity Derived
from Investment
Activity.................. 462,736 585,164 12,131 6,321 77,499
----------------- ----------------- -------------- -------------- ---------------
EQUITY TRANSACTIONS
Contract Owners' Net
Payments.................. 633,824 376,570 31,093 12,987 125,930
Annuity Payments............ (6,268) (5,967) (76) (21) (435)
Surrenders and Other
(net)..................... (166,092) (155,370) (1,841) (588) (19,236)
Transfers from Other
Divisions................. 334,350 223,928 21,267 10,958 81,962
Transfers to Other
Divisions................. (341,164) (223,928) (5,833) (2,028) (53,520)
----------------- ----------------- -------------- -------------- ---------------
Increase in Equity Derived
from Equity Transactions.... 454,650 215,233 44,610 21,308 134,701
----------------- ----------------- -------------- -------------- ---------------
Net Increase in Equity........ 917,386 800,397 56,741 27,629 212,200
EQUITY
Beginning of Period......... 3,034,600 2,234,203 39,986 12,357 444,286
----------------- ----------------- -------------- -------------- ---------------
End of Period............... $ 3,951,986 $ 3,034,600 $ 96,727 $ 39,986 $ 656,486
----------------- ----------------- -------------- -------------- ---------------
----------------- ----------------- -------------- -------------- ---------------

YEAR ENDED
DECEMBER 31,
1995
---------------
<S> <C>
INVESTMENT INCOME
Dividend Income............. $ 1,785
Annuity Rate and Expense
Guarantees................ 4,157
---------------
Net Investment Income
(Loss).................... (2,372)
---------------
REALIZED AND UNREALIZED GAIN
ON INVESTMENTS
Realized Gain on
Investments............... 1,461
Unrealized Appreciation of
Investments During the
Year...................... 111,310
---------------
Net Gain on Investments..... 112,771
---------------
Increase in Equity Derived
from Investment
Activity.................. 110,399
---------------
EQUITY TRANSACTIONS
Contract Owners' Net
Payments.................. 66,252
Annuity Payments............ (236)
Surrenders and Other
(net)..................... (14,041)
Transfers from Other
Divisions................. 54,585
Transfers to Other
Divisions................. (23,879)
---------------
Increase in Equity Derived
from Equity Transactions.... 82,681
---------------
Net Increase in Equity........ 193,080
EQUITY
Beginning of Period......... 251,206
---------------
End of Period............... $ 444,286
---------------
---------------
</TABLE>

---
B-8
<PAGE>
NML VARIABLE ANNUITY ACCOUNT B
Statement of Operations and Changes in Equity
(IN THOUSANDS)

<TABLE>
<CAPTION>
INTERNATIONAL EQUITY GROWTH & INCOME INDEX 500
DIVISION STOCK DIVISION STOCK DIVISION
---------------------------------- --------------------------------- ---------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1995 1996 1995 1996
--------------- --------------- --------------- -------------- ---------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividend Income............. $ 15,413 $ 1,696 $ 13,580 $ 4,879 $ 10,681
Annuity Rate and Expense
Guarantees................ 3,631 3,029 1,159 672 4,435
--------------- --------------- --------------- -------------- ---------------
Net Investment Income
(Loss).................... 11,782 (1,333) 12,421 4,207 6,246
--------------- --------------- --------------- -------------- ---------------
REALIZED AND UNREALIZED GAIN
ON INVESTMENTS
Realized Gain on
Investments............... 1,533 3,333 214 33 1,384
Unrealized Appreciation of
Investments During the
Year...................... 45,599 28,381 8,486 9,759 74,302
--------------- --------------- --------------- -------------- ---------------
Net Gain on Investments..... 47,132 31,714 8,700 9,792 75,686
--------------- --------------- --------------- -------------- ---------------
Increase in Equity Derived
from Investment
Activity.................. 58,914 30,381 21,121 13,999 81,932
--------------- --------------- --------------- -------------- ---------------
EQUITY TRANSACTIONS
Contract Owners' Net
Payments.................. 63,376 39,604 40,002 25,211 88,137
Annuity Payments............ (324) (214) (257) (53) (933)
Surrenders and Other
(net)..................... (11,636) (12,919) (2,673) (1,653) (16,428)
Transfers from Other
Divisions................. 38,185 21,883 20,255 18,619 50,087
Transfers to Other
Divisions................. (29,316) (45,059) (9,131) (4,649) (27,976)
--------------- --------------- --------------- -------------- ---------------
Increase in Equity Derived
from Equity Transactions.... 60,285 3,295 48,196 37,475 92,887
--------------- --------------- --------------- -------------- ---------------
Net Increase in Equity........ 119,199 33,676 69,317 51,474 174,819
EQUITY
Beginning of Period......... 265,576 231,900 83,072 31,598 331,489
--------------- --------------- --------------- -------------- ---------------
End of Period............... $ 384,775 $ 265,576 $ 152,389 $ 83,072 $ 506,308
--------------- --------------- --------------- -------------- ---------------
--------------- --------------- --------------- -------------- ---------------

MONEY MARKET DIVISION
----------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1995 1996 1995
--------------- --------------- ---------------
<S> <C> <C> <C>
INVESTMENT INCOME
Dividend Income............. $ 2,545 $ 5,433 4,468
Annuity Rate and Expense
Guarantees................ 3,096 1,033 920
--------------- --------------- ---------------
Net Investment Income
(Loss).................... (551) 4,400 3,548
--------------- --------------- ---------------
REALIZED AND UNREALIZED GAIN
ON INVESTMENTS
Realized Gain on
Investments............... 432 -- --
Unrealized Appreciation of
Investments During the
Year...................... 78,497 -- --
--------------- --------------- ---------------
Net Gain on Investments..... 78,929 0 0
--------------- --------------- ---------------
Increase in Equity Derived
from Investment
Activity.................. 78,378 4,400 3,548
--------------- --------------- ---------------
EQUITY TRANSACTIONS
Contract Owners' Net
Payments.................. 46,603 69,991 43,673
Annuity Payments............ (530) (82) (55)
Surrenders and Other
(net)..................... (12,558) (10,887) (14,173)
Transfers from Other
Divisions................. 28,379 62,742 44,923
Transfers to Other
Divisions................. (13,997) (96,594) (51,807)
--------------- --------------- ---------------
Increase in Equity Derived
from Equity Transactions.... 47,897 25,170 22,561
--------------- --------------- ---------------
Net Increase in Equity........ 126,275 29,570 26,109
EQUITY
Beginning of Period......... 205,214 94,799 68,690
--------------- --------------- ---------------
End of Period............... $ 331,489 $ 124,369 $ 94,799
--------------- --------------- ---------------
--------------- --------------- ---------------
</TABLE>

---
B-9
<PAGE>

NML VARIABLE ANNUITY ACCOUNT B
Statement of Operations and Changes in Equity
(IN THOUSANDS)

<TABLE>
<CAPTION>
HIGH YIELD
BALANCED DIVISION SELECT BOND DIVISION BOND DIVISION
-------------------------------------- ---------------------------------- --------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1995 1996 1995 1996
----------------- ----------------- --------------- --------------- --------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividend Income............. $ 91,785 $ 46,459 $ 5,375 $ 3,550 $ 4,708
Annuity Rate and Expense
Guarantees................ 20,070 17,821 1,709 1,593 289
----------------- ----------------- --------------- --------------- --------------
Net Investment Income....... 71,715 28,638 3,666 1,957 4,419
----------------- ----------------- --------------- --------------- --------------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS
Realized Gain on
Investments............... 9,799 983 993 437 39
Unrealized Appreciation
(Depreciation) of
Investments During the
Year...................... 115,967 289,373 (1,053) 19,053 1,194
----------------- ----------------- --------------- --------------- --------------
Net Gain (Loss) on
Investments............... 125,766 290,356 (60) 19,490 1,233
----------------- ----------------- --------------- --------------- --------------
Increase in Equity Derived
from Investment
Activity.................. 197,481 318,994 3,606 21,447 5,652
----------------- ----------------- --------------- --------------- --------------
EQUITY TRANSACTIONS
Contract Owners' Net
Payments.................. 171,824 114,081 28,026 20,089 15,445
Annuity Payments............ (3,643) (4,551) (449) (297) (69)
Surrenders and Other
(net)..................... (92,872) (89,615) (10,027) (9,328) (492)
Transfers from Other
Divisions................. 38,144 26,186 12,644 11,189 9,064
Transfers to Other
Divisions................. (93,322) (69,173) (21,333) (10,352) (4,139)
----------------- ----------------- --------------- --------------- --------------
Increase (Decrease) in Equity
Derived from Equity
Transactions................ 20,131 (23,072) 8,861 11,301 19,809
----------------- ----------------- --------------- --------------- --------------
Net Increase in Equity........ 217,612 295,922 12,467 32,748 25,461
EQUITY
Beginning of Period......... 1,603,582 1,307,660 150,864 118,116 20,946
----------------- ----------------- --------------- --------------- --------------
End of Period............... $ 1,821,194 $ 1,603,582 $ 163,331 $ 150,864 $ 46,407
----------------- ----------------- --------------- --------------- --------------
----------------- ----------------- --------------- --------------- --------------

YEAR ENDED
DECEMBER 31,
1995
--------------
<S> <C>
INVESTMENT INCOME
Dividend Income............. $ 1,763
Annuity Rate and Expense
Guarantees................ 160
--------------
Net Investment Income....... 1,603
--------------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS
Realized Gain on
Investments............... 27
Unrealized Appreciation
(Depreciation) of
Investments During the
Year...................... 67
--------------
Net Gain (Loss) on
Investments............... 94
--------------
Increase in Equity Derived
from Investment
Activity.................. 1,697
--------------
EQUITY TRANSACTIONS
Contract Owners' Net
Payments.................. 8,070
Annuity Payments............ (10)
Surrenders and Other
(net)..................... (495)
Transfers from Other
Divisions................. 7,206
Transfers to Other
Divisions................. (2,984)
--------------
Increase (Decrease) in Equity
Derived from Equity
Transactions................ 11,787
--------------
Net Increase in Equity........ 13,484
EQUITY
Beginning of Period......... 7,462
--------------
End of Period............... $ 20,946
--------------
--------------
</TABLE>

---
B-10
<PAGE>

Notes to Financial Statements

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" or "Sponsor") 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, 1996 by each Division
are shown below:

<TABLE>
<CAPTION>
Purchases Sales
--------------- ---------------
<S> <C> <C>
Growth Stock Division........... $ 48,289,795 $ 483,528
Aggressive Growth Division...... 153,857,605 5,793,306
International Equity Division... 77,145,237 5,206,933
Growth & Income Stock
Division........................ 61,261,714 828,530
Index 500 Stock Division........ 103,877,887 4,205,970
Money Market Division........... 76,402,801 46,792,404
Balanced Division............... 150,419,860 57,802,511
Select Bond Division............ 22,741,859 10,315,018
High Yield Bond Division........ 24,600,214 678,904
</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.

For contracts issued after December 16, 1981 and prior to 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.

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 re-invested 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-11
<PAGE>
NML VARIABLE ANNUITY ACCOUNT B
Notes to Financial Statements
DECEMBER 31, 1996

Note 8 -- Equity Values by Division are shown below:

<TABLE>
<CAPTION>
CONTRACTS ISSUED:
CONTRACTS ISSUED: AFTER DECEMBER 16, 1981 AND
PRIOR TO DECEMBER 17, 1981 PRIOR TO MARCH 31, 1995
---------------------------------------- -----------------------------------------
ACCUMULATION UNITS ACCUMULATION UNITS
DIVISION UNIT VALUE OUTSTANDING EQUITY UNIT VALUE OUTSTANDING EQUITY
- --------------------------------------- -------------- ------------- --------- -------------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Growth Stock........................... $ 1.572985 239 $ 377 $ 1.552125 37,212 $ 57,758
Aggressive Growth Stock................ 3.298766 1,697 5,599 3.199964 162,837 521,073
International Equity................... 1.679665 2,277 3,825 1.649102 190,865 314,755
Growth and Income...................... 1.545596 221 342 1.525144 63,969 97,563
Index 500 Stock........................ 2.538967 12,235 31,064 2.463008 146,945 361,927
Money Market........................... 2.421366 1,377 3,334 2.246287 35,677 80,142
Balanced............................... 5.205492 6,695 34,851 4.829655 331,700 1,601,998
Select Bond............................ 6.750136 1,152 7,776 6.260939 19,498 122,078
High Yield Bond........................ 1.412413 125 177 1.393713 18,023 25,118
--------- -----------
Equity............................... 87,345 3,182,412
Annuity Reserves..................... 3,904 46,647
--------- -----------
Total Equity......................... $ 91,249 $3,229,059
--------- -----------
--------- -----------
</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>
Growth Stock........................... $ 1.455537 6,777 $ 9,864 $ 1.552125 17,809 $ 27,641
Aggressive Growth Stock................ 1.529999 19,594 29,978 3.199964 29,723 95,112
International Equity................... 1.374484 12,485 17,161 1.649102 27,579 45,481
Growth and Income Stock................ 1.429760 9,882 14,129 1.525144 24,818 37,852
Index 500 Stock........................ 1.527085 17,302 26,421 2.463008 31,554 77,718
Money Market........................... 1.090643 11,211 12,227 2.246287 12,210 27,426
Balanced............................... 1.334426 24,916 33,249 4.829655 24,089 116,341
Select Bond............................ 1.161454 6,391 7,423 6.260939 3,654 22,875
High Yield Bond........................ 1.326020 4,519 5,992 1.393713 10,289 14,339
---------- ----------
Equity............................... 156,444 464,785
Annuity Reserves..................... 2,316 8,133
---------- ----------
Total Equity......................... $ 158,760 $ 472,918
---------- ----------
---------- ----------
</TABLE>

---
B-12

<PAGE>

ACCOUNTANTS' LETTER

PRICE WATERHOUSE LLP

REPORT OF INDEPENDENT ACCOUNTANTS

To The Northwestern Mutual Life Insurance Company and
Contract Owners 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, 1996,
the results of their operations and the changes in their equity for the year
then ended and for each of the other periods presented, in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of The Northwestern Mutual Life Insurance Company's management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these financial statements in
accordance with generally accepted auditing standards which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included direct confirmation of the number of
shares owned at December 31, 1996 with Northwestern Mutual Series Fund, Inc.,
provide a reasonable basis for the opinion expressed above.

/s/ Price Waterhouse LLP

Milwaukee, Wisconsin
January 22, 1997

---
B-13

<PAGE>

THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY

NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY AND SUBSIDIARY

CONSOLIDATED FINANCIAL STATEMENTS

The following financial statements of Northwestern Mutual should be considered
only as bearing upon the ability of Northwestern Mutual Life to meet its
obligations under the Policies.

CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(IN MILLIONS)

<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1996 1995
---------- ----------
<S> <C> <C>
ASSETS
BONDS
United States Government.................................................................. $ 5,417 $ 3,282
Industrial and other...................................................................... 23,659 22,236
---------- ----------
29,076 25,518
---------- ----------
STOCKS
Common.................................................................................... 3,356 2,894
Unconsolidated subsidiaries............................................................... 612 531
Preferred................................................................................. 760 546
---------- ----------
4,728 3,971
---------- ----------
MORTGAGE LOANS.............................................................................. 9,564 8,429
REAL ESTATE
Investment................................................................................ 1,257 1,294
Home office............................................................................... 128 135
---------- ----------
1,385 1,429
---------- ----------
LOANS ON POLICIES........................................................................... 6,802 6,476
OTHER INVESTMENTS........................................................................... 1,714 1,589
CASH AND TEMPORARY INVESTMENTS.............................................................. 1,131 544
DUE AND ACCRUED INVESTMENT INCOME........................................................... 764 721
---------- ----------
Total invested assets................................................................... 55,164 48,677
---------- ----------
SEPARATE ACCOUNT BUSINESS................................................................... 6,339 5,000
OTHER ASSETS................................................................................ 1,177 1,199
---------- ----------
Total Assets............................................................................ $ 62,680 $ 54,876
---------- ----------
---------- ----------
</TABLE>

The accompanying notes are an integral part of the financial statements

--
B-14
<PAGE>
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY

NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY AND SUBSIDIARY

CONSOLIDATED FINANCIAL STATEMENTS

CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(IN MILLIONS)

<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1996 1995
---------- ----------
<S> <C> <C>
LIABILITIES AND RESERVES
LIABILITY FOR POLICY BENEFITS
Insurance and annuity reserves............................................................ $ 43,209 $ 39,545
Policy benefits in process or left for future payments.................................... 1,140 1,109
Premium deposits.......................................................................... 427 427
Policyowner dividends payable............................................................. 2,350 2,115
---------- ----------
47,126 43,196
---------- ----------
OTHER LIABILITIES
Interest maintenance reserve.............................................................. 299 281
Income taxes.............................................................................. 942 895
Miscellaneous............................................................................. 2,921 1,336
---------- ----------
4,162 2,512
---------- ----------
SEPARATE ACCOUNT BUSINESS................................................................... 6,339 5,000
---------- ----------
ASSET VALUATION RESERVE..................................................................... 1,538 1,382
---------- ----------
Total liabilities......................................................................... 59,165 52,090
---------- ----------
GENERAL CONTINGENCY RESERVE................................................................. 3,515 2,786
---------- ----------
Total Liabilities and Contingency Reserve................................................... $ 62,680 $ 54,876
---------- ----------
---------- ----------
</TABLE>

The accompanying notes are an integral part of the financial statements

--
B-15

<PAGE>
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY

THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY AND SUBSIDIARY

CONSOLIDATED FINANCIAL STATEMENTS

CONSOLIDATED SUMMARY OF OPERATIONS
(IN MILLIONS)

<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
----------------------------------
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
INCOME
PREMIUMS..................................................................... $ 6,760 $ 6,196 $ 5,743
NET INVESTMENT INCOME........................................................ 3,836 3,673 3,106
POLICY BENEFITS LEFT WITH COMPANY AND OTHER INCOME........................... 666 733 636
---------- ---------- ----------
Total income............................................................... 11,262 10,602 9,485
---------- ---------- ----------
DISPOSITION OF INCOME
COSTS
Agents' compensation....................................................... 529 508 492
Other insurance costs...................................................... 418 398 334
Premium and other taxes or assessments..................................... 96 120 120
---------- ---------- ----------
1,043 1,026 946
---------- ---------- ----------
BENEFITS TO POLICYOWNERS AND BENEFICIARIES
Death benefits............................................................. 673 655 609
Surrender benefits......................................................... 1,182 1,375 904
Disability benefits........................................................ 202 174 151
Annuity benefits........................................................... 128 92 94
Matured endowments......................................................... 52 48 54
Payments from policy benefits left with Company............................ 684 590 568
Net transfers to separate accounts......................................... 579 236 344
Net additions to policy reserves........................................... 3,701 3,506 3,313
---------- ---------- ----------
7,201 6,676 6,037
---------- ---------- ----------
Total disposition of income.............................................. 8,244 7,702 6,983
---------- ---------- ----------
SAVINGS FROM OPERATIONS BEFORE INCOME TAXES AND DIVIDENDS...................... 3,018 2,900 2,502
INCOME TAX EXPENSE............................................................. 452 467 281
---------- ---------- ----------
SAVINGS FROM OPERATIONS BEFORE DIVIDENDS....................................... 2,566 2,433 2,221
POLICYOWNER DIVIDENDS.......................................................... 2,341 2,111 1,942
---------- ---------- ----------
NET SAVINGS FROM OPERATIONS.................................................... 225 322 279
NET REALIZED CAPITAL GAINS, LESS TAX EXPENSE OF $208, $98 AND 85,
RESPECTIVELY.................................................................. 395 137 119
---------- ---------- ----------
CONTRIBUTION TO GENERAL CONTINGENCY RESERVE FROM OPERATIONS.................... $ 620 $ 459 $ 398
---------- ---------- ----------
---------- ---------- ----------
</TABLE>

The accompanying notes are an integral part of the financial statements

--
B-16
<PAGE>
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY

NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY AND SUBSIDIARY

CONSOLIDATED FINANCIAL STATEMENTS

CONSOLIDATED STATEMENT OF GENERAL CONTINGENCY RESERVE
(IN MILLIONS)

<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
----------------------------------
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
BEGINNING OF YEAR BALANCE........................................................... $ 2,786 $ 2,225 $ 2,030
Contribution to general contingency reserve from operations....................... 620 459 398
Change in net unrealized capital gains............................................ 295 373 (242)
Change in asset valuation reserve................................................. (156) (192) 37
Other -- net...................................................................... (30) (79) 2
---------- ---------- ----------
END OF YEAR BALANCE................................................................. $ 3,515 $ 2,786 $ 2,225
---------- ---------- ----------
---------- ---------- ----------
</TABLE>

The accompanying notes are an integral part of the financial statements

--
B-17

<PAGE>
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY

NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY AND SUBSIDIARY

CONSOLIDATED FINANCIAL STATEMENTS

CONSOLIDATED STATEMENT OF CASH FLOWS
(IN MILLIONS)

<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
----------------------------------
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Insurance premiums, annuities and other considerations................... $ 7,361 $ 6,864 $ 6,299
Net investment income received........................................... 3,634 3,480 3,013
Net loans on policies.................................................... (326) (331) (297)
Benefits paid to policyholders and beneficiaries......................... (2,912) (2,939) (2,357)
Net transfers to separate accounts....................................... (579) (236) (344)
Policyowner dividends paid............................................... (2,105) (1,945) (1,777)
Expenses and taxes....................................................... (1,424) (1,279) (1,033)
Other -- net............................................................. 1,558 381 89
---------- ---------- ----------
NET CASH PROVIDED BY OPERATING ACTIVITIES................................ 5,207 3,995 3,593
CASH FLOWS FROM INVESTING ACTIVITIES
PROCEEDS FROM INVESTMENTS SOLD OR MATURED
Bonds.................................................................... 31,942 25,317 27,096
Stocks................................................................... 4,570 2,465 1,469
Mortgage loans........................................................... 1,253 431 512
Real estate.............................................................. 178 48 164
Other invested assets.................................................... 316 149 213
Capital gain (tax) benefit............................................... (239) (85) 28
---------- ---------- ----------
38,020 28,325 29,482
COST OF INVESTMENTS ACQUIRED
Bonds.................................................................... 35,342 27,596 29,674
Stocks................................................................... 4,463 2,562 1,606
Mortgage loans........................................................... 2,455 1,883 1,356
Real estate.............................................................. 125 202 6
Other invested assets.................................................... 255 336 413
---------- ---------- ----------
42,640 32,579 33,055
NET CASH USED IN INVESTING ACTIVITIES.................................... (4,620) (4,254) (3,573)
---------- ---------- ----------
NET (DECREASE) INCREASE IN CASH AND TEMPORARY INVESTMENTS.................... 587 (259) 20
CASH AND TEMPORARY INVESTMENTS, BEGINNING OF YEAR............................ 544 803 783
---------- ---------- ----------
CASH AND TEMPORARY INVESTMENTS, END OF YEAR.................................. $ 1,131 $ 544 $ 803
---------- ---------- ----------
---------- ---------- ----------
</TABLE>

The accompanying notes are an integral part of the financial statements

--
B-18

<PAGE>
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY

THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED STATUTORY FINANCIAL STATEMENTS

DECEMBER 31, 1996, 1995 AND 1994

NOTE 1 -- PRINCIPAL ACCOUNTING POLICIES

The accompanying consolidated statutory 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 (statutory basis of
accounting). Prior to December 15, 1995, these policies were considered
generally accepted accounting principles ("GAAP") for mutual life insurance
enterprises. However, in April 1993, the Financial Accounting Standards Board
issued Interpretation No. 40, "Applicability of Generally Accepted Accounting
Principles to Mutual Life Insurance Companies and Other Enterprises," which
established a different definition of GAAP for mutual life insurance
enterprises. Under the Interpretation, financial statements of mutual life
insurance enterprises for periods beginning after December 15, 1995 which are
prepared on the statutory basis of accounting are no longer characterized as
being in conformity with GAAP.

The consolidated financial statements are prepared on the statutory basis of
accounting and are not intended to represent a presentation in accordance with
GAAP. Financial statements prepared on a statutory basis of accounting vary from
financial statements prepared on a GAAP basis primarily because on a GAAP basis
policy acquisition costs are deferred and amortized, investment valuations and
insurance reserves are based on different assumptions, deferred taxes are
provided for book and tax differences and premiums on annuity contracts are
accounted for as deposits to policyholders' accounts.

The preparation of financial statements in conformity with the statutory basis
of accounting 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.

INVESTMENTS

The Company's investments are valued on the following bases:

<TABLE>
<S> <C> <C>
Bonds -- Amortized cost using the interest method; loan-backed and structured securities are
amortized using estimated prepayment rates and, generally, the prospective
adjustment method
Common Stocks -- Market value
Unconsolidated Subsidiaries -- Equity in subsidiaries' net assets
Preferred Stocks -- Cost
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
</TABLE>

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

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.

--
B-19
<PAGE>
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY

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 uses 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 the 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 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 VALUE 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 83.8% of the allowable maximum at December 31, 1996.

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
reinsurance to other insurance enterprises or reinsurers under excess coverage
and co-insurance contracts. In 1996, the Company increased its use of
coinsurance on term insurance. As of December 31, 1996, total life insurance
inforce approximated $430 billion, of which approximately $146 billion,
comprised principally of term insurance, had been ceded to various reinsurers.
The Company retains a maximum of $15 million of coverage per individual life and
$20 million maximum of coverage per joint 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
tax. Adequate provision has been made in the financial statements for any
additional taxes which may become due with respect to the open years.
--
B-20
<PAGE>
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY

The Company's effective tax rate on savings from operations before income tax
expense (after dividends) in 1996 was approximately 67%. Two significant factors
cause the Company's effective tax 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 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.

RECLASSIFICATION

Certain amounts in previously issued financial statements have been reclassified
to conform to current year presentation.

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 common 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 of 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.

NOTE 3 -- INVESTMENTS

NET INVESTMENT INCOME

The Company's net investment income for the years ended December 31, 1996, 1995
and 1994 of the following:

<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ----------
(IN MILLIONS)
<S> <C> <C> <C>
Interest, dividends, rents,
equity in unconsolidated
subsidiaries' earnings and
joint venture income........... $ 4,125 $ 3,952 $ 3,395
Less: Investment expenses and
depreciation................... (289) (279) (289)
---------- ---------- ----------
Net investment income.......... $ 3,836 $ 3,673 $ 3,106
---------- ---------- ----------
---------- ---------- ----------
</TABLE>

--
B-21
<PAGE>
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY

REALIZED GAINS AND LOSSES

During 1996, 1995 and 1994, 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,
DECEMBER 31, 1996 DECEMBER 31, 1995 1994
--------------------------------------- --------------------------------------- ------------
NET REALIZED NET REALIZED
REALIZED REALIZED GAINS REALIZED REALIZED GAINS REALIZED
GAINS LOSSES (LOSSES) GAINS LOSSES (LOSSES) GAINS
----------- ------------ ------------ ----------- ------------ ------------ ------------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
Bonds............................ $ 396 $ (383) $ 13 $ 576 $ (130) $ 446 $ 171
Stocks........................... 580 (115) 465 574 (429) 145 499
Mortgage loans................... 2 (15) (13) 2 (32) (30) --
Real estate...................... 36 0 36 14 (3) 11 16
Other invested assets............ 204 (51) 153 188 (95) 93 110
----------- ------ ----- ----------- ------ ----- -----
$ 1,218 $ (564) $ 654 $ 1,354 $ (689) $ 665 $ 796
----------- ------ ----- ----------- ------ ----- -----
----------- ------ ----- ----------- ------ ----- -----

NET REALIZED
REALIZED GAINS
LOSSES (LOSSES)
------------ ------------

<S> <C> <C>
Bonds............................ $ (535) $ (364)
Stocks........................... (291) 208
Mortgage loans................... (37) (37)
Real estate...................... (7) 9
Other invested assets............ (98) 12
------ ------
$ (968) $ (172)
------ ------
------ ------
</TABLE>

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

DEBT SECURITIES

Debt securities consist of all bonds, fixed maturity preferred stocks and short
term fixed income investments.

The statement values, which principally represent amortized cost, and estimated
market values of the Company's debt securities at December 31, 1996 and 1995 are
as follows:

--
B-22
<PAGE>
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
<TABLE>
<CAPTION>
RECONCILIATION TO ESTIMATED MARKET VALUE
---------------------------------------------------------
GROSS GROSS ESTIMATED
STATEMENT UNREALIZED UNREALIZED MARKET
DECEMBER 31, 1996 VALUE APPRECIATION DEPRECIATION VALUE
- ----------------------------------------------------------------------- ----------- -------------- --------------- -----------
(IN MILLIONS)
<S> <C> <C> <C> <C>
US Government and political obligations................................ $ 4,809 $ 171 $ (2) $ 4,978
Mortgage-backed securities............................................. 6,747 179 (38) 6,888
Corporate and other debt securities.................................... 18,722 776 (99) 19,399
----------- ------- ------ -----------
30,278 1,126 (139) 31,265
Preferred stocks....................................................... 84 6 (1) 89
----------- ------- ------ -----------
Total.................................................................. $ 30,362 $ 1,132 $ (140) $ 31,354
----------- ------- ------ -----------
----------- ------- ------ -----------

RECONCILIATION TO ESTIMATED MARKET VALUE
---------------------------------------------------------
GROSS GROSS ESTIMATED
STATEMENT UNREALIZED UNREALIZED MARKET
DECEMBER 31, 1995 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
----------- ------- ------ -----------
----------- ------- ------ -----------
</TABLE>

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

The amortized cost and estimated value of debt securities at December 31, 1996
and 1995, 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, 1996 DECEMBER 31, 1995
------------------------ ------------------------
ESTIMATED ESTIMATED
STATEMENT MARKET STATEMENT MARKET
VALUE VALUE VALUE VALUE
----------- ----------- ----------- -----------
(IN MILLIONS)
<S> <C> <C> <C> <C>
Due in one year or less..................................................... $ 1,659 $ 1,713 $ 977 $ 979
Due after one year through five years....................................... 4,077 4,205 3,658 3,879
Due after five years through ten years...................................... 7,802 8,092 6,879 7,347
Due after ten years......................................................... 10,077 10,456 7,860 8,668
----------- ----------- ----------- -----------
23,615 24,466 19,374 20,873
Mortgage-backed securities.................................................. 6,747 6,888 6,734 7,058
----------- ----------- ----------- -----------
$ 30,362 $ 31,354 $ 26,108 $ 27,931
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>

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

The fair value of perpetual preferred stocks as of December 31, 1996 and 1995
approximates $892 million and $578 million, respectively, compared to the
statement values of $676 million and $439 million, respectively.

The Company has entered into a securities lending agreement whereby blocks of
securities are loaned to third parties, primarily major brokerage firms. As of
December 31, 1996 the estimated fair value of loaned securities was $2.2
billion. The Company's policy requires a minimum of 102 percent of the fair
value of the loaned securities as collateral, calculated on a daily basis in the
form of either cash or securities. Cash collateral received and related amounts
due to counterparties are reflected in the consolidated statement of financial
position. To further minimize the credit risks related to this program, the
financial

--
B-23
<PAGE>
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY

condition of counterparties is monitored on a regular basis.

MORTGAGE LOANS

As of December 31, 1996 and 1995, the mortgage loan portfolio was distributed as
follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1996 DECEMBER 31, 1995
-------------------------------- ------------------
GEOGRAPHIC LOCATION % OF TOTAL
- ----------------------------------------------------------------- STATEMENT VALUE ------------ STATEMENT VALUE
------------------ ------------------
(IN MILLIONS) (IN MILLIONS)
<S> <C> <C> <C>
Middle Atlantic................................................ $ 1,170 12.3% $ 945
South Atlantic................................................. 2,845 29.7 2,346
North Central.................................................. 1,675 17.5 1,560
South Central.................................................. 1,035 10.8 1,018
Pacific Northwest.............................................. 578 6.1 454
Pacific........................................................ 1,998 20.9 1,803
Canada......................................................... 263 2.7 303
------- ------------ -------
$ 9,564 100.0% $ 8,429
------- ------------ -------
------- ------------ -------

PROPERTY TYPE
- -----------------------------------------------------------------
Retail......................................................... $ 3,099 32.4% $ 2,897
Office Building................................................ 2,963 31.0 2,677
Residential.................................................... 2,340 24.5 1,804
Commercial..................................................... 818 8.5 792
Other.......................................................... 344 3.6 259
------- ------------ -------
$ 9,564 100.0% $ 8,429
------- ------------ -------
------- ------------ -------

GEOGRAPHIC LOCATION % OF TOTAL
- ----------------------------------------------------------------- ------------

<S> <C>
Middle Atlantic................................................ 11.2%
South Atlantic................................................. 27.8
North Central.................................................. 18.5
South Central.................................................. 12.1
Pacific Northwest.............................................. 5.4
Pacific........................................................ 21.4
Canada......................................................... 3.6
------------
100.0%
------------
------------
PROPERTY TYPE
- -----------------------------------------------------------------
Retail......................................................... 34.4%
Office Building................................................ 31.8
Residential.................................................... 21.4
Commercial..................................................... 9.4
Other.......................................................... 3.0
------------
100.0%
------------
------------
</TABLE>

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

The fair value of mortgage loans as of December 31, 1996 and 1995 approximates
$9,823 million and $8,983 million, respectively.

AFFILIATES

The Company has a 17.7% investment in MGIC Investment Corporation ("MGIC"), an
affiliate. At December 31, 1996, the market value of the Company's investment in
MGIC (10.4 million shares) exceeded the statement value by $466 million. During
1996, NML sold 1.2 million shares of MGIC resulting in a realized gain of $50.0
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, 1996, investment real estate includes $119 million of real
estate acquired through foreclosure. In 1996, the Company recorded writedowns of
$31 million and $12 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
$110 million special

--
B-24
<PAGE>
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY

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. The Company's derivative transactions are used to reduce or modify
risks of volatility related to foreign currency, interest rate movements and
stock price fluctuation. These hedging strategies use forwards, futures, options
and swaps.

At December 31, 1996 the Company held the following positions:

<TABLE>
<CAPTION>
DERIVATIVE FINANCIAL INSTRUMENT: RISKS REDUCED
- ------------------------------------------------------- NOTIONAL -------------------------------------------------------
CONTRACT
AMOUNTS
--------------
($ MILLIONS)
<S> <C> <C>
Foreign Currency Forward Contracts..................... $ 854 Currency exposure on foreign denominated investments.
Stock Futures.......................................... 279 Stock market price fluctuation.
Option to acquire an Interest Rate Swap................ 320 Interest rates payable on Fixed Annuities.
Foreign Currency and Interest Rate Swaps............... 251 Interest rates on variable rate notes and currency on
foreign denominated bonds.
</TABLE>

The hedges are recorded by the Company in the same manner as the underlying
investments. Changes in the values of these contracts are expected to offset the
gains and losses on the hedged investments. On hedges marked to market, gains
and losses are unrealized before contract settlement and realized on settlement.

The effect of derivative transactions is not significant to the Company's
results of operations or financial position.

NOTE 4 -- ANNUITIES AND OTHER DEPOSIT LIABILITIES

The value of annuities (without mortality/morbidity features) and other deposit
liabilities as of December 31, 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
DECEMBER 31, 1996 1995
-------------------------- ------------
STATEMENT STATEMENT
VALUE FAIR VALUE VALUE
------------ ------------ ------------
(IN MILLIONS)
<S> <C> <C> <C>
Annuities.................................................................... $ 2,554 $ 2,477 $ 2,631
Other deposit liabilities.................................................... 797 797 783

FAIR VALUE
------------

<S> <C>
Annuities.................................................................... $ 2,437
Other deposit liabilities.................................................... 783
</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 $1.3 billion at December 31, 1996
are primarily included in the separate accounts of the Company. As of January 1,
1996, 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 cost for the year ended December 31, 1996 was a benefit
of $12 million; it includes the expected cost of postretirement benefits for
newly eligible and vested employees and interest cost totaling $6 million offset
by gains from differences between actuarial assumptions and actual experience of

--
B-25
<PAGE>
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY

$18 million. At December 31, 1996 and 1995, the unfunded postretirement benefit
obligation for retirees and other fully eligible or vested employees was $35
million and $49 million, respectively. The estimated postretirement benefit
obligation for active non-vested employees was $43 million. The discount rate
used to determine the postretirement benefit obligation was 7% and the health
care cost trend rate was 10% in 1996, declining by 1% per year to an ultimate
rate of 5% over 5 years. If the health care cost trend rate assumptions were
increased by 1%, the postretirement benefit obligation as of December 31, 1996
would be increased by $5 million.

At December 31, 1996, the plan assets attributable to postretirement health care
benefits totaled $34 million.

NOTE 6 -- REINSURANCE

The amounts shown in the accompanying consolidated financial statements are net
of reinsurance activity. Reserves at December 31, 1996 are stated net of
reinsurance of $355 million. The effect of reinsurance on premiums and benefits
for the years ended December 31, 1996, 1995 and 1994 are as follows (in
millions):

<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Direct premiums................ $ 7,064 $ 6,452 $ 5,977
Reinsurance ceded.............. (304) (256) (234)
---------- ---------- ----------
Net premiums................... $ 6,760 $ 6,196 $ 5,743
---------- ---------- ----------
---------- ---------- ----------
Benefits to policyholders and
beneficiaries................. $ 7,348 $ 6,818 $ 6,178
Reinsurance recoveries......... (147) (142) (141)
---------- ---------- ----------
Net benefits to policyholders
and beneficiaries............. $ 7,201 $ 6,676 $ 6,037
---------- ---------- ----------
---------- ---------- ----------
</TABLE>

In addition, the Company received credits of $93 million from reinsurers
representing reimbursements of commissions and other expenses. The 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 $120 million at December 31, 1996 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-26

<PAGE>
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY

[LOGO]

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Trustees and Policyowners of
The Northwestern Mutual Life Insurance Company

We have audited the accompanying consolidated statement of financial position of
The Northwestern Mutual Life Insurance Company and its subsidiary as of December
31, 1996 and 1995, and the related consolidated summary of operations and
consolidated statements of general contingency reserve and of cash flows for
each of the three years in the period ended December 31, 1996. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards 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. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our report dated January 24, 1996, we expressed an opinion that the 1995
consolidated financial statements, prepared using accounting practices
prescribed or permitted by the Insurance Departments of the states in which the
Company and its subsidiary are domiciled (statutory basis of accounting), were
presented fairly, in all material respects, in conformity with generally
accepted accounting principles. As described in Note 1 to these financial
statements, pursuant to the pronouncement of the Financial Accounting Standards
Board, financial statements of mutual life insurance enterprises prepared using
accounting practices prescribed or permitted by insurance regulators (statutory
basis of accounting) are no longer considered presentations in conformity with
generally accepted accounting principles. Accordingly, our present opinion on
the presentation of the 1995 financial statements, as presented herein, is
different from that expressed in our previous report.

As described in Note 1, these consolidated financial statements were prepared in
conformity with accounting practices prescribed or permitted by the Insurance
Departments of the states in which the Company and its subsidiary are domiciled
(statutory basis of accounting), which practices differ from generally accepted
accounting principles. Accordingly, the consolidated financial statements are
not intended to represent a presentation in accordance with generally accepted
accounting principles. The effects on the consolidated financial statements of
the variances between the statutory basis of accounting and generally accepted
accounting principles, although not reasonably determinable, are presumed to be
material.

In our opinion, the consolidated financial statements audited by us (1) do not
present fairly in conformity with generally accepted accounting principles, the
financial position of The Northwestern Mutual Life Insurance Company and its
subsidiary at December 31, 1996 and 1995, or the results of their operations or
their cash flows for each of the three years in the period ended December 31,
1996 because of the effects of the variances between the statutory basis of
accounting and generally accepted accounting principles referred to in the
preceding paragraph and (2) do present fairly, in all material respects, the
financial position of The Northwestern Mutual Life Insurance Company and its
subsidiary at December 31, 1996 and 1995 and the results of their operations and
their cash flows for each of the three years in the period ended December 31,
1996, on the basis of accounting described in Note 1.

/s/ Price Waterhouse

January 22, 1997

B-27

<PAGE>
TABLE OF CONTENTS

PAGE
----

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

PERFORMANCE DATA . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-4

EXPERTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-6

FINANCIAL STATEMENTS OF THE ACCOUNT. . . . . . . . . . . . . . . . . . . B-7
(for year ended December 31, 1996)

REPORT OF INDEPENDENT ACCOUNTANTS. . . . . . . . . . . . . . . . . . . .B-13
(for year ended December 31, 1996)

FINANCIAL STATEMENTS OF NORTHWESTERN MUTUAL LIFE . . . . . . . . . . . .B-14
(for the three years ended December 31, 1996)

REPORT OF INDEPENDENT ACCOUNTANTS. . . . . . . . . . . . . . . . . . . .B-27
(for the three years ended December 31, 1996)

B-28

<PAGE>

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, 1996)
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, 1996)
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, 1996.

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 March
1, 1997, 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 Aarque Capital Corporation
111 West Second Street
Jamestown, NY 14701

Edward E. Barr Sun Chemical Corporation
222 Bridge Plaza South
Fort Lee, NJ 07024

C-1
<PAGE>

Gordon T. Beaham III Faultless Starch/Bon Ami Co.
1025 West Eighth Street
Kansas City, MO 64101

Robert C. Buchanan Fox Valley Corporation
P.O. Box 727
Appleton, WI 54912

Robert E. Carlson The Northwestern Mutual Life
Insurance Company
20 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

Stephen N. Graff 805 Lone Tree Road
Elm Grove, WI 53122-2014

Patricia Albjerg Graham 420 Gutman
Graduate School of Education
Harvard University
Cambridge, MA 02138

Stephen F. Keller The Santa Anita Companies
P.O. Box 60014
Arcadia, CA 91066-6014

Barbara A. King Landscape Structures, Inc.
601 - 7th Street South
Delano, MN 55328

C-2
<PAGE>

J. Thomas Lewis Monroe & Lemann
Suite 3300
210 St. Charles Avenue
New Orleans, LA 70170

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 52 River Ridge Road
Little Rock, AR 72227-1518

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

C-3
<PAGE>

EXECUTIVE OFFICERS

NAME TITLE
---- -----

Deborah A. Beck Senior Vice President
William H. Beckley Vice President
Robert J. Berdan 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
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
Bruce L. Miller Senior Vice President
Gregory C. Oberland Vice President
Barbara F. Piehler Vice President
James F. Reiskytl Vice President
Mason G. Ross Senior Vice President
John E. Schlifske 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 Associate Director-Public Markets
Maria J. Avila Assistant Controller
Michael J. Backus Associate Director of Information Systems
Jerome R. Baier Vice President
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

C-4
<PAGE>

James M. Baumgartner Officer - Underwriting Standards & Services
Beth M. Berger Assistant General Counsel & Assistant
Secretary
James L. Bergschneider Director - Underwriting Services
Frederick W. Bessette Assistant General Counsel & Asst. Secretary
Carrie L. Bleck Assistant Director
D. Rodney Bluhm Assistant General Counsel
Donald T. Bobbs Associate Director
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
Michael R. Buchholz Director - Real Estate Investments
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 - Advanced Marketing
J. Thomas Christofferson Vice President
Eric P. Christophersen Associate Director
David D. Clark Director - Real Estate Investments
Alan E. Close Associate Controller
Carolyn M. Colbert Assistant Director - New Business
Timothy S. Collins Director
Margaret Winter Combe Director - Corporate Development
Virginia A. Corwin Assistant Director - New Business
Barbara E. Courtney Associate Director
J. Scott Craig Associate Director
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 Director - Annuity Services
John Diliberti Assistant Director - New Business
Joseph Dobering, III Director - Underwriting Standards & Services

C-5
<PAGE>

Lisa C. Dodd Associate Actuary
Richard P. Dodd Assistant Director
Daniel C. Dougherty Director - Individual Product Marketing
Margaret T. Dougherty Assistant Director - Information Systems
John R. Dowell Director - Workforce Diversity
William O. Drehfal Assistant Director - Media Services
Jeffrey S. Dunn Vice President
John E. Dunn Assistant General Counsel & Secretary
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
Donald Forecki Investment Officer
Phillip B. Franczyk Vice President
Stephen H. Frankel Vice President
Anne A. Frigo Assistant Director
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
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
Linda J. Gorens-Levey Associate Director
David Lee Gosse Assistant Director - Disability Benefits
William F. Grady Associate Director of Field Finances
John M. Grogan Assistant General Counsel and Assistant
Secretary
Jill M. Grueninger Associate Director
Thomas C. Guay Associate Director
Colleen M. Gunther Investment Officer
Gerald A. Haas Assistant Director - Information Systems
Stanley K. Hall Assistant Director - Policyowner Services
Thomas P. Hamilton Associate Director - Information Systems
Lori A. Hanes Director - Human Resources
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 Associate Medical Director
Jacquelyn F. Heise Associate Director - Information Systems
Robert L. Hellrood Director - New Business
Herbert F. Hellwig Assistant Director - Individual Annuity
Marketing

C-6
<PAGE>

Jane A. Herman Assistant Director - Term Upgrade
Gary M. Hewitt Vice President & Treasurer
Donna R. Higgins Assistant Director - Information Systems
David L. Hilbert Investment Officer
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 Associate Actuary
Cindy L. Jackson Associate Director
James C. Jackson Investment Officer
Meg E. Jansky Assistant Director
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
Peter Keehn Investment Officer
Michael Kelly Assistant Director
Kevin C. Kennedy Assistant Director - Architecture
James B. Kern Regional Director - Central Region
David R. Keuler Associate Director
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
Daniel C. Knuth Investment Officer
William S. Koch Assistant Regional Director - Agency
A. Kipp Koester Vice President
John L. Kordsmeier Director - Human Resources
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
Melissa C. Lloyd Assistant Director
James Lodermeier Assistant Director - Tax Planning
James G. Loduha Director - Asset Management
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

C-7
<PAGE>

Jon K. Magalska Associate Actuary
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
James L. McFarland Assistant General Counsel & 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
Jill Mocarski Assistant Medical Director
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 Director
James J. Nemec Vice President
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
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 Director of Policyowner Services - West
Harvey W. Pogoriler Assistant General Counsel

C-8
<PAGE>

Gary A. Poliner Vice President
Randolph R. Powell, M.D. Medical Director
Mark A. Prange Associate Director - Information Systems
David R. Remstad Senior 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
Michael J. Riordan Assistant General Counsel & Secretary
Kathleen M. Rivera Vice President - Insurance Counsel
Faith B. Rodenkirk Assistant Director - Group Marketing
James S. Rolfsmeyer Assistant Director - Information Systems
Larry R. Roscoe Assistant Director - Compliance
Lora A. Rosenbaum Associate Director
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
Kathleen H. Schluter Assistant General Counsel & Secretary
Calvin R. Schmidt Assistant Director - Information Systems
Richard A. Schnell Assistant Director - Asset Management
John O. Schnorr Assistant Director
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 Director
Norman W. Seguin, II Investment Officer - Ad Valorem Taxes
John W. Seifert Director - Real Estate Investments
Catherine L. Shaw Assistant General Counsel & Asst. Secretary
John E. Sheaffer, Jr. Assistant Director - Agent Development
Ronald A. Shuster Assistant Director - Real Estate Investments
Catherine A. Siebert Investment Officer
Janet Z. Silverman Assistant Director - New Business
Stephen M. Silverman Assistant General Counsel
David W. Simbro Senior Actuary
Eugene R. Skaggs Vice President
Paul W. Skalecki Assistant Actuary
Cynthia S. Slavik Assistant Director - Environmental Engineer
Ignatius L. Smetek Director - Common Stocks
Lois A. Smith Director - Asset Management
Mark W. Smith Assistant General Counsel & Asst. Secretary

C-9
<PAGE>

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
Karen J. Stevens Assistant General Counsel & Asst. Secretary
Richard A. Strait Vice President
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
William H. Taylor Assistant Director - Advanced Marketing
Paul B. Tews Associate Director - Investment Planning
J. Edward Tippetts Vice President
Susan M. Tompkins Director - Recruitment & Management
Chris J. Torkelson Assistant Director
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
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 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

C-10
<PAGE>

Anna C. Westfall Financial Officer
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
Michael L. Youngman Vice President - Legislative Representative
James A. Youngquist Associate Actuary
Richard S. Zakrzewski Associate Research Officer
John Zao Assistant Director - Information Systems
Diana M. Zawada Assistant Director
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 December 31, 1996, are set forth on pages
C-12 and C-13. In addition to the subsidiaries set forth on pages C-12 and C-
13, 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-12 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-11
<PAGE>

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 - 18%. 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% * Includes all NML mutual
Hobby, Inc. - 100% funds and other corpor-
Logan, Inc. - 100% ations of which 50% or
Baraboo, Inc. - 100% more voting power con-
Mitchell, Inc. - 100% trolled by NML.
Elizabeth International Sales, Inc. - 100%
Sean International Sales, Inc. - 100% 12-31-96

C-12
<PAGE>

NML CORPORATE STRUCTURE, CONTINUED*

Alexandra International Sales, Inc. - 100%
Brian International Sales, Inc. - 100%
Jack International Sales, Inc. - 100%
Brendan International Sales, Inc. - 100%
Justin International FSC, Inc. - 100%
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%
Bradington-Young, Inc. - 50%

* Includes all NML mutual
funds and other corporations of
which 50% or more of voting
power controlled by NML

12-31-96

C-13
<PAGE>

Item 27. NUMBER OF CONTRACT OWNERS

As of March 31, 1997, 184,550 variable annuity contracts issued in
connection with NML Variable Annuity Account B were outstanding. 150,264 such
contracts were issued as contracts for plans qualifying for special treatment
under various provisions of the Internal Revenue Code. 34,268 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
---- --------

Deborah A. Beck Vice President, Variable Life Administration
William H. Beckley Executive Vice President, Sales
Peter W. Bruce Director
Robert E. Carlson Director
Thomas A. Carroll Vice President - Common Stocks
Walter J. Chossek Treasurer
Barbara E. Courtney Assistant Treasurer
Jefferson V. De Angelis Vice President - Fixed Income Securities
Mark G. Doll Executive Vice President, Investment Advisory
Services
James R. Eben Assistant Secretary
Richard L. Hall President and CEO
Beatrice C. Kmiec Assistant Vice President, Variable Life
Administration
Patrick W. Lavin Assistant Treasurer
Merrill C. Lundberg Secretary
Meridee J. Maynard Vice President, Variable Annuity Administration
and Marketing
Donald Parker Assistant Manager, Office of Supervisory
Jurisdiction
Larry R. Roscoe Vice President and Chief Compliance Officer
Ignatius L. Smetek Vice President - Common Stocks
Leonard F. Stecklein Vice President, Sales Support
Steven P. Swanson Vice President

C-14
<PAGE>

Carla A. Thoke Manager, Offfice of Supervisory Jurisdiction
Julie Van Cleave Vice President - Common Stocks
Patricia L. Van Kampen Vice President - Common Stocks
William R. Walker Vice President
Edward J. Zore Director

The address for each director and officer of NMIS is 720 East Wisconsin Avenue,
Milwaukee, Wisconsin 53202.

(c) During 1996 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 $17,556,375 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
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

C-15
<PAGE>

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.

(e) The Northwestern Mutual Life Insurance Company hereby
represents that the fees and charges deducted under the contracts registered
by this registration statement, in the aggregate, are reasonable in relation
to the services rendered, the expenses expected to be incurred, and the risks
assumed by the insurance company.

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-16
<PAGE>

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 29th day of April, 1997.

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: RICHARD L. HALL
------------------- ----------------
Merrill C. Lundberg, Secretary Richard L. Hall
President and CEO

As required by the Securities Act of 1933, this Amended Registration
Statement has been signed by the depositors on the 29th day of April, 1997.

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: RICHARD L. HALL
----------------------------- ---------------------------
Merrill C. Lundberg, Secretary Richard L. Hall
President and CEO

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 29, 1997
James D. Ericson

C-17
<PAGE>

GARY E. LONG Vice President, Controller
- ------------------------ and Principal Accounting
Gary E. Long Officer

HAROLD B. SMITH* Trustee
- ------------------------
Harold B. Smith

J. THOMAS LEWIS* Trustee
- ------------------------
J. Thomas Lewis

PATRICIA ALBJERG GRAHAM* Trustee
- ------------------------
Patricia Albjerg Graham

DONALD J. SCHUENKE* Trustee
- ------------------------
Donald J. Schuenke

R. QUINTUS ANDERSON* Trustee
- ------------------------
R. Quintus Anderson

STEPHEN F. KELLER* Trustee Dated
- ------------------------ April 29, 1997
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

BARRY L. WILLIAMS* Trustee
- ------------------------
Barry L. Williams

GORDON T. BEAHAM III* Trustee
- ------------------------
Gordon T. Beaham III

C-18
<PAGE>

DANIEL F. MCKEITHAN, JR.* Trustee
- ------------------------
Daniel F. McKeithan, Jr.

ROBERT E. CARLSON* Trustee
- ------------------------
Robert E. Carlson

EDWARD E. BARR* Trustee
- ------------------------
Edward E. Barr

ROBERT C. BUCHANAN* Trustee
- ------------------------
Robert C. Buchanan

SHERWOOD H. SMITH, JR.* Trustee
- ------------------------
Sherwood H. Smith, Jr.

H. MASON SIZEMORE* Trustee Dated
- ------------------------ April 29, 1997
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

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

BARBARA A. KING* Trustee
- ------------------------
Barbara A. King

*By: JAMES D. ERICSON
------------------------------------------
James D. Ericson, Attorney in Fact pursuant
to the Power of Attorney previously filed

C-19
<PAGE>
EXHIBIT INDEX
EXHIBITS FILED WITH FORM N-4
POST-EFFECTIVE AMENDMENT NO. 55 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, 1996.

<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
NORTHWESTERN MUTUAL LIFE VARIABLE ANNUITY ACCOUNT B DECEMBER 31, 1996
FINANCIAL STATEMENT AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 3,050,703
<INVESTMENTS-AT-VALUE> 3,955,006
<RECEIVABLES> 6,463
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 3,961,469
<PAYABLE-FOR-SECURITIES> 1,167
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 8,316
<TOTAL-LIABILITIES> 9,483
<SENIOR-EQUITY> 3,951,986
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 3,961,469
<DIVIDEND-INCOME> 170,431
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 39,297
<NET-INVESTMENT-INCOME> 131,134
<REALIZED-GAINS-CURRENT> 17,426
<APPREC-INCREASE-CURRENT> 314,176
<NET-CHANGE-FROM-OPS> 462,736
<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> 917,386
<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>

<PAGE>
EX-99.B11

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the use in the Statement of Additional Information
constituting part of this Post-Effective Amendment No. 55 to the registration
statement on Form N-4 (the "Registration Statement") of our report dated
January 22, 1997, relating to the financial statements of The Northwestern
Mutual Life Insurance Company, and of our report dated January 22, 1997,
relating to the financial statements of NML Variable Annuity Account B, which
appears in such Statement of Additional Information, and to the incorporation
by reference of such report 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 29, 1997