<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. 57 /X/
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940 / /
Amendment No. 22 /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, Executive 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
----
on (DATE) pursuant to paragraph (b) of Rule 485
----
60 days after filing pursuant to paragraph (a)(1) of Rule 485
----
X on April 30, 1999 pursuant to paragraph (a)(1) of Rule 485
----
this post-effective amendment designates a new effective date for a
---- previously filed post-effective amendment.
<PAGE>
NML VARIABLE ANNUITY ACCOUNT B
- -------------------------------------------------------------------------------
CROSS-REFERENCE SHEET
<TABLE>
<CAPTION>
N-4, PART A HEADING IN
ITEM PROSPECTUS
- ----------- ----------
<S> <C>
1 ..................................................... Cover Page
2 ..................................................... Index of Special Terms
3 ..................................................... Expense Table
4 ..................................................... Accumulation Unit Values, Performance Data,
Financial Statements
5 ..................................................... The Company, NML Variable Annuity Account
B, The Funds, 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
</TABLE>
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
N-4, PART B HEADING IN STATEMENT
ITEM OF ADDITIONAL INFORMATION
- ----------- -------------------------
<S> <C>
15 ......................................................... Cover Page
16 ......................................................... Table of Contents
17 ......................................................... Not Applicable
18 ......................................................... Experts
19 ......................................................... Not Applicable
20 ......................................................... Distribution of the Contracts
21 ......................................................... Performance Data
22 ......................................................... Determination of Annuity Payments
23 ......................................................... Financial Statements
</TABLE>
<PAGE>
April 30, 1999
The Quiet Company(R)
NML VARIABLE ANNUITY ACCOUNT B
Nontax - Qualified Annuities
[GRAPHIC OMITTED]
Individual Retirement Annuities
Roth IRAs
Simplified Employee Pension Plan IRAs
SIMPLE IRAs
Tax Deferred Annuities
457 Deferred Compensation Plan Annuities
Non-Transferable Annuities
(PHOTO)
Northwestern Mutual Series Fund, Inc.
and Russell Insurance Funds
The Northwestern Mutual
Life Insurance Company
720 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
(414) 271-1444
<PAGE>
CONTENTS FOR THIS PROSPECTUS
<TABLE>
<CAPTION>
PAGE
------
<S> <C>
PROFILE........................................i-v
PROSPECTUS......................................1
NML Variable Annuity Account B ..............1
INDEX OF SPECIAL TERMS..........................2
EXPENSE TABLE...................................2
ACCUMULATION UNIT VALUES........................5
THE COMPANY.....................................8
NML VARIABLE ANNUITY
ACCOUNT B....................................8
THE FUNDS.......................................8
THE CONTRACTS...................................9
Purchase Payments Under the Contracts ......9
Amount and Frequency......................9
Application of Purchase Payments .........9
Net Investment Factor.......................9
Benefits Provided Under the Contracts ......10
Withdrawal Amount.......................10
Death Benefit...........................10
Maturity Benefit........................10
Variable Payment Plans ...................10
Description of Payment Plans ...........10
Amount of Annuity Payments .............11
Assumed Investment Rate.........................11
Additional Information ...................11
Transfers Between Divisions and
Payment Plans........................11
Owners of the Contracts ...............12
Special Contract for Employers ................12
Disability Provision...........................12
Deferment of Benefit Payments .........12
Dividends..............................12
Voting Rights..........................12
Substitution and Change ...............13
Fixed Annuity Payment Plans ...........13
Performance Data.......................13
Financial Statements......................13
THE GUARANTEED INTEREST FUND ..................14
FEDERAL INCOME TAXES...........................14
Qualified and Nontax-Qualified Plans ......14
Contribution Limitations and General
Requirements Applicable to Contracts .....15
Traditional IRA..........................15
SEP......................................15
SIMPLE IRA...............................15
Roth IRA.................................15
Tax Deferred Annuity.....................15
Section 457 Plan.........................15
Nontransferable Annuity .................16
Nontax-qualified Contract ...............16
Taxation of Contract Benefits .............16
IRAs, SEPs, SIMPLE IRAs, TDAs and
Section 457 Plans and Nontransferable
Annuities...............................16
Roth IRAs................................16
Nonqualified Contracts ..................16
Premature Withdrawals ...................17
Mandatory Withholding ...................17
Taxation of Northwestern Mutual Life ......17
Other Considerations.......................17
DEDUCTIONS.....................................17
Contracts Issued Prior to
March 31, 1995 ..........................19
Contracts Issued Prior to
December 17, 1981........................19
Certain Nontax-Qualified Contracts ........19
Reduced Charges for Exchange
Transactions.............................19
DISTRIBUTION OF THE CONTRACTS .................20
YEAR 2000 ISSUES...............................20
</TABLE>
THE TABLE OF CONTENTS FOR THE STATEMENT OF ADDITIONAL INFORMATION APPEARS ON THE
PAGE FOLLOWING PAGE 20 OF THIS PROSPECTUS.
<PAGE>
The Northwestern Mutual Life Insurance Company April 30, 1999
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. WE DESCRIBE THE CONTRACT MORE
FULLY 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 sixteen 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 sixteen 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 we set once each
year. Both interest and principal are guaranteed by Northwestern Mutual Life.
You may invest in any or all of the sixteen 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 eleven 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. All of these are described in the attached prospectuses for
Northwestern Mutual Series Fund, Inc. and the Russell Insurance Funds.
Northwestern Mutual Series Fund, Inc.:
1. Small Cap Growth Stock Portfolio
2. Aggressive Growth Stock Portfolio
3. International Equity Portfolio
4. Index 400 Stock Portfolio
5. Growth Stock Portfolio
6. Growth and Income Stock Portfolio
7. Index 500 Stock Portfolio
8. Balanced Portfolio
9. High Yield Bond Portfolio
10. Select Bond Portfolio
11. Money Market Portfolio
PROFILE-i
<PAGE>
Russell Insurance Funds
1. Multi-Style Equity Fund
2. Aggressive Equity Fund
3. Non-U.S. Fund
4. Real Estate Securities Fund
5. Core Bond Fund
You may also invest all or part of your funds on a fixed basis (the Guaranteed
Interest Fund).
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 1.30% 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 first
three columns show the annual expenses as a percentage of assets including the
risk charges, the portfolio charges and the total charges. Portfolio expenses
are based on 1998 expenses for the thirteen portfolios that were in operation
during 1998. Portfolio expenses for the other three portfolios, which have not
begun operations, are estimated for 1999 at an annualized rate. The last two
columns show you examples of the charges, in dollars, you would pay. The
examples reflect the impact of the asset based charges, any sales loads or
withdrawals that would apply, and the $30 Contract fee (expressed as a
percentage of assets). The examples assume that you invested $1,000 in a
Contract which earns 5% annually and that you withdraw your money at the end of
year one, and 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.
<TABLE>
<CAPTION>
EXPENSES
- --------------------------------------------------------------------------------------------------------------------------------
FRONT LOAD CONTRACT ANNUAL EXPENSES AS A PERCENTAGE OF ASSETS
EXAMPLES: *
Charges for Total Expenses At End of
Mortality & Portfolio Portfolio Total
Portfolio Expense Risk Expenses Expenses 1 Year 10 Years
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NORTHWESTERN MUTUAL SERIES FUND, INC.
Small Cap Growth Stock .40% .92% 1.32% $53 $193
Aggressive Growth Stock .40 .52 .92 $49 $149
International Equity .40 .76 1.16 $51 $175
Index 400 Stock .40 .35 .75 $47 $129
Growth Stock .40 .46 .86 $48 $142
Growth and Income Stock .40 .58 .98 $50 $155
Index 500 Stock .40 .21 .61 $46 $113
Balanced .40 .30 .70 $47 $124
High Yield Bond .40 .50 .90 $49 $146
Select Bond .40 .30 .70 $47 $124
Money Market .40 .30 .70 $47 $124
RUSSELL INSURANCE FUNDS
-----------------------
Multi-Style Equity .40 .92 1.32 $53 $193
Aggressive Equity .40 1.25 1.65 $56 $228
Non-U.S. .40 1.30 1.70 $57 $233
Real Estate Securities* .40 1.16 1.56 $55 $218
Core Bond .40 .80 1.20 $52 $180
- ----------------------------------------------------------------------------------------------------------------------------------
</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.
PROFILE-ii
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
BACK LOAD CONTRACT ANNUAL EXPENSES AS A PERCENTAGE OF ASSETS
EXAMPLES: **
Charges for Total Expenses At End of
Mortality & Portfolio Portfolio Total
Portfolio Expense Risk Expenses Expenses 1 Year 10 Years
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NORTHWESTERN MUTUAL SERIES FUND, INC.
Small Cap Growth Stock 1.25% .92% 2.17% $92 $269
Aggressive Growth Stock 1.25 .52 1.77 $88 $227
International Equity 1.25 .76 2.01 $90 $252
Index 400 Stock 1.25 .35 1.60 $86 $209
Growth Stock 1.25 .46 1.71 $87 $221
Growth and Income Stock 1.25 .58 1.83 $89 $234
Index 500 Stock 1.25 .21 1.46 $85 $194
Balanced 1.25 .30 1.55 $86 $204
High Yield Bond 1.25 .50 1.75 $88 $225
Select Bond 1.25 .30 1.55 $86 $204
Money Market 1.25 .30 1.55 $86 $204
RUSSELL INSURANCE FUNDS
Multi-Style Equity 1.25 .92 2.17 $92 $269
Aggressive Equity 1.25 1.25 2.50 $95 $301
Non-U.S. 1.25 1.30 2.55 $96 $306
Real Estate Securities 1.25 1.16 2.41 $94 $292
Core Bond 1.25 .80 2.05 $91 $256
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* THE $30 CONTRACT FEE IS ASSUMED NOT TO APPLY BASED ON AN AVERAGE CONTRACT
SIZE OF $55,000.
** THE $30 CONTRACT FEE IS REFLECTED AS 0.20% OF THE ASSETS BASED ON AN
AVERAGE CONTRACT SIZE OF $15,000.
6. TAXES The Contracts may be issued as an individual retirement annuity (IRA),
simplified employee pension (SEP), SIMPLE IRA, Roth IRA, tax deferred annuity
(TDA), Section 457 deferred compensation plan, nontransferable annuity or
nontax-qualified annuity. The Contracts will be subject to certain contribution
limits and/or other requirements depending on their tax classification. With the
exception of Roth IRAs and nontax-qualified annuities, purchase payments are
excluded from income. In all cases, earnings on your Contract are not taxed as
they accrue. If the Contract is purchased as an individual retirement annuity
(IRA), tax deferred annuity (TDA) or in other situations where purchase payments
are excluded from income, the entire amount of monthly annuity payments, and any
withdrawals, will generally be taxed as income. If the Contract is purchased as
a ROTH IRA, certain distributions after 5 years will be tax-free. Finally, if
the Contract is purchased as a nonqualified annuity, amounts withdrawn prior to
the income phase will be taxed as income to the extent of earnings. During the
income phase, monthly annuity payments will be considered partly a return of
your investment which is not taxed and partly a distribution of earnings which
is taxed as income. In all cases, a 10% federal penalty tax may apply if you
make taxable withdrawals from the Contract before you reach age 59 1/2.
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 that was in operation, and used
with the Account, during the years shown. These numbers, for the Front Load
Contract and the Back Load Contract, reflect the asset-based charges for
mortality and expense risks 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. The numbers also
do not reflect the annuity Contract fee. Those charges, if applied, would reduce
the performance. Past performance does not guarantee future results.
PROFILE- iii
<PAGE>
PERFORMANCE
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
FRONT LOAD CONTRACT
CALENDAR YEAR
Portfolio 1998 1997 1996 1995 1994 1993 1992 1991 1990 1989
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Aggressive Growth Stock 7.12 13.41 17.22 38.74 4.98 18.63 5.52 55.37 NA NA
International Equity 4.40 11.83 20.53 14.12 -.50 NA NA NA NA NA
Growth Stock 26.18 29.33 20.42 30.30 NA NA NA NA NA NA
Growth and Income Stock 22.64 29.51 19.49 30.60 NA NA NA NA NA NA
Index 500 Stock 28.21 32.67 22.25 36.70 .79 9.33 6.83 29.04 NA NA
Balanced 18.40 21.03 13.00 25.88 -.42 9.14 4.90 23.44 .64 15.14
High Yield Bond -2.24 15.39 19.29 16.31 NA NA NA NA NA NA
Select Bond 6.64 9.03 2.90 18.62 -3.22 9.89 6.56 16.41 7.89 13.41
Money Market 5.01 5.05 4.86 5.40 3.64 2.44 2.93 5.27 7.60 8.54
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
BACK LOAD CONTRACT
<TABLE>
<CAPTION>
CALENDAR YEAR
Portfolio 1998 1997 1996 1995 1994 1993 1992 1991 1990 1989
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Aggressive Growth Stock 6.22 12.45 16.23 37.57 4.10 17.63 4.63 54.06 NA NA
International Equity 3.52 10.89 19.50 13.16 -1.34 NA NA NA NA NA
Growth Stock 25.12 28.24 19.40 29.20 NA NA NA NA NA NA
Growth and Income Stock 21.61 28.42 18.47 29.50 NA NA NA NA NA NA
Index 500 Stock 27.13 31.55 21.22 35.56 -.06 8.41 5.92 27.95 NA NA
Balanced 17.40 20.01 12.04 24.83 -1.25 8.22 4.01 22.40 -.21 14.17
High Yield Bond -3.06 14.42 18.27 15.33 NA NA NA NA NA NA
Select Bond 5.74 8.11 2.02 17.62 -4.04 8.97 5.66 15.43 6.98 12.46
Money Market 4.12 4.16 3.97 4.51 2.77 1.58 2.05 4.38 6.69 7.63
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
9. DEATH BENEFIT If you die before age 65, and 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.
DIVIDENDS. We are paying dividends on approximately 18% of our inforce variable
annuity contracts in 1999, primarily older, larger contracts. The dividends
arise principally as a result of more favorable expense results than assumed in
determining deductions on these contracts.
PROFILE-iv
<PAGE>
PORTFOLIO REBALANCING. To help you maintain your asset allocation plan over time
we offer a rebalancing service. This will automatically readjust your investment
option allocations, on a periodic basis, back to the allocation percentages you
have selected.
INTEREST SWEEPS. If you select this service we will automatically sweep or
transfer interest from the Guaranteed Interest Fund to any combination of
variable investment options. Interest earnings can be swept monthly, quarterly,
semi-annually or annually.
NML EXPRESS. 1-800-519-4NML (1-800-519-4665). Get up-to-date information about
your contract at your convenience with your contract number and your Personal
Identification Number (PIN). Call toll-free to review contract values and unit
values, transfer among portfolios, change the allocation and obtain fund
performance information. INTERNET. For information about Northwestern Mutual
Life, visit us on our Website. Included are daily unit values and fund
performance information.
WWW.NORTHWESTERNMUTUAL.COM
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, WISCONSIN 53202; (414) 271-1444.
PROFILE- v
<PAGE>
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").
We offer the Contracts for use in these situations:
- - Individual Retirement Annuities (IRAs), including traditional IRAs,
Simplified Employee Pensions (SEPs) and SIMPLE IRAs.
- - Roth IRAs.
- - Tax-Deferred Annuities (TDAs).
- - Section 457 deferred compensation plans.
- - Non-transferable annuities issued in exchange for fixed-dollar annuities
received or distributions of termination benefits from tax-qualified plans
or trusts.
Other situations that do not qualify for special tax treatment.
We use NML Variable Annuity Account B (the "Account") to keep the money you
invest separate from our general assets. The money in the Account is invested in
the eleven portfolios of Northwestern Mutual Series Fund, Inc. and the five
Russell Insurance Funds. You select the Portfolios or Funds in which you want to
invest. The Account has 16 Divisions that correspond to the 11 Portfolios and 5
Funds in which you may invest. The Contracts also permit you to invest on a
fixed basis, at rates that we determine. This prospectus describes only the
Account and the variable provisions of the Contracts except where there are
specific references to the fixed provisions. We offer two versions of the
Contracts: Front Load Contracts and Back Load Contracts. See the Expense table
on page 2 and the Deductions section, beginning on page 17.
This prospectus is a concise description of the information you should know
before you buy a Contract. We have filed additional information about the
Contracts with the Securities and Exchange Commission in a Statement of
Additional Information. We incorporate the Statement of Additional Information
into this prospectus by reference. We will send you the Statement of Additional
Information without charge if you write to The Northwestern Mutual Life
Insurance Company, 720 East Wisconsin Avenue, Milwaukee, Wisconsin, 53202, or
call us at Telephone Number (414) 271-1444. You will find the table of contents
for the Statement of Additional Information on the inside front cover of this
prospectus.
THIS PROSPECTUS IS VALID ONLY WHEN ACCOMPANIED BY THE CURRENT PROSPECTUSES FOR
NORTHWESTERN MUTUAL SERIES FUND, INC. AND THE RUSSELL INSURANCE FUNDS WHICH ARE
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.
The Date of the Statement of Additional Information is April 30, 1999.
1
<PAGE>
INDEX OF SPECIAL TERMS
THE FOLLOWING SPECIAL TERMS USED IN THIS PROSPECTUS ARE DISCUSSED AT THE PAGES
INDICATED.
<TABLE>
<CAPTION>
TERM PAGE TERM PAGE
- ----- ----- ------ ------
<S> <C> <C> <C>
ACCUMULATION UNIT....................................8 ANNUITANT.........................................11
ANNUITY (or ANNUITY PAYMENTS).......................10 MATURITY DATE......................................9
NET INVESTMENT FACTOR................................8 OWNER.............................................11
PAYMENT PLANS.......................................10 WITHDRAWAL AMOUNT..................................9
</TABLE>
EXPENSE TABLE
<TABLE>
<CAPTION>
Front Load Contract ANNUAL EXPENSES OF THE ACCOUNT
------------------------------
TRANSACTION EXPENSES FOR CONTRACTOWNERS (AS A PERCENTAGE OF ASSETS)
- --------------------------------------- ----------------------------
<S> <C> <C> <C>
Maximum Sales Load (as a percentage Mortality Rate and Expense Guarantee
of purchase payments)...........................4% Charge....................................... .40%
Withdrawal Charge..............................None
ANNUAL CONTRACT FEE
$30; waived if the Contract Value equals or exceeds
$50,000
BACK LOAD CONTRACT ANNUAL EXPENSES OF THE ACCOUNT
------------------------------
TRANSACTION EXPENSES FOR CONTRACTOWNERS (AS A PERCENTAGE OF ASSETS)
- --------------------------------------- ----------------------------
Sales Load (as a percentage of purchase Mortality Rate and Expense Guarantee
Payments)......................................None Charge....................................... 1.25%
Withdrawal Charge for Sales Expenses
(as a percentage of amounts paid) ANNUAL CONTRACT FEE
-------------------
$30; waived if the Contract Value equals or exceeds
$50,000
</TABLE>
Annual Expenses of the Portfolios and Funds
(as a percentage of the assets)
<TABLE>
<CAPTION>
Management Custody Other Total Annual
FEES FEES EXPENSES EXPENSES
--------- ---------- ---------- -------------
<S> <C> <C> <C> <C>
Northwestern Mutual Series Fund, Inc.
Small Cap Growth Stock* .80% .00% .12% .92%
Aggressive Growth Stock .52% .00% .00% .52%
International Equity .67% .08% .01% .76%
Index 400 Stock* .25% .00% .10% .35%
Growth Stock .45% .00% .01% .46%
Growth and Income Stock .57% .00% .01% .58%
Index 500 Stock .20% .00% .01% .21%
Balanced .30% .00% .00% .30%
High Yield Bond .49% .00% .01% .50%
Select Bond .30% .00% .00% .30%
Money Market .30% .00% .00% .30%
RUSSELL INSURANCE FUNDS
-----------------------
Multi-Style Equity .49% .25% .18% .92%
Aggressive Equity .53% .45% .27% 1.25%
Non-U.S. .00% 1.10% .20% 1.30%
Real Estate Securities* .85% .12% .19% 1.16%
Core Bond .12% .39% .29% .80%
</TABLE>
* Expenses are estimated for these new Portfolios and Funds, for 1999 at
annualized rates. The estimates for the Russell Insurance Funds reflect fee
waivers and reimbursements that the Funds' adviser has voluntarily agreed to
make for 1999. These may be changed at any time without notice.
2
<PAGE>
EXAMPLE
FRONT LOAD CONTRACT - You would pay the following expenses on each $1,000
investment, assuming 5% annual return:
<TABLE>
<CAPTION>
1 YEAR 3 YEARs 5 YEARS 10 YEARS
------- --------- --------- ----------
<S> <C> <C> <C> <C>
NORTHWESTERN MUTUAL SERIES FUND, INC.
Small Cap Growth Stock $53 $80 $109 $193
Aggressive Growth Stock $49 $68 $ 89 $149
International Equity $51 $75 $101 $175
Index 400 Stock $47 $63 $ 80 $129
Growth Stock $48 $66 $ 86 $142
Growth and Income Stock $50 $70 $ 92 $155
Index 500 Stock $46 $59 $ 73 $113
Balanced $47 $61 $ 77 $124
High Yield Bond $49 $68 $ 88 $146
Select Bond $47 $61 $ 77 $124
Money Market $47 $61 $ 77 $124
RUSSELL INSURANCE FUNDS
-----------------------
Multi-Style Equity $53 $80 $109 $193
Aggressive Equity $56 $90 $126 $228
Non-U.S. $57 $91 $129 $233
Real Estate Securities $55 $87 $122 $218
Core Bond $52 $77 $103 $180
</TABLE>
NOTE: THE MINIMUM INITIAL PURCHASE PAYMENT FOR A FRONT-LOAD CONTRACT IS $10,000.
YOU MUST MULTIPLY THE NUMBERS ABOVE BY 10 TO FIND THE EXPENSES FOR A FRONT-LOAD
CONTRACT OF MINIMUM SIZE.
EXAMPLE
BACK LOAD CONTRACT - You would pay the following expenses on a $1,000
investment, assuming (1) 5% annual return and (2) surrender at the end of each
time period:
<TABLE>
<CAPTION>
1 YEAR 3 YEARs 5 YEARS 10 YEARS
------ ------ ------- --------
<S> <C> <C> <C> <C>
NORTHWESTERN MUTUAL SERIES FUND, INC.
Small Cap Growth Stock $ 92 $122 $155 $269
Aggressive Growth Stock $ 88 $110 $134 $227
International Equity $ 90 $117 $146 $252
Index 400 Stock $ 86 $105 $125 $209
Growth Stock $ 87 $108 $131 $221
Growth and Income Stock $ 89 $112 $137 $234
Index 500 Stock $ 85 $100 $118 $194
Balanced $ 86 $103 $123 $204
High Yield Bond $ 88 $109 $133 $225
Select Bond $ 86 $103 $123 $204
Money Market $ 86 $103 $123 $204
RUSSELL INSURANCE FUNDS
-----------------------
Multi-Style Equity $ 92 $122 $155 $269
Aggressive Equity $ 95 $132 $171 $301
Non-U.S. $ 96 $133 $173 $306
Real Estate Securities $ 94 $129 $167 $292
Core Bond $ 91 $118 $148 $256
</TABLE>
3
<PAGE>
You would pay the following expenses on the same $1,000 investment, assuming NO
SURRENDER OR ANNUITIZATION:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
NORTHWESTERN MUTUAL SERIES FUND, INC.
Small Cap Growth Stock $22 $72 $125 $269
Aggressive Growth Stock $18 $60 $104 $227
International Equity $20 $67 $116 $252
Index 400 Stock $16 $55 $ 95 $209
Growth Stock $17 $58 $101 $221
Growth and Income Stock $19 $62 $107 $234
Index 500 Stock $15 $50 $ 88 $194
Balanced $16 $53 $ 93 $204
High Yield Bond $18 $59 $103 $225
Select Bond $16 $53 $ 93 $204
Money Market $16 $53 $ 93 $204
RUSSELL INSURANCE FUNDS
-----------------------
Multi-Style Equity $22 $72 $125 $269
Aggressive Equity $25 $82 $141 $301
Non-U.S. $26 $83 $143 $306
Real Estate Securities $24 $68 $137 $292
Core Bond $21 $68 $118 $256
</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 Funds 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 in the Back Load Contract based on an average Contract size of
$15,000. The $30 annual Contract fee is not reflected in the Front Load Contract
based on an average Contract size of $55,000. The Contracts provide for charges
for transfers between the Divisions of the Account and for premium taxes, but we
are not currently making such charges. See "Transfers Between Divisions and
Payment Plans", p. 11 and "Deductions", p. 17, for additional information about
expenses for the Contracts. The expenses shown in the table for the Portfolios
and Funds show the annual expenses for each, as a percentage of their average
net assets, based on 1998 operations for the Portfolios and their predecessors
and the Funds. Expenses for Portfolios and Funds which have not begun operations
are estimated. Expenses for the Russell Insurance Funds reflect fee waivers and
reimbursements that the Funds' adviser has voluntarily agreed to make for 1999.
These may be changed at any time without notice. For additional information
about expenses of the Portfolios and Funds, see the prospectuses for
Northwestern Mutual Series Fund, Inc. and the Russell Insurance Funds 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
nine Divisions of the Account for the Contracts, including Contracts issued
prior to the date of this prospectus. These nine Divisions are those which were
in operation in 1998 and prior years. The Contracts issued prior to March 31,
1995 are different in certain material respects from Contracts offered
currently, but the values shown below for Contracts issued after December 16,
1981 and prior to March 31, 1995 are calculated on the same basis as those for
the Back Load Contracts described in this prospectus. The Front Load Contracts
described in this prospectus have a lower mortality rate and expense guarantee
charge than any of the Contracts issued prior to March 31, 1995.
4
<PAGE>
ACCUMULATION UNIT VALUES
CONTRACTS ISSUED ON OR AFTER MARCH 31, 1995
<TABLE>
<CAPTION>
FOR YEARS ENDED
DECEMBER 31 FOR THE NINE
------------------------------------------------------- MONTHS ENDED
1998 1997 1996 DECEMBER 31, 1995
------- ------- -------- -----------------
<S> <C> <C> <C> <C>
AGGRESSIVE GROWTH STOCK DIVISION
Front Load Version
Beginning of Period $1.735 $1.305 $1.305 $1.00
End of Period $1.859 $1.735 $1.530 $1.305
Back Load Version
Beginning of Period $3.598 $3.200 $2.753 $2.123
End of Period $3.822 $3.598 $3.200 $2.753
Number of Units
Outstanding, End of Period
Front Load 38,301,039 30,869,455 19,593,516 5,338,263
Back Load 50,240,828 42,824,318 29,722,778 8,294,210
INTERNATIONAL EQUITY DIVISION
Front Load Version
Beginning of Period $1.537 $1.374 $1.140 $1.00
End of Period $1.605 $1.537 $1.374 $1.140
Back Load Version
Beginning of Period $1.829 $1.649 $1.380 $1.218
End of Period $1.893 $1.829 $1.649 $1.380
Number of Units
Outstanding, End of Period
Front Load 30,705,368 24,895,817 12,485,204 2,784,309
Back Load 58,015,141 49,418,651 27,579,179 7,214,357
GROWTH STOCK DIVISION
Front Load Version
Beginning of Period $1.883 $1.456 $1.209 $1.00
End of Period $2.375 $1.883 $1.456 $1.209
Back Load Version
Beginning of Period $1.991 $1.552 $1.300 $1.082
End of Period $2.491 $1.991 $1.552 $1.300
Number of Units
Outstanding, End of Period
Front Load 20,435,890 12,915,731 6,777,198 1,715,092
Back Load 43,931,364 30,083,122 17,808,617 3,952,191
GROWTH AND INCOME STOCK DIVISION
Front Load Version
Beginning of Period $1.852 $1.430 $1.197 $1.00
End of Period $2.271 $1.852 $1.430 $1.197
Back Load Version
Beginning of Period $1.959 $1.525 $1.287 $1.083
End of Period $2.382 $1.959 $1.525 $1.287
Number of Units
Outstanding, End of Period
Front Load 28,665,538 19,189,183 9,882,138 3,530,232
Back Load 60,018,961 43,671,623 24,818,409 7,514,293
</TABLE>
<TABLE>
<CAPTION>
FOR YEARS ENDED
DECEMBER 31 FOR THE NINE
----------------------------------------------------- MONTHS ENDED
1998 1997 1996 DECEMBER 31, 1995
------ --------- ----------- ------------------
<S> <C> <C> <C> <C>
INDEX 500 STOCK DIVISION
Front Load Version
Beginning of Period $2.026 $1.527 $1.249 $1.00
End of Period $2.597 $2.026 $1.527 $1.249
Back Load Version
Beginning of Period $3.240 $2.463 $2.032 $1.604
End of Period $4.119 $3.240 $2.463 $1.991
Number of Units
Outstanding, End of Period
Front Load 49,367,899 32,584,892 17,301,664 278,235
Back Load 74,933,584 53,900,586 31,553,915 471,752
BALANCED DIVISION
Front Load Version
Beginning of Period $1.615 $1.334 $1.181 $1.00
End of Period $1.912 $1.615 $1.334 $1.181
Back Load Version
Beginning of Period $5.796 $4.830 $4.311 $3.655
End of Period $6.805 $5.796 $4.830 $4.290
Number of Units
Outstanding, End of Period
Front Load 72,292,495 43,288,762 24,916,332 164,302
Back Load 50,001,293 37,392,725 24,088,931 372,457
HIGH YIELD BOND DIVISION
Front Load Version
Beginning of Period $1.530 $1.326 $1.112 $1.00
End of Period $1.496 $1.530 $1.326 $1.112
Back Load Version
Beginning of Period $1.595 $1.394 $1.178 $1.067
End of Period $1.546 $1.595 $1.394 $1.178
Number of Units
Outstanding, End of Period
Front Load 19,796,158 11,305,194 4,518,513 1,418,382
Back Load 34,432,479 22,019,285 10,288,680 2,700,647
SELECT BOND DIVISION
Front Load Version
Beginning of Period $1.266 $1.161 $1.129 $1.00
End of Period $1.350 $1.266 $1.161 $1.129
Back Load Version
Beginning of Period $6.768 $6.261 $6.137 $5.419
End of Period $7.157 $6.768 $6.261 $6.078
Number of Units
Outstanding, End of Period
Front Load 22,093,895 12,652,127 6,391,221 26,732
Back Load 8,005,277 5,418,476 3,653,656 50,828
MONEY MARKET DIVISION
Front Load Version
Beginning of Period $1.146 $1.091 $1.040 $1.00
End of Period $1.203 $1.146 $1.091 $1.040
Back Load Version
Beginning of Period $2.340 $2.246 $2.161 $2.086
End of Period $2.436 $2.340 $2.246 $2.156
Number of Units
Outstanding, End of Period
Front Load 27,165,662 16,238,723 11,210,749 327,441
Back Load 22,512,853 14,615,063 12,209,698 379,473
</TABLE>
<PAGE>
ACCUMULATION UNIT VALUES
CONTRACTS ISSUED AFTER DECEMBER 16, 1981 AND PRIOR TO MARCH 31, 1995
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31
---------------------------------------------------------------------------------------
1998 1997 1996 1995 1994
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
AGGRESSIVE GROWTH STOCK DIVISION
Beginning of Period* $3.598 $3.200 $2.753 $2.001 $1.922
End of Period $3.822 $3.598 $3.200 $2.753 $2.001
Number of Units
Outstanding, End of Period 142,097,252 157,775,380 162,837,073 147,960,662 123,249,312
INTERNATIONAL EQUITY DIVISION
Beginning of Period** $1.829 $1.649 $1.380 $1.220 $1.236
End of Period $1.893 $1.829 $1.649 $1.380 $1.220
Number of Units
Outstanding, End of Period 169,103,754 194,160,450 190,864,716 179,261,185 186,097,279
GROWTH STOCK DIVISION
Beginning of Period+ $1.991 $1.552 $1.300 $1.006 $1.000
End of Period $2.491 $1.991 $1.552 $1.300 $1.006
Number of Units
Outstanding, End of Period 55,469,040 45,562,063 37,212,487 24,827,801 12,213,322
GROWTH AND INCOME STOCK DIVISION
Beginning of Period+ $1.959 $1.525 $1.287 $0.994 $1.000
End of Period $2.382 $1.959 $1.525 $1.287 $0.994
Number of Units
Outstanding, End of Period 86,893,255 80,719,502 63,969,388 52,866,200 31,542,581
INDEX 500 STOCK DIVISION
Beginning of Period* $3.240 $2.463 $2.032 $1.499 $1.500
End of Period $4.119 $3.240 $2.463 $2.032 $1.499
Number of Units
Outstanding, End of Period 162,495,472 156,622,110 146,945,069 134,818,674 119,845,898
BALANCED DIVISION
Beginning of Period $5.796 $4.830 $4.311 $3.453 $3.497
End of Period $6.805 $5.796 $4.830 $4.311 $3.453
Number of Units
Outstanding, End of Period 300,355,018 315,853,927 331,700,359 347,995,936 363,391,482
HIGH YIELD BOND DIVISION
Beginning of Period+ $1.595 $1.394 $1.178 $1.022 $1.000
End of Period $1.546 $1.595 $1.394 $1.178 $1.022
Number of Units
Outstanding, End of Period 32,862,095 28,965,737 18,022,623 13,474,146 7,229,418
SELECT BOND DIVISION
Beginning of Period $6.768 $6.261 $6.137 $5.217 $5.437
End of Period $7.157 $6.768 $6.261 $6.137 $5.217
Number of Units
Outstanding, End of Period 19,385,225 18,885,862 19,498,362 21,048,883 20,642,740
MONEY MARKET DIVISION
Beginning of Period $2.340 $2.246 $2.161 $2.067 $2.012
End of Period $2.436 $2.340 $2.246 $2.161 $2.067
Number of Units
Outstanding, End of Period 46,595,608 33,000,108 35,677,445 34,040,829 31,466,730
</TABLE>
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31
------------------------------------------------------------------------------
1993 1992 1991 1990 1989
---------- ---------- ---------- ------- ------
<S> <C> <C> <C> <C>
AGGRESSIVE GROWTH STOCK DIVISION
Beginning of Period* $1.634 $1.562 $1.014 $1.000 --
End of Period $1.922 $1.634 $1.562 $1.014 --
Number of Units
Outstanding, End of Period 77,246,018 53,918,035 19,966,511 205,590 --
INTERNATIONAL EQUITY DIVISION
Beginning of Period** $1.000 -- -- -- --
End of Period $1.236 -- -- -- --
Number of Units
Outstanding, End of Period 74,174,799 -- -- -- --
GROWTH STOCK DIVISION
Beginning of Period+ -- -- -- -- --
End of Period -- -- -- -- --
Number of Units
Outstanding, End of Period -- -- -- -- --
GROWTH AND INCOME STOCK DIVISION
Beginning of Period+ -- -- -- -- --
End of Period -- -- -- -- --
Number of Units
Outstanding, End of Period -- -- -- -- --
INDEX 500 STOCK DIVISION
Beginning of Period* $1.384 $1.306 $1.021 $1.000 --
End of Period $1.500 $1.384 $1.306 $1.021 --
Number of Units
Outstanding, End of Period 105,795,927 32,924,088 12,058,133 189,751 --
BALANCED DIVISION
Beginning of Period $3.232 $3.107 $2.538 $2.544 $2.228
End of Period $3.497 $3.232 $3.107 $2.538 $2.544
Number of Units
Outstanding, End of Period 377,043,512 355,125,051 322,313,588 322,488,873 316,204,759
HIGH YIELD BOND DIVISION
Beginning of Period+ -- -- -- -- --
End of Period -- -- -- -- --
Number of Units
Outstanding, End of Period -- -- -- -- --
SELECT BOND DIVISION
Beginning of Period $4.990 $4.722 $4.091 $3.824 $3.401
End of Period $5.437 $4.990 $4.722 $4.091 $3.824
Number of Units
Outstanding, End of Period 21,874,778 15,399,609 10,692,797 6,997,013 5,553,863
MONEY MARKET DIVISION
Beginning of Period $1.980 $1.940 $1.859 $1.743 $1.619
End of Period $2.012 $1.980 $1.940 $1.859 $1.743
Number of Units
Outstanding, End of Period 24,431,865 27,773,056 24,758,592 27,363,279 20,510,416
</TABLE>
* The initial investments in the Aggressive Growth Stock Division and Index
500 Stock Division were made on December 3, 1990.
** The initial investment in the International Equity Division was made on
April 30, 1993.
+ The initial investments in the Growth Stock Division, Growth and Income
Stock Division, and High Yield Bond Division were made on May 3, 1994.
6
<PAGE>
ACCUMULATION UNIT VALUES
CONTRACTS ISSUED PRIOR TO DECEMBER 17, 1981
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31
-----------------------------------------------------------------------------------
1998 1997 1996 1995 1994
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
AGGRESSIVE GROWTH STOCK DIVISION
Beginning of Period* $3.728 $3.299 $2.824 $2.042 $1.952
End of Period $3.980 $3.728 $3.299 $2.824 $2.042
Number of Units
Outstanding, End of Period 1,180,359 1,476,370 1,697,195 1,617,883 1,474,133
INTERNATIONAL EQUITY DIVISION
Beginning of Period** $1.872 $1.680 $1.398 $1.230 $1.240
End of Period $1.947 $1.872 $1.680 $1.398 $1.230
Number of Units
Outstanding, End of Period 1,884,199 2,125,863 2,276,960 2,141,462 2,642,855
GROWTH STOCK DIVISION
Beginning of Period+ $2.027 $1.573 $1.311 $1.009 --
End of Period $2.549 $2.027 $1.573 $1.311 --
Number of Units
Outstanding, End of Period 390,133 263,014 239,460 19,315 --
GROWTH AND INCOME STOCK DIVISION
Beginning of Period+ $1.995 $1.546 $1.298 $0.997 --
End of Period $2.438 $1.995 $1.546 $1.298 --
Number of Units
Outstanding, End of Period 617,635 551,213 221,275 32,681 --
INDEX 500 STOCK DIVISION
Beginning of Period* $3.357 $2.539 $2.084 $1.530 $1.523
End of Period $4.289 $3.357 $2.539 $2.084 $1.530
Number of Units
Outstanding, End of Period 10,746,288 11,228,774 12,234,934 13,256,279 14,230,394
BALANCED DIVISION
Beginning of Period $6.278 $5.205 $4.623 $3.685 $3.713
End of Period $7.408 $6.278 $5.205 $4.623 $3.685
Number of Units
Outstanding, End of Period 5,670,828 6,272,328 6,695,097 7,327,654 8,155,713
HIGH YIELD BOND DIVISION
Beginning of Period+ $1.624 $1.412 $1.188 $1.025 --
End of Period $1.582 $1.624 $1.412 $1.188 --
Number of Units
Outstanding, End of Period 248,592 251,003 125,053 58,755 --
SELECT BOND DIVISION
Beginning of Period $7.334 $6.750 $6.583 $5.569 $5.774
End of Period $7.794 $7.334 $6.750 $6.583 $5.569
Number of Units
Outstanding, End of Period 1,023,445 1,078,985 1,151,998 1,364,416 1,492,775
MONEY MARKET DIVISION
Beginning of Period $2.535 $2.421 $2.317 $2.206 $2.136
End of Period $2.652 $2.535 $2.421 $2.317 $2.206
Number of Units
Outstanding, End of Period 1,208,793 997,887 1,377,051 1,358,156 1,458,463
</TABLE>
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31
----------------------------------------------------------------------------
1993 1992 1991 1990 1989
------- ------- ------- ------ -----
<S> <C> <C> <C> <C> <C>
AGGRESSIVE GROWTH STOCK DIVISION
Beginning of Period* $1.651 $1.570 $1.014 $1.000 --
End of Period $1.952 $1.651 $1.570 $1.014 --
Number of Units
Outstanding, End of Period 969,604 833,606 534,196 22,431 --
INTERNATIONAL EQUITY DIVISION
Beginning of Period** $1.000 -- -- -- --
End of Period $1.240 -- -- -- --
Number of Units
Outstanding, End of Period 1,802,948 -- -- -- --
GROWTH STOCK DIVISION
Beginning of Period+ -- -- -- -- --
End of Period -- -- -- -- --
Number of Units
Outstanding, End of Period -- -- -- -- --
GROWTH AND INCOME STOCK DIVISION
Beginning of Period+ -- -- -- -- --
End of Period -- -- -- -- --
Number of Units
Outstanding, End of Period -- -- -- -- --
INDEX 500 STOCK DIVISION
Beginning of Period* $1.398 $1.313 $1.021 $1.000 --
End of Period $1.523 $1.398 $1.313 $1.021 --
Number of Units
Outstanding, End of Period 15,442,799 317,023 326,395 4 --
BALANCED DIVISION
Beginning of Period $3.414 $3.266 $2.655 $2.647 $2.307
End of Period $3.713 $3.414 $3.266 $2.655 $2.647
Number of Units
Outstanding, End of Period 9,324,132 10,125,067 10,652,114 11,655,303 12,655,382
HIGH YIELD BOND DIVISION
Beginning of Period+ -- -- -- -- --
End of Period -- -- -- -- --
Number of Units
Outstanding, End of Period -- -- -- -- --
SELECT BOND DIVISION
Beginning of Period $5.273 $4.965 $4.280 $3.981 $3.522
End of Period $5.774 $5.273 $4.965 $4.280 $3.981
Number of Units
Outstanding, End of Period 1,701,121 1,808,558 1,979,936 2,041,191 2,293,077
MONEY MARKET DIVISION
Beginning of Period $2.092 $2.040 $1.945 $1.814 $1.677
End of Period $2.136 $2.092 $2.040 $1.945 $1.814
Number of Units
Outstanding, End of Period 1,331,457 1,787,440 2,059,962 2,574,527 2,285,388
</TABLE>
* The initial investments in the Aggressive Growth Stock Division and Index
500 Stock Division were made on December 3, 1990.
** The initial investment in the International Equity Division was made on
April 30, 1993.
+ The initial investments in the Growth Stock Division, Growth and Income
Stock Division, and High Yield Bond Division were made on May 3, 1994.
7
<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 fourth largest life
insurance company, based on total assets in excess of $77 billion on December
31, 1998, 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.
"We" in this prospectus means Northwestern Mutual
Life.
NML VARIABLE ANNUITY ACCOUNT B
We established the Account on February 14, 1968 by action of our Board of
Trustees in accordance with the provisions of the Wisconsin insurance law. The
Account is registered with the Securities and Exchange Commission as a unit
investment trust under the Investment Company Act of 1940.
The Account has sixteen Divisions. The money you invest to provide variable
benefits under your Contract is placed in one or more of the Divisions as you
direct.
Under Wisconsin law, the investment operations of the Account are kept separate
from our other operations. The values for your Contract will not be affected by
income, gains or losses for the rest of our business. The income, gains or
losses, realized or unrealized, for the assets we place in the Account for your
Contract will determine the value of your Contract benefits and will not affect
the rest of our business. The assets in the Account are reserved for you and
other Contract owners, although the assets belong to us and we do not hold the
assets as a trustee. We and our creditors cannot reach those assets to satisfy
other obligations until our obligations under your Contract have been satisfied.
But all of our assets (except those we hold in some other separate accounts) are
available to satisfy our obligations under your Contract.
THE FUNDS
Northwestern Mutual Series Fund, Inc. is composed of eleven separate
portfolios which operate as separate mutual funds. The portfolios are the
Small Cap Growth Stock Portfolio, Aggressive Growth Stock Portfolio,
International Equity Portfolio, Index 400 Stock Portfolio, Growth Stock
Portfolio, Growth and Income Stock Portfolio, Index 500 Stock Portfolio,
Balanced Portfolio, High Yield Bond Portfolio, Select Bond Portfolio and
Money Market Portfolio. The Account buys shares of each Portfolio at net
asset value, that is, without any sales charge.
Northwestern Mutual Investment Services, LLC ("NMIS"), our wholly-owned
subsidiary, is the investment adviser to the Fund. We provide the people and
facilities that NMIS uses in performing its investment advisory functions, and
we are a party to the investment advisory agreement. We and NMIS also perform
certain administrative functions and act as co-depositors of the Account. NMIS
has retained J.P. Morgan Investment Management, Inc. and Templeton Investment
Counsel, Inc. under investment sub-advisory agreements to provide investment
advice to the Growth and Income Stock Portfolio and the International Equity
Portfolio.
The Russell Insurance Funds include five separate portfolios which operate as
separate mutual funds. These are the Multi-Style Equity Fund, Aggressive Equity
Fund, Non-U.S. Fund, Real Estate Securities Fund and Core Bond Fund. The Account
buys shares of each of the Russell Insurance Funds at net asset value, that is,
without any sales charge.
The assets of each of the Russell Insurance Funds are invested by one or more
investment management organizations researched and recommended by Frank Russell
Company ("Russell"), and an affiliate of Russell, Frank Russell Investment
Management Company ("FRIMCo"). FRIMCo also advises, operates and administers the
Russell Insurance Funds. Russell is our majority-owned subsidiary.
FOR MORE INFORMATION REGARDING THE MUTUAL FUNDS, INCLUDING INFORMATION ABOUT
THEIR INVESTMENT OBJECTIVES AND EXPENSES, SEE THE PROSPECTUSES FOR NORTHWESTERN
MUTUAL SERIES FUND, INC. AND RUSSELL INSURANCE FUNDS ATTACHED HERETO. YOU SHOULD
READ THE MUTUAL FUND PROSPECTUSES CAREFULLY BEFORE YOU INVEST IN THE CONTRACTS.
8
<PAGE>
THE CONTRACTS
PURCHASE PAYMENTS UNDER THE CONTRACTS
AMOUNT AND FREQUENCY A purchase payment is the money you give us to pay for your
Contract. You may make purchase payments monthly, quarterly, semiannually,
annually or on any other frequency acceptable to us.
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. 14). 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. We 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 our
consent.
Purchase payments may not exceed the applicable
federal income tax limits. (See "Federal Income Taxes",
p. 14.)
APPLICATION OF PURCHASE PAYMENTS We credit net purchase payments, after
deduction of any sales load, to the Account and allocate them to one or more
Divisions as you direct. We then invest those assets in shares of the Portfolio
or Fund which corresponds to that Division.
We apply purchase payments to provide "Accumulation Units" in one or more
Divisions. Accumulation Units represent your interest in the Account. The number
of Accumulation Units you receive for 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 first valuation
of the assets of the Division we make after we receive your purchase payment at
our Home Office. Receipt of purchase payments at a lockbox facility we have
designated will be considered the same as receipt at the Home Office. We value
assets 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 your 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 your 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 or Fund). We determine the value by
multiplying the value on the immediately preceding valuation date by the net
investment factor for the Division. (See "Net Investment Factor", below.) Since
you bear the investment risk, there is no guarantee as to the aggregate value of
your Accumulation Units. That value may be less than, equal to, or more than the
cumulative net purchase payments you have made.
You may direct all or part of a purchase payment to the
Guaranteed Interest Fund. Amounts you direct to the
Guaranteed Interest Fund will be invested on a fixed
basis. See "The Guaranteed Interest Fund", p. 14.
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 or Fund 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 or Fund.
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 that we have assumed. (See "Deductions", p.
17.)
The Portfolios and Funds will distribute investment income and realized capital
gains to the Account
9
<PAGE>
Divisions. We will reinvest those distributions in additional shares of the same
Portfolio or Fund. 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,
we will pay all of these benefits in a lump sum or under the payment plans
described below.
WITHDRAWAL AMOUNT On or prior to the maturity date you are entitled to withdraw
the Accumulation Units credited to your Contract and receive the value thereof
less the applicable withdrawal charge. (See "Withdrawal Charge", p. 18.) The
value, which may be either greater or less than the amount you paid is
determined as of the valuation date coincident with or next following our
receipt of your written request for withdrawal on a form we provide. The forms
are available from our Home Office and our agents. You may withdraw a portion of
the Accumulation Units on the same basis, except that we will not grant a
partial withdrawal which would result in less than 100 Accumulation Units
remaining; we will treat a request for such a partial withdrawal 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. 14.) A penalty tax will apply to
premature 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.
18.) 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", p. 10.)
DEATH BENEFIT Upon the death of the Annuitant prior to the maturity date, we
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 our Home Office or, if later, the date on which
the beneficiary elects a method of payment. 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 we received 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. You may select any date up to age 90 as
the maturity date, subject to applicable tax law requirements and state law. On
the maturity date, if you have not elected any other permissible payment plan,
we will change the maturity date to the Contract anniversary nearest the
Annuitant's 90th birthday. On that date, if you have not elected any other
permissible payment plan, we will pay the value of the Contract in monthly
payments for life under a variable payment plan with payments certain for ten
years.
VARIABLE PAYMENT PLANS
We will pay part or all of the benefits under a Contract under a variable
payment plan you select. Under a variable plan, you bear the entire investment
risk, since we make no guarantees of investment return. Accordingly, there is no
guarantee of the amount of the variable payments, and you must expect the amount
of such payments 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. 14.
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,
we will make payments as they come due to the designated contingent beneficiary.
You may select a certain period of either 10 or 20 years, or you may choose a
plan with no certain period.
10
<PAGE>
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.
We may limit the election of a payment plan to one that results in payments of
at least $20.
From time to time we may establish payment plan rates with greater actuarial
value than those stated in the Contract and make them available at the time of
settlement. We may also make available other payment plans, with provisions and
rates we publish for those plans.
AMOUNT OF ANNUITY PAYMENTS We will determine the amount of the first annuity
payment on the basis of the particular payment plan you select, 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. 12.) Variable
annuity payments after the first will vary from month to month to reflect the
fluctuating value of the Annuity Units credited to your Contract. Annuity Units
represent the interest of the Contract in each Division of the Account after
annuity payments begin.
ASSUMED INVESTMENT RATE The variable annuity rate tables for the Contracts are
based upon an Assumed Investment Rate of 3 1/2%. Variable annuity rate tables
based upon an Assumed Investment Rate of 5% are also available where permitted
by state law.
The Assumed Investment Rate affects both the amount of the first variable
payment and the amount by which subsequent payments increase or decrease. The
Assumed Investment Rate does not affect the actuarial value of the future
payments as of the date when payments begin, though it does affect the actual
amount which may be received by an individual Annuitant.
Over a period of time, if each Division achieved a net investment result exactly
equal to the Assumed Investment Rate applicable to a particular payment plan,
the amount of annuity payments would be level. However, if the Division 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 You may change the allocation of
purchase payments among the Divisions and transfer values from one Division to
another both before and after annuity payments begin. In order to take full
advantage of these features, you should carefully consider, on a continuing
basis, which Division or apportionment is best suited to your long-term
investment needs.
You may at any time change the allocation of purchase payments among the
Divisions by written notice to us. Purchase payments we receive at our Home
Office on and after the date on which we receive notice 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 you 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. We will adjust the number of Accumulation or Annuity Units to be
credited 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, we may deduct a transfer fee
of $25 from the amount transferred. We currently make no charge for transfers.
If you contemplate the transfer of funds from one Division to another, you
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.
You may transfer amounts which you have invested on a fixed basis to any
Division of the Account, and you may transfer the value of Accumulation Units in
any Division of the Account 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. 14.
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. We will apply the value of the remaining payments to the new plan
selected. We will determine the amount of the first annuity payment under the
new plan on the basis of the particular plan selected, the annuity
11
<PAGE>
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.
We permit other transfers between payment plans subject to such limitations as
we may reasonably determine. Generally, however, we do not permit transfer from
a payment plan involving a life contingency to a payment plan which does not
involve the same life contingency. You may make transfers from the Money Market
Division 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 we permit transfers at any time but we reserve the right to
change this practice in the future. We will make the transfer as of the close of
business on the valuation date coincident with or next following the date on
which we receive the request for transfer at our Home Office, or at a later date
if you request.
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. In this prospectus, "you" means the Owner or a prospective
purchaser of 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. You 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 we 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 We reserve 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
shares of either of the mutual funds 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 funds or disposal of securities they hold is not reasonably
practical; or (e) such suspension or postponement is otherwise permitted by the
Act.
DIVIDENDS The Contracts share in our divisible surplus, except while payments
are being made under a variable payment plan. Our divisible surplus is
determined annually for the following year. State law requires that we
distribute the surplus equitably among participating contracts. Distributions of
divisible surplus are commonly referred to as "dividends".
We are paying dividends on approximately 18% of our inforce variable annuity
contracts in 1999. 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 which we 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, we are not paying dividends on Contracts with an average variable
Contract value of less than $30,000, and about 75% of those with a value above
$30,000 will receive dividends. The expected dividend payout for 1999 represents
about 0.39% of the average variable Contract value for those Contracts that will
receive dividends. The maximum dividend we are paying on a specific contract is
about 0.70%.
We pay any dividend for a Contract on the anniversary date of that Contract. We
apply the dividend as a net purchase payment unless you elect 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
12
<PAGE>
are invested in shares of the Portfolio or the Funds, we will vote the shares
held in the Account in accordance with instructions we receive from the Owners
of Accumulation Units or payees receiving payments under variable payment plans.
Each Owner or payee will receive periodic reports relating to both of the mutual
funds, proxy material and a form with which to give instructions with respect to
the proportion of shares of each Portfolio or Fund held in the Account
corresponding to the Accumulation Units credited to his Contract, or the number
of shares of each Portfolio or 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. We will vote shares for which no
instructions have been received in the same proportion as the shares as for
which instructions have been received.
SUBSTITUTION AND CHANGE We may take any of the following actions, so long as we
comply with all of the requirements of the securities and insurance laws that
may apply. A vote of Contract owners, or of those who have an interest in one or
more of the Divisions of the Account, may be required. Approval by the
Securities and Exchange Commission or another regulatory authority may be
required. In the event that we take any of these actions, we may make an
appropriate endorsement of your Contract and take other actions to carry out
what we have done.
1. We may invest the assets of a Division in securities of another mutual fund
or another issuer, instead of the Portfolio or Fund in which you have invested,
as a substitute for the shares you already have or as the securities to be
purchased in the future.
2. We may operate the Account or a Division as a mutual fund itself, instead of
investing its assets in a mutual fund, if our Board of Trustees decides that
this would be in the best interest of our Contract owners.
3. We may deregister the Account under the Investment Company Act of 1940 if
registration is no longer required.
4. We may change the provisions of the Contracts to comply with federal or state
laws that apply, including changes to comply with federal tax laws in order to
assure that your Contract qualifies for tax benefits relating to retirement
annuity or variable annuity contracts.
FIXED ANNUITY PAYMENT PLANS We will also pay Contract benefits under fixed
annuity payment plans which are not described in this Prospectus. If you select
a fixed annuity, we will cancel the Accumulation Units credited to your Deferred
Contract, we will transfer the withdrawal value of the Contract to our general
account, and you will no longer have any interest in the Account. We may make a
withdrawal charge in determining the withdrawal value. (See "Withdrawal Amount",
p. 10, and "Withdrawal Charge", p. 18.)
PERFORMANCE DATA We may publish advertisements containing performance data for
the Divisions of the Account 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.
We will base all of the performance data on actual historical investment results
for the Portfolios or Funds, including all expenses they bear. The data are not
intended to indicate future performance. We may construct some of the data
hypothetically to reflect expense factors for the Contracts we currently offer.
We have included additional information about the performance data 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.
13
<PAGE>
THE GUARANTEED INTEREST FUND
You may direct all or part of your purchase payments to the Guaranteed Interest
Fund for investment on a fixed basis. You may transfer amounts previously
invested in the Account Divisions to the Guaranteed Interest Fund, prior to the
maturity date, and you may transfer amounts in the Guaranteed Interest Fund to
the Account Divisions. In each case, these transfers are subject to the
restrictions described in the Contract.
Amounts you invest in the Guaranteed Interest Fund become part of our general
assets. In reliance on certain exemptive and exclusionary provisions, we have
not registered interests in the Guaranteed Interest Fund under the Securities
Act of 1933 and we have not registered the Guaranteed Interest Fund 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. We have 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 you invest in the Guaranteed Interest Fund earn interest at rates we
declare from time to time. We will guarantee the interest rate for each amount
for at least one year. The interest rate will be at an annual effective rate of
at least 3%. At the expiration of the period for which we guarantee the interest
rate, a new interest rate may apply. We credit interest and compound it daily.
We determine the effective date for a transaction involving the Guaranteed
Interest Fund in the same manner as the effective date for a transaction
involving a Division of the Account.
Investments in the Guaranteed Interest Fund are subject to a maximum limit of
$1,000,000 ($250,000 in New York) without our prior consent. 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 this maximum
limit, we will place the amount of the excess in the Money Market Division and
it will remain there until you instruct us otherwise.
Transfers from the Guaranteed Interest Fund to the Account Divisions are subject
to limits. After a transfer from the Guaranteed Interest Fund, we will allow no
further transfers from the Guaranteed Interest Fund for a period of 365 days; in
addition, we will allow no further transfers back into the Guaranteed Interest
Fund for a period of 90 days. The maximum amount that you may transfer from the
Guaranteed Interest Fund in one transfer is the greater of (1) 25% of the amount
that you had invested in the Guaranteed Interest Fund as of the last Contract
anniversary preceding the transfer and (2) the amount of your 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 $50,000 limit
does not apply in New York.)
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 either of the mutual funds.
Other charges under the Contracts apply for amounts in the Guaranteed Interest
Fund as they are described in this prospectus for amounts you invest on a
variable basis. See "Deductions", p. 17. For purposes of allocating and
deducting the annual Contract fee, we consider any investment in the Guaranteed
Interest Fund as though it were an investment of the same amount in one of the
Account Divisions.
FEDERAL INCOME TAXES
QUALIFIED AND NONTAX-QUALIFIED PLANS
We offer the Contracts 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 a traditional IRA established under Section
408(b), simplified employee pensions established under Section 408(j)
and (k) and SIMPLE IRAs established under Section 408(p).
2. Roth IRAs pursuant to the provisions of Section 408A of the Code.
3. 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).
4. Deferred compensation plans established pursuant to Section 457 of the
Code for employees of state and local governments and tax-exempt
organizations.
5. Nontransferable annuity contracts issued in exchange for fixed dollar
annuities previously issued by Northwestern Mutual Life or other
insurance companies or as distributions of termination benefits from
tax-qualified pension or
14
<PAGE>
profit-sharing plans or trusts or annuity purchase plans.
We also offer the Contracts for use in non tax-qualified situations (i.e.,
contributions are taxable).
CONTRIBUTION LIMITATIONS AND GENERAL
REQUIREMENTS APPLICABLE TO CONTRACTS
Traditional IRA If an individual has earned income, the individual and the
individual's spouse are each permitted to make a maximum contribution of $2,000
to an IRA or IRAs for their benefit for each taxable year. The $2,000 limit is
reduced by contributions to any Roth IRAs of the Owner. Contributions cannot be
made after age 70 1/2. Annual contributions are generally deductible unless the
Owner or the Owner's spouse is an "active participant" in a plan in another
qualified plan during the taxable year. If the Owner is an "active participant"
in a plan, the deduction for 1999 phases out at an adjusted gross income ("AGI")
of between $31,000 - $41,000 (indexed through 2005) for single filers and
between $51,000 - $61,000 (indexed through 2007) for married individuals filing
jointly. If the Owner is not an "active participant" in a plan but the Owner's
spouse is, the Owner's deduction phases out at an AGI of between $150,000 -
$160,000.
The Owner may also make tax free rollover and direct transfer contributions to
an IRA from the Owner's other IRAs or contracts purchased under tax qualified
plans. The surviving spouse can also roll over the deceased Owner's IRA, tax
deferred annuity or qualified plan to the spouse's own IRA.
An IRA is nonforfeitable and generally cannot be transferred.
SEP An employer can make a maximum contribution to a SEP for an eligible
employee of the lesser of 15% of the employee's compensation (generally up to
$160,000 for 1999) or $30,000. SEP contributions are subject to certain minimum
participation and nondiscrimination requirements. Contributions and earnings
thereon are not includible in the employee's gross income until distributed. The
Contracts are nonforfeitable and nontransferable.
SIMPLE IRA A SIMPLE IRA can be established by an employer for any calendar year
in which the employer has no more than 100 employees who each earned at least
$5,000 during the preceding calendar year and the employer does not maintain
another employer sponsored retirement plan. An eligible employee can elect to
contribute up to $6,000 (indexed) per year to a SIMPLE IRA and the employer must
contribute either a matching contribution of up to 3% of the employee's
compensation or a nonelective contribution of 2% of the employee's compensation
(up to $160,000) for each employee. Contributions and earnings thereon are not
includible in the employee's gross income until distributed. SIMPLE IRAs are
exempt from the nondiscrimination, top-heavy and reporting rules applicable to
qualified plans. The Contracts are nonforfeitable and nontransferable.
ROTH IRA If an individual has earned income, the individual and the individual's
spouse are each permitted to make a maximum contribution of $2,000 to a Roth IRA
or IRAs for their benefit for each taxable year. The $2,000 limit is reduced by
contributions to any traditional IRAs of the Owner. The maximum contribution is
phased out at an adjusted gross income ("AGI") of between $95,000 and $110,000
for single filers, between $150,000 and $160,000 for married individuals filing
jointly and between $0 and $10,000 for married individuals filing separately.
Regular contributions to a Roth IRA are not deductible.
An IRA, SEP or SIMPLE IRA (after two years of participation in a SIMPLE IRA
plan) may be rolled over or converted to a Roth IRA if the Owner has an AGI of
$100,000 or less for the year (not including the rollover amount) and is not
married filing a separate tax return. A rollover to a Roth IRA is fully taxable
(although the tax on rollovers made in 1998 could have been prorated over the
four year period following the rollover). IRA rollovers are not subject to a 10%
premature withdrawal penalty.
TAX DEFERRED ANNUITY Section 403(b) tax deferred annuities can be established
for employees of Section 501(c)(3) tax exempt organizations and public
educational organizations. An eligible employee can make salary reduction
contributions to a tax deferred annuity subject to the employee's "exclusion
allowance" as defined by the Code and an overall limit under Section 415 of the
Code. Elective deferrals for all of the Owner's tax deferred annuity contracts
are limited to $10,000 per year (indexed) with catch-up contributions permitted
in certain circumstances. Contributions and earnings thereon are not included in
the employee's gross income until distributed. Tax deferred annuities are
nonforfeitable and nontransferable and distributions of salary reduction
contributions and earning thereon (except those held as of December 31, 1988)
cannot be withdrawn prior to age 59 1/2 except on account of termination of
service, death, disability or hardship (contributions only).
The employer can also make contributions to a tax deferred annuity subject to
the same rules that apply to qualified plans, including the minimum coverage,
nondiscrimination and spousal consent requirements.
ERISA disclosure rules also apply.
SECTION 457 PLAN A Section 457 deferred compensation plan can be established by
a state or local government or tax-exempt organization. Contracts
15
<PAGE>
must be owned by a trust for the exclusive benefit of the employees and the
employees' beneficiaries in a governmental plan and by the employer (subject to
claims of the employer's general creditors) in a plan of a tax-exempt
organization. An employee can defer the lesser of 33 1/3% of compensation or
$8,000 per year under the plan. Amounts deferred and earnings thereon are not
includible in the employee's gross income until they are paid or made available
to the employee or the employee's beneficiary.
NONTRANSFERABLE ANNUITY Nontransferable annuity contracts are contracts held in
a tax-qualified plan or trust and transferred to the employee on the employee's
separation from service or the termination of the plan. These Contracts cannot
accept additional purchase payments and must comply with the spousal consent
requirements.
NONTAX-QUALIFIED CONTRACT There are no limitations on who can purchase a
nontax-qualified annuity or the amount that can be contributed to the Contract.
Contributions to nontax-qualified Contracts are not deductible. For the Contract
to qualify as a nontax- qualified annuity, the Contract death proceeds must be
distributed to any nonspouse beneficiary either within five years of the Owner's
death or as substantially periodic payments over the beneficiary's life or life
expectancy commencing within one year of the Owner's death. The surviving spouse
is entitled to continue deferral under the Contract.
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. Except for qualified distributions from Roth IRAs,
Contract benefits will be taxable as ordinary income when received in accordance
with Section 72 of the Code.
IRAS, SEPS, SIMPLE IRAS, TDAS AND SECTION 457 PLANS AND NONTRANSFERABLE
ANNUITIES As a general rule, benefits received as annuity payments or upon death
or withdrawal from these contracts 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." After the
Owner attains age 70 1/2, 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,
including hardship withdrawals from tax-deferred annuities, 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.
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.
ROTH IRAS Qualified distributions from a Roth IRA are not taxable. A qualified
distribution is a distribution (1) made at least 5 years after the issuance of
the Owner's first Roth IRA, and (2) made after the Owner has attained age 59
1/2, made to a beneficiary after the Owner's death, attributable to the Owner
being disabled, or used to pay acquisition expenses of a qualified first time
home purchase. A nonqualified distribution is taxable as ordinary income only to
the extent it exceeds the "investment in the contract" as defined in Section 72.
Distributions are not required to be made from a Roth IRA before the Owner's
death.
A withdrawal from a Roth IRA of part or all of an IRA rollover contribution
within 5 years of the rollover is subject to a 10% premature withdrawal penalty
(unless an exception applies). In addition, if part or all of an IRA rollover
made in 1998 is withdrawn before 1/1/2001, any taxes on the rollover deferred by
proration may be accelerated. Rollover contributions are treated as withdrawn
after regular contributions for this purpose.
A regular or conversion contribution to a Roth IRA can be recharacterized to an
IRA in a trustee-to-trustee transfer provided the transfer includes the net
income or loss allocable to the contribution and is completed by the due date
for filing the Owner's federal income tax return for the year the contribution
was made. The recharacterized amount will be treated for tax purposes as
originally made from the IRA. Recharacterized amounts can be reconverted to a
Roth IRA once each calendar year. Benefits from a Roth IRA can be rolled over or
transferred directed only to another Roth IRA.
NONQUALIFIED CONTRACTS Benefits received as annuity payments from
nontax-qualified 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"
16
<PAGE>
is recovered. Benefits received in a lump sum from these Contracts will be
taxable as ordinary income to the extent they exceed the "investment in the
contract." A partial withdrawal or collateral assignment prior to the Maturity
Date will result in the receipt of gross income by the Owner to the extent that
the amounts withdrawn or assigned do not exceed the excess (if any) of the total
value of Accumulation Units over total purchase payments paid under the Contract
less any amounts previously withdrawn or assigned. Thus, any investment gains
reflected in the Contract values are considered to be withdrawn first and are
taxable as ordinary income. For Contracts issued after October 21, 1988,
investment gains will be determined by aggregating all nontax-qualified deferred
Contracts we issue 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.
PREMATURE WITHDRAWALS 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, Roth IRAs, 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 and for certain
substantially equal periodic payments for life. Additional exceptions for
certain large medical expenses, reimbursement of health insurance premiums paid
while the Owner was unemployed, qualified education expenses and first time home
purchases apply to IRAs and Roth IRAs.
MANDATORY WITHHOLDING 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."
TAXATION OF NORTHWESTERN MUTUAL LIFE
We 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. We are currently making no charge. (See
"Net Investment Factor", p. 9 and "Deductions", p. 17.)
OTHER CONSIDERATIONS
You should understand 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. We do not intend this discussion as tax advice. Before you
purchase a Contract, we advise you to consult qualified tax counsel.
DEDUCTIONS
We will make the following deductions:
1. SALES LOAD. For the Front Load Contract we deduct a sales load from all
purchase payments we receive. We base the deduction on cumulative purchase
payments we have received and the rates in the table below:
<TABLE>
<CAPTION>
CUMULATIVE PURCHASE PAYMENTS
PAID UNDER THE CONTRACT RATE
- ----------------------------- ------
<S> <C>
First $100,000.....................................................4.0%
Next $400,000......................................................2.0%
Next $500,000......................................................1.0%
Balance over $1,000,000............................................0.5%
</TABLE>
2. DEDUCTIONS FOR MORTALITY RATE AND EXPENSE RISKS. The net investment factor
(see "Net Investment Factor", p. 9) we use in determining the value of
Accumulation and Annuity Units reflects a deduction on each valuation date for
mortality rate and expense risks we have assumed. For the Front Load Contract,
the deduction from Accumulation Units is at a current annual rate of 0.4% of the
assets of the Account, while the deduction from Annuity Units is zero. For the
Back Load Contract the deduction is at a current annual rate of 1.25% of the
assets of the Account. Our Board of Trustees may increase or decrease the
deduction, but in no event may the deduction exceed an annual rate of
17
<PAGE>
.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 mutual funds
pay expenses which are described in the attached prospectuses for the mutual
funds.
The risks we assume 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 we make may be insufficient to
cover the actual costs we incur in connection with the Contracts. We assume
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
the mutual funds as described under "Substitution and Change", p. 13, and any
applicable taxes, i.e., any tax liability we have paid or reserved for resulting
from the maintenance or operation of a Division of the Account, other than
applicable premium taxes which we may deduct directly from considerations. We do
not presently anticipate that we will make any deduction for federal income
taxes (see "Federal Income Taxes", p. 14), nor do we anticipate that maintenance
or operation of the Account will give rise to any deduction for state or local
taxes. However, we reserve 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 we make
a deduction of $30 for administrative expenses relating to a Deferred Contract
during the prior year. We make the charge by reducing the number of Accumulation
Units credited to the Contract. For purposes of allocating and deducting the
annual Contract fee, we consider any investment in the Guaranteed Interest Fund
as though it were an investment of the same amount in one of the Account
Divisions. We cannot increase this charge. The charge is intended only to
reimburse us for our actual administrative expenses. We currently are waiving
the charge if the Contract value on the Contract anniversary is $50,000 or more.
4. WITHDRAWAL CHARGE. For the Back Load Contract if you withdraw Accumulation
Units for cash, we will deduct a withdrawal charge for sales expenses. We will
base the withdrawal charge on the Amount Categories and the Rates in the table
below. We base the amount in each Category on cumulative purchase payments you
have made and on the number of Contract anniversaries that have occurred since
you made each purchase payment.
<TABLE>
<CAPTION>
AMOUNT CATEGORY RATE
- ----------------- -------
<S> <C>
Eight.............................................................8%
Seven.............................................................7%
Six...............................................................6%
Five..............................................................5%
Four..............................................................4%
Three.............................................................3%
Two...............................................................2%
One...............................................................1%
Zero..............................................................0%
</TABLE>
The first $100,000 of total purchase payments paid over the life of the Contract
start out in Category Eight, the next $400,000 start out in Category Four, the
next $500,000 start out in Category Two, and all additional purchase payments
paid start out in Category One. As of each Contract anniversary, we move any
amount in a Category 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 we use to calculate the withdrawal
charge will be limited to the value of the Contract benefits that are subject to
the withdrawal charge. The amounts we use will be taken from those Categories
that produce the lowest withdrawal charge. However, any amounts we use 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 you have
paid under the Contract; but in the case of a partial withdrawal, we consider
the purchase payments paid under the Contract to be withdrawn first, except for
amounts eligible for the withdrawal charge free amount described in the next
paragraph.
The withdrawal charge free amount is available on a Contract if the Contract
value is at least $10,000 on the Contract anniversary preceding a withdrawal.
For each Contract year, the withdrawal charge free amount is equal to the lesser
of 10% of the Contract value on the last Contract anniversary, and the amount by
which the Contract value exceeds cumulative purchase payments as of the date of
the withdrawal. We will take eligible amounts withdrawn meeting these
requirements first from the portion of the Contract value that exceeds
cumulative purchase payments. We will base the withdrawal charge for any amounts
not included in the withdrawal charge free amount first on the purchase payments
that have been paid.
We will make no withdrawal charge when you select a variable payment plan.
However, we will make the withdrawal charge if you make a withdrawal, or partial
withdrawal, within five years after the beginning of a variable payment plan
which is not contingent on the
18
<PAGE>
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, we 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 you
select the payment plan after the Contract has been in force for at least one
full year.
The amount of withdrawal charges we collect from the Back Load Contracts as a
group will depend on the volume and timing of withdrawal transactions. We are
unable to determine in advance whether this amount will be greater or less than
the sales expenses we incur in connection with those Contracts, but based on the
information presently available we believe it is more likely than not that the
sales expenses we incur will be greater than the withdrawal charges we receive.
We bear this risk for the duration of the Contracts. We will pay any excess of
sales expenses over withdrawal charges from our general assets. 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. Various
jurisdictions levy premium taxes. Premium taxes 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, we do
not deduct premium taxes from purchase payments received under the Contracts or
from Contract benefits. However, we reserve 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 for sales expenses. The deduction is 8% on the first $5,000
received during a single Contract year as defined in the Contract, 4% on the
next $20,000, 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 we may raise 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 we may raise to a maximum annual rate of 1%.
REDUCED CHARGES FOR EXCHANGE TRANSACTIONS As a matter of current practice, we
permit owners of fixed dollar annuities we have previously issued 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 we may change or withdraw at any time.
In general, we make a $25 administrative charge on these exchange transactions
and we permit only one such transaction 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 we are presently waiving this
limit.
Amounts exchanged from a fixed contract which provides for a surrender charge
are not charged for sales expenses when the exchange is effected. We place these
amounts in the same withdrawal charge category under the new Back Load Contract
as they were before.
We place exchange proceeds from fixed contracts which have no surrender charge
provisions 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.
19
<PAGE>
DISTRIBUTION OF THE CONTRACTS
We sell the Contracts through individuals who, in addition to being licensed
insurance agents of Northwestern Mutual Life, are registered representatives of
Northwestern Mutual Investment Services, LLC, our wholly-owned subsidiary.
Northwestern Mutual Investment Services, LLC is 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, these agents will also be licensed
securities salesmen. Commissions paid to the agents on sales of the Contracts
will not exceed 4% of purchase payments.
YEAR 2000 ISSUES
Since early 1996, we have been preparing for the computer requirements
associated with the approaching turn of the century. We completed assessment of
our internal systems in 1996. As of the date of this prospectus, the necessary
system changes are substantially complete. System testing is in process and we
expect testing of all critical systems to be completed during the first six
months of 1999.
The work on these computer systems extends to software packages we purchase from
vendors. In addition, we have been communicating formally with our business
partners to identify and assess potential exposure that could result from their
failure to address these computer issues on a timely basis. Each of our
departments has prepared a contingency plan.
We and our business partners bear all of the costs of identifying and resolving
the computer systems issues associated with the year 2000. These costs will have
no effect on the performance of the Account. The Contracts permit us to increase
the charges for our expense risks up to the guaranteed maximum rates. However,
we do not expect our costs for year 2000 compliance to have any significant
effect on the benefits or values provided by the Contracts.
We believe that our computer systems will be ready for the year 2000 well in
advance of the deadline. By their nature, however, the issues in this area carry
the risk of unforeseen problems, both at Northwestern Mutual Life and at all the
other sites where supporting functions and interaction take place. There can be
no assurance that these problems will not have a material adverse impact on the
operations of Northwestern Mutual Life and the Account.
20
<PAGE>
TABLE OF CONTENTS FOR STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
PAGE
------
<S> <C>
DISTRIBUTION OF THE
CONTRACTS.......................................................................................B-2
DETERMINATION OF ANNUITY
PAYMENTS........................................................................................B-2
Amount of Annuity Payments ...................................................................B-2
Annuity Unit Value............................................................................B-3
Illustrations of Variable Annuity
Payments....................................................................................B-3
VALUATION OF ASSETS OF THE
ACCOUNT.........................................................................................B-4
TRANSFERABILITY RESTRICTIONS .....................................................................B-4
PERFORMANCE DATA..................................................................................B-4
EXPERTS...........................................................................................B-6
FINANCIAL STATEMENTS OF THE ACCOUNT (for the two years ended
December 31, 1998)................................................................................B-7
REPORT OF INDEPENDENT
ACCOUNTANTS (for the two years ended
December 31, 1998)...........................................................................B-13
FINANCIAL STATEMENTS OF
NORTHWESTERN MUTUAL LIFE (for
the three years ended December
31, 1998).....................................................................................B-14
REPORT OF INDEPENDENT
ACCOUNTANTS (for the three years
ended December 31, 1998)......................................................................B-27
</TABLE>
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 Products 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
----------------------------------------------- ------------ -------
21
<PAGE>
More information about Northwestern Mutual Series Fund, Inc. is included in the
Fund's Statement of Additional Information (SAI), incorporated by reference in
this prospectus, which is available free of charge.
More information about the Fund's investments is included in the Fund's annual
and semi-annual reports, which discuss the market conditions and investment
strategies that significantly affected each Portfolio's performance during the
previous fiscal period.
To request a free copy of the Fund's SAI, or current annual or semi-annual
report, call us at 1-800-519-4665. Information about the Fund (including the
SAI) can be reviewed and copied at the Public Reference Room of the Securities
and Exchange Commission (SEC) in Washington, DC. Information on the operation of
the Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330.
Reports and other information about the Fund are available on the SEC's Internet
site at http://www.sec.gov. Copies of this information may be obtained, upon
payment of a duplicating fee, by writing the Public Reference Section of the
SEC, Washington, DC 20549-6009.
N O R T H W E S T E R N M U T U A L L I F E
Variable Annuity Contracts
Nontax-Qualified Annuities Individual Retirement Annuities
Roth IRAs 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.
Russell Insurance Funds
P R O S P E C T U S
Investment Company Act File Nos. 811-3990 and 811-5371
Northwestern
Mutual Life(R)
PO Box 3095
Milwaukee WI 53201-3095
Change Service Requested
60826
<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, 1999.
The Date of this Statement of Additional Information is April 30, 1999.
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, LLC ("NMIS").
NMIS may be considered the underwriter of the Contracts for purposes of the
federal securities laws. The following amounts of commissions were paid on sales
of the Contracts during each of the last three years:
<TABLE>
<CAPTION>
YEAR AMOUNT
------ --------
<S> <C>
1998 $20,405,686
1997 $15,326,743
1996 $14,128,993
</TABLE>
DETERMINATION OF ANNUITY PAYMENTS
The following discussion of the method for determining the amount of
monthly annuity payments under a variable payment plan is intended to be read in
conjunction with these sections of the prospectus for the Contracts: "Variable
Payment Plans", p. 10, including "Description of Payment Plans", p. 10, "Amount
of Annuity Payments", p. 10, and "Assumed Investment Rate", p. 11; "Dividends",
p. 12; "Net Investment Factor", p. 9; 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).
<TABLE>
<S> <C>
(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
</TABLE>
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 or Fund shares 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 a Portfolio or 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:
P(1 + T) to the power of n = ERV
Where:
<TABLE>
<S> <C>
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)
</TABLE>
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 for the
Back Load Contract based on an average Contract size of $15,000. The $30 annual
Contract fee is not reflected in the Front Load Contract based on an average
Contract size of $55,000. 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, 1998:
B-4
<PAGE>
FRONT LOAD CONTRACT
<TABLE>
<CAPTION>
DIVISION 1-YEAR 5-YEAR 10-YEAR INCEPTION*
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Aggressive Growth Stock 2.84 14.77 NA 18.46
International Equity 0.22 8.93 NA 12.05
Growth Stock 21.14 NA NA 21.61
Growth and Income Stock 17.74 NA NA 20.45
Index 500 Stock 23.08 22.43 NA 19.56
Balanced 13.67 14.27 12.30 NA
High Yield Bond -6.15 NA NA 9.76
Select Bond 2.38 5.68 8.20 NA
Money Market 0.81 3.94 4.63 NA
- -------------------------------------------------------------------------------------------------------------
</TABLE>
BACK LOAD CONTRACT
<TABLE>
<CAPTION>
DIVISION 1-YEAR 5-YEAR 10-YEAR INCEPTION*
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Aggressive Growth Stock -0.99 14.15 NA 17.83
International Equity -3.69 8.25 NA 11.40
Growth Stock 17.87 NA NA 21.01
Growth and Income Stock 14.37 NA NA 19.84
Index 500 Stock 19.87 21.88 NA 18.92
Balanced 10.17 13.65 11.59 NA
High Yield Bond -10.25 NA NA 8.98
Select Bond -1.47 4.95 7.51 NA
Money Market -3.09 3.17 3.96 NA
- -------------------------------------------------------------------------------------------------------------
</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, 1998:
FRONT LOAD CONTRACT
<TABLE>
<CAPTION>
DIVISION 1-YEAR 5-YEAR 10-YEAR INCEPTION*
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Aggressive Growth Stock 7.12 15.71 NA 19.06
International Equity 4.40 9.83 NA 12.86
Growth Stock 26.18 NA NA 22.68
Growth and Income Stock 22.64 NA NA 21.51
Index 500 Stock 28.21 23.43 NA 20.17
Balanced 18.40 15.21 12.76 NA
High Yield Bond -2.24 NA NA 10.73
Select Bond 6.64 6.55 8.64 NA
Money Market 5.01 4.79 5.06 NA
- -------------------------------------------------------------------------------------------------------------
</TABLE>
B-5
<PAGE>
BACK LOAD CONTRACT
<TABLE>
<CAPTION>
DIVISION 1-YEAR 5-YEAR 10-YEAR INCEPTION*
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Aggressive Growth Stock 6.22 14.73 NA 18.06
International Equity 3.52 8.90 NA 11.91
Growth Stock 25.12 NA NA 21.64
Growth and Income Stock 21.61 NA NA 20.48
Index 500 Stock 27.13 22.39 NA 19.16
Balanced 17.40 14.24 11.81 NA
High Yield Bond -3.06 NA NA 9.79
Select Bond 5.74 5.65 7.73 NA
Money Market 4.12 3.91 4.17 NA
- ------------------------------------------------------------------------------------------------------------
</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.
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, 1998 and for
each of the two years in the period ended December 31, 1998 and of
Northwestern Mutual Life as of December 31, 1998 and 1997 and for each of the
three years in the period ended December 31, 1998 included in this Statement
of Additional Information have been so included in reliance on the reports of
PricewaterhouseCoopers LLP, independent accountants, given on the authority
of said firm as experts in auditing and accounting. PricewaterhouseCoopers LLP
provides audit services for the Account. The address of
PricewaterhouseCoopers LLP is 100 East Wisconsin Avenue, Suite 1500,
Milwaukee, Wisconsin 53202.
B-6
<PAGE>
ACCOUNT B FINANCIAL STATEMENTS
NML VARIABLE ANNUITY ACCOUNT B
Financial Statements
DECEMBER 31, 1998
STATEMENT OF ASSETS AND LIABILITIES
(IN THOUSANDS)
<TABLE>
<S> <C> <C>
ASSETS
Investments at Market Value:
Northwestern Mutual Series Fund, Inc.
Aggressive Growth Stock
236,145 shares (cost $565,515)............. $ 818,007
International Equity
291,261 shares (cost $408,731)............. 488,444
Growth Stock
133,789 shares (cost $210,399)............. 300,624
Growth and Income Stock
260,808 shares (cost $348,055)............. 423,552
Index 500 Stock
356,667 shares (cost $645,769)............. 1,173,076
Balanced
1,180,836 shares (cost $1,687,263)......... 2,626,180
High Yield Bond
145,498 shares (cost $159,267)............. 136,186
Select Bond
191,043 shares (cost $226,720)............. 238,613
Money Market
205,636 shares (cost $205,636)............. 205,636 $ 6,410,318
-----------
Due from Sale of Fund Shares.................................... 2,508
Due from Northwestern Mutual Life Insurance Company............. 2,063
-----------
Total Assets.................................................... $ 6,414,889
-----------
-----------
LIABILITIES
Due to Participants........................................... $ 8,709
Due to Northwestern Mutual Life Insurance Company............. 2,508
Due on Purchase of Fund Shares................................ 2,021
-----------
Total Liabilities......................................... 13,238
-----------
EQUITY (NOTE 8)
Contracts Issued Prior to December 17, 1981................... 91,339
Contracts Issued After December 16, 1981 and Prior to March
31, 1995..................................................... 4,318,647
Contracts Issued On or After March 31, 1995:
Front Load Version............................................ 599,836
Back Load Version............................................. 1,391,829
-----------
Total Equity.............................................. 6,401,651
-----------
Total Liabilities and Equity.............................. $ 6,414,889
-----------
-----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements
B-7
<PAGE>
ACCOUNT B FINANCIAL STATEMENTS
NML VARIABLE ANNUITY ACCOUNT B
Statements of Operations and Changes in Equity
(IN THOUSANDS)
<TABLE>
<CAPTION>
AGGRESSIVE GROWTH INTERNATIONAL EQUITY
COMBINED STOCK DIVISION DIVISION
----------------------------- ----------------------------- -----------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1998 1997 1998 1997 1998 1997
------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividend Income............... $ 279,975 $ 273,279 $ 29,446 $ 42,923 $ 29,263 $ 15,386
Annuity Rate and Expense
Guarantees.................. 67,916 53,021 9,236 8,086 6,000 5,358
------------- ------------- ------------- ------------- ------------- -------------
Net Investment Income......... 212,059 220,258 20,210 34,837 23,263 10,028
------------- ------------- ------------- ------------- ------------- -------------
REALIZED AND UNREALIZED GAIN
ON INVESTMENTS
Realized Gain on
Investments............... 88,924 39,663 27,122 12,892 17,380 4,228
Unrealized Appreciation
(Depreciation) of
Investments During the
Period.................... 521,055 527,607 650 39,283 (24,915) 30,048
------------- ------------- ------------- ------------- ------------- -------------
Net Gain (Loss) on
Investments............... 609,979 567,270 27,772 52,175 (7,535) 34,276
------------- ------------- ------------- ------------- ------------- -------------
Increase in Equity Derived
from Investment
Activity.................. 822,038 787,528 47,982 87,012 15,728 44,304
------------- ------------- ------------- ------------- ------------- -------------
EQUITY TRANSACTIONS
Contract Owners' Net
Deposits.................. 804,374 677,589 94,566 99,971 60,272 74,713
Annuity Payments............ (11,449) (8,151) (737) (540) (559) (462)
Surrenders and Other
(net)..................... (370,626) (227,384) (55,445) (31,527) (33,875) (17,649)
Transfers from Other
Divisions or Sponsor...... 812,385 508,492 57,046 68,100 56,567 53,618
Transfers to Other Divisions
or Sponsor................ (825,382) (519,749) (113,076) (92,620) (102,582) (46,867)
------------- ------------- ------------- ------------- ------------- -------------
Increase in Equity Derived
from Equity Transactions.... 409,302 430,797 (17,646) 43,384 (20,177) 63,353
------------- ------------- ------------- ------------- ------------- -------------
Net Increase (Decrease) in
Equity...................... 1,231,340 1,218,325 30,336 130,396 (4,449) 107,657
EQUITY
Beginning of Year........... 5,170,311 3,951,986 786,882 656,486 492,432 384,775
------------- ------------- ------------- ------------- ------------- -------------
End of Year................. $6,401,651 $5,170,311 $817,218 $786,882 $487,983 $492,432
------------- ------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- ------------- -------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements
B-8
<PAGE>
NML VARIABLE ANNUITY ACCOUNT B
Statements of Operations and Changes in Equity
(IN THOUSANDS)
<TABLE>
<CAPTION>
GROWTH & INCOME INDEX 500
GROWTH STOCK DIVISION STOCK DIVISION STOCK DIVISION
----------------------------- ----------------------------- -----------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1998 1997 1998 1997 1998 1997
------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividend Income............... $ 4,848 $ 7,990 $ 3,489 $ 61,425 $ 32,261 $ 21,296
Annuity Rate and Expense
Guarantees.................. 2,665 1,459 4,034 2,356 11,266 7,413
------------- ------------- ------------- ------------- ------------- -------------
Net Investment Income
(Loss)...................... 2,183 6,531 (545) 59,069 20,995 13,883
------------- ------------- ------------- ------------- ------------- -------------
REALIZED AND UNREALIZED GAIN
ON INVESTMENTS
Realized Gain on
Investments............... 1,471 694 2,454 731 15,353 3,597
Unrealized Appreciation
(Depreciation) of
Investments During the
Period.................... 49,578 26,626 67,034 (8,963) 198,764 158,395
------------- ------------- ------------- ------------- ------------- -------------
Net Gain (Loss) on
Investments............... 51,049 27,320 69,488 (8,232) 214,117 161,992
------------- ------------- ------------- ------------- ------------- -------------
Increase in Equity Derived
from Investment
Activity.................. 53,232 33,851 68,943 50,837 235,112 175,875
------------- ------------- ------------- ------------- ------------- -------------
EQUITY TRANSACTIONS
Contract Owners' Net
Deposits.................. 54,754 35,700 73,068 55,118 152,424 115,401
Annuity Payments............ (268) (151) (642) (386) (1,910) (1,292)
Surrenders and Other
(net)..................... (12,505) (4,686) (19,173) (7,534) (53,430) (28,174)
Transfers from Other
Divisions or Sponsor...... 56,084 30,593 63,150 55,360 154,924 88,834
Transfers to Other Divisions
or Sponsor................ (28,461) (14,624) (46,768) (21,037) (115,601) (57,501)
------------- ------------- ------------- ------------- ------------- -------------
Increase in Equity Derived
from Equity Transactions.... 69,604 46,832 69,635 81,521 136,407 117,268
------------- ------------- ------------- ------------- ------------- -------------
Net Increase (Decrease) in
Equity...................... 122,836 80,683 138,578 132,358 371,519 293,143
EQUITY
Beginning of Year........... 177,410 96,727 284,747 152,389 799,451 506,308
------------- ------------- ------------- ------------- ------------- -------------
End of Year................. $300,246 $177,410 $423,325 $284,747 $1,170,970 $799,451
------------- ------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- ------------- -------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements
B-9
<PAGE>
NML VARIABLE ANNUITY ACCOUNT B
Statements of Operations and Changes in Equity
(IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCED DIVISION HIGH YIELD BOND DIVISION SELECT BOND DIVISION
----------------------------- ----------------------------- -----------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1998 1997 1998 1997 1998 1997
------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividend Income............... $ 143,628 $ 91,116 $ 13,983 $ 15,911 $ 14,579 $ 10,248
Annuity Rate and Expense
Guarantees.................. 29,061 24,287 1,408 752 2,437 1,923
------------- ------------- ------------- ------------- ------------- -------------
Net Investment Income
(Loss)...................... 114,567 66,829 12,575 15,159 12,142 8,325
------------- ------------- ------------- ------------- ------------- -------------
REALIZED AND UNREALIZED GAIN
ON INVESTMENTS
Realized Gain on
Investments............... 24,370 16,178 87 147 687 1,196
Unrealized Appreciation
(Depreciation) of
Investments During the
Period.................... 248,726 283,731 (18,317) (5,691) (465) 4,178
------------- ------------- ------------- ------------- ------------- -------------
Net Gain (Loss) on
Investments............... 273,096 299,909 (18,230) (5,544) 222 5,374
------------- ------------- ------------- ------------- ------------- -------------
Increase in Equity Derived
from Investment
Activity.................. 387,663 366,738 (5,655) 9,615 12,364 13,699
------------- ------------- ------------- ------------- ------------- -------------
EQUITY TRANSACTIONS
Contract Owners' Net
Deposits.................. 220,919 162,927 40,941 27,421 33,881 26,099
Annuity Payments............ (6,278) (4,545) (301) (159) (570) (457)
Surrenders and Other
(net)..................... (153,449) (105,615) (8,012) (2,481) (13,382) (10,101)
Transfers from Other
Divisions or Sponsor...... 103,591 60,446 39,779 29,165 50,470 22,652
Transfers to Other Divisions
or Sponsor................ (133,506) (98,388) (31,044) (9,307) (36,471) (23,258)
------------- ------------- ------------- ------------- ------------- -------------
Increase in Equity Derived
from Equity Transactions.... 31,277 14,825 41,363 44,639 33,928 14,935
------------- ------------- ------------- ------------- ------------- -------------
Net Increase (Decrease) in
Equity...................... 418,940 381,563 35,708 54,254 46,292 28,634
EQUITY
Beginning of Year........... 2,202,757 1,821,194 100,661 46,407 191,965 163,331
------------- ------------- ------------- ------------- ------------- -------------
End of Year................. $2,621,697 $2,202,757 $136,369 $100,661 $238,257 $191,965
------------- ------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- ------------- -------------
<CAPTION>
MONEY MARKET DIVISION
-----------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1998 1997
------------- -------------
<S> <C> <C>
INVESTMENT INCOME
Dividend Income............... $ 8,478 $ 6,984
Annuity Rate and Expense
Guarantees.................. 1,809 1,387
------------- -------------
Net Investment Income
(Loss)...................... 6,669 5,597
------------- -------------
REALIZED AND UNREALIZED GAIN
ON INVESTMENTS
Realized Gain on
Investments............... -- --
Unrealized Appreciation
(Depreciation) of
Investments During the
Period.................... -- --
------------- -------------
Net Gain (Loss) on
Investments............... -- --
------------- -------------
Increase in Equity Derived
from Investment
Activity.................. 6,669 5,597
------------- -------------
EQUITY TRANSACTIONS
Contract Owners' Net
Deposits.................. 73,549 80,239
Annuity Payments............ (184) (159)
Surrenders and Other
(net)..................... (21,355) (19,617)
Transfers from Other
Divisions or Sponsor...... 230,774 99,724
Transfers to Other Divisions
or Sponsor................ (217,873) (156,147)
------------- -------------
Increase in Equity Derived
from Equity Transactions.... 64,911 4,040
------------- -------------
Net Increase (Decrease) in
Equity...................... 71,580 9,637
EQUITY
Beginning of Year........... 134,006 124,369
------------- -------------
End of Year................. $205,586 $134,006
------------- -------------
------------- -------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements
B-10
<PAGE>
NOTES TO FINANCIAL STATEMENTS
NML VARIABLE ANNUITY ACCOUNT B
Notes to Financial Statements
DECEMBER 31, 1998
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" 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% 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, 1998 by each Division
are shown below:
<TABLE>
<CAPTION>
PURCHASES SALES
------------- ------------
<S> <C> <C>
Aggressive Growth Division.......... $ 52,886,651 $ 49,961,563
International Equity Division....... 56,140,710 53,062,162
Growth Stock Division............... 74,993,862 3,109,497
Growth & Income Stock
Division............................ 78,595,199 9,143,672
Index 500 Stock Division............ 181,353,026 22,684,529
Balanced Division................... 220,059,260 73,056,429
High Yield Bond Division............ 63,971,868 9,992,629
Select Bond Division................ 56,781,795 10,814,747
Money Market Division............... 133,792,656 62,264,377
</TABLE>
NOTE 6 -- A deduction for annuity rate and expense guarantees is determined
daily and paid to Northwestern Mutual 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 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. For these contracts, the rates may be increased or
decreased by the Board of Trustees of Northwestern Mutual not to exceed 3/4 of
1% and 1 1/2% annual rate, 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 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 not to exceed a 1% annual rate.
Since 1995, Northwestern Mutual has paid a dividend to certain contracts. The
dividend is re-invested in the Account and has been reflected as a Contract
Owners' Net Deposit in the accompanying financial statements.
NOTE 7 -- Northwestern Mutual 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. Under current law, no federal income
taxes are payable with respect 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
(IN THOUSANDS)
DECEMBER 31, 1998
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>
Aggressive Growth Stock................. $ 3.979925 1,033 $ 4,111 $ 3.822308 142,251 $ 543,726
International Equity.................... 1.947470 1,521 2,962 1.893030 169,478 320,826
Growth Stock............................ 2.549324 335 854 2.490522 55,526 138,288
Growth and Income....................... 2.437983 433 1,056 2.381813 87,082 207,413
Index 500 Stock......................... 4.288648 10,167 43,603 4.119000 163,099 671,803
Balanced................................ 7.408002 3,072 22,761 6.804809 303,184 2,063,107
High Yield Bond......................... 1.582307 139 220 1.545816 32,974 50,972
Select Bond............................. 7.793891 958 7,457 7.157135 19,458 139,262
Money Market............................ 2.652467 1,060 2,812 2.436196 46,757 113,910
--------- ----------
Equity................................ 85,836 4,249,307
Annuity Reserves...................... 5,503 69,340
--------- ----------
Total Equity.......................... $ 91,339 $4,318,647
--------- ----------
--------- ----------
</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>
Aggressive Growth Stock................. $ 1.858751 38,301 71,192 $ 3.822308 50,241 $ 192,036
International Equity.................... 1.604722 30,706 49,274 1.893030 58,015 109,824
Growth Stock............................ 2.375383 20,436 48,543 2.490522 43,931 109,412
Growth and Income Stock................. 2.270962 28,665 65,098 2.381813 60,019 142,954
Index 500 Stock......................... 2.597374 49,368 128,227 4.119000 74,933 308,651
Balanced................................ 1.912247 72,292 138,241 6.804809 50,001 340,250
High Yield Bond......................... 1.495835 19,796 29,612 1.545816 34,432 53,226
Select Bond............................. 1.350384 22,094 29,835 7.157135 8,005 57,295
Money Market............................ 1.203067 27,166 32,682 2.436196 22,513 54,846
--------- ----------
Equity................................ 592,704 1,368,494
Annuity Reserves...................... 7,132 23,335
--------- ----------
Total Equity.......................... $ 599,836 $1,391,829
--------- ----------
--------- ----------
</TABLE>
B-12
<PAGE>
ACCOUNTANTS' REPORT
[LOGO]
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 Aggressive Growth Stock Division,
International Equity Division, Growth Stock Division, Growth and Income Stock
Division, Index 500 Stock Division, Balanced Division, High Yield Bond Division,
Select Bond Division and the Money Market Division thereof at December 31, 1998,
the results of each of their operations and the changes in each of their equity
for each of the two years in the period ended December 31, 1998, 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, 1998 with
Northwestern Mutual Series Fund, Inc., provide a reasonable basis for the
opinion expressed above.
[SIG]
Milwaukee, Wisconsin
January 25, 1999
B-13
<PAGE>
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(IN MILLIONS)
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.
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1998 1997
--------- ---------
<S> <C> <C>
ASSETS
Bonds......................................... $ 34,888 $ 32,359
Common and preferred stocks................... 6,576 6,524
Mortgage loans................................ 12,250 10,835
Real estate................................... 1,481 1,372
Policy loans.................................. 7,580 7,163
Other investments............................. 1,839 2,026
Cash and temporary investments................ 1,275 572
Due and accrued investment income............. 827 795
Other assets.................................. 1,313 1,275
Separate account assets....................... 9,966 8,160
--------- ---------
Total assets.............................. $ 77,995 $ 71,081
--------- ---------
--------- ---------
LIABILITIES AND SURPLUS
Reserves for policy benefits.................. $ 51,815 $ 47,343
Policy benefit and premium deposits........... 1,709 1,624
Policyowner dividends payable................. 2,870 2,640
Interest maintenance reserve.................. 606 461
Asset valuation reserve....................... 1,994 1,974
Income taxes payable.......................... 1,161 1,043
Other liabilities............................. 3,133 3,735
Separate account liabilities.................. 9,966 8,160
--------- ---------
Total liabilities......................... 73,254 66,980
Surplus....................................... 4,741 4,101
--------- ---------
Total liabilities and surplus............. $ 77,995 $ 71,081
--------- ---------
--------- ---------
</TABLE>
The accompanying notes are an integral part of these financial statements.
B-14
<PAGE>
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENT OF OPERATIONS
(IN MILLIONS)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
---------------------------------
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
REVENUE
Premium income................................ $ 8,021 $ 7,294 $ 6,667
Net investment income......................... 4,536 4,171 3,836
Other income.................................. 922 861 759
--------- --------- ---------
Total revenue............................. 13,479 12,326 11,262
--------- --------- ---------
BENEFITS AND EXPENSES
Benefit payments to policyowners and
beneficiaries................................ 3,602 3,329 2,921
Net additions to policy benefit reserves...... 4,521 4,026 3,701
Net transfers to separate accounts............ 564 566 579
--------- --------- ---------
Total benefits............................ 8,687 7,921 7,201
Operating expenses............................ 1,297 1,138 1,043
--------- --------- ---------
Total benefits and expenses............... 9,984 9,059 8,244
--------- --------- ---------
Gain from operations before dividends and taxes... 3,495 3,267 3,018
Policyowner dividends............................. 2,869 2,636 2,341
--------- --------- ---------
Gain from operations before taxes................. 626 631 677
Income tax expense................................ 301 356 452
--------- --------- ---------
Net gain from operations.......................... 325 275 225
Net realized capital gains........................ 484 414 395
--------- --------- ---------
Net income................................ $ 809 $ 689 $ 620
--------- --------- ---------
--------- --------- ---------
</TABLE>
The accompanying notes are an integral part of these financial statements.
B-15
<PAGE>
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENT OF CHANGES IN SURPLUS
(IN MILLIONS)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
-------------------------------
1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
BEGINNING OF YEAR BALANCE......................... $4,101 $3,515 $2,786
Net income...................................... 809 689 620
Increase (decrease) in net unrealized gains..... (147) 576 295
Increase in investment reserves................. (20) (526) (176)
Other, net...................................... (2) (153) (10)
------- ------- -------
Net increase in surplus......................... 640 586 729
------- ------- -------
END OF YEAR BALANCE............................... $4,741 $4,101 $3,515
------- ------- -------
------- ------- -------
</TABLE>
The accompanying notes are an integral part of these financial statements.
B-16
<PAGE>
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN MILLIONS)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
----------------------------------
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Insurance and annuity premiums.................. $ 8,876 $ 8,093 $ 7,361
Investment income received...................... 4,216 3,928 3,634
Disbursement of policy loans, net of
repayments..................................... (416) (360) (326)
Benefits paid to policyowners and
beneficiaries.................................. (3,572) (3,316) (2,912)
Net transfers to separate accounts.............. (564) (565) (579)
Policyowner dividends paid...................... (2,639) (2,347) (2,105)
Operating expenses and taxes.................... (1,749) (1,722) (1,663)
Other, net...................................... (83) 124 (59)
-------- -------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES..... 4,069 3,835 3,351
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
PROCEEDS FROM INVESTMENTS SOLD OR MATURED
Bonds......................................... 28,720 38,284 31,942
Common and preferred stocks................... 10,359 9,057 4,570
Mortgage loans................................ 1,737 1,012 1,253
Real estate................................... 159 302 178
Other investments............................. 768 398 316
-------- -------- --------
41,743 49,053 38,259
-------- -------- --------
COST OF INVESTMENTS ACQUIRED
Bonds......................................... 30,873 41,169 35,342
Common and preferred stocks................... 9,642 9,848 4,463
Mortgage loans................................ 3,135 2,309 2,455
Real estate................................... 268 202 125
Other investments............................. 567 359 255
-------- -------- --------
44,485 53,887 42,640
-------- -------- --------
NET INCREASE (DECREASE) IN SECURITIES LENDING
AND OTHER...................................... (624) 440 1,617
-------- -------- --------
NET CASH USED IN INVESTING ACTIVITIES......... (3,366) (4,394) (2,764)
-------- -------- --------
NET INCREASE (DECREASE) IN CASH AND TEMPORARY
INVESTMENTS...................................... 703 (559) 587
CASH AND TEMPORARY INVESTMENTS, BEGINNING OF
YEAR............................................. 572 1,131 544
-------- -------- --------
CASH AND TEMPORARY INVESTMENTS, END OF YEAR....... $ 1,275 $ 572 $ 1,131
-------- -------- --------
-------- -------- --------
</TABLE>
The accompanying notes are an integral part of these financial statements.
B-17
<PAGE>
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED STATUTORY FINANCIAL STATEMENTS
DECEMBER 31, 1998, 1997 AND 1996
1. PRINCIPAL ACCOUNTING POLICIES
The accompanying consolidated statutory financial statements include the
accounts of The Northwestern Mutual Life Insurance Company ("Company") and its
wholly-owned life insurance subsidiary, Northwestern Long Term Care Insurance
Company ("Subsidiary"). The Company and its Subsidiary offer life, annuity,
disability income and long term care 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 Office of the Commissioner of Insurance
of the State of Wisconsin ("statutory basis of accounting").
In 1998, the National Association of Insurance Commissioners ("NAIC") adopted
the Codification of Statutory Accounting Principles, which will replace the
current Accounting Practices and Procedures manual as the NAIC's primary
guidance on statutory accounting. The NAIC is now considering amendments to the
codification guidance that would also be effective upon its planned
implementation effective January 1, 2001. It is expected that the Office of the
Commissioner of Insurance of the State of Wisconsin ("OCI") will adopt the
codification, but it is not known whether the OCI will make any changes to that
guidance. The potential effect of the codification on the Company will depend
upon the guidance adopted by the OCI.
Financial statements prepared on the statutory basis of accounting vary from
financial statements prepared on the basis of Generally Accepted Accounting
Principles ("GAAP") primarily because on a GAAP basis (1) policy acquisition
costs are deferred and amortized, (2) investment valuations and insurance
reserves are based on different assumptions, (3) funds received under
deposit-type contracts are not reported as premium revenue, and (4) deferred
taxes are provided for temporary differences between book and tax basis of
certain assets and liabilities. The effects on the financial statements of the
differences between the statutory basis of accounting and GAAP are material to
the Company.
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 future results could differ from these 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 and preferred stocks -- Common stocks are carried at fair value, preferred stocks
are generally carried at cost, and unconsolidated
subsidiaries are recorded using the equity method
Mortgage loans -- Amortized cost
Real estate -- Lower of cost, less depreciation and encumbrances, or
estimated net realizable value
Policy loans -- Unpaid principal balance, which approximates fair value
Other investments -- Consists primarily of joint venture investments which are
valued at equity in ventures' net assets
Cash and temporary investments -- Amortized cost, which approximates fair value
</TABLE>
B-18
<PAGE>
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED STATUTORY FINANCIAL STATEMENTS
DECEMBER 31, 1998, 1997 AND 1996
TEMPORARY INVESTMENTS
Temporary investments consist of debt securities that have maturities of one
year or less at acquisition.
NET INVESTMENT INCOME
Net investment income includes interest and dividends received or due and
accrued on debt securities and stocks, equity in unconsolidated subsidiaries'
earnings and the Company's share of joint venture income. Net investment income
is reduced by investment management expenses, real estate depreciation,
depletion related to energy assets and costs associated with securities lending.
INTEREST MAINTENANCE RESERVE
The Company is required to maintain an interest maintenance reserve ("IMR"). The
IMR is used to defer realized gains and losses, net of tax, on fixed income
investments resulting from changes in interest rates. Net realized gains and
losses deferred to the IMR are amortized into investment income over the
approximate remaining term to maturity of the investment sold.
INVESTMENT RESERVES
The Company is required to maintain an asset valuation reserve ("AVR"). The AVR
establishes a general reserve for invested asset valuation using a formula
prescribed by state regulations. The AVR is designed to stabilize surplus
against potential declines in the value of investments. In addition, the Company
maintained a $200 million voluntary investment reserve at December 31, 1998 and
1997 to absorb potential investment losses exceeding those considered by the AVR
formula. Increases or decreases in these investment reserves are recorded
directly to surplus.
SEPARATE ACCOUNTS
Separate account assets and related policy liabilities represent the segregation
of funds deposited by "variable" life insurance and annuity policyowners.
Policyowners bear the investment performance risk associated with variable
products. Separate account assets are invested at the direction of the
policyowner in a variety of Company-managed mutual funds. Variable product
policyowners also have the option to invest in a fixed interest rate annuity in
the general account of the Company. Separate account assets are reported at fair
value.
PREMIUM REVENUE AND OPERATING EXPENSES
Life insurance premiums are recognized as revenue at the beginning of each
policy year. Annuity and disability income premiums are recognized when received
by the Company. Operating expenses, including costs of acquiring new policies,
are charged to operations as incurred.
OTHER INCOME
Other income includes considerations on supplementary contracts, ceded
reinsurance expense allowances and miscellaneous policy charges.
B-19
<PAGE>
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED STATUTORY FINANCIAL STATEMENTS
DECEMBER 31, 1998, 1997 AND 1996
BENEFIT PAYMENTS TO POLICYOWNERS AND BENEFICIARIES
Benefit payments to policyowners and beneficiaries include death, surrender and
disability benefits, matured endowments and supplementary contract payments.
RESERVES FOR POLICY BENEFITS
Reserves for policy benefits are determined using actuarial estimates based on
mortality and morbidity experience tables and valuation interest rates
prescribed by the Office of the Commissioner of Insurance of the State of
Wisconsin. See Note 3.
POLICYOWNER DIVIDENDS
Almost all life insurance policies, and certain annuity and disability income
policies, issued by the Company are participating. Annually, the Company's Board
of Trustees approves dividends payable on participating policies in the
following fiscal year, which are accrued and charged to operations when
approved.
RECLASSIFICATION
Certain financial statement balances for 1997 and 1996 have been reclassified to
conform to the current year presentation.
2. INVESTMENTS
DEBT SECURITIES
Debt securities consist of all bonds and fixed-maturity preferred stocks. The
estimated fair values of debt securities 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. The Company
records unrealized losses for debt securities considered impaired.
B-20
<PAGE>
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED STATUTORY FINANCIAL STATEMENTS
DECEMBER 31, 1998, 1997 AND 1996
Statement value, which principally represents amortized cost, and estimated fair
value of the Company's debt securities at December 31, 1998 and 1997 were as
follows:
<TABLE>
<CAPTION>
RECONCILIATION TO ESTIMATED FAIR VALUE
---------------------------------------
GROSS GROSS ESTIMATED
STATEMENT UNREALIZED UNREALIZED FAIR
DECEMBER 31, 1998 VALUE APPRECIATION DEPRECIATION VALUE
- -------------------------------------------------- --------- ------------ ------------ ---------
(IN MILLIONS)
<S> <C> <C> <C> <C>
US Government and political obligations........... $ 3,904 $ 461 $ (11) $ 4,354
Mortgage-backed securities........................ 7,357 280 (15) 7,622
Corporate and other debt securities............... 23,627 1,240 (382) 24,485
--------- ------------ ------ ---------
34,888 1,981 (408) 36,461
Preferred stocks.................................. 189 4 (1) 192
--------- ------------ ------ ---------
Total............................................. $35,077 $1,985 $(409) $36,653
--------- ------------ ------ ---------
--------- ------------ ------ ---------
<CAPTION>
RECONCILIATION TO ESTIMATED FAIR VALUE
---------------------------------------
GROSS GROSS ESTIMATED
STATEMENT UNREALIZED UNREALIZED FAIR
DECEMBER 31, 1997 VALUE APPRECIATION DEPRECIATION VALUE
- -------------------------------------------------- --------- ------------ ------------ ---------
(IN MILLIONS)
<S> <C> <C> <C> <C>
US Government and political obligations........... $ 3,695 $ 336 $ (3) $ 4,028
Mortgage-backed securities........................ 7,015 264 (4) 7,275
Corporate and other debt securities............... 21,649 1,098 (208) 22,539
--------- ------------ ------ ---------
32,359 1,698 (215) 33,842
Preferred stocks.................................. 167 4 (2) 169
--------- ------------ ------ ---------
Total............................................. $32,526 $1,702 $(217) $34,011
--------- ------------ ------ ---------
--------- ------------ ------ ---------
</TABLE>
The statement value of debt securities by contractual maturity at December 31,
1998 and 1997 is 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, DECEMBER 31,
1998 1997
------------ ------------
(IN MILLIONS)
<S> <C> <C>
Due in one year or less........................... $ 655 $ 605
Due after one year through five years............. 5,031 4,878
Due after five years through ten years............ 10,286 9,760
Due after ten years............................... 11,748 10,268
------------ ------------
27,720 25,511
Mortgage-backed securities........................ 7,357 7,015
------------ ------------
$35,077 $32,526
------------ ------------
------------ ------------
</TABLE>
STOCKS
The estimated fair values of common and perpetual preferred stocks 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.
B-21
<PAGE>
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED STATUTORY FINANCIAL STATEMENTS
DECEMBER 31, 1998, 1997 AND 1996
The adjusted cost of common and preferred stock held by the Company at December
31, 1998 and 1997 was $4.8 billion and $5.0 billion, respectively.
MORTGAGE LOANS AND REAL ESTATE
Mortgage loans are collateralized by properties located throughout the United
States and Canada. The Company attempts to minimize mortgage loan investment
risk by diversification of geographic locations and types of collateral
properties.
The fair value of mortgage loans as of December 31, 1998 and 1997 was
approximately $12.9 billion and $11.5 billion, respectively. The fair value of
the mortgage loan portfolio is estimated 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.
At December 31, 1998 and 1997, real estate includes $61 million acquired through
foreclosure at each date and $120 million and $124 million, respectively, of
home office real estate. In 1998, 1997 and 1996, the Company recorded unrealized
losses of $5 million, $2 million and $43 million, respectively, for the excess
of statement value over fair value of certain real estate investments and
mortgage loans.
REALIZED GAINS AND LOSSES
Realized investment gains and losses for the years ended December 31, 1998, 1997
and 1996 were as follows:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED FOR THE YEAR ENDED FOR THE YEAR ENDED
DECEMBER 31, 1998 DECEMBER 31, 1997 DECEMBER 31, 1996
------------------------------ ------------------------------ ------------------------------
NET NET NET
REALIZED REALIZED REALIZED
REALIZED REALIZED GAINS REALIZED REALIZED GAINS REALIZED REALIZED GAINS
GAINS LOSSES (LOSSES) GAINS LOSSES (LOSSES) GAINS LOSSES (LOSSES)
-------- -------- -------- -------- -------- -------- -------- -------- --------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Bonds......................... $ 514 $ (231) $ 283 $ 518 $ (269) $ 249 $ 396 $ (383) $ 13
Common and preferred stocks... 885 (240) 645 533 (150) 383 580 (115) 465
Mortgage loans................ 18 (11) 7 14 (14) - 2 (15) (13)
Real estate................... 41 - 41 100 (2) 98 36 - 36
Other investments............. 330 (267) 63 338 (105) 233 204 (51) 153
-------- -------- -------- -------- -------- -------- -------- -------- --------
1,788 (749) 1,039 1,503 (540) 963 1,218 (564) 654
-------- -------- -------- -------- -------- -------- -------- -------- --------
Less: Capital gains taxes..... 358 340 224
Less: IMR deferrals........... 197 209 35
-------- -------- --------
Net realized capital gains.... $ 484 $ 414 $ 395
-------- -------- --------
-------- -------- --------
</TABLE>
SECURITIES LENDING
The Company has entered into a securities lending agreement whereby certain
securities are loaned to third parties, primarily major brokerage firms. 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. Collateral assets received and related liability due
to counterparties of $1.5 billion are included in the consolidated
B-22
<PAGE>
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED STATUTORY FINANCIAL STATEMENTS
DECEMBER 31, 1998, 1997 AND 1996
statements of financial position for each of the periods ended at December 31,
1998 and 1997, and approximate the statement value of securities loaned at those
dates.
INVESTMENT IN MGIC
The Company owns 11.0% (11.9 million shares) of the outstanding common stock of
MGIC Investment Corporation ("MGIC"). This investment is accounted for using the
equity method. At December 31, 1998 and 1997, the fair value of the Company's
investment in MGIC exceeded the statement value of $180 million and $273
million, respectively, by $296 million and $768 million, respectively.
In July 1995, the Company entered into a forward contract with a brokerage firm
to deliver 8.9 million to 10.7 million shares of MGIC (or cash in an amount
equal to the market value of the MGIC shares at contract maturity) in August,
1998, in exchange for a fixed cash payment of $247 million ($24 per share). The
Company's objective in entering into the forward contract was to hedge against
depreciation in the value of its MGIC holdings during the contract period below
the initial spot price of $24, while partially participating in appreciation, if
any, during the forward contract's duration. In August 1998, the Company
delivered 8.9 million shares to settle the forward contract. In conjunction with
the settlement, the Company recorded a $114 million realized gain.
DERIVATIVE FINANCIAL INSTRUMENTS
In the normal course of business, the Company enters into transactions to reduce
its exposure to fluctuations in interest rates, foreign currency exchange rates
and market volatility. These hedging strategies include the use of forwards,
futures, options and swaps.
The Company held the following positions for hedging purposes at December 31,
1998 and 1997:
<TABLE>
<CAPTION>
DERIVATIVE FINANCIAL INSTRUMENT NOTIONAL AMOUNTS
- --------------------------------------------- ---------------------------------------
(IN MILLIONS)
DECEMBER 31,
1998 DECEMBER 31, 1997
------------------ ------------------
<S> <C> <C> <C>
Foreign Currency Forward
Contracts................................... $601 $564
Common Stock Futures......................... 657 327
Bond Futures................................. 379 95
Options to acquire Interest Rate Swaps....... 419 530
Foreign Currency and Interest Rate Swaps..... 94 209
<CAPTION>
DERIVATIVE FINANCIAL INSTRUMENT RISKS REDUCED
- --------------------------------------------- ---------------------------------------------
<S> <C>
Foreign Currency Forward Currency exposure on foreign-denominated
Contracts................................... investments.
Common Stock Futures......................... Stock market price fluctuation.
Bond Futures................................. Bond market price fluctuation.
Options to acquire Interest Rate Swaps....... Interest rates payable on certain annuity and
insurance contracts.
Foreign Currency and Interest Rate Swaps..... Interest rates on variable rate notes and
currency exposure on foreign-denominated
bonds.
</TABLE>
The notional or contractual amounts of derivative financial instruments are used
to denominate these types of transactions and do not represent the amounts
exchanged between the parties.
In addition to the use of derivatives for hedging purposes, equity swaps were
held for investment purposes during 1997 and 1998. The notional amount of equity
swaps outstanding at December 31, 1998 and 1997 was $188 million and $143
million, respectively.
Foreign currency forwards, foreign currency swaps, stock futures and equity
swaps are reported at fair value. Resulting gains and losses on these contracts
are unrealized until expiration of the contract. There is no statement
B-23
<PAGE>
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED STATUTORY FINANCIAL STATEMENTS
DECEMBER 31, 1998, 1997 AND 1996
value reported for interest rate swaps, bond futures and options to acquire
interest rate swaps prior to the settlement of the contract, at which time
realized gains and losses are deferred to IMR. Changes in the value of
derivative instruments are expected to offset gains and losses on the hedged
investments. During 1998, net realized and unrealized gains on investments were
partially offset by net realized losses of $104 million and net unrealized
losses of $58 million on derivative instruments. The effect of derivative
instruments in 1997 and 1996 was not material to the Company's results of
operations.
3. RESERVES FOR POLICY BENEFITS
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 life policy reserves are primarily based on the net
level premium method employing various mortality tables at interest rates
ranging from 2% to 4 1/2%.
Deferred annuity reserves on contracts issued since 1985 are valued primarily
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
contract value. Immediate annuity reserves are based on 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. Active life reserves for prior DI policies are based on the net level
premium method, a 3% to 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 primarily using 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.
4. EMPLOYEE AND AGENT BENEFIT PLANS
The Company sponsors noncontributory defined benefit retirement plans for all
eligible employees and agents. The expense associated with these plans is
generally recorded by the Company in the period contributions to the plans are
funded. As of January 1, 1998, the most recent actuarial valuation date
available, the qualified defined benefit plans were fully funded. The Company
recorded a liability of $98 million and $87 million for nonqualified defined
benefit plans at December 31, 1998 and 1997, respectively. In addition, the
Company has a contributory 401(k) plan for eligible employees and a
noncontributory defined contribution plan for all full-time agents. The
Company's contributions are expensed in the period contributions are made to the
plans. The Company recorded $29 million, $27 million and $25 million of total
expense related to its defined benefit and defined contribution plans for the
years ended December 31, 1998, 1997 and 1996, respectively. The defined benefit
and defined contribution plans' assets of $1.9 billion and $1.7 billion at
December 31, 1998 and 1997, respectively, were primarily invested in the
separate accounts of the Company.
In addition to pension and retirement 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
costs for the years ended December 31, 1998, 1997 and 1996 were a net expense
(benefit) of $1.8 million, ($1.3) million and
B-24
<PAGE>
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED STATUTORY FINANCIAL STATEMENTS
DECEMBER 31, 1998, 1997 AND 1996
($12.0) million, respectively. Net benefits were primarily a result of favorable
differences between actuarial assumptions and actual experience.
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1998 1997
-------------------- --------------------
<S> <C> <C>
Unfunded postretirement
benefit obligation for
retirees and other fully
eligible employees (Accrued
in statement of financial
position).................... $35 million $34 million
Estimated postretirement
benefit obligation for active
non-vested employees (Not
accrued until employee
vests)....................... $56 million $50 million
Discount rate................. 7% 7%
Health care cost trend rate... 10% to an ultimate 10% to an ultimate
5%, declining 1% for 5%, declining 1% for
5 years 5 years
</TABLE>
If the health care cost trend rate assumptions were increased by 1%, the accrued
postretirement benefit obligation as of December 31, 1998 and 1997 would have
been increased by $5 million and $4 million, respectively.
At December 31, 1998 and 1997, the recorded postretirement benefit obligation
was reduced by $23 million and $20 million, respectively, for assets funded for
postretirement health care benefits.
5. 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
to reinsurers under excess coverage and coinsurance contracts. The Company
retains a maximum of $25 million of coverage per individual life and $35 million
maximum of coverage per joint life. The Company has an excess reinsurance
contract for disability income policies with retention limits varying based upon
on coverage type.
The amounts shown in the accompanying consolidated financial statements are net
of reinsurance. Policy benefit reserves at December 31, 1998 and 1997 were
reported net of ceded reserves of $518 million and $435 million, respectively.
The effect of reinsurance on premiums and benefits for the years ended December
31, 1998, 1997 and 1996 was as follows:
<TABLE>
<CAPTION>
1998 1997 1996
------- ------- -------
(IN MILLIONS)
<S> <C> <C> <C>
Direct premiums................................... $8,426 $7,647 $7,064
Premiums ceded.................................... (405) (353) (397)
------- ------- -------
Net premium revenue............................... $8,021 $7,294 $6,667
------- ------- -------
------- ------- -------
Benefits to policyowners and beneficiaries........ $8,869 $8,057 $7,348
Benefits ceded.................................... (182) (136) (147)
------- ------- -------
Net benefits to policyowners and beneficiaries.... $8,687 $7,921 $7,201
------- ------- -------
------- ------- -------
</TABLE>
B-25
<PAGE>
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED STATUTORY FINANCIAL STATEMENTS
DECEMBER 31, 1998, 1997 AND 1996
In addition, the Company received $121 million, $115 million and $93 million for
the years ended December 31, 1998, 1997 and 1996, respectively, from reinsurers
representing allowances for reimbursement of commissions and other expenses.
These amounts are included in other income in the consolidated statement of
operations.
Reinsurance contracts do not relieve the Company from its obligations to
policyowners. 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.
6. INCOME TAXES
Provisions for income taxes are based on current income tax payable without
recognition of deferred taxes. 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.
The Company's effective tax rate on gains from operations before taxes for the
years ended December 31, 1998, 1997 and 1996 was 48%, 56%, and 67% respectively.
The Company's effective tax rate exceeds the federal corporate rate of 35%
primarily because, (1) the Company pays a tax that is assessed only on the
surplus of mutual life insurance companies ("equity tax"), and (2) the Company
must capitalize and amortize (as opposed to immediately deducting) an amount
deemed to represent the cost of acquiring new business ("DAC tax").
7. ACQUISITION OF FRANK RUSSELL COMPANY
Pursuant to an Agreement and Plan of Merger, dated as of August 10, 1998, the
Company acquired Frank Russell Company effective January 1, 1999 for a purchase
price of approximately $950 million. Frank Russell is a leading investment
management and consulting firm, providing investment advice, analytical tools
and investment vehicles to institutional and individual investors in more than
30 countries.
In connection with its acquisition of Frank Russell Company, the Company will be
required in 1999 to charge-off directly from surplus approximately $341 million,
which represents the amount of acquisition goodwill less 10% of the Company's
surplus at December 31, 1998. In addition, the Company will request permission
from the OCI to charge-off the remaining $474 million of acquisition goodwill in
1999 and currently intends to do so.
In connection with the acquisition, the Company has unconditionally guaranteed
certain debt obligations of Frank Russell Company, including $350 million of
senior notes and up to $150 million of other credit facilities.
8. CONTINGENCIES
The Company has guaranteed certain obligations of its affiliates. These
guarantees totaled approximately $133 million at December 31, 1998 and are
generally supported by the underlying net asset values of the affiliates.
In addition, the Company routinely makes commitments to fund mortgage loans or
other investments in the normal course of business. These commitments aggregated
to $2.1 billion at December 31, 1998 and were extended at market interest rates
and terms.
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 position.
B-26
<PAGE>
[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, 1998 and 1997, and the related consolidated statements of operations, of
changes in surplus and of cash flows for each of the three years in the period
ended December 31, 1998. 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.
As described in Note 1, these consolidated financial statements were prepared in
conformity with accounting practices prescribed or permitted by the Office of
the Commissioner of Insurance of the State of Wisconsin (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, 1998 and 1997, or the results of their operations or
their cash flows for each of the three years in the period ended December 31,
1998 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, 1998 and 1997 and the results of their operations and
their cash flows for each of the three years in the period ended December 31,
1998, on the basis of accounting described in Note 1.
PRICEWATERHOUSECOOPERS LLP
January 25, 1999
B-27
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
DISTRIBUTION OF THE CONTRACTS....................................................B-2
DETERMINATION OF ANNUITY PAYMENTS................................................B-2
Amount of Annuity Payments....................................................B-2
Annuity Unit Value............................................................B-3
Illustrations of Variable Annuity Payments....................................B-3
VALUATION OF ASSETS OF THE ACCOUNT...............................................B-4
TRANSFERABILITY RESTRICTIONS.....................................................B-4
PERFORMANCE DATA.................................................................B-4
EXPERTS..........................................................................B-6
FINANCIAL STATEMENTS OF THE ACCOUNT..............................................B-7
(for the two years ended December 31, 1998)
REPORT OF INDEPENDENT ACCOUNTANTS...............................................B-13
(for the two years ended December 31, 1998)
FINANCIAL STATEMENTS OF NORTHWESTERN MUTUAL LIFE................................B-14
(for the three years ended December 31, 1998)
REPORT OF INDEPENDENT ACCOUNTANTS...............................................B-27
(for the three years ended December 31, 1998)
</TABLE>
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 the two years ended December 31, 1998)
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, 1998)
Consolidated Statement of Financial Position
Consolidated Summary of Operations
Consolidated Statement of Changes in Surplus
Consolidated Statement of Cash Flows
Notes to Consolidated Statutory Financial Statements
Report of Independent Accountants
(b) Exhibits
Exhibit B(4)(a) Flexible Payment Variable Annuity Front Load
Contract, QQV.ACCT.B. (0196), with amended
application, including Contract amendment (sex
neutral)
Exhibit B(4)(b) Flexible Payment Variable Annuity Back Load
Contract, QQV.ACCT.B. (0196), with amended
application, including Contract amendment (sex
neutral)
Exhibit B(4)(c) Variable Annuity Front Load and Back Load
Contract Payment Rate Tables, QQV.ACCT.A.B.
(0196) (sex distinct)
Exhibit B(5) Application forms are included in Exhibits
B(4)(a) and B(4)(b) above
Exhibit B(8)(a) Form of Participation Agreement Among Russell
Insurance Funds, Russell Fund Distributors, Inc.
and The Northwestern Mutual Life Insurance
Company
Exhibit B(8)(b) Form of Administrative Service Fee Agreement
between The Northwestern Mutual Life Insurance
Company and Frank Russell Company
Exhibit B(10) Consent of PricewaterhouseCoopers LLP
Exhibit 27 Financial Data Schedule for period ended
December 31, 1998
C-1
<PAGE>
The following exhibit was filed in electronic format with the
Registration Statement on Form S-6 for Northwestern Mutual Variable Life
Account, File No. 333-59103, CIK 0000742277, dated July 15, 1998, and is
incorporated herein by reference.
Exhibit A(6)(b) Amended By-Laws of The Northwestern Mutual Life
Insurance Company dated January 28, 1998
Item 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
The following lists include all of the Trustees, executive officers and
other officers of The Northwestern Mutual Life Insurance Company as of February
1, 1999 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
<TABLE>
<CAPTION>
NAME BUSINESS ADDRESS
- ---- ----------------
<S> <C>
R. Quintus Anderson Aarque Capital Corporation
111 West Second Street
P.O. Box 310
Jamestown, NY 14702-0310
Edward E. Barr Sun Chemical Corporation
222 Bridge Plaza South
Fort Lee, NJ 07024
Gordon T. Beaham III Faultless Starch/Bon Ami Co.
1025 West Eighth Street
Kansas City, MO 64101
Robert C. Buchanan Fox Valley Corporation
100 West Lawrence Street
P.O. Box 727
Appleton, WI 54911
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
Pierre S. du Pont Richards, Layton and Finger
P.O. Box 551
1 Rodney Square
Wilmington, DE 19899
</TABLE>
C-2
<PAGE>
<TABLE>
<S> <C>
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 87505
Stephen N. Graff 805 Lone Tree Road
Elm Grove, WI 53122-2014
Patricia Albjerg Graham Graduate School of Education
Harvard University
420 Gutman
Cambridge, MA 02138
Stephen F. Keller 101 South Las Palmas Avenue
Los Angeles, CA 90004
Barbara A. King Landscape Structures, Inc.
Route 3
601 - 7th Street South
Delano, MN 55328
J. Thomas Lewis 228 St. Charles Avenue
Suite 1024
New Orleans, LA 70130
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
Timothy D. Proctor Glaxo Wellcome plc
P.O. Box 13398
5 Moore Drive
Research Triangle Park, NC 27709
Donald J. Schuenke The Northwestern Mutual
Life Insurance Company
720 East Wisconsin Avenue
Milwaukee, WI 53202
</TABLE>
C-3
<PAGE>
<TABLE>
<S> <C>
H. Mason Sizemore, Jr. The Seattle Times
Fairview Avenue North and John Street
P.O. Box 70
Seattle, WA 98109
Harold B. Smith, Jr. Illinois Tool Works, Inc.
3600 West Lake Avenue
Glenview, IL 60625-5811
Sherwood H. Smith, Jr. Carolina Power & Light Company
411 Fayetteville Street Mall
P.O. Box 1551
Raleigh, NC 27602
John E. Steuri Advanced Thermal Technologies
2102 Riverfront Drive, Suite 120
Little Rock, AR 72202-1747
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.
100 First Street
Suite 2350
San Francisco, CA 94105
Kathryn D. Wriston c/o Shearman & Sterling
599 Lexington Avenue
Room 1126
New York, NY 10022
</TABLE>
EXECUTIVE OFFICERS
<TABLE>
<CAPTION>
NAME TITLE
----- --------
<S> <C>
Deborah A. Beck Senior Vice President
William H. Beckley Senior Vice President
Robert J. Berdan Vice President
John M. Bremer Executive 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 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
</TABLE>
C-4
<PAGE>
<TABLE>
<S> <C>
Donald L. Mellish Senior 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 Senior 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
</TABLE>
OTHER OFFICERS
<TABLE>
<CAPTION>
NAME TITLE
- ---- ------
<S> <C>
John M. Abbott Associate Director - Benefits Research
Carl G. Amick Director - Disability Benefits
Maria J. Avila Assistant Controller
Michael J. Backus Associate Director - Information Systems
John E. Bailey Senior Actuary
Nicholas H. Bandow Assistant Director - Information Systems
Lynn F. Bardele Assistant Director - Field Training & Development
Margaret A. Barkley Assistant Director
Walter L. Barlow Assistant Director - Education
Sandra L. Barton Assistant Director - Marketing
Bradford P. Bauer Assistant Director - Advanced Marketing
Beth M. Berger Assistant General Counsel & Assistant Secretary
Frederick W. Bessette Assistant General Counsel & Assistant Secretary
Carrie L. Bleck Assistant Director
D. Rodney Bluhm Assistant General Counsel
Willette Bowie Employee Relations Director
Martin R. Braasch Director - Underwriting Standards & Services
Patricia R. Braeger Associate Director - Information Systems
James A. Brewer Investment Research Officer
William J. Buholzer Employee Relations Director
Michael S. Bula Assistant General Counsel
Jerry C. Burg Associate Director - Field Benefits
Pency P. Byhardt Assistant Director - New Business
Gregory B. Bynan Director - Corporate Services
Kim M. Cafaro Assistant General Counsel & Assistant Secretary
Gwen C. Canady Assistant Director-Mutual Funds
Shanklin B. Cannon, M.D. Medical Director - Life Products/Research
Terese J. Capizzi Assistant Director
Kurt P. Carbon Assistant Regional Director
Michael G. Carter Assistant General Counsel & Assistant Secretary
William W. Carter Associate Actuary
John E. Caspari Assistant Director - Advertising & Corporate
Information
</TABLE>
C-5
<PAGE>
<TABLE>
<S> <C>
Walter J. Chossek Associate Controller
Thomas R. Christenson Director - Advanced Marketing
Eric P. Christophersen Associate Director
Alan E. Close Associate Controller
Carolyn M. Colbert Assistant Director - New Business
Margaret Winter Combe Director - Corporate Development
Virginia A. Corwin Assistant Director - New Business
Barbara E. Courtney Associate Director - Mutual Funds
Larry A. Curran Actuarial Administrative Officer
Dennis J. Darland Assistant Director - Disability Income
Thomas H. Davis Associate Director - Information Systems
Nicholas De Fino Assistant Director
Carol A. Detlaf Director - Annuity Administration
Colleen Devlin Assistant Director - Communications
Glen W. DeZeeuw Director - Agency Services
Joseph Dobering, III Director - Underwriting Standards & Services
Jennifer L. Docea Actuary
Lisa C. Dodd Actuary
Richard P. Dodd Assistant Director - Agency
Daniel C. Dougherty Director - Personal Markets
Margaret T. Dougherty Assistant Director - Information Systems
John R. Dowell Director - Workforce Diversity
William O. Drehfal Assistant Director - Media Services
Steven J. Dryer Associate Director
Jeffrey S. Dunn Vice President
John E. Dunn Assistant General Counsel & Secretary
Somayajulu Durvasula Associate Director - Field Financial
James R. Eben Assistant General Counsel and Assistant
Secretary
Magda El Sayed Assistant Director - Information Systems
Michael S. Ertz Assistant Director - Advanced Marketing
Thomas F. Fadden Assistant Director - Information Systems
Christina H. Fiasca Director - Policyowner Services
Zenia J. Fieldbinder Assistant Director - Annuity Accumulation
Richard F. Fisher Senior Actuary
Dennis J. Fitzpatrick Director - Advanced Marketing
Jon T. Flaschner Director - Policyowner Services
Kate M. Fleming Assistant General Counsel and Secretary
Carol J. Flemma Assistant Director - Marketing
John E. Fobes II Assistant Director - Agency Services
Donald Forecki Investment Officer
Phillip B. Franczyk Vice President
Stephen H. Frankel Vice President
Peter Q. Fraser Director - Development
Anne A. Frigo Assistant Director - New Business
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 P. Glazier Director - New Business
Robert K. Gleeson, M.D. Vice President - Medical Director
</TABLE>
C-6
<PAGE>
<TABLE>
<S> <C>
Mark J. Gmach Director - Agency
Jason G. Goetze Assistant Director - Marketing
David Lee Gosse Assistant Director - Disability Benefits
William F. Grady Director of Field Finances
John M. Grogan Director - Disability Income
Thomas C. Guay Director - Field Financial
Gerald A. Haas Assistant Director - Information Systems
Patricia Ann Hagen Assistant Director - Information Systems
Ronald D. Hagen Vice President
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 Medical Director
Jacquelyn F. Heise Associate Director - Information Systems
Robert L. Hellrood Director - New Business
Herbert F. Hellwig Assistant Director - Personal Markets
Jane A. Herman Director - Term Upgrade
Gary M. Hewitt Vice President & Treasurer
Donna R. Higgins Associate Director - Information Systems
David L. Hilbert Investment Officer
Karla D. Hill Human Resource Officer
Susan G. Hill Assistant Director
John D. Hillmer Assistant Director - Information Systems
Hugh L. Hoffman Assistant Director - Information Systems
Richard S. Hoffmann Director - Audit
Bruce Holmes Associate Actuary
Scott C. Iodice Assistant Director - Agency
Joseph P. Jansky Assistant Director - Corporate Planning
Michael D. Jaquint Assistant Actuary
Dolores A. Juergens Associate Director of Restaurant Operations
Marilyn J. Katz Assistant Director - Medical Consultants
John C. Kelly Associate Controller
Kevin C. Kennedy Assistant Director - Architecture
James B. Kern Regional Director - Central Region
Donald C. Kiefer Vice President
Jason T. Klawonn Assistant Actuary
Brian J. Klink Director - Research
Allen B. Kluz Director - Field Financial
Beatrice C. Kmiec Assistant Regional Director - East
James A. Koelbl Assistant General Counsel and Secretary
John L. Kordsmeier Director - Human Resources
Robert J. Kowalsky Associate Director - Information Systems
Carol L. Kracht Assistant General Counsel & Assistant Secretary
Martha Krawczak Officer - Life and Disability
Jeffrey J. Krygiel Assistant Actuary
Todd L. Laszewski Associate Actuary
Patrick J. Lavin Director - Disability Benefits
James L. Lavold Associate Director - Meetings
</TABLE>
C-7
<PAGE>
<TABLE>
<S> <C>
Elizabeth J. Lentini Assistant General Counsel & Secretary
Sally Jo Lewis Assistant General Counsel & Assistant Secretary
Mark P. Lichtenberger Associate Director - LINK Technical Planning
Paul E. Lima Vice President-International Insurance Operations
Steven M. Lindstedt Assistant Director - Information Systems
Melissa C. Lloyd Assistant Director - Advanced Marketing
James Lodermeier Assistant Director - Tax Planning
George R. Loxton Assistant General Counsel & Assistant Secretary
Mary M. Lucci Director - New Business
Christine M. Lucia Human Resources Officer
Mark J. Lucius Corporate Information Officer
Merrill C. Lundberg Assistant General Counsel & Assistant Secretary
Jon K. Magalska Associate Actuary
Jean M. Maier Vice President - Life Benefits
Joseph Maniscalco Associate Director - Information Systems
Raymond J. Manista Assistant General Counsel and Secretary
Steven C. Mannebach Assistant Director - Field Financial Services
Jeffrey S. Marks Multi Life, Research & Reinsurance Officer
Steve Martinie Assistant General Counsel & Assistant Secretary
Ted A. Matchulat Actuarial Products Officer
Margaret McCabe Director - Policy Benefits Systems
Richard A. McComb Director - Human Resources
William L. McCown Vice President & Investment Counsel
Paul E. McElwee Assistant General Counsel & Assistant Secretary
James L. McFarland Assistant General Counsel & Secretary
Mary C. McIntosh Associate Director - Field Financial
Daniel E. McGinley Director - Management Development
Mark J. McLennon Assistant Director
Robert J. Meiers Ad Valorem Tax Manager
Larry S. Meihsner Assistant General Counsel & Assistant Secretary
Robert G. Meilander Vice President
Richard E. Meyers Assistant General Counsel
Patricia A. Michel Assistant Director - Policyowner Services
Jay W. Miller Vice President & Tax Counsel
Sara K. Miller Vice President
Jill Mocarski Associate Medical Director
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 - Personal Markets
Timothy P. Murphy Assistant Director-Marketing
Randolph J. Musil Assistant Director - Advanced Marketing
John E. Muth Assistant Director - Advanced Marketing
David K. Nelson Assistant General Counsel
Ronald C. Nelson Director
Timothy Nelson Assistant Director - Marketing
Leon W. Nesbitt Vice President-Agency
Karen M. Niessing Director - Policyowner Services
Daniel J. O'Meara Director - Field Financial
Mary Joy O'Meara Assistant Director - Advanced Marketing
Kathleen A. Oman Associate Director - Information Systems
</TABLE>
C-8
<PAGE>
<TABLE>
<S> <C>
Thomas A. Pajewski Investment Research Officer
Arthur V. Panighetti Director - Tax Planning
Christen L. Partleton Associate Director - Policyowner Services
David W. Perez Assistant General Counsel
Judith L. Perkins Assistant General Counsel & Assistant Secretary
Wilson D. Perry Assistant General Counsel & Assistant Secretary
Gary N. Peterson Actuary
John C. Peterson Director of Policyowner Services - West
Harvey W. Pogoriler Assistant General Counsel
Randolph R. Powell, M.D. Medical Director
Mark A. Prange Associate Director - Information Systems
Brian R. Pray Assistant Regional Director - New Business
Thomas O. Rabenn Assistant General Counsel and Secretary
David R. Remstad Senior Actuary
David R. Retherford Assistant Director of New Business - Central
Stephen M. Rhode Assistant Director - Qualified Benefits
Richard R. Richter Vice President
Daniel A. Riedl Assistant General Counsel
Marcia Rimai Vice President - Litigation Counsel
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 Director - New Business
Robert K. Roska Associate Director - Information Systems
Sue M. Roska Director - Systems and Services
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 Director - Field Training & Development
Linda Ann Schaefer Assistant Director - Marketing
Thomas F. Scheer Assistant General Counsel & Assistant Secretary
Carlen A. Schenk Associate Director
Jane A. Schiltz Vice President - Disability Income
Kathleen H. Schluter Assistant General Counsel & Secretary
Calvin R. Schmidt Associate Director - Information Systems
Rodd Schneider Assistant General Counsel and Secretary
John O. Schnorr Assistant Director
Margaret R. Schoewe Vice President - Information Systems
Todd M. Schoon Assistant Regional Director - Agency
John F. Schroeder Associate Director of Field Office Real Estate
Melva T. Seabron Director - Corporate Services
Norman W. Seguin, II Investment Officer - Ad Valorem Taxes
Catherine L. Shaw Assistant General Counsel & Assistant Secretary
John E. Sheaffer, Jr. Assistant Director - Agent Development
Janet Z. Silverman Director - New Business
Stephen M. Silverman Assistant General Counsel
David W. Simbro Managing Director - Life Marketing
Paul W. Skalecki Associate Actuary
Cynthia S. Slavik Assistant Director - Environmental Engineer
</TABLE>
C-9
<PAGE>
<TABLE>
<S> <C>
Landon T. Smith Assistant Director - Replacements
Mark W. Smith Assistant General Counsel & Assistant Secretary
Warren L. Smith, Jr. Investment Officer - Architecture
Steven W. Speer Director - Public Markets
Robert J. Spellman, M.D. Vice President & Chief Medical Director
Steve P. Sperka Assistant Actuary
Mark A. Stalsberg Assistant Director - Agency
Barbara J. Stansberry Director - New Business
Bonnie L. Steindorf Director - Department Operations
Steven H. Steidinger Assistant Director - Marketing
Karen J. Stevens Assistant General Counsel & Assistant Secretary
Steven J. Stribling Associate Actuary
Stephen J. Strommen Associate Actuary
Theodore H. Strupp Assistant Director
Daniel J. Suprenant Director - Group Disability Marketing
Victoria A. Sweigart Human Resources Officer
Rachel L. Taknint Assistant General Counsel & Assistant Secretary
Thomas Talajkowski Assistant Director - Tax Compliance
Paul B. Tews Director - Investment Planning
J. Edward Tippetts Vice President
Susan M. Tompkins Director - Agency
Chris J. Torkelson Assistant Director
Jeannine M. Torkelson Assistant Director - Marketing
Thomas W. Towers Associate Director - Public Relations
Gloria E. Tracy Assistant Director - Marketing
Linda K. Tredupp Assistant Director - Information Systems
Chris G. Trost Associate Actuary
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
Gloria J. Venski Associate Director - Disability Benefits
Scott E. Wallace Assistant Director - Projects
Hal W. Walter Vice President
Robert J. Waltos Regional Director - Agency
P. Andrew Ware Vice President
Mary L. Wehrle-Schnell Associate Director - Information Systems
Daniel T. Weidner Assistant Director - Information Systems
Joel S. Weiner Assistant Medical Director
Ronald J. Weir Associate Director - Information Systems
Kenneth R. Wentland Assistant Director of Policyowner Services - East
Sandra D. Wesley Associate Director of Special Projects
Anna C. Westfall Financial Officer
Catherine A. Wilbert Assistant General Counsel & Secretary
David L. Wild Director - Corporate Services
Donald R. Wilkinson Vice President - Agency
Jeffrey B. Williams Risk Manager
John K. Wilson Director - Personal Markets
Penelope A. Woodcock Associate Director - Benefit Systems
Richard W. Woody Assistant Director - Agency
Stanford A. Wynn Assistant Director - Advanced Marketing
Catherine M. Young Assistant General Counsel & Secretary
Michael L. Youngman Vice President - Legislative Representative
</TABLE>
C-10
<PAGE>
<TABLE>
<S> <C>
James A. Youngquist Associate Actuary
Richard S. Zakrzewski Associate Research Officer
John Zao Assistant Director - Information Systems
Diana M. Zawada Associate Director
Rick T. Zehner Director - Corporate Planning
Patricia A. Zimmermann Investment Officer - Real Estate Systems
Ray Zimmermann Director - LINK Information Network
Philip R. Zwieg Vice President - Technical Support
Robert E. Zysk Director - Tax Compliance
</TABLE>
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 January 1, 1999 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*
(AS OF JANUARY 1, 1999)
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%
Frank Russell Company and its subsidiaries - 100%
Bradford, Inc. - 100%
NML/Tallahassee, Inc. - 100%
Northwestern Investment Management Company - 100%
Northwestern Mutual Las Vegas, Inc. - 100%
Northwestern Long Term Care Insurance Company - 100%
Northwestern International Holdings, Inc. - 100%
Saskatoon Centre, Limited (inactive) - 100%
Northwestern Mutual Series Fund, Inc. (and its 9 portfolios) - 100%
Mason Street Funds, Inc. (and its 9 funds) - 77.03%
MGIC Investment Corporation - 10.5%. MGIC holds 100% of the voting stock of
the following:
Mortgage Guaranty Reinsurance Corporation, MGIC, MGIC Reinsurance
Corporation of Wisconsin, MGIC Mortgage Insurance Corporation, and
various subsidiaries.
Baird Financial Corporation - 80%. Baird Financial Corporation holds 83%
of the voting stock of Robert W. Baird & Co., Incorporated and various
subsidiaries.
Northwestern Mutual Investment Services, LLC - 100%
NML REAL ESTATE HOLDINGS, LLC - 100%
<TABLE>
<S> <C>
The Grand Avenue Corporation - 98.54% Olive, Inc. - 100%
Marina Pacific, Ltd. - 100% Bayridge, Inc. - 100%
NML - Bellevue Corporation - 100% Ryan, Inc. - 100%
Solar Resources, Inc. - 100% Pembrook, Inc. - 100%
Rocket Sports, Inc. (inactive) - 100% PBClub, Inc. - 100%
Summit Sports, Inc. - 100%
Greenway Sports, Inc. - 100%
RE Corporation - 100%
INV Corp. - 100%
Buffalo Promotions, Inc. - 100%
NW Greenway #1 (inactive) - 100%
NW Greenway #9 - 100%
Logan, Inc. - 100%
Mitchell, Inc. - 100%
Cass Corporation - 100%
Burgundy, Inc. - 100%
Amber, Inc. - 100%
</TABLE>
* Except for MGIC Investment Corporation and its subsidiaries, includes all
NML mutual funds and other corporations of which 50% or more voting power
is controlled by NML.
C-12
<PAGE>
NML CORPORATE STRUCTURE, CONTINUED*
(AS OF JANUARY 1, 1999)
NML SECURITIES HOLDINGS, LLC-100%
<TABLE>
<S> <C>
NW Pipeline, Inc. - 100% Kristina International Sales, Inc. - 100%
Painted Rock Development Corporation - 100% NML/Mid Atlantic, Inc. - 100%
NML Development Corporation - 100%
Stadium and Arena Management, Inc. - 100%
Carlisle Ventures, Inc. - 100%
Park Forest Northeast, Inc. - 100%
Travers International Sales, Inc. - 100%
Highbrook International Sales, Inc. - 100%
Elderwood International Sales, Inc. - 100%
Mallon International Sales, Inc. - 100%
Higgins, Inc. - 100%
Hobby, Inc. - 100%
Baraboo, Inc. - 100%
Elizabeth International Sales, Inc. - 100%
Sean International Sales, Inc. - 100%
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%
Mason & Marshall, Inc. - 100%
North Van Buren, Inc. - 100%
Northwestern Mutual Life
International, Inc. - 100%
White Oaks, Inc. - 100%
Hazel, Inc. - 100%
Maroon, Inc. - 100%
Coral, Inc. - 100%
Russet, Inc. - 100%
Larkin, Inc. - 100%
Lydell, Inc. - 100%
Klode, Inc. - 100%
Chateau, Inc. - 100%
Diversey, Inc. - 100%
Lake Bluff, Inc. - 100%
Nicolet, Inc. - 100%
Tupelo, Inc. - 100%
</TABLE>
* Except for MGIC Investment Corporation and its subsidiaries, includes all NML
mutual funds and other corporations of which 50% or more voting power is
controlled by NML.
C-13
<PAGE>
Item 27. NUMBER OF CONTRACT OWNERS
As of January 31, 1999, 225,681 variable annuity contracts issued in
connection with NML Variable Annuity Account B were outstanding. 183,178 such
contracts were issued as contracts for plans qualifying for special treatment
under various provisions of the Internal Revenue Code. 42,503 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, LLC ("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:
<TABLE>
<CAPTION>
NAME POSITION
------ ----------
<S> <C>
Maria J. Avila Assistant Treasurer
Deborah A. Beck Director and 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
Lisa M. Heise Assistant Director, Equity Compliance, NMIS Office of Supervisory Jurisdiction
Beatrice C. Kmiec Assistant Vice President, Variable Life Administration
Merrill C. Lundberg Secretary
Meridee J. Maynard Vice President, Variable Annuity Administration and Marketing
Donald Parker Assistant Director, Equity Compliance, NMIS 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
</TABLE>
C-14
<PAGE>
<TABLE>
<S> <C>
Steven P. Swanson Vice President
Carla A. Thoke Director, Equity Compliance, NMIS Office 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
Robert J. Ziegler Assistant Treasurer
</TABLE>
The address for each director and officer of NMIS is 720 East Wisconsin Avenue,
Milwaukee, Wisconsin 53202.
(c) During 1998 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 $20,405,685 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,
C-15
<PAGE>
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the registered
securities, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
(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, has duly caused this
Amended Registration Statement to be signed on its behalf, in the City of
Milwaukee, and State of Wisconsin, on the 25th day of February, 1999.
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
Executive Vice President, and Chief Executive Officer
General Counsel and Secretary
By NORTHWESTERN MUTUAL
INVESTMENT SERVICES, LLC
(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 25th day of February, 1999.
THE NORTHWESTERN MUTUAL LIFE
INSURANCE COMPANY
(Depositor)
Attest: JOHN M. BREMER By: JAMES D. ERICSON
------------------------------ ------------------------------
John M. Bremer James D. Ericson
Executive Vice President, President and Chief
General Counsel and Secretary Executive Officer
NORTHWESTERN MUTUAL INVESTMENT
SERVICES, LLC
(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:
<TABLE>
<CAPTION>
SIGNATURE TITLE
- --------- --------
<S> <C> <C>
JAMES D. ERICSON Trustee, President and
- ---------------------------- Principal Executive and Dated February
James D. Ericson Financial Officer 25, 1999
</TABLE>
C-17
<PAGE>
<TABLE>
<S> <C> <C>
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
- ------------------------------ February 25, 1999
Stephen F. Keller
PIERRE S. du PONT* Trustee
- ------------------------------
Pierre S. du Pont
J. E. GALLEGOS* Trustee
- ------------------------------
J. E. Gallegos
KATHRYN D. WRISTON* Trustee
- ------------------------------
Kathryn D. Wriston
BARRY L. WILLIAMS* Trustee
- ------------------------------
Barry L. Williams
GORDON T. BEAHAM III* Trustee
- ------------------------------
Gordon T. Beaham III
DANIEL F. MCKEITHAN, JR.* Trustee
- ------------------------------
Daniel F. McKeithan, Jr.
</TABLE>
C-18
<PAGE>
<TABLE>
<S> <C> <C>
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
- ------------------------------ February 25, 1999
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
TIMOTHY D. PROCTOR* Trustee
- ------------------------------
Timothy D. Proctor
*By: JAMES D. ERICSON
------------------------------
James D. Ericson, Attorney in Fact pursuant
to the Power of Attorney attached hereto
</TABLE>
C-19
<PAGE>
POWER OF ATTORNEY
The undersigned Trustees of THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
hereby constitute and appoint James D. Ericson and Robert E. Carlson, or either
of them, their true and lawful attorneys and agents to sign the names of the
undersigned Trustees to (1) the registration statement or statements to be filed
under the Securities Act of 1933 and to any instrument or document filed as part
thereof or in connection therewith or in any way related thereto, and any and
all amendments thereto in connection with variable contracts issued or sold by
The Northwestern Mutual Life Insurance Company or any separate account credited
therein and (2) the Form 10-K Annual Report or Reports of The Northwestern
Mutual Life Insurance Company and/or its separate accounts for its or their
fiscal year ended December 31, 1998 to be filed under the Securities Exchange
Act of 1934 and to any instrument or document filed as part thereof or in
connection therewith or in any way related thereto, and any and all amendments
thereto. "Variable contracts" as used herein means any contracts providing for
benefits or values which may vary according to the investment experience of any
separate account maintained by The Northwestern Mutual Life Insurance Company,
including variable annuity contracts and variable life insurance policies. Each
of the undersigned hereby ratifies and confirms all that said attorneys and
agents shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, each of the undersigned has subscribed these presents
this 22nd day of July, 1998.
<TABLE>
<S> <C>
R. QUINTUS ANDERSON Trustee
------------------------------------------
R. Quintus Anderson
EDWARD E. BARR Trustee
------------------------------------------
Edward E. Barr
GORDON T. BEAHAM III Trustee
------------------------------------------
Gordon T. Beaham III
ROBERT C. BUCHANAN Trustee
------------------------------------------
Robert C. Buchanan
ROBERT E. CARLSON Trustee
------------------------------------------
Robert E. Carlson
GEORGE A. DICKERMAN Trustee
------------------------------------------
George A. Dickerman
</TABLE>
C-20
<PAGE>
<TABLE>
<S> <C>
PIERRE S. du PONT Trustee
------------------------------------------
Pierre S. du Pont
JAMES D. ERICSON Trustee
------------------------------------------
James D. Ericson
J. E. GALLEGOS Trustee
------------------------------------------
J. E. Gallegos
STEPHEN N. GRAFF Trustee
------------------------------------------
Stephen N. Graff
PATRICIA ALBJERG GRAHAM Trustee
------------------------------------------
Patricia Albjerg Graham
STEPHEN F. KELLER Trustee
------------------------------------------
Stephen F. Keller
BARBARA A. KING Trustee
------------------------------------------
Barbara A. King
J. THOMAS LEWIS Trustee
------------------------------------------
J. Thomas Lewis
DANIEL F. MCKEITHAN, JR. Trustee
------------------------------------------
Daniel F. McKeithan, Jr.
GUY A. OSBORN Trustee
------------------------------------------
Guy A. Osborn
</TABLE>
C-21
<PAGE>
<TABLE>
<S> <C>
TIMOTHY D. PROCTOR Trustee
------------------------------------------
Timothy D. Proctor
DONALD J. SCHUENKE Trustee
------------------------------------------
Donald J. Schuenke
H. MASON SIZEMORE, JR. Trustee
------------------------------------------
H. Mason Sizemore, Jr.
HAROLD B. SMITH Trustee
------------------------------------------
Harold B. Smith
SHERWOOD H. SMITH, JR. Trustee
------------------------------------------
Sherwood H. Smith, Jr.
JOHN E. STEURI Trustee
------------------------------------------
John E. Steuri
JOHN J. STOLLENWERK Trustee
------------------------------------------
John J. Stollenwerk
BARRY L. WILLIAMS Trustee
------------------------------------------
Barry L. Williams
KATHRYN D. WRISTON Trustee
------------------------------------------
Kathryn D. Wriston
</TABLE>
C-22
<PAGE>
EXHIBIT INDEX
EXHIBITS FILED WITH FORM N-4
POST-EFFECTIVE AMENDMENT NO. 57 TO
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
FOR
NML VARIABLE ANNUITY ACCOUNT B
<TABLE>
<CAPTION>
EXHIBIT NUMBER EXHIBIT NAME
- -------------- ------------
<S> <C>
Exhibit B(4)(a) Flexible Payment Variable Annuity Front Load Contract,
QQV.ACCT.B. (0196), with amended application, including Contract
amendment (sex neutral)
Exhibit B(4)(b) Flexible Payment Variable Annuity Back Load Contract, QQV.ACCT.B.
(0196), with amended application, including Contract amendment (sex
neutral)
Exhibit B(4)(c) Variable Annuity Front Load and Back Load Contract Payment Rate
Tables, QQV.ACCT.A.B. (0196) (sex distinct)
Exhibit B(5) Application forms are included in Exhibits B(4)(a) and B(4)(b) above
Exhibit B(8)(a) Form of Participation Agreement Among Russell Insurance Funds,
Russell Fund Distributors, Inc. and The Northwestern Mutual Life
Insurance Company
Exhibit B(8)(b) Form of Administrative Service Fee Agreement between The
Northwestern Mutual Life Insurance Company and Frank Russell
Company
Exhibit B(10) Consent of PricewaterhouseCoopers LLP
Exhibit 27 Financial Data Schedule for period ended December 31, 1998
The following exhibit was filed in electronic format with the Registration
Statement on Form S-6 for Northwestern Mutual Variable Life Account, File No.
333-59103, CIK 0000742277, dated July 15, 1998, and is incorporated herein by
reference.
Exhibit A(6)(b) Amended By-Laws of The Northwestern Mutual Life Insurance
Company dated January 28, 1998
</TABLE>
<PAGE>
Exhibit B(4)(a)
The Northwestern Mutual Life Insurance Company agrees to pay the benefits
provided in this contract, subject to its terms and conditions. Signed at
Milwaukee, Wisconsin on the Issue Date.
/s/ James D. Ericson /s/ John M. Bremer
PRESIDENT AND C.E.O. SECRETARY
FLEXIBLE PAYMENT VARIABLE ANNUITY-ACCOUNT B
Net Purchase Payments accumulated in a Separate Account, assets of which are
invested in shares of one or more mutual funds, or Guaranteed Interest Fund.
Retirement benefit payable at maturity.
Payment at death before maturity.
Contract benefits payable in one sum or as variable or guaranteed monthly
income. Variable Payment Plan benefits described in Section 11.
Participating.
AMOUNTS ALLOCATED TO THE SEPARATE ACCOUNT DIVISIONS AND VARIABLE PAYMENTS
PROVIDED BY THIS CONTRACT ARE NOT GUARANTEED AS TO FIXED DOLLAR AMOUNT BUT ARE
VARIABLE AND MAY INCREASE OR DECREASE TO REFLECT THE INVESTMENT EXPERIENCE OF
THE SEPARATE ACCOUNT.
RIGHT TO RETURN CONTRACT -- Please read this contract carefully. The Owner may
return the contract for any reason within ten days after receiving it. Return of
the contract is effective on the date written notice of the return is delivered,
mailed or sent by telegram to either The Northwestern Mutual Life Insurance
Company, 720 E. Wisconsin Avenue, Milwaukee, Wisconsin 53202 or the agent who
sold the contract. If returned, the contract will be cancelled and the Company
will refund the sum of (a) the difference between the Purchase Payments paid and
the amounts, if any, allocated to the Separate Account plus (b) the value of the
contract on the effective date of return.
[NORTHWESTERN MUTUAL LIFE LOGO]
CONTRACT NUMBER V12 345 678
ANNUITANT John J. Doe
ISSUE DATE January 15, 1996
Sex Neutral
<PAGE>
TABLE OF CONTENTS
PAGE
----
CONTRACT INFORMATION, SEPARATE ACCOUNT DIVISIONS 3
LOADS, FEES, AND CHARGES;
PURCHASE PAYMENTS, ACCUMULATION VALUE, PAYMENT PLANS 4
SECTION 1. GENERAL TERMS AND DEFINITIONS 5
SECTION 2. SEPARATE ACCOUNT 6
- Definition of Separate Account
- Accumulation Units
- Net Investment Factor
- Substitution and Change
SECTION 3. GUARANTEE INTEREST FUND 7
- Guaranteed Interest Fund
- Accumulation Value
- Transfer Restrictions
- Maximum Accumulation Value
SECTION 4. PURCHASE PAYMENTS, TRANSFERS AND WITHDRAWALS 7
- Payment of Purchase Payments
- Application of Purchase Payments
- Selection of Division for Purchase Payments
- Transfer of Accumulation Units
- Withdrawals and Full Surrender
- Effective Date
SECTION 5. BENEFITS 8
- Maturity Benefit
- Payment at Death
SECTION 6. BENEFICIARIES 9
- Definition of Beneficiaries
- Naming and Change of Beneficiaries
- Succession in Interest of Beneficiaries
- General
SECTION 7. LOADS, FEES, AND CHARGES 10
- Contract Fee
- Sales Load and Premium Taxes
- Withdrawal Charge
SECTION 8. OWNERSHIP 11
- The Owner
- Transfer of Ownership
- Collateral Assignment
- Reports to Owners
- Transferability Restrictions
1
<PAGE>
PAGE
----
SECTION 9. THE CONTRACT 11
- Guarantees
- Valuation of Assets
- Determination of Values
- Deferment of Benefit Payments
- Dividends
- Incontestability
- Misstatement of Age or Sex
- Entire Contract; Changes
- Termination of Contract
SECTION 10. PAYMENT OF CONTRACT BENEFITS 12
- Payment of Benefits
- Payment at Death
- Effective Date for Payment Plan
- Payment Plan Elections
SECTION 11. PAYMENT PLANS 13
- Description of Payment Plans
- Allocation of Benefits
- Annuity Units under Variable Payment Plans
- Payments under Variable Payment Plans
- Transfers between Variable Payment Plans
- Withdrawal under Payment Plans
- Payment Plan Rates
ADDITIONAL BENEFITS (if any) Following page
APPLICATION Attached to the contract
ENDORSEMENTS
to be made only by the Company at the Home Office
2
<PAGE>
CONTRACT INFORMATION
CONTRACT NUMBER V12 345 678
PLAN Flexible Payment Variable Annuity
ADDITIONAL BENEFITS None
TAX REPORTING CATEGORY Personal Annuity
ANNUITANT John J. Doe
AGE AND SEX 35 Male
OWNER John J. Doe, the Annuitant
ISSUE DATE June 1, 1999
CONTRACT ANNIVERSARY June 1, 2000 and each June 1
thereafter
MATURITY DATE June 1, 2029
DIRECT BENEFICIARY Jane K. Doe, Wife of the Annuitant
INVESTMENT DIVISIONS
On the Issue Date, Purchase Payments and contract values may be allocated among
the following Investment Accounts. Available Separate Account Divisions are
subject to change. See Section 2.1.
Divisions of Separate Account B:
Select Bond Division
International Equity Division
Money Market Division
Balanced Division
Index 500 Stock Division
Aggressive Growth Stock Division
High Yield Bond Division
Growth Stock Division
Growth and Income Stock Division
Index 400 Stock Division
Small Cap Growth Stock Division
Russell Multi-Style Equity Division
Russell Aggressive Equity Division
Russell Non-US Division
Russell Real Estate Securities Division
Russell Core Bond Division
Guaranteed Accounts:
Guaranteed Interest Fund
QQV.ACCT.B.(0599) Page 3
HOL03 116614
<PAGE>
CONTRACT NUMBER V12 345 678
LOADS, FEES, AND CHARGES
DEDUCTION FROM PURCHASE PAYMENTS:
SALES LOAD (See Section 7.2):
Total Purchase Payments Amount Deducted
Paid Under the Contract From Purchase Payment
First $100,000 4.0%
Next $400,000 2.0%
Next $500,000 1.0%
Balance over $1,000,000 0.5%
PREMIUM TAX (See Section 7.2):
For the first Contract Year, Premium Taxes are not deducted from
Purchase Payments. After the first Contract Year, the Company may
deduct Premium Taxes from Purchase Payments received or benefits
paid.
ANNUAL ANNUITY RATE AND EXPENSE GUARANTEE CHARGE (See Section 2.3):
0.40% at Issue; 0.75% Maximum
ANNUAL CONTRACT FEE (See Section 7.1):
$30 charged on the contract anniversary. The contract fee will be
waived if the Accumulation Value of the contract equals or exceeds
$50,000 on the contract anniversary.
TRANSFER FEE (See Sections 4.4 and 11.5):
$25 beginning with the thirteenth transfer in any Contract Year.
WITHDRAWAL CHARGE: Not Applicable
MINIMUM PURCHASE PAYMENTS, ACCUMULATION VALUE, PAYMENT PLANS
MINIMUM PURCHASE PAYMENT (See Section 4.1): $25
MINIMUM ACCUMULATION VALUE (See Section 9.9):
$2,000 after the first contract anniversary
MINIMUM PAYMENT UNDER PAYMENT PLAN (See Sections 9.9 and 10.4): $20
Page 4
<PAGE>
GUARANTEED INTEREST FUND - TABLE OF GUARANTEED VALUES
The table shows minimum guaranteed values and assumes a $10,000 Purchase Payment
made at the time of issue followed by subsequent $1,000 Purchase Payments made
annually thereafter on each contract anniversary. The values are based on the
assumption that 100% of all net Purchase Payments are allocated to, and remain
in, the Guaranteed Interest Fund.
<TABLE>
<CAPTION>
End of
Contract Accumulation Cash
Year October 1, Value Value
<S> <C> <C> <C>
1 1996 $ 9,888 $9,888
2 1997 11,143 11,143
3 1998 12,435 12,435
4 1999 13,766 13,766
5 2000 15,137 15,137
6 2001 16,549 16,549
7 2002 18,003 18,003
8 2003 19,501 19,501
9 2004 21,044 21,044
10 2005 22,633 22,633
11 2006 24,270 24,270
12 2007 25,956 25,956
13 2008 27,692 27,692
14 2009 29,481 29,481
15 2010 31,323 31,323
16 2011 33,221 33,221
17 2012 35,176 35,176
18 2013 37,189 37,189
19 2014 39,262 39,262
20 2015 41,398 41,398
Age 60 2020 53,108 53,108
Age 65 2025 66,817 66,817
</TABLE>
This table is based on the guaranteed annual interest rate of 3%. Higher
declared rates of interest will increase values. Values shown at the end of
contract years do not reflect any Purchase Payments paid on that contract
anniversary. The actual guaranteed values may differ from those shown above,
depending on the amount and frequency of Purchase Payments.
Page 4A
<PAGE>
SECTION 1. GENERAL TERMS AND DEFINITIONS
ACCUMULATION UNIT. A unit of measure used to determine the value of the interest
of this contract in the Separate Account prior to the date on which amounts are
placed under a payment plan.
ACCUMULATION VALUE. The Accumulation Value of a Separate Account Division is the
total value of all Accumulation Units in that Division. The Accumulation Value
of the Guaranteed Interest Fund is the sum of amounts applied to the fund, plus
credited interest, less amounts withdrawn or transferred from the fund. The
Accumulation Value of the contract is the sum of the Accumulation Values of all
Investment Accounts.
ANNUITANT. The person upon whose life this contract is issued and contract
benefits depend.
ANNUITY UNIT. A unit of measure used to determine the amount of variable
payments under a variable payment plan and the value of the interest of a
variable payment plan in the Separate Account.
COMPANY. The Northwestern Mutual Life Insurance Company.
CONTRACT FEE. An annual charge for administrative expense; made on each contract
anniversary prior to the Maturity Date.
CONTRACT YEAR. The first Contract Year is the period of time ending on the first
contract anniversary. Subsequent Contract Years are the annual periods between
contract anniversaries.
DIVISION. A component of the Separate Account to which the Owner may allocate
Purchase Payments and contract values.
GUARANTEED INTEREST FUND. The portion of the contract that is credited with a
guaranteed interest rate and which is held as part of the general assets of the
Company.
HOME OFFICE. The office of the Northwestern Mutual Life Insurance Company
located at 720 East Wisconsin Avenue, Milwaukee, Wisconsin 53202.
INVESTMENT ACCOUNT. The Guaranteed Interest Fund and Separate Account Divisions
available for allocation of Purchase Payments and contract values. The available
Investment Accounts are listed on page 3.
ISSUE DATE. The date this contract is issued and becomes effective.
MATURITY DATE. The date upon which contract benefits will become payable. If the
contract is continued in force under the Optional Maturity Date provision, the
Optional Maturity Date will become the Maturity Date.
NET PURCHASE PAYMENT. A Purchase Payment less all applicable deductions.
Deductions may include the Sales Load and Premium Tax.
OPTIONAL MATURITY DATE. The contract anniversary nearest the Annuitant's 90th
birthday. Upon reaching the Maturity Date shown on page 3, the Owner may elect
to continue the contract in force until this Optional Maturity Date.
OWNER. The person possessing the ownership rights stated in this contract.
PREMIUM TAX. A tax imposed by a governmental entity when Purchase Payments and
charges for the Disability Waiver of Purchase Payment Benefit are received or
benefits are paid.
PURCHASE PAYMENT. A payment made by or on behalf of the Owner with respect to
this contract excluding any charge for the Disability Waiver of Purchase Payment
Benefit.
SALES LOAD. A deduction made from Purchase Payments received.
SEPARATE ACCOUNT. NML Variable Annuity Account B. The Separate Account consists
of assets set aside by the Company, the investment performance of which is kept
separate from that of the general assets and all other separate account assets
of the Company.
WITHDRAWAL CHARGE. A deduction that is made from maturity benefits and
withdrawal amounts.
WITHDRAWAL CHARGE FREE AMOUNT. For a withdrawal, the amount that can be
withdrawn without a Withdrawal Charge prior to the withdrawal of Net Purchase
Payments.
TRANSFER FEE. A deduction that is made from the amount transferred between
Investment Accounts.
VALUATION DATE. Any day on which the assets of the Separate Account are valued.
Assets are valued as of the close of trading on the New York Stock Exchange for
each day the Exchange is open.
5
<PAGE>
SECTION 2. SEPARATE ACCOUNT
2.1 SEPARATE ACCOUNT
The Separate Account (NML Variable Annuity Account B) has been established
by the Company. The Separate Account consists of assets set aside by the
Company, the investment performance of which is kept separate from that of the
general assets and all other separate account assets of the Company. The assets
of the Separate Account will not be charged with liabilities arising out of any
other business the Company may conduct. Interests in the Separate Account are
represented by Accumulation Units and Annuity Units, described in Sections 2.2
and 11.3, respectively.
The Separate Account is comprised of the Divisions listed on page 3. The
assets allocated to these Divisions are invested in shares of corresponding
Portfolios of the Northwestern Mutual Series Fund, Inc. (the Series Fund). The
Series Fund is registered under the Investment Company Act of 1940 as an
open-end, diversified management investment company. Shares of the Series Fund
Portfolios are purchased for the Separate Account at their net asset value.
The Company reserves the right to eliminate or add additional Divisions
and Portfolios.
2.2 ACCUMULATION UNITS
The interest of this contract in the Separate Account, prior to the date
on which amounts become payable under a payment plan, is represented by
Accumulation Units. The dollar value of Accumulation Units for each Division
will increase or decrease to reflect the investment experience of the Division.
The value of an Accumulation Unit on any Valuation Date is determined by
multiplying:
- the value on the immediately preceding Valuation Date; by
- the Net Investment Factor for the period from the immediately
preceding Valuation Date up to and including the current Valuation
Date (the current period).
2.3 NET INVESTMENT FACTOR
For each Division of the Separate Account the Net Investment Factor for
the current period is one plus the net investment rate for the Division. The net
investment rate for the current period is equal to the gross investment rate for
the Division reduced on each Valuation Date by a charge for annuity rate and
expense guarantees. The charge for these guarantees on the Issue Date is shown
on page 4. The Company may increase or decrease the charge after the Issue Date,
but the Company may not increase the charge to exceed the maximum charge shown
on page 4.
The gross investment rate for the current period for each Division is
equal to a. divided by b. where:
a. is:
- the investment income of the Division for the current period; plus
- captial gains for the period, whether realized or unrealized, on the
assets of the Division; less
- capital losses for the period, whether realized or unrealized, on
the assets of the Division; less
- deduction for any tax liability paid or reserved for by the Company
resulting from the maintenance or operation of the Division; and
less
- any reasonable expenses paid or reserved for by the Company which
result from a substitution of other securities for shares of the
Portfolio(s) as set forth in Section 2.4 and
b. is the value of the assets in the Division on the immediately preceding
Valuation Date.
The gross investment rate may be positive or negative. The deduction for
any tax liability may be charged proportionately against those contracts to
which the liability is attributable by a reduction in the gross investment rate
for those contracts.
2.4 SUBSTITUTION AND CHANGE
Pursuant to the authority of the Board of Trustees of the Company:
- the assets of the Division may be invested in securities other than
shares of the Portfolio(s) as a substitute for those shares already
purchased or as the securities to be purchased in the future;
- the provision of the contracts may be modified to comply with any
other applicable federal or state laws.
In the event of a substitution or change, the Company may make appropriate
endorsement on this and other contracts having an interest in the Separate
Account and take other actions as may be necessary to effect the substitution or
change.
6
<PAGE>
SECTION 3. GUARANTEED INTEREST FUND
3.1 GUARANTEED INTEREST FUND
Net Purchase Payments (see Section 4.2) and amounts transferred from other
Investment Accounts under this contract (see Section 4.4) may be applied to the
Guaranteed Interest Fund. Contract benefits placed under a variable payment plan
may not be applied to the Guaranteed Interest Fund. Amounts applied to the
Guaranteed Interest Fund become part of the general assets of the Company.
3.2 ACCUMULATION VALUE
The Accumulation Value of the Guaranteed Interest Fund is the sum of the
amounts applied to it, plus credited interest, less any amounts withdrawn or
transferred from the fund. Interest begins to accrue on the effective date of
the Purchase Payment or transfer (see Section 4.6). Interest will be credited at
an annual effective interest rate of not less than 3%. A higher rate may be
declared by the Company from time to time for a period set by the Company.
3.3 TRANSFER RESTRICTIONS
Neither transfers of Accumulation Value into the Guaranteed Interest Fund
nor transfers of Accumulation Value from the Guaranteed Interest Fund will be
allowed for a period of 365 days following the most recent transfer of
Accumulation Value from the Guaranteed Interest Fund. The maximum amount of the
Accumulation Value that may be transferred from the Guaranteed Interest Fund in
one transfer is limited to the greater of:
- 20% of the Accumulation Value of the Guaranteed Interest Fund on the
last contract anniversary preceding the transfer, and
- the amount of the most recent transfer from the Guaranteed Interest
Fund.
However, in no event will this maximum transfer amount be less than $1,000
or greater than $50,000.
3.4 MAXIMUM GUARANTEED INTEREST FUND ACCUMULATION VALUE
The Accumulation Value of the Guaranteed Interest Fund may not exceed
$1,000,000 without prior consent of the Company, except when the maximum is
exceeded because of interest accruing to the Guaranteed Interest Fund.
3.5 TABLE OF GUARANTEED VALUES
Accumulation and cash values are shown on page 4A for the end of the
contract years shown. Values for contract years not shown are calculated on the
same basis as those shown on page 4A. All values are at least as great as those
required by the state in which this contract is delivered.
SECTION 4. PURCHASE PAYMENTS, TRANSFERS, WITHDRAWALS
4.1 PAYMENT OF PURCHASE PAYMENTS
All Purchase Payments are payable at the Home Office or to an authorized
agent. A receipt signed by an officer of the Company will be furnished on
request.
Purchase Payments may be made at any time prior to the Maturity Date. The
Owner may vary the amount of Purchase Payments, but no Purchase Payment may be
less than the minimum Purchase Payment shown on page 4. Total Purchase Payments
may not exceed $5,000,000 without the consent of the Company.
The Company will not accept any Purchase Payments under Section 4 unless
it is a contribution under a pension or profit sharing plan which meets the
requirements of Section 401 of the Internal Revenue Code of 1954, as amended, or
the requirements for deduction of the employe's contribution under Section
404(a)(2) of such code.
4.2 APPLICATION OF PURCHASE PAYMENTS
Each Purchase Payment, net of the Sales Load and Premium Tax, will be
applied to one or more Investment Accounts. Net Purchase Payments applied to the
Guaranteed Interest Fund will accrue interest from the effective date of the
Purchase Payment. Net Purchase Payments applied to the Separate Account will
provide Accumulation Units in one or more Divisions. Accumulation Units are
credited as of the effective date of the Purchase Payment.
The number of Accumulation Units will be determined by dividing the Net
Purchase Payment by the value of an Accumulation Unit on the effective date.
This number of Accumulation Units will not be changed by any subsequent change
in the dollar value of Accumulation Units.
4.3 SELECTION OF INVESTMENT ACCOUNT FOR PURCHASE PAYMENTS
The Owner may at any time change the allocation of Net Purchase Payments
among the Investment Accounts by written notice to the Company. Net Purchase
Payments received at the Home Office on or after the date on which notice is
received will be applied to the designated Investment Accounts on the basis of
the new allocation.
4.4 TRANSFER OF ACCUMULATION VALUE
Before the Maturity Date the Owner may, on request satisfactory to the
Company, transfer amounts from one Investment Account to another, subject to the
transfer restrictions described in Section 3.3. For transfers among the Separate
Account Divisions, the number of Accumulation Units to be applied or deducted
will be adjusted to reflect the respective value of the Accumulation Units in
each of the Divisions on the date the transfer is effective. A Transfer Fee will
be deducted from the amount transferred. The amount of the Transfer Fee is shown
on page 4. The minimum amount which may be transferred is the lesser of $100 or
the entire Accumulation Value of the Investment Account from which the transfer
is being made.
For transfers from the Guaranteed Interest Fund, amounts closest to
expiration of an interest rate guarantee will be removed first. In the event
that two amounts are equally close to expiration, the one which was applied to
the Guaranteed Interest Fund earlier will be removed first.
7
<PAGE>
4.5 WITHDRAWALS AND FULL SURRENDER
Before the Maturity Date the Owner may, on request satisfactory to the
Company, withdraw all or a portion of the Accumulation Value of the contract.
The Company may require that at least 100 Accumulation Units or $100 of
Accumulation Value of the Guaranteed Interest Fund remain after a partial
withdrawal. Withdrawal of the entire value of the contract constitutes a full
surrender, and receipt of the contract at the Home Office will terminate this
contract. Receipt of the contract may be waived by the Company.
The cash value of the amount withdrawn will be the Accumulation Value
withdrawn determined as of the date the withdrawal is effective, less any
applicable Withdrawal Charge. The Withdrawal Charge is described, in Section
7.3.
The term "withdrawal amounts" as used in this contract includes amounts
paid as full surrenders and withdrawals of a portion of the Accumulation Value
of the contract.
For withdrawals from the Guaranteed Interest Fund, amounts closest to
expiration of an interest rate guarantee will be removed first. In the event
that two amounts are equally close to expiration, the one which was applied to
the Guaranteed Interest Fund earlier will be removed first.
4.6 EFFECTIVE DATE
The effective date of a Purchase Payment, transfer, or withdrawal is the
Valuation Date on which the Purchase Payment or the request for transfer or
withdrawal is received at the Home Office. However, the Purchase Payment,
transfer, or withdrawal will be effective on the following Valuation Date if the
Purchase Payment or request for transfer or withdrawal is received at the Home
Office either:
- on a Valuation Date after the close of trading on the New York Stock
Exchange; or
- on a day on which the New York Stock Exchange is closed.
SECTION 5. BENEFITS
5.1 MATURITY BENEFIT
MATURITY OPTIONS. If the Annuitant is living on the Maturity Date shown on page
3, and that Maturity Date is earlier than the contract anniversary nearest the
Annuitant's 90th birthday, the Owner may elect between the following maturity
options:
- payment of a monthly income to the Annuitant under a payment plan
chosen by the Owner; or
- deferral of the maturity benefit and continuation of this contract,
without any Disability Waiver of Purchase Payment Benefit, to the
Optional Maturity Date. The contract will continue under this option
if a written election for this purpose is received by the Company or
if on the Maturity Date shown on page 3, the Owner has not chosen a
payment plan.
If the Annuitant is living on the Maturity Date and that Maturity Date is
on or after the contract anniversary nearest the Annuitant's 90th birthday, the
Company will pay a monthly income to the Annuitant under a payment form chosen
by the Owner.
PAYMENT OF MATURITY BENEFIT. The amount of the monthly income paid as the
maturity benefit will depend on the payment plan chosen (see Section 11) and the
maturity value. The maturity value of this contract will be the Accumulation
Value of the contract on the effective date of the maturity benefit, less any
applicable Withdrawal Charge (see Section 7.3). The maturity benefit will be
effective on the Maturity Date. However, if the New York Stock Exchange is
closed on the Maturity Date, the effective date will be the Valuation Date next
preceding the Maturity Date.
If no payment form is chosen at the time a monthly income becomes payable,
payments will be made to the Annuitant under the variable payment form of Life
Income Plan (Option C), with installments certain for ten years, as described in
Section 11.1.
OPTIONAL MATURITY DATE. The Optional Maturity Date is the contract anniversary
nearest the Annuitant's 90th birthday. If the contract is continued to the
Optional Maturity Date, all contract rights of the Owner will continue in effect
to the Optional Maturity Date except that the Disability Waiver of Purchase
Payment Benefit will not continue in force after the Maturity Date shown on page
3. The Optional Maturity Date will become the Maturity Date for all other
purposes of this contract.
5.2 PAYMENT AT DEATH
The Company will make a payment to the beneficiary upon receipt at its
Home Office of satisfactory proof of the death of the Annuitant before the
Maturity Date. The payment at death will be the Accumulation Value of the
contract determined on the effective date of the payment at death. The payment
at death will be effective on the Valuation Date on which proof of death is
received at the Home Office or, if later, the date on which a method of payment
is elected. However, payment at death will be effective on the next following
Valuation Date if the proof of death is received at the Home Office either:
- on a Valuation Date after the close of trading on the New York Stock
Exchange; or
- on a day on which the New York Stock Exchange is closed.
If the date of death is before the Annuitant's 65th birthday, the payment
at death will not be less than:
- total Purchase Payments paid under the contract; less
- any amounts withdrawn under Section 4.5.
The term "death benefits" as used in this contract refers to the payment
at death.
8
<PAGE>
SECTION 6. BENEFICIARIES
6.1 DEFINITIONS
The term "beneficiaries" as used in this contract includes direct
beneficiaries, contingent beneficiaries and further payees.
6.2 NAMING AND CHANGE OF BENEFICIARIES
FOR MATURITY BENEFITS BY OWNER. The Owner may name and change the beneficiaries
of maturity benefits before the Maturity Date. If no direct beneficiary is named
by the Owner, the Annuitant will be the direct beneficiary.
FOR DEATH BENEFITS BY OWNER. The Owner may name and change the beneficiaries:
- while the Annuitant is living; or
- during the first 60 days after the date of death of tire Annuitant,
if the Annuitant was not the Owner immediately prior to the
Annuitant's death. A change made during this 60 days cannot be
revoked.
FOR WITHDRAWAL AMOUNTS BY OWNER. The Owner may name the beneficiaries at the
time of withdrawal.
FOR DEATH BENEFITS BY DIRECT BENEFICIARY. A direct beneficiary may name and
change the contingent beneficiaries and further payees of the direct
beneficiary's share of the benefits:
- if the direct beneficiary is the Owner,
- if, at any time after the death of the Annuitant, no contingent
beneficiary or further payee of that share is living; or
- if, after the death of the Annuitant, the direct beneficiary elects
a payment plan. The interest of any other beneficiary in the share
of that direct beneficiary will end.
These direct beneficiary rights are subject to the Owner's rights during
the 60 days after the date of death of the Annuitant.
FOR MATURITY BENEFITS OR WITHDRAWAL AMOUNTS BY DIRECT BENEFICIARY. After a
withdrawal or the maturity of the contract, the direct beneficiary may name and
change the contingent beneficiaries and further payees of the direct
beneficiary's share of benefits that is under a payment plan.
FOR MATURITY OR DEATH BENEFITS OR WITHDRAWAL AMOUNTS BY SPOUSE (MARITAL
DEDUCTION PROVISION).
- POWER TO APPOINT. The spouse of the Annuitant will have the power
alone and in all events to appoint all amounts payable to the spouse
under the contract if:
a. just before the Annuitant's death, the Annuitant was the
Owner, and
b. the spouse is a direct beneficiary; and
c. the spouse survives the Annuitant.
- TO WHOM SPOUSE CAN APPOINT. Under this power, the spouse can
appoint:
a. to the estate of the spouse; or
b. to any other persons as contingent beneficiaries and further
payees.
- EFFECT OF EXERCISE. As to the amounts appointed, the exercise of
this power will:
a. revoke any other designation of beneficiaries;
b. revoke any election of payment plan as it applies to them; and
c. cause any provision to the contrary in Section 6 or 10 of this
contract to be of no effect.
EFFECTIVE DATE. A naming or change of a beneficiary will be made on receipt at
the Home Office of a written request that is acceptable to the Company. The
request will then take effect as of the date that it was signed. The Company is
not responsible for any payment or other action that is taken by it before the
receipt of the request. The Company may require that the contract be sent to it
to be endorsed to show the naming or change.
6.3 SUCCESSION IN INTEREST OF BENEFICIARIES
DIRECT BENEFICIARIES. The maturity or death benefits or withdrawal amounts will
be payable in equal shares to the direct beneficiaries who survive and receive
payment. If a direct beneficiary dies before receiving all or part of the direct
beneficiary's full share, the unpaid portion will be payable in equal shares to
the other direct beneficiaries who survive and receive payment.
CONTINGENT BENEFICIARIES. At the death of all of the direct beneficiaries, the
maturity or death benefits, the withdrawal amounts, or the present value of any
unpaid payments under a payment plan, will be payable in equal shares to the
contingent beneficiaries who survive and receive payment. If a contingent
beneficiary dies before receiving all or part of the contingent beneficiary's
full share, the unpaid portion will be payable in equal shares to the other
contingent beneficiaries who survive and receive payment.
FURTHER PAYEES. At the death of all the direct and contingent beneficiaries, the
maturity or death benefits, the withdrawal amounts, or the present value of any
unpaid payments under a payment plan, will be paid in one sum:
- in equal shares to the further payees who survive and receive
payment; or
- if no further payees survive and receive payment, to the estate of
the last to die of all beneficiaries who survive the Annuitant.
9
<PAGE>
OWNER OR THE OWNER'S ESTATE. If no beneficiaries are alive when the Annuitant
dies, the benefits will be paid to the Owner or to the Owner's estate.
6.4 TRUSTEE AS BENEFICIARY
If a trustee is named as a beneficiary and no qualified trustee makes
claim to the proceeds, or to the present value of any unpaid payments under a
payment plan, within one year after payment becomes due to the trustee, or if
satisfactory evidence is furnished to the Company within that year showing that
no trustee can qualify to receive payment, payment will be made as though the
trustee had not been named.
The Company will be fully discharged of liability for any action taken by
the trustee and for all amounts paid to, or at the direction of, the trustee and
will have no obligation as to the use of the amounts. In all dealings with the
trustee the Company will be fully protected against the claims of every other
person. The Company will not be charged with notice of a change of trustee
unless written evidence of the change is received at the Home Office.
6.5 GENERAL
TRANSFER OF OWNERSHIP. A transfer of ownership of itself will not change the
interest of a beneficiary.
CLAIMS OF CREDITORS. So far as allowed by law, no amount payable under this
contract will be subject to the claims of creditors of a beneficiary.
SUCCESSION UNDER PAYMENT PLANS. A direct or contingent beneficiary who succeeds
to an interest in a payment plan will continue under the terms of the plan.
SECTION 7. FEES AND CHARGES
7.1 CONTRACT FEE
On each contract anniversary prior to the Maturity Date, a Contract Fee
will be charged for administrative expenses. The amount of the Contract Fee is
shown on page 4. The Contract Fee will be deducted from the Investment Accounts
in proportion to the Accumulation Value of the Investment Accounts. The
effective date of the Contract Fee will be the contract anniversary. However, if
the New York Stock Exchange is closed on the contract anniversary, the effective
date will be the next following Valuation Date.
7.2 SALES LOAD AND PREMIUM TAXES
The Company will deduct from Purchase Payments received the Sales Load
shown on page 4. The Company may also deduct from Purchase Payments received any
Premium Taxes incurred.
7.3 WITHDRAWAL CHARGE
CONDITIONS. Maturity benefits and withdrawals are subject to a Withdrawal Charge
described on page 4. There is no Withdrawal Charge on benefits that are paid
under a variable Instalment Income or variable Life Income Payment Plan.
However, the withdrawal of the present value of any unpaid installments under a
variable Installment Income Plan (Option B) will be subject to a withdrawal
charge if the withdrawal is made less than five years after the date that the
payment plan takes effect.
CALCULATIONS. The amount of the Withdrawal Charge on the contract is equal to
the sum of the Withdrawal Charges on all Net Purchase Payments. The Withdrawal
Charge on a Net Purchase Payment is equal to the Withdrawal Charge percentage on
the date the Withdrawal Charge is determined, multiplied by the amount of the
Net Purchase Payment. The Withdrawal Charge percentages are shown on page 4. The
excess of the Accumulation Value of the contract over the total of Net Purchase
Payments paid is not subject to a Withdrawal Charge.
Withdrawal Charges are determined:
- for maturity benefits, as of the Maturity Date.
- for withdrawals under Section 4.5, as of the effective date of the
withdrawal.
- for withdrawals from payment plans, as of the effective date of the
withdrawal.
WITHDRAWAL CHARGE FREE AMOUNT. If the Accumulation Value of the contract is at
least $10,000 on the most recent contract anniversary preceding a withdrawal
under Section 4.5, then the amount withdrawn will be taken first from any
eligible portion of the Accumulation Value of the contract that exceeds the
total of Net Purchase Payments paid. For each Contract Year, the amount eligible
for the Withdrawal Charge Free Amount is the lesser of the following:
- the excess of the Accumulation Value of the contract on the
effective date of the withdrawal over the total of Net Purchase
Payments paid up to the effective date of the withdrawal; and
- 10% of the Accumulation Value of the contract on the most recent
contract anniversary preceding the withdrawal.
ORDER OF WITHDRAWAL. A withdrawal will be taken from the contract in the
following order:
- first, from the Withdrawal Charge Free Amount, if any;
- next, from the Net Purchase Payments in the order that produces the
lowest Withdrawal Charge; and
- last, from any remaining amount by which the Accumulation Value of
the contract exceeds the total of Net Purchase Payments.
10
<PAGE>
SECTION 8. OWNERSHIP
8.1 THE OWNER
The Owner is named on page 3. All contract rights may be exercised by the
Owner, the Owner's successor, or the Owner's transferee without the consent of
any beneficiary. After the Annuitant's death, contract rights may be exercised
only as provided in Sections 6 and 1).
If the contract has more than one Owner, contract rights may be exercised
only by authorization of all Owners.
8.2 TRANSFER OF OWNERSHIP
The Owner may transfer the ownership of this contract. Written proof of
transfer satisfactory to the Company must be received at its Home Office. The
transfer will then take effect as of the date it was signed. The Company may
require that the contract be sent to it for endorsement to show the transfer.
The Company will not be responsible to a transferee Owner for any payment or
other action taken by the Company before receipt of the proof of transfer at its
Home Office.
8.3 COLLATERAL ASSIGNMENT
The Owner may assign this contract as collateral security. The Company is
not responsible for the validity or effect of a collateral assignment. The
Company will not be responsible to an assignee for any payment or other action
taken by the Company before receipt of the assignment in writing at its Home
Office.
The interest of any beneficiary will be subject to any collateral
assignment made either before or after the beneficiary is named.
A collateral assignee is not an Owner. A collateral assignment is not a
transfer of ownership. Ownership can be transferred only by complying with
Section 8.2.
8.4 REPORTS TO OWNERS
At least once each Contract Year, the Company will also send to the Owner
or payee a statement of the Accumulation Values of the Investment Accounts, the
number of units credited to the contract, the dollar value of a unit as of a
date not more than two months previous to the date of mailing, and a statement
of the investments held by the Separate Account.
8.5 TRANSFERABILITY RESTRICTIONS
Notwithstanding any other provisions of this contract, the Owner may not:
- change the ownership of the contract; or
- sell the contract, or asssign or pledge the contract as
collateral for a loan or as security for the performance of an
obligation or for any other purpose, to any person other than
the Company.
These restrictions will not apply if the Owner is:
- the trustee of an employee trust that is qualified under the
Internal Revenue Code; or
- the custodian of a custodial account treated as an employee
trust that is qualified under the Internal Revenue Code.
The restrictions do not preclude the employer under a non-trusteed plan
from transferring ownership of this contract to the Annuitant or to the employer
or trustee under another plan or trust when required by the plan.
SECTION 9. THE CONTRACT
9.1 GUARANTEES
The Company guarantees that mortality and expense results will not
adversely affect the amount of variable payments.
9.2 VALUATION OF SEPARATE ACCOUNT ASSETS
The value of the shares of each Portfolio held in the Separate Account on
each Valuation Date will be the redemption value of the shares on that date. If
the right to redeem shares of a Portfolio has been suspended, or payment of the
redemption value has been postponed, the shares held in the Separate Ac. count
(and Annuity Units) may be valued at fair value as determined in good faith by
the Board of Trustees of the Company for the sole purpose of computing annuity
payments.
9.3 DETERMINATION OF SEPARATE ACCOUNT VALUES
The method of determination by the Company of the Net Investment Factor,
and the number and value of Accumulation Units and Annuity Units, will be
conclusive upon the Owner, any assignee, the Annuitant, and any beneficiary.
9.4 DEFERMENT OF BENEFIT PAYMENTS
SEPARATE ACCOUNT DIVISIONS. The Company reserves the right to defer
determination of the contract values of the Separate Account portion of this
contract, or the payment of benefits under a variable payment plan, until after
the end of any period during which the right to redeem shares of a Portfolio is
suspended, or payment of the redemption value is postponed. Any deferment would
be in accordance with the provisions of the Investment Company Act of 1940 by
reason of closing of, or restriction of trading on, the New York Stock Exchange,
or other emergency, or as otherwise permitted by the Act. In addition, the
Company reserves the right to defer payment of contract values until seven days
after the end of any deferment in the determination of contract values.
GUARANTEED INTEREST FUND. The Company may defer paying contract values of the
Guaranteed Interest Fund for up to six months from the effective date of the
withdrawal or full surrender. If payment is deferred for 30 days or more,
interest will be paid on the withdrawal amounts at an annual effective rate of
3% from the effective date of the withdrawal or surrender to the date of the
payment.
11
<PAGE>
9.5 DIVIDENDS
This contract will share in the divisible surplus of the Company, except
while payments are being made under a variable payment plan. This surplus will
be determined each year, and the dividend, if any, will be credited on the
contract anniversary. Any dividend credited prior to the Maturity Date will be
applied on the effective date as a Net Purchase Payment unless the Owner elects
to have the dividend paid in cash. The effective date of the dividend will be
the contract anniversary. However, if the New York Stock Exchange is closed on
the contract anniversary, the effective date will be the next following
Valuation Date.
9.6 INCONTESTABILITY
The Company will not contest this contract after it has been in force
during the lifetime of the Annuitant for two years from the Issue Date. This
Issue Date is shown on page 3.
9.7 MISSTATEMENT OF AGE OR SEX
If the age or sex of the Annuitant has been misstated, the amount payable
will be the amount which the Purchase Payments paid would have purchased at the
correct age and sex.
9.8 ENTIRE CONTRACT; CHANGES
This contract with the attached application is the entire contract.
Statements in the application are representations and not warranties. A change
in the contract is valid only if it is approved by an officer of the Company.
The Company may require that the contract be sent to it for endorsement to show
a change. No agent has the authority to change the contractor or to waive any of
its terms.
All payments by the Company under this contract are payable at its Home
Office.
Assets of the Separate Account are owned by the Company and the Company is
not a trustee with respect thereto. The Company may from time to time adjust the
amount of assets contained in the Separate Account, by periodic withdrawals or
additions, to reflect the contract deductions and the Company's reserves for
this and other similar contracts.
This contract is subject to the laws of the state in which it is
delivered. All benefits are at least as great as those required by that state.
9.9 TERMINATION OF CONTRACT
At any time after the first contract anniversary, the Company may
terminate the contract and pay the Owner the Accumulation Value of the contract
and be released of any further obligation if:
- prior to the Maturity Date no Purchase Payments have been received
under the contract for a period of two full years and each of the
following is less than the Minimum Accumulation Value shown on page
4:
a. the Accumulation Value of the contract; and
b. total Purchase Payments paid under the contract, less any
amounts withdrawn under Section 4.5; or
- on the Maturity Date the Accumulation Value of the contract is less
than the Minimum Accumulation Value shown on page 4 or would provide
a monthly income the initial amount of which is less than the
minimum payment amount shown on page 4.
SECTION 10. PAYMENT OF CONTRACT BENEFITS
10.1 PAYMENT OF BENEFITS
All or part of the contract benefits may be paid under one or more of the
following:
- a variable payment plan;
- a fixed payment plan; or
- in cash.
The provisions and rate for variable and fixed payment plans are described
in Section 11. Contract benefits may not be placed under a payment plan unless
the plan would provide to each beneficiary a monthly income the initial amount
of which is at least the minimum payment amount shown on page 4. A Withdrawal
Charge will be deducted from contract benefits before their payment under
certain conditions described in Section 7.3.
10.2 PAYMENT AT DEATH
Upon the death of the Annuitant prior to the Maturity Date, the payment at
death will be made under any payment plan previously elected. If no payment plan
has been elected, the payment at death will be made under a payment plan or in
cash as elected by the Owner or beneficiary.
12
<PAGE>
10.3 EFFECTIVE DATE FOR PAYMENT PLAN
A payment plan that is elected for maturity benefits will take effect on
the Maturity Date.
A payment plan that is elected for death benefits will take effect on the
date proof of death of the Annuitant is received at the Home Office if:
- the plan is elected by the Owner; and
- the election is received at the Home Office while the Annuitant is
living.
In all other cases, a payment plan that is elected will take effect:
- on the date the election is received at the Home Office; or
- on a later date, if requested.
10.4 PAYMENT PLAN ELECTIONS
FOR DEATH BENEFITS BY OWNER. The Owner may elect payment plans for death
benefits:
- while the Annuitant is living; or
- during the first 60 days after the date of death of the Annuitant,
if the Annuitant was not the Owner immediately prior to the
Annuitant's death. An election made during the 60 days cannot be
changed.
FOR DEATH BENEFITS BY DIRECT OR CONTINGENT BENEFICIARY. A direct or contingent
beneficiary may elect payment plans for death benefits payable to the direct or
contingent beneficiary if no payment plan that has been elected is in effect.
This right is subject to the Owner's rights during the above 60 days.
FOR MATURITY BENEFITS OR WITHDRAWAL AMOUNTS. The Owner may elect payment plans
for maturity benefits or withdrawal amounts.
TRANSFER BETWEEN PAYMENT PLANS. A beneficiary who is receiving payment under a
payment plan which includes the right to withdraw may transfer the amount
withdrawable to any other payment plan that is available.
SECTION 11. PAYMENT PLANS
11.1 DESCRIPTION OF PAYMENT PLANS
INSTALLMENT INCOME FOR SPECIFIED PERIOD (OPTION B)
The Company will make monthly installment income payments providing for
payment of benefits over a specified period of 5 to 3 years.
LIFE INCOME PLANS
- SINGLE LIFE INCOME (OPTION C). The Company will make monthly
payments for the selected certain period, if any, and thereafter
during the remaining lifetime of the individual upon whose life
income payments depend. The selections available are: (a) no certain
period; or (b) a certain period of 10 or 20 years.
- JOINT AND SURVIVOR LIFE INCOME (OPTION E). The Company will make
monthly payments for a 10-year certain period and thereafter during
the joint lifetime of the two individuals upon whose lives income
payments depend and continuing during the remaining lifetime of the
survivor.
- OTHER SELECTIONS. The Company may offer other selections under the
Life Income Plans.
- LIMITATIONS. A direct or contingent beneficiary who is a natural
person may be paid under a Life Income Plan only if the payments
depend on that beneficiary's life. A corporation may be paid under a
Life Income Plan only if the payments depend on the life of the
Annuitant or, after the death of the Annuitant, on the life of the
Annuitant's spouse or dependent.
These payment plans are available on either a fixed or variable basis.
Under a fixed payment plan the payment remains level. Under a variable payment
plan the payment will increase or decrease as described in Section 11.4.
11.2 ALLOCATION OF BENEFITS
Upon election of a variable payment plan, the Owner or direct or
contingent beneficiary may select the allocation of variable benefits among the
Divisions.
If no selection is made, the allocation of benefits will be as follows:
- for amounts in the Separate Account Divisions, benefits will be
allocated in proportion to the Accumulation Value of each Division
on the effective date of the variable payment plan, and
- for amounts in the Guaranteed Interest Fund, benefits will be
allocated 100% to the Money Market Division.
11.3 ANNUITY UNITS UNDER VARIABLE PAYMENT PLANS
The interest of this contract in the Separate Account after the effective
date of a variable payment plan is represented by Annuity Units. The dollar
value of Annuity Units for each Division will increase or decrease to reflect
the investment experience of the Division. The value of Annuity Unit on any
Valuation Date is the product of:
- the Annuity Unit value on the immediately preceding Valuation Date;
- the Net Investment Factor for the period from the immediately
preceding Valuation Date up to and including the current Valuation
Date (the current period); and
- the Daily Adjustment Factor of .99990575 raised to a power equal to
the number of days in the current period to reflect the Assumed
Investment Rate of 3 1/2% used in calculating the monthly payment
rate.
13
<PAGE>
11.4 PAYMENTS UNDER VARIABLE PAYMENT PLANS
FIRST PAYMENT. The first payment under a variable payment plan will be due as of
the effective date of the payment plan.
The amount of the first payment is the sum of payments from each Division,
each determined by multiplying the benefits allocated to the Division under the
variable payment plan by the applicable monthly variable payment rate per $1,000
of benefits.
NUMBER OF ANNUITY UNITS. The number of Annuity Units in each Division under a
variable payment plan is determined by dividing the amount of the first payment
payable from the Division by the Annuity Unit value for the Division at the
close of business on the Valuation Date on which the variable payment plan
becomes effective. The number of Annuity Units will not be changed by any
subsequent change in the dollar value of Annuity Units.
SUBSEQUENT VARIABLE PAYMENTS. The amount of each subsequent payment from each
Division under a variable payment plan will increase or decrease in accord with
the increase or decrease in the value of an Annuity Unit which reflects the
investment experience of that Division of the Separate Account.
The Amount of subsequent variable payments is the sum of payments from
each Division, each determined by multiplying the fixed number of Annuity Units
for the Division by the value of an Annuity Unit for the Division on:
- the fifth Valuation Date prior to the payment due date if the
payment due date is a Valuation Date; or
- the sixth Valuation Date prior to the payment due date if the
payment due date is not a Valuation Date.
11.5 TRANSFER BETWEEN VARIABLE PAYMENT PLANS
A payee or joint payees receiving payments under a variable payment plan
may:
- transfer Annuity Units from one Division to another. The number of
Annuity Units in each Division will be adjusted to reflect the
respective value of the Annuity Units in the Divisions on the date
the transfer is effective. A Transfer Fee will be deducted from the
amount transferred. The amount of the Transfer Fee is shown on page
4. Transfers from the Money Market Division may be made at any time.
No transfer from the other Divisions may be made within 90 days of
the effective date of the variable payment plan or within 90 days
from the effective date of the last transfer.
- transfer from an Installment Income Plan (Option B) to either form
of the Life Income Plan (Option C or E).
Other transfers may be permitted subject to conditions set by the Company.
A transfer will be effective on the Valuation Date on which a satisfactory
transfer request is received in the Home Office, or a later date if requested.
However, the transfer will be effective on the following Valuation Date if the
request is received at the Home Office either:
- on a Valuation Date after the close of trading on the New York Stock
Exchange; or
- on a day on which the New York Stock Exchange is closed.
11.6 WITHDRAWAL UNDER PAYMENT PLANS
Withdrawal of the present value of any unpaid income payments may be
elected at any time by the beneficiary, except at withdrawal may not be elected
under a Life Income Plan (Option C or E) until the death of all individuals upon
whose lives income payments depend.
The withdrawal value under the Installment Income Plan (Option B) will be
the present value of any unpaid payments, less any applicable Withdrawal Charge
under Section 7.3. The withdrawal value under a Life Income Plan (Option C or E)
will be the present value of any unpaid payments for the certain period with no
Withdrawal Charge.
For a fixed payment plan, the present value of any unpaid income payments
will be based on the rate of interest used to determine the amount of the
payments. For a variable payment plan, the present value of any unpaid income
payments will be based on interest at the Assumed Investment Rate used in
calculating the amount of the variable payments. The amount of variable payments
used in calculating the present value of unpaid payments will be determined by
multiplying the number of Annuity Units by the value of an Annuity Unit on the
effective date of the withdrawal.
A withdrawal will be effective on the Valuation Date on which the request
is received in the Home Office. However, the withdrawal will be effective on the
following Valuation Date if the request is received at the Home Office either:
- on a Valuation Date after the close of trading on the New York Stock
Exchange; or
- on a day on which the New York Stock Exchange is closed.
14
<PAGE>
11.7 PAYMENT PLAN RATES
PAYMENT RATE TABLES. The guaranteed monthly payment rates for both a fixed
payment plan and the first payment under a variable payment plan are shown in
the Payment Rate Tables. The tables show rates for the Installment Income Plan
for a Specified Period (Option B) and Life Income Plans (Options C and E). Life
Income Plan (Option C or E) rates are based on the sex and adjusted age of any
individual upon whose life payments depend. The adjusted age is:
- the age on the birthday that is nearest to the date on which the
payment plan takes effect; plus
- the age adjustment shown below for the number of Contract Years that
have elapsed from the Issue Date to the date that the payment plan
takes effect. A part of a Contract Year is counted as a full year.
CONTRACT CONTRACT
YEARS AGE YEARS AGE
ELAPSED ADJUSTMENT ELAPSED ADJUSTMENT
- ---------------------------------------------------------------
1 to 8 0 33 to 40 -4
9 to 16 -1 41 to 48 -5
17 to 24 -2 49 or more -6
25 to 32 -3
CURRENT FIXED PAYMENT PLAN RATES
- INSTALLMENT INCOME FOR SPECIFIED PERIOD (OPTION B). The Company may
offer fixed payment plan rates higher than those guaranteed in this
contract with conditions on withdrawal.
- LIFE INCOME PLANS (OPTION C OR E). Payments will be based on rates
declared by the Company which will not be less than the rates
guaranteed in this contract. The declared rates will provide at
least as much income as would the Company's rates, on the date that
the payment plan takes effect, for a single premium immediate
annuity contract.
ALTERNATE VARIABLE RATE BASIS. The Company may from time to time publish higher
initial rates for variable payment plans under this contract. These higher rates
will not be available to increase payments under payment plans already in
effect.
When a variable payment plan is effective on an alternate rate basis, the
Daily Adjustment Factor described in Section 11.3 will be determined based on
the Assumed Investment Rate used in calculating the alternate payment rate.
PAYMENT RATE TABLES
MONTHLY INCOME PAYMENTS PER $1,000 BENEFITS
FIRST PAYMENT UNDER VARIABLE PAYMENT PLAN
INSTALLMENT INCOME PLAN (OPTION B)
PERIOD MONTHLY PERIOD MONTHLY PERIOD MONTHLY
(YEARS) PAYMENT (YEARS) PAYMENT (YEARS) PAYMENT
- --------------------------------------------------------------------
Years 1-4 11 $9.09 21 $5.56
Not Available 12 8.46 22 5.39
13 7.94 23 5.24
14 7.49 24 5.09
5 $18.12 15 7.10 25 4.96
6 15.35 16 6.76 26 4.84
7 13.38 17 6.47 27 4.73
8 11.90 18 6.20 28 4.63
9 10.75 19 5.97 29 4.53
10 9.83 20 5.75 30 4.45
GUARANTEED FIXED PAYMENT PLANS
INSTALLMENT INCOME PLAN (OPTION B)
PERIOD MONTHLY PERIOD MONTHLY PERIOD MONTHLY
(YEARS) PAYMENT (YEARS) PAYMENT (YEARS) PAYMENT
Years 1-4 11 $ 8.42 21 $ 4.85
Not Available 12 7.80 22 4.67
13 7.26 23 4.51
14 6.81 24 4.36
5 $17.49 15 6.42 25 4.22
6 14.72 16 6.07 26 4.10
7 12.74 17 5.77 27 3.98
8 11.25 18 5.50 28 3.87
9 10.10 19 5.26 29 3.77
10 9.18 20 5.04 30 3.68
15
<PAGE>
PAYMENT RATE TABLES
MONTHLY INCOME PAYMENTS PER $1,000 BENEFITS
LIFE INCOME PLAN (OPTION C)
SINGLE LIFE MONTHLY PAYMENTS
- ---------------------------------------------
CHOSEN PERIOD (YEARS)
ADJUSTED
AGE ZERO 10 20
- ---------------------------------------------
55 $ 4.17 $ 4.14 $ 4.06
56 4.23 4.20 4.11
57 4.31 4.28 4.17
58 4.39 4.35 4.23
59 4.47 4.43 4.29
60 4.56 4.51 4.35
61 4.65 4.59 4.42
62 4.76 4.69 4.49
63 4.87 4.79 4.56
64 4.98 4.90 4.63
65 5.10 5.00 4.70
66 5.24 5.12 4.77
67 5.38 5.24 4.84
68 5.54 5.37 4.91
69 5.70 5.51 4.98
70 5.88 5.66 5.05
71 6.07 5.81 5.12
72 6.27 5.96 5.19
73 6.49 6.13 5.24
74 6.73 6.30 5.30
75 6.99 6.48 5.36
76 7.27 6.67 5.40
77 7.58 6.86 5.45
78 7.91 7.05 5.49
79 8.26 7.25 5.52
80 8.64 7.45 5.55
81 9.05 7.65 5.58
82 9.50 7.84 5.60
83 9.98 8.02 5.62
84 10.50 8.20 5.63
85 and over 11.06 8.38 5.64
LIFE INCOME PLAN (OPTION E)
JOINT AND SURVIVOR MONTHLY PAYMENTS
- -------------------------------------------------------------------------
OLDER LIFE YOUNGER LIFE ADJUSTED AGE*
ADJUSTED
AGE 55 60 65 70 75 80 85 and over
- -------------------------------------------------------------------------
55 $ 3.79
60 3.87 $ 4.07
65 3.94 4.18 $ 4.45
70 3.99 4.27 4.61 $ 4.99
75 4.02 4.34 4.73 5.20 $ 5.72
80 4.05 4.38 4.81 5.35 6.00 $ 6.67
85 and over 4.06 4.40 4.06 5.45 6.18 7.00 $ 7.75
*See Section 10.7.
The amount of the payment for any other combination of ages will be furnished by
the Company on request. The maximum initial monthly income per $1,000 will be
$7.75.
Monthly payment rates are based on an Assumed Investment Rate of 3 1/2% and the
1983 Table a with Projection Scale G.
16
<PAGE>
AMENDMENT TO SECTION 2 AND SECTION 8
FOR FLEXIBLE PAYMENT VARIABLE ANNUITY
ACCOUNT B
AS OF THE ISSUE DATE, THE SECOND PARAGRAPH OF SECTION 2.1 IS AMENDED TO
READ AS FOLLOWS:
The Separate Account is comprised of the Divisions listed on page 3. The
assets allocated to these Divisions are invested in shares of corresponding
mutual funds or portfolios of mutual funds, both of which are referred to in
this policy as Portfolios. Shares of the Portfolios are purchased for the
Separate Account at their net asset value.
AS OF THE ISSUE DATE, THE FIRST PARAGRAPH OF SECTION 8.4 IS AMENDED TO READ
AS FOLLOWS:
As long as the Separate Account continues to be registered as a unit
investment trust under the Investment Company Act of 1940 and the assets of the
Separate Account are invested in shares of a Portfolio, the Company will vote
shares held by the Separate Account in accordance with the instructions received
from the Owners of Accumulation Units or, after payments have commenced under a
variable payment plan, from the payees receiving payments under those payment
plans. Each Owner or payee will receive:
- - periodic reports relating to the Portfolio;
- - proxy material;
- - a form with which to give voting instructions; and
- - information regarding the proportion of shares of each Portfolio held in
the Separate Account corresponding either to the Accumulation Units
credited to this contract or the number of shares held in the Separate
Account representing the Company's actuarial liability under the variable
payment plan.
Secretary
NORTHWESTERN MUTUAL LIFE
INSURANCE COMPANY
QQVB.FUNDS.(0599)
HOL03 116620
<PAGE>
AMENDMENT TO SEPARATE ACCOUNT DIVISIONS
AS OF APRIL 30, 1999, THE SECOND AND THIRD PARAGRAPHS OF THE SEPARATE
ACCOUNT SECTION OF THE CONTRACT RELATING TO THE DIVISIONS OF THE SEPARATE
ACCOUNT AND THE ASSETS ALLOCATED TO THESE DIVISIONS ARE AMENDED TO READ AS
FOLLOWS:
The Separate Account is comprised of the Select Bond, International Equity,
Money Market, Balanced, Index 500 Stock, Aggressive Growth Stock, High Yield
Bond, Growth Stock, Growth and Income Stock, Index 400 Stock, Small Cap Growth
Stock, Russell Multi-Style Equity, Russell Aggressive Equity, Russell Non-US,
Russell Real Estate Securities, and Russell Core Bond Divisions. Assets
allocated to these Divisions are invested in shares of corresponding mutual
funds or portfolios of mutual funds, both of which are referred to in this
policy as Portfolios. Shares of the Portfolios are purchased for the Separate
Account at their net asset value.
The Company may make available additional Divisions and Portfolios.
Secretary
NORTHWESTERN MUTUAL LIFE
INSURANCE COMPANY
VA.FUNDS.(0599)
B
HOL03 116699
<PAGE>
INSURANCE COMPANY
720 E. WISCONSIN AVENUE
MILWAUKEE, WISCONSIN 53202
A
<TABLE>
<CAPTION>
<S><C>
--------------------------
CONTRACT NUMBER
_______________________
--------------------------
DEFERRED ANNUITY APPLICATION
- ----------------------------------------------------------------------------------------------------------------------------------
1. Has a Northwestern Mutual policy ever been issued on the annuitant's life? / / Yes / / No
If yes, the last policy number is
-----------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
2. ANNUITANT
/X/ Mr. / / Mrs. / / Ms. / / Dr. / / Other____________________________ /X/ Male / / Female
-----------------------------------------------------------------------------------------------------------------------------
NAME BIRTHDATE (MONTH, DAY, YEAR)
/J/O/H/N/ /J/ /D/O/E/ /0/1/ - /1/5/ - /1/9/6/4/
-----------------------------------------------------------------------------------------------------------------------------
STATE OF BIRTH (OR FOREIGN COUNTRY) TAXPAYER IDENTIFICATION NUMBER
Wisconsin / / / / / / - / / / / - / / / / / / / /
-----------------------------------------------------------------------------------------------------------------------------
PRIMARY RESIDENCE
STREET OR PO BOX 1234 Main Street
-----------------------------------------------------------------------------------------------------------------------------
CITY, STATE, ZIP (COUNTRY IF OTHER THAN U.S.)
Milwaukee, WI 53200
-----------------------------------------------------------------------------------------------------------------------------
E-MAIL ADDRESS
-----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
3. MARKET CATEGORY (SELECT ONE)
NON-TAX QUALIFIED
/X/ Personal
/ / Estate or Business
/ / Net Income Makeup Charitable Remainder Unitrust (NIM-CRUT)
/ / Eligible 457 Deferred Compensation Plan
GO TO QUESTION 4.
TAX QUALIFIED
/ / Traditional IRA
/ / Roth IRA
/ / SIMPLE IRA
/ / IRA Simplified Employee Pension Plan (SEP)
/ / TDA Employee salary reduction only
/ / TDA Employer matching or non-elective contributions included
/ / 401(g) Non-transferable annuity
THE OWNER IS THE ANNUITANT. GO TO QUESTION 5.
/ / Pension and Profit Sharing
----------------------------
If new trust, attach
Trust Number / / / / / / / / / / / / Declaration of Employer (31-3344)
----------------------------
-------------------
MONTH DAY
Contract Anniversary Date / / / / - / / / / Complete only if required by plan.
-------------------
THE OWNER AND BENEFICIARY ARE THE TRUSTEE(S) OF THE PLAN. GO TO QUESTION 6.
- ----------------------------------------------------------------------------------------------------------------------------------
90-1900 (0599) (PAGE 1)
<PAGE>
4. OWNER (NOTE: A minor owner limits future contract actions.)
/X/ Annuitant / / See attached information / / Other: (Complete A, B, C below)
-----------------------------------------------------------------------------------------------------------------------
A. / / Mr. / / Mrs. / / Ms. / / Dr. / / Other______________________________ / / Male / / Female
-----------------------------------------------------------------------------------------------------------------------
PERSONAL NAME BIRTHDATE (MONTH, DAY, YEAR)
/ / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / - / / / / - / / / /
-----------------------------------------------------------------------------------------------------------------------
OR
-----------------------------------------------------------------------------------------------------------------------
BUSINESS/TRUST NAME
-----------------------------------------------------------------------------------------------------------------------
B. RELATIONSHIP TO ANNUITANT TAXPAYER IDENTIFICATION NUMBER
/ / / / / / - / / / / - / / / / / / / /
-----------------------------------------------------------------------------------------------------------------------
C. ADDRESS - ANNUITANT'S ADDRESS, OR
STREET OR PO BOX
-----------------------------------------------------------------------------------------------------------------------
CITY, STATE, ZIP (COUNTRY IF OTHER THAN US) E-MAIL ADDRESS
-----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
BENEFICIARY (NOTE: Cannot be annuitant unless "Estate of Annuitant" named.)
5. A. Direct Beneficiary of payment at DEATH: / / Owner /X/ Other
-----------------------------------------------------------------------------------------------------------------------
FIRST MIDDLE INITIAL LAST RELATIONSHIP TO ANNUITANT
Jane J Doe Wife
-----------------------------------------------------------------------------------------------------------------------
FIRST MIDDLE INITIAL LAST RELATIONSHIP TO ANNUITANT
-----------------------------------------------------------------------------------------------------------------------
FIRST MIDDLE INITIAL LAST RELATIONSHIP TO ANNUITANT
-----------------------------------------------------------------------------------------------------------------------
B. Contingent Beneficiary of payment at DEATH:
-----------------------------------------------------------------------------------------------------------------------
FIRST MIDDLE INITIAL LAST RELATIONSHIP TO ANNUITANT
-----------------------------------------------------------------------------------------------------------------------
FIRST MIDDLE INITIAL LAST RELATIONSHIP TO ANNUITANT
-----------------------------------------------------------------------------------------------------------------------
Box (1) or (2) may be selected to include all children or brothers and sisters without naming them, or to add to the
contingent beneficiaries named. Box (3) may be selected to provide for children of a deceased contingent beneficiary; use
only if contingent beneficiaries are named and/or box (1) or (2) is checked. NOTE: The word "children" includes child and
any legally adopted child.
/ / (1) and all (other) children of the Annuitant.
/ / (2) and all (other) brothers and sisters of the Annuitant born of the marriage of or legally adopted by __________
and ______________ before the Annuitant's death.
/ / (3) any amount that would have been paid to a deceased contingent beneficiary, if living, will be paid in one sum
and in equal shares to the children of that contingent beneficiary who survive and receive payment.
C. Further Payee of payment at DEATH:
-----------------------------------------------------------------------------------------------------------------------
FIRST MIDDLE INITIAL LAST RELATIONSHIP TO ANNUITANT
-----------------------------------------------------------------------------------------------------------------------
D. / / See attached information form (Use in place of 5A, 5B, 5C)
- ---------------------------------------------------------------------------------------------------------------------------------
As a result of this purchase will the values or benefits of any other life insurance policy or annuity contract,
6. on any life, be affected in any way? / / Yes /X/ No
NOTE TO AGENT:
VALUES OR BENEFITS ARE AFFECTED IF ANY QUESTION ON THE DEFINITION OF REPLACEMENT SUPPLEMENT COULD BE ANSWERED "YES."
If "yes", this transaction is a replacement of life insurance or annuity.
The agent must:
- submit required papers and sales materials and
- provide required disclosure notices to the applicant.
The applicant must answer the questions:
- on the Definition of Replacement Supplement and
- A, B, and C below.
Will this annuity: A. replace Northwestern Mutual Life? / / Yes /X/ No
B. replace other Companies? / / Yes /X/ No
C. result in 1035 exchange? / / Yes /X/ No
- ---------------------------------------------------------------------------------------------------------------------------------
7. PLAN (Select One) /X/ VARIABLE ANNUITY. Complete Variable Annuity Section (Pages 3-5)
/ / SINGLE PREMIUM RETIREMENT ANNUITY. Complete Single Premium Retirement Annuity Section (Page 6)
- ----------------------------------------------------------------------------------------------------------------------------------
90-1900 (0599) (PAGE 2)
<PAGE>
- ----------------------------------------------------------------------------------------------------------------------------------
V1 TYPE / / Back-end Design
/X/ Front-end Design ($10,000 minimum initial purchase payment)
The front-end design may provide better long term financial value than the back-end design. Factors you may want to
consider in making your decision include the expected holding period of the annuity as well as anticipated liquidity
needs.
- ----------------------------------------------------------------------------------------------------------------------------------
V2 MATURITY: Defaults to age 85 unless otherwise specified below.
------------ ----------------------------------------
(MONTH, DAY, YEAR)
MATURITY AGE / / / / OR MATURITY DATE / / / / - / / / / - / / / / / / / /
------------ ----------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
V3 INDICATE ALLOCATION OF NET PURCHASE PAYMENTS (Use whole %. Total must equal 100%)
NORTHWESTERN MUTUAL SERIES FUNDS RUSSELL INSURANCE FUNDS
Select Bond 20% Multi-Style Equity %
--- ---
International Equity % Aggressive Equity %
--- ---
Money Market % Non-US 10%
--- ---
Balanced 10% Real Estate Securities %
--- ---
Index 500 Stock % Core Bond 10%
--- ---
Aggressive Growth Stock 10%
---
High Yield Bond % FIXED FUND
---
Growth Stock 20% Guaranteed Interest* %
--- ---
Growth and Income Stock 20%
---
Index 400 Stock % TOTAL 100%
---
Small Cap Growth Stock % * Guaranteed Interest Fund not available in all states.
---
- ---------------------------------------------------------------------------------------------------------------------------------
90-1900 (0599) (PAGE 3)
<PAGE>
VARIABLE ANNUITY SECTION (Continued)
- ---------------------------------------------------------------------------------------------------------------------------------
V4 INITIAL PURCHASE PAYMENT
A. METHOD OF PAYMENT
/X/ PREPAID A purchase payment for the contract applied for has been given to the agent in exchange for the receipt
with the same number as this application. NOTE: ALL PURCHASE PAYMENT CHECKS MUST BE MADE PAYABLE TO
NORTHWESTERN MUTUAL LIFE. DO NOT MAKE CHECKS PAYABLE TO AGENT OR LEAVE PAYEE BLANK.
------------------------
AMOUNT
$ 10,000.00
------------------------
/ / NON-PREPAID (NOTE: Contract will not be issued until initial purchase payment is received.)
/ / 1. Collected via Multiple Contract Bill (MCB). RECOMMENDED FOR SIMPLE IRA'S
/ / 2. Automatic withdrawal from checking account (ISA/EFT). ------------------------------
/ / 3. Check coming from another financial institution. Estimated Amount: $
------------------------------
B. FOR IRA's (Traditional, SEP, SIMPLE and Roth IRA) enter amount(s) indicating how the initial purchase payment is to
be applied. CAUTION: Accurate selection is needed to assure correct tax reporting.
--------------------------------------------------------------------------------------------------------------
$ CURRENT ( ) TAX YEAR (Date on check matches current tax year.)
--------------------------------------------------------------------------------------------------------------
$ PRIOR ( ) TAX YEAR (One year prior to current calendar year.)
--------------------------------------------------------------------------------------------------------------
$ DIRECT TRANSFER - CHECK PAYABLE TO NORTHWESTERN MUTUAL LIFE for the benefit
of the contract owner.
THE SOURCE MARKET MUST BE INDICATED. CHECK ONE:
/ / Traditional IRA
/ / TDA
/ / Pension/Profit Sharing/401k/Defined Benefit
/ / Roth IRA
/ / SIMPLE IRA - The owner has been a participant in the employer's SIMPLE Plan for:
/ / Two years or LESS. / / More than two years.
/ / SEP
---------------------------------------------------------------------------------------------------------
$ 60-DAY ROLLOVER - PERSONAL CHECK FROM OWNER OR CHECK ENDORSED TO
NORTHWESTERN MUTUAL LIFE.
THE SOURCE MARKET MUST BE INDICATED IF THE FOLLOWING IS APPLICABLE.
/ / Traditional IRA (Traditional IRA to Roth IRA)
/ / SIMPLE IRA (SIMPLE IRA to Traditional IRA)
The owner has been a participant in the employer's SIMPLE Plan for:
/ / Two years or LESS. / / More than two years.
---------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
90-1900 (0599) (PAGE 4)
<PAGE>
- ----------------------------------------------------------------------------------------------------------------------------------
V5 SUBSEQUENT PURCHASE PAYMENTS (Select One) -----------------
/ / None Anticipated. ISA NUMBER
/X/ Send Investment Reminders to Owner with Confirmations and Quarterly Summary Statements. _____________
------------------------- ----------------
ANTICIPATED ANNUAL AMOUNT
$ 3,000.00
-------------------------
/ / Automatic Withdrawal from Checking Account (ISA/EFT).
-------------------------------------------------------------------------------------------------------------------------
AMOUNT DATE OF FIRST DRAFT (MONTH, DAY, YEAR) FREQUENCY
$ / / / / - / / / / - / / / / / / / / / / Monthly / / Quarterly / / Semiannual / / Annual
-------------------------------------------------------------------------------------------------------------------------
NOTE: Subsequent withdrawals will be on the same day of the month (1-28 ONLY) as the initial draft. ATTACH VOID CHECK
IF ONGOING DRAFT DRAWN ON DIFFERENT ACCOUNT THAN INITIAL PAYMENT CHECK OR IF CHECK NOT ATTACHED.
ISA/EFT Payer / / Annuitant at annuitant's address / / Other:
-------------------------------------------------------------------------------------------------------------------------
A. / / Mr. / / Mrs. / / Ms. / / Dr. / / Other:_______________________________ / / Male / / Female
-------------------------------------------------------------------------------------------------------------------------
PERSONAL NAME BIRTHDATE (MONTH, DAY, YEAR)
/ / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / - / / / / - / / / / / / / /
-------------------------------------------------------------------------------------------------------------------------
OR
-------------------------------------------------------------------------------------------------------------------------
BUSINESS/TRUST NAME
-------------------------------------------------------------------------------------------------------------------------
B. TAXPAYER IDENTIFICATION NUMBER DAYTIME TELEPHONE NUMBER
/ / / / / / / / / / / / / / / / / / / / / / ( )
-------------------------------------------------------------------------------------------------------------------------
C. ADDRESS
STREET OR PO BOX
-------------------------------------------------------------------------------------------------------------------------
CITY, STATE, ZIP (COUNTRY IF OTHER THAN US)
-------------------------------------------------------------------------------------------------------------------------
Payer signature below is authorization to the depository institution named on the attached check to pay and charge named
account with electronic funds transfers, or other form of pre-authorized check or withdrawal order transfers, initiated
by the Northwestern Mutual Life Insurance Company to its own order. This authorization will remain in effect until
revoked in writing.
X
----------------------------------------------------------
ISA/EFT PAYER SIGNATURE
/ / Add to Multiple Contract Bill.
-------------------------------------------------------------------------------------------------------------------------
AMOUNT MCB NUMBER MCB PAYER
$
-------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
V6 THE COMPANY IS REQUIRED TO MAKE THE FOLLOWING INQUIRIES FOR PURPOSES OF DETERMINING SUITABILITY OF THIS SALE. THE
APPLICATION WILL NOT BE ACCEPTED WITHOUT THIS INFORMATION.
ANNUITANT'S PURPOSE FOR CONTRACT CURRENT FINANCIAL STATUS
/ / Fund tax-qualified retirement plan Total Annual Income (all sources) $__________________________
/X/ Personal retirement planning Total Net Worth $__________________________
/ / Other. Specify __________________________________ ANTICIPATED NUMBER OF YEARS CONTRACT WILL BE IN FORCE__________
INVESTMENT OBJECTIVES FOR THIS CONTRACT
/ / Preservation of principal / / Moderate risk, moderate return potential
/ / Lower risk, lower return potential / / Higher risk, higher return potential
THE ANSWERS TO V6 ACCURATELY DESCRIBE MY CURRENT FINANCIAL STATUS AND OBJECTIVES.
ON (date of delivery: ___-___-___) THE FOLLOWING PROSPECTUS OR OFFERING CIRCULAR AND REPORT WAS DELIVERED:
/ / Account A Offering Circular dated ___-___-___ and Report dated ___-___-___ (Corporate Pension Plans)
/ / Account A Prospectus dated ___-___-___ (Partnership or Sole Proprietorship Pension Plans)
/X/ Account B Prospectus dated 05-01-99 (all others)
I ACKNOWLEDGE RECEIPT OF THE PROSPECTUS OR OFFERING CIRCULAR AND REPORT AND I UNDERSTAND THAT ALL PAYMENTS AND VALUES
PROVIDED BY THIS CONTRACT, WHEN BASED ON THE INVESTMENT EXPERIENCE OF A SEPARATE ACCOUNT, ARE VARIABLE AND ARE NOT
GUARANTEED AS TO AMOUNT.
X X (Signed) John J. Doe
------------------------------------------------------------- -----------------------------------------------------------
ANNUITANT SIGNATURE (IF OTHER THAN APPLICANT) APPLICANT SIGNATURE
- ----------------------------------------------------------------------------------------------------------------------------------
90-1900 (0599) (PAGE 5)
<PAGE>
- ----------------------------------------------------------------------------------------------------------------------------------
F1 GUARANTEED PERIOD: / / One Year / / Three Year
- ----------------------------------------------------------------------------------------------------------------------------------
-------------
F2 MATURITY AGE / / / If not specified, defaults to age 85.
-------------
- ----------------------------------------------------------------------------------------------------------------------------------
F3 PREMIUM PAYMENT
A. METHOD OF PAYMENT
/ / PREPAID The premium for the contract applied for has been given to the agent in exchange for the receipt with the
same number as this application. NOTE: ALL PREMIUM PAYMENT CHECKS MUST BE PAYABLE TO NORTHWESTERN MUTUAL
LIFE. DO NOT MAKE CHECK PAYABLE TO AGENT OR LEAVE PAYEE BLANK.
-----------------------------
AMOUNT
$
-----------------------------
/ / NON-PREPAID (NOTE: Contract will not be issued until initial premium is received.)
-----------------------------
$ (Estimated amount of check coming from another financial institution.)
-----------------------------
B. FOR IRAS (Traditional, SEP, SIMPLE and Roth IRA) enter amount(s) indicating how the premium payment is to be applied.
CAUTION: Accurate selection is needed to assure correct tax reporting.
Only Direct Transfer or 60-Day Rollover can be selected.
-------------------------------------------------------------------------------------------------------------------------
$ DIRECT TRANSFER - CHECK PAYABLE TO NORTHWESTERN MUTUAL LIFE for the benefit
of the contract owner.
THE SOURCE MARKET MUST BE INDICATED. CHECK ONE:
/ / Traditional IRA
/ / TDA
/ / Pension/Profit Sharing/401k/Defined Benefit
/ / Roth IRA
/ / SIMPLE IRA - The Owner has been a participant in the employer's SIMPLE Plan for:
/ / Two years or LESS. / / More than two years.
/ / SEP
-------------------------------------------------------------------------------------------------------------------------
$ 60-DAY ROLLOVER - PERSONAL CHECK from owner OR check ENDORSED TO
NORTHWESTERN MUTUAL LIFE.
THE SOURCE MARKET MUST BE INDICATED IF THE FOLLOWING IS APPLICABLE.
/ / Traditional IRA (Traditional IRA to Roth IRA)
/ / SIMPLE IRA (SIMPLE IRA TO Traditional IRA)
The owner has been a participant in the employer's SIMPLE Plan for:
/ / Two years or LESS. / / More than two years.
-------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
90-1900 (0599) (PAGE 6)
<PAGE>
- ----------------------------------------------------------------------------------------------------------------------------------
THE ANNUITANT CONSENTS TO THIS APPLICATION.
EACH PERSON SIGNING THIS APPLICATION DECLARES THAT THE ANSWERS AND STATEMENTS MADE IN THIS APPLICATION ARE CORRECTLY
RECORDED, COMPLETE AND TRUE TO THE BEST OF HIS OR HER KNOWLEDGE AND BELIEF.
IT IS UNDERSTOOD AND AGREED THAT:
For the purposes of this application, if a Variable Annuity is applied for, the word "policy" means contract and the word
"premium" means purchase payment.
If the Owner is a Trustee or a successor Trustee under a tax qualified plan or the employer under a tax qualified
non-trusteed plan, Northwestern Mutual LIfe will be fully discharged of liability for any action taken by the Owner in the
exercise of any policy right and for all amounts paid to, or at the direction of, the Owner and will have no obligation as
to the use of the amounts. In all dealings with the Owner, Northwestern Mutual Life will be fully protected against the
claims of every other person.
The initial purchase payment will be credited the valuation date coincident with or next following the date it is received
at the Home Office. Receipt of purchase payments at a payment facility designated by Northwestern Mutual LIfe will be
considered the same as receipt at the Home Office.
If a Tax Qualified Employee Plan, an IRA or TDA is applied for, the Applicant and/or Annuitant have received and reviewed
the appropriate ERISA, IRA or TDA disclosure statements.
BACK-END DESIGN VARIABLE ANNUITY AND SINGLE PREMIUM RETIREMENT ANNUITY POLICIES HAVE PROVISIONS FOR THE ASSESSMENT OF
SURRENDER CHARGES ON CASH WITHDRAWAL.
No agent is authorized to make or alter contracts or to waive the rights or requirements of Northwestern Mutual Life.
X X (signed) John J. Doe
------------------------------------------------------ ---------------------------------------------------------------
SIGNATURE OF ANNUITANT (IF OTHER THAN APPLICANT) SIGNATURE APPLICANT (INDICATE RELATIONSHIP BELOW, IF APPLICABLE)
/ / TRUSTEE / / EMPLOYER
SIGNED at Milwaukee Milwaukee WI DATE /0/5/ - /0/1/ - /1/9/9/9/
----------------------------------------------------------- -------------------------------------------
CITY COUNTY STATE MONTH DAY YEAR
X (signed) Norm W. Western
----------------------------------------------------------
SIGNATURE OF LICENSED AGENT
- ----------------------------------------------------------------------------------------------------------------------------------
90-1900 (0599) (PAGE 7)
</TABLE>
<PAGE>
IT IS RECOMMENDED THAT YOU ...
read your contract.
notify your Northwestern Mutual agent or the Company at
720 E. Wisconsin Avenue, Milwaukee, Wis. 53202, of an
address change.
call your Northwestern Mutual agent for information
-particularly on a suggestion to terminate or exchange
this contract for another contract or plan.
ELECTION OF TRUSTEES
The members of The Northwestern Mutual Life Insurance
Company are its policyholders of insurance policies and
deferred annuity contracts. The members exercise control
through a Board of Trustees. Elections to the Board are
held each year at the annual meeting of members. Members
are entitled to vote in person or by proxy.
FLEXIBLE PAYMENT VARIABLE ANNUITY-ACCOUNT B
AMOUNTS ALLOCATED TO THE SEPARATE ACCOUNT DIVISIONS AND
VARIABLE PAYMENTS PROVIDED BY THIS CONTRACT ARE NOT
GUARANTEED AS TO FIXED DOLLAR AMOUNT BUT ARE VARIABLE
AND MAY INCREASE OR DECREASE TO REFLECT THE INVESTMENT
EXPERIENCE OF THE SEPARATE ACCOUNT.
[NORTHWESTERN
MUTUAL LIFE LOGO]
<PAGE>
Exhibit-B(4)(b)
The Northwestern Mutual Life Insurance Company agrees
to pay the benefits provided in this contract, subject
to its terms and conditions. Signed at Milwaukee,
Wisconsin on the Issue Date.
James D. Ericson John M. Brenner
PRESIDENT AND C.E.O. SECRETARY
FLEXIBLE PAYMENT VARIABLE ANNUITY-Account B
Net Purchase Payments accumulated in a Separate Account,
assets of which are invested in shares of one or more
mutual funds, or Guaranteed Interest Fund.
Retirement benefit payable at maturity.
Payment at death before maturity.
Contract benefits payable in one sum or as variable or
guaranteed monthly income. Variable Payment Plan
benefits described in Section 11.
Participating.
AMOUNTS ALLOCATED TO THE SEPARATE ACCOUNT DIVISIONS AND
VARIABLE PAYMENTS PROVIDED BY THIS CONTRACT ARE NOT
GUARANTEED AS TO FIXED DOLLAR AMOUNT BUT ARE VARIABLE
AND MAY INCREASE OR DECREASE TO REFLECT THE INVESTMENT
EXPERIENCE OF THE SEPARATE ACCOUNT.
RIGHT TO RETURN CONTRACT -- Please read this contract
carefully. The Owner may return the contract for any
reason within ten days after receiving it. Return of the
contract is effective on the date written notice of the
return is delivered, mailed or sent by telegram to
either The Northwestern Mutual Life Insurance Company,
720 E. Wisconsin Avenue, Milwaukee, Wisconsin 53202 or
the agent who sold the contract. If returned, the
contract will be cancelled and the Company will refund
the sum of (a) the difference between the Purchase
Payments paid and the amounts, if any, allocated to the
Separate Account plus (b) the value of the contract on
the effective date of return.
[NORTHWESTERN
MUTUAL LIFE LOGO]
CONTRACT NUMBER V12 345 678
ANNUITANT John J. Doe
ISSUE DATE January 15, 1996
Sex Neutral
<PAGE>
TABLE OF CONTENTS
PAGE
----
CONTRACT INFORMATION, SEPARATE ACCOUNT DIVISIONS 3
LOADS, FEES, AND CHARGES;
PURCHASE PAYMENTS, ACCUMULATION VALUE, PAYMENT PLANS 4
SECTION 1. GENERAL TERMS AND DEFINITIONS 5
SECTION 2. SEPARATE ACCOUNT 6
- Definition of Separate Account
- Accumulation Units
- Net Investment Factor
- Substitution and Change
SECTION 3. GUARANTEE INTEREST FUND 7
- Guaranteed Interest Fund
- Accumulation Value
- Transfer Restrictions
- Maximum Accumulation Value
SECTION 4. PURCHASE PAYMENTS, TRANSFERS AND WITHDRAWALS 7
- Payment of Purchase Payments
- Application of Purchase Payments
- Selection of Division for Purchase Payments
- Transfer of Accumulation Units
- Withdrawals and Full Surrender
- Effective Date
SECTION 5. BENEFITS 8
- Maturity Benefit
- Payment at Death
SECTION 6. BENEFICIARIES 9
- Definition of Beneficiaries
- Naming and Change of Beneficiaries
- Succession in Interest of Beneficiaries
- General
SECTION 7. LOADS, FEES, AND CHARGES 10
- Contract Fee
- Sales Load and Premium Taxes
- Withdrawal Charge
SECTION 8. OWNERSHIP 11
- The Owner
- Transfer of Ownership
- Collateral Assignment
- Reports to Owners
- Transferability Restrictions
1
<PAGE>
PAGE
----
SECTION 9. THE CONTRACT 11
- Guarantees
- Valuation of Assets
- Determination of Values
- Deferment of Benefit Payments
- Dividends
- Incontestability
- Misstatement of Age or Sex
- Entire Contract; Changes
- Termination of Contract
SECTION 10. PAYMENT OF CONTRACT BENEFITS 12
- Payment of Benefits
- Payment at Death
- Effective Date for Payment Plan
- Payment Plan Elections
SECTION 11. PAYMENT PLANS 13
- Description of Payment Plans
- Allocation of Benefits
- Annuity Units under Variable Payment Plans
- Payments under Variable Payment Plans
- Transfers between Variable Payment Plans
- Withdrawal under Payment Plans
- Payment Plan Rates
ADDITIONAL BENEFITS (IF ANY) Following page
APPLICATION Attached to the contract
ENDORSEMENTS
TO BE MADE ONLY BY THE COMPANY AT THE HOME OFFICE
2
<PAGE>
CONTRACT INFORMATION
CONTRACT NUMBER V12 345 678
PLAN Flexible Payment Variable Annuity
ADDITIONAL BENEFITS None
TAX REPORTING CATEGORY Personal Annuity
ANNUITANT John J. Doe
AGE AND SEX 35 Male
OWNER John J. Doe, the Annuitant
ISSUE DATE June 1, 1999
CONTRACT ANNIVERSARY June 1, 2000 and each June 1
thereafter
MATURITY DATE June 1, 2029
DIRECT BENEFICIARY Jane K. Doe, Wife of the Annuitant
INVESTMENT DIVISIONS
On the Issue Date, Purchase Payments and contract values may be allocated among
the following Investment Accounts. Available Separate Account Divisions are
subject to change. See Section 2.1.
Divisions of Separate Account B:
Select Bond Division
International Equity Division
Money Market Division
Balanced Division
Index 500 Stock Division
Aggressive Growth Stock Division
High Yield Bond Division
Growth Stock Division
Growth and Income Stock Division
Index 400 Stock Division
Small Cap Growth Stock Division
Russell Multi-Style Equity Division
Russell Aggressive Equity Division
Russell Non-US Division
Russell Real Estate Securities Division
Russell Core Bond Division
Guaranteed Accounts:
Guaranteed Interest Fund
QQV.ACCT.B.(0599) Page 3
HOL03 116614
<PAGE>
CONTRACT NUMBER V12 345 678
LOADS, FEES, AND CHARGES
DEDUCTION FROM PURCHASE PAYMENTS:
SALES LOAD: Not applicable.
PREMIUM TAX (See Section 7.2):
For the first Contract Year, Premium Taxes are not deducted
from Purchase payments. After the first Contract Year, the
Company may deduct Premium Taxes from Purchase Payments
received or benefits paid.
ANNUAL ANNUITY RATE AND EXPENSE GUARANTEE CHARGE (See Section 2.3):
1.25% at Issue; 1.50% Maximum
ANNUAL CONTRACT FEE (See Section 7.1):
$30 charged on the contract anniversary. The contract fee will be
waived if the Accumulation Value of the contract equals or exceeds
$50,000 on the contract anniversary.
TRANSFER FEE (See Sections 4.4 and 11.5):
$25 beginning with the thirteenth transfer in any Contract Year.
WITHDRAWAL CHARGE (See Section 7.3):
Total Purchase Payments Withdrawal Charge
Paid Under the Contract Starts at
First $100,000 8% of each Purchase Payment
Next $400,000 4% of each Purchase Payment
Next $500,000 2% of each Purchase Payment
Balance over $1,000,000 1% of each Purchase Payment
The Withdrawal Charge for each Purchase Payment is reduced by l% as of each
contract anniversary after the Purchase Payment is paid. The Withdrawal Charge
may be waived or deferred as described in the contract.
MINIMUM PURCHASE PAYMENTS, ACCUMULATION VALUE, PAYMENT PLANS
MINIMUM PURCHASE PAYMENT (See Section 4.1): $25
MINIMUM ACCUMULATION VALUE (See Section 9.9):
$2,000 after the first contract anniversary
MINIMUM PAYMENT UNDER PAYMENT PLAN (See Sections 9.9 and 10.4): $20
Page 4
<PAGE>
GUARANTEED INTEREST FUND - TABLE OF GUARANTEED VALUES
The table shows minimum guaranteed values and assumes a $1,000 Purchase Payment
made at the time of issue and annually thereafter on each contract anniversary.
The values are based on the assumption that 100% of all net Purchase Payments
are allocated to, and remain in, the Guaranteed Interest Fund.
End of
Contract Accumulation Cash
Year October 1, Value Value
1 1996 $ 1,030 $ 960
2 1997 2,060 1,930
3 1998 3,121 2,941
4 1999 4,214 3,994
5 2000 5,339 5,089
6 2001 6,498 6,228
7 2002 7,692 7,412
8 2003 8,922 8,642
9 2004 10,189 9,909
10 2005 11,494 11,214
11 2006 12,838 12,558
12 2007 14,222 13,942
13 2008 15,648 15,368
14 2009 17,116 16,836
15 2010 18,629 18,349
16 2011 20,187 19,907
17 2012 21,792 21,512
18 2013 23,444 23,164
19 2014 25,147 24,867
20 2015 26,900 26,620
Age 60 2020 36,489 36,209
Age 65 2025 47,605 47,325
This table is based on the guaranteed annual interest rate of 3%. Higher
declared rates of interest will increase values. Values shown at the end of
contract years do not reflect any Purchase Payments paid on that contract
anniversary. The actual guaranteed values may differ from those shown above,
depending on the amount and frequency of Purchase Payments.
Page 4A
<PAGE>
SECTION 1. GENERAL TERMS AND DEFINITIONS
ACCUMULATION UNIT. A unit of measure used to determine the value of the interest
of this contract in the Separate Account prior to the date on which amounts are
placed under a payment plan.
ACCUMULATION VALUE. The Accumulation Value of a Separate Account Division is the
total value of all Accumulation Units in that Division. The Accumulation value
of the Guaranteed Interest Fund is the sum of amounts applied to the fund, plus
credited interest, less amounts withdrawn or transferred from the fund. The
Accumulation Value of the contract is the sum of the Accumulation Values of all
Investment Accounts.
ANNUITANT. The person upon whose life this contract is issued and contract
benefits depend.
ANNUITY UNIT. A unit of measure used to determine the amount of variable
payments under a variable payment plan and the value of the interest of a
variable payment plan in the Separate Account.
COMPANY. The Northwestern Mutual Life Insurance Company.
CONTRACT FEE. An annual charge for administrative expenses made on each contract
anniversary prior to the Maturity Date.
CONTRACT YEAR. The first Contract Year is the period of time ending on the first
contract anniversary. Subsequent Contract Years are the annual periods between
contract anniversaries.
DIVISION. A component of the Separate Account to which the Owner may allocate
Purchase Payments and contract values.
GUARANTEED INTEREST FUND. The portion of the contract that is credited with a
guaranteed interest rate and which is held as part of the general assets of the
Company.
HOME OFFICE. The office of the Northwestern Mutual Life Insurance Company
located at 720 East Wisconsin Avenue, Milwaukee Wisconsin 53202.
INVESTMENT ACCOUNT. The Guaranteed Interest Fund and Separate Account Divisions
available for allocation of Purchase Payments and contract values. The available
investment Accounts are listed on page 3.
ISSUE DATE. The date this contract is issued and becomes effective.
MATURITY DATE. The date upon which contract benefits will become payable. If the
contract is continued in force under the Optional Maturity Date provision, the
Optional Maturity Date will become the Maturity Date.
NET PURCHASE PAYMENT. A Purchase Payment less all applicable deductions.
Deductions may include the Sales Load and Premium Tax.
OPTIONAL MATURITY DATE. The contract anniversary nearest the Annuitant's 90th
birthday. Upon reaching the Maturity Date shown on page 3, the Owner may elect
to continue the contract in force until this Optional Maturity Date.
OWNER. The person possessing the ownership rights stated in this contract.
PREMIUM TAX. A tax imposed by a governmental entity when Purchase Payments and
charges for the Disability Waiver of Purchase Payment Benefit are received or
benefits are paid.
PURCHASE PAYMENT. A payment made by or on behalf of the Owner with respect to
this contract excluding any charge for the Disability Waiver of Purchase Payment
Benefit.
SALES LOAD. A deduction made from Purchase Payments received.
SEPARATE ACCOUNT. NML Variable Annuity Account B. The Separate Account consists
of assets set aside by the Company, the investment performance of which is kept
separate from that of the general assets and all other separate account assets
of the Company.
WITHDRAWAL CHARGE. A deduction that is made from maturity benefits and
withdrawal amounts.
WITHDRAWAL CHARGE FREE AMOUNT. For a withdrawal, the amount that can be
withdrawn without a Withdrawal Charge prior to the withdrawal of Net Purchase
Payments.
TRANSFER FEE. A deduction that is made from the amount transferred between
Investment Accounts.
VALUATION DATE. Any day on which the assets of the Separate Account are valued.
Assets are valued as of the close of trading on the New York Stock Exchange for
each day the Exchange is open.
5
<PAGE>
SECTION 2. SEPARATE ACCOUNT
2.1 SEPARATE ACCOUNT
The Separate Account (NML Variable Annuity Account B) has been established
by the Company. The Separate Account consists of assets set aside by the
Company, the investment performance of which is kept separate from that of the
general assets and all other separate account assets of the Company. The assets
of the Separate Account will not be charged with liabilities arising out of any
other business the Company may conduct. Interests in the Separate Account are
represented by Accumulation Units and Annuity Units, described in Sections 2.2
and 11.3, respectively.
The Separate Account is comprised of the Divisions listed on page 3. The
assets allocated to these Divisions are invested in shares of corresponding
Portfolios of the Northwestern Mutual Series Fund, Inc. (the Series Fund). The
Series Fund is registered under the Investment Company Act of 1940 as an
open-end, diversified management investment company. Shares of the Series Fund
Portfolios are purchased for the Separate Account at their net asset value.
The Company reserves the right to eliminate or add additional Divisions
and Portfolios.
2.2 ACCUMULATION UNITS
The interest of this contract in the Separate Account, prior to the date
on which amounts become payable under a payment plan, is represented by
Accumulation Units. The dollar value of Accumulation Units for each Division
will increase or decrease to reflect the investment experience of the Division.
The value of an Accumulation Unit on any Valuation Date is determined by
multiplying:
- The value on the immediately preceding Valuation Date; by
- The Net Investment Factor for the period from the immediately
preceding Valuation Date up to and including the current Valuation
Date (the current period).
2.3 NET INVESTMENT FACTOR
For each Division of the Separate Account the Net Investment Factor for
the current period is one plus the net investment rate for the Division. The net
investment rate for the current period is equal to the gross investment rate for
the Division reduced on each Valuation Date by a charge for annuity rate and
expense guarantees. The charge for these guarantees on the Issue Date is shown
on page 4. The Company may increase or decrease the charge after the Issue Date,
but the Company may not increase the charge to exceed the maximum charge shown
on page 4.
The gross investment rate for the current period for each Division is equal to
a. divided by b. where:
a. is:
- the investment income of the Division for the current period; plus
- captial gains for the period, whether realized or unrealized, on the
assets of the Division; less
- capital losses for the period, whether realized or unrealized, on
the assets of the Division; less
- deduction for any tax liability paid or reserved for by the Company
resulting from the maintenance or operation of the Division; and
less
- any reasonable expenses paid or reserved for by the Company which
result from a substitution of other securities for shares of the
Portfolio(s) as set forth in Section 2.4 and
b. is the value of the assets in the Division on the immediately
preceding Valuation Date.
The gross investment rate may be positive or negative. The deduction for
any tax liability may be charged proportionately against those contracts to
which the liability is attributable by a reduction in the gross investment rate
for those contracts.
2.4 SUBSTITUTION AND CHANGE
Pursuant to the authority of the Board of Trustees of the Company:
- the assets of the Division may be invested in securities other than
shares of the Portfolio(s) as a substitute for those shares already
purchased or as the securities to be purchased in the future;
- the provision of the contracts may be modified to comply with any
other applicable federal or state laws.
In the event of a substitution or change, the Company may make appropriate
endorsement on this and other contracts having an interest in the Separate
Account and take other actions as may be necessary to effect the substitution or
change.
6
<PAGE>
SECTION 3. GUARANTEED INTEREST FUND
3.1 GUARANTEED INTEREST FUND
Net Purchase Payments (see Section 4.2) and amounts transferred from other
investment Accounts under this contract (see Section 4.4) may be applied to the
Guaranteed Interest Fund. Contract benefits placed under a variable payment plan
may not be applied to the Guaranteed Interest Fund. Amounts applied to the
Guaranteed Interest Fund become part of the general assets of the Company.
3.2 ACCUMULATION VALUE
The Accumulation Value of the Guaranteed Interest Fund is the sum of the
amounts applied to it, plus credited interest, less any amounts withdrawn or
transferred from the fund. Interest begins to accrue on the effective date of
the Purchase Payment or transfer (see Section 4.6). Interest will be credited at
an annual effective interest rate of not less than 3%. A higher rate may be
declared by the Company from time to time for a period set by the Company.
3.3 TRANSFER RESTRICTIONS
Neither transfers of Accumulation Value into the Guaranteed Interest Fund
nor transfers of Accumulation Value from the Guaranteed Interest Fund will be
allowed for a period of 365 days following the most recent transfer of
Accumulation Value from the Guaranteed Interest Fund. The maximum amount of the
Accumulation Value that may be transferred from the Guaranteed Interest Fund in
one transfer is limited to the greater of:
- 20% of the Accumulation Value of the Guaranteed Interest Fund on the
last contract anniversary preceding the transfer, and
- the amount of the most recent transfer from the Guaranteed Interest
Fund.
However, in no event will this maximum transfer amount be less than $1,000
or greater than $50,000.
3.4 MAXIMUM GUARANTEED INTEREST FUND ACCUMULATION VALUE
The Accumulation Value of the Guaranteed interest Fund may not exceed
$1,000,000 without prior consent of the Company, except when the maximum is
exceeded because of interest accruing to the Guaranteed Interest Fund.
3.5 TABLE Of GUARANTEED VALUES
Accumulation and cash values are shown on page 4A for the end of the
contract years shown. Values for contract years not shown are calculated on the
same basis as those shown on page 4A. All values are at least as great as those
required by the state in which this contract is delivered.
SECTION 4. PURCHASE PAYMENTS TRANSFERS, WITHDRAWALS
4.1 PAYMENT Of PURCHASE PAYMENTS
All Purchase Payments are payable at the Home Office or to an authorized
agent. A receipt signed by an officer of the Company will be furnished on
request.
Purchase Payments may be made at any time prior to the Maturity Date. The
Owner may vary the amount of Purchase Payments, but no Purchase Payment may be
less than the minimum Purchase Payment shown on page 4. Total Purchase Payments
may not exceed $5,000,000 without the consent of the Company.
The Company will not accept any Purchase Payments under Section 4 unless
it is a contribution under a pension or profit sharing plan which meets the
requirements of Section 401 of the Internal Revenue Code of 1954, as amended, or
the requirements for deduction of the employer's contribution under Section
404(a)(2) of such code.
4.2 APPLICATION OF PURCHASE PAYMENTS
Each Purchase Payment, net of the Sales Load and Premium Tax, will be
applied to one or more Investment Accounts. Net Purchase Payments applied to the
Guaranteed Interest Fund will accrue interest from the effective date of the
Purchase Payment. Net Purchase Payments applied to the Separate Account will
provide Accumulation Units in one or more Divisions. Accumulation Units are
credited as of the effective date of the Purchase Payment.
The number of Accumulation Units will be determined by dividing the Net
Purchase Payment by the value of an Accumulation Unit on the effective date.
This number of Accumulation Units will not be changed by any subsequent change
in the dollar value of Accumulation Units.
4.3 SELECTION OF INVESTMENT ACCOUNT FOR PURCHASE PAYMENTS
The Owner may at any time change the allocation of Net Purchase Payments
among the Investment Accounts by written notice to the Company. Net Purchase
Payments received at the Home Office on or after the date on which notice is
received will be applied to the designated Investment Accounts on the basis of
the new allocation.
4.4 TRANSFER OF ACCUMULATION VALUE
Before the Maturity Date the Owner may, on request satisfactory to the
Company, transfer amounts from one Investment Account to another, subject to the
transfer restrictions described in Section 3.3. For transfers among the Separate
Account Divisions, the number of Accumulation Units to be applied or deducted
will be adjusted to reflect the respective value of the Accumulation Units in
each of the Divisions on the date the transfer is effective. A Transfer Fee will
be deducted from the amount transferred. The amount of the Transfer Fee is shown
on page 4. The minimum amount which may be transferred is the lesser of $100 or
the entire Accumulation Value of the Investment Account from which the transfer
is being made.
For transfers from the Guaranteed Interest Fund, amounts closest to
expiration of an interest rate guarantee will be removed first. In the event
that two amounts are equally close to expiration, the one which was applied to
the Guaranteed Interest Fund earlier will be removed first.
7
<PAGE>
4.5 WITHDRAWALS AND FULL SURRENDER
Before the Maturity Date the Owner may, on request satisfactory to the
Company, withdraw all or a portion of the Accumulation Value of the contract.
The Company may require that at least 100 Accumulation Units or $100 of
Accumulation Value of the Guaranteed Interest Fund remain after a partial
withdrawal. Withdrawal of the entire value of the contract constitutes a full
surrender, and receipt of the contract at the Home Office will terminate this
contract. Receipt of the contract may be waived by the Company.
The cash value of the amount withdrawn will be the Accumulation Value
withdrawn determined as of the date the withdrawal is effective, less any
applicable Withdrawal Charge. The Withdrawal Charge is described in Section 7.3.
The term "withdrawal amounts" as used in this contract includes amounts
paid as full surrenders and withdrawals of a portion of the Accumulation Value
of the contract.
For withdrawals from the Guaranteed Interest Fund, amounts closest to
expiration of an interest rate guarantee will be removed first. In the event
that two amounts are equally close to expiration, the one which was applied to
the Guaranteed Interest Fund earlier will be removed first.
4.6 EFFECTIVE DATE
The effective date of a Purchase Payment, transfer, or withdrawal is the
Valuation Date on which the Purchase Payment or the request for transfer or
withdrawal is received at the Home Office. However, the Purchase Payment,
transfer, or withdrawal will be effective on the following Valuation Date if the
Purchase Payment or request for transfer or withdrawal is received at the Home
Office either:
- on a Valuation Date after the close of trading on the New York Stock
Exchange; or
- on a day on which the New York Stock Exchange is closed.
SECTION 5. BENEFITS
5.1 MATURITY BENEFIT
MATURITY OPTIONS. If the Annuitant is living on the Maturity Date shown on page
3, and that Maturity Date is earlier than the contract anniversary nearest the
Annuitant's 90th birthday, the Owner may elect between the following maturity
options:
- payment of a monthly income to the Annuitant under a payment plan
chosen by the Owner; or
- deferral of the maturity benefit and continuation of this contract,
without any Disability Waiver of Purchase Payment Benefit, to the
Optional Maturity Date. The contract will continue under this option
if a written election for this purpose is received by the Company or
if on the Maturity Date shown on page 3, the Owner has not chosen a
payment plan.
If the Annuitant Is living on the Maturity Date and that Maturity Date is
on or after the contract anniversary nearest the Annuitant's 90th birthday, the
Company will pay a monthly income to the Annuitant under a payment form chosen
by the Owner.
PAYMENT OF MATURITY BENEFIT. The amount of the monthly income paid as the
maturity benefit will depend on the payment plan chosen (see Section 11) and the
maturity value. The maturity value of this contract will be the Accumulation
Value of the contract on the effective date of the maturity benefit, less any
applicable Withdrawal Charge (see Section 7.3). The maturity benefit will be
effective on the Maturity Date. However, if the New York Stock Exchange is
closed on the Maturity Date, the effective date will be the Valuation Date next
preceding the Maturity Date.
If no payment form is chosen at the time a monthly income becomes payable,
payments will be made to the Annuitant under he variable payment form of Life
Income Plan (Option C), with installments certain for ten years, as described in
Section 11.1.
OPTIONAL MATURITY DATE. The Optional Maturity Date is the contract anniversary
nearest the Annuitant's 90th birthday. If the contract is continued to the
Optional Maturity Date, all contract rights of the Owner will continue in effect
to the Optional Maturity Date except that the Disability Waiver of Purchase
Payment Benefit will not continue in force after the Maturity Date shown on page
3. The Optional Maturity Date will become the Maturity Date for all other
purposes of this contract.
5.2 PAYMENT AT DEATH
The Company will make a payment to the beneficiary upon receipt at its
Home Office of satisfactory proof of the death of the Annuitant before the
Maturity Date. The payment at death will be the Accumulation Value of the
contract determined on the effective date of the payment at death. The payment
at death will be effective on the Valuation Date on which proof of death is
received at the Home Office or, if later, the date on which a method of payment
is elected. However, payment at death will be effective on the next following
Valuation Date if the proof of death is received at the Home Office either:
- on a Valuation Date after the close of trading on the New York Stock
Exchange; or
- on a day on which the New York Stock Exchange is closed.
If the date of death is before the Annuitant's 65th birthday, the payment
at death will not be less than:
- total Purchase Payments paid under the contract; less
- any amounts withdrawn under Section 4.5.
The term "death benefits" as used in this contract refers to the payment
at death.
8
<PAGE>
SECTION 6. BENEFICIARIES
6.1 DEFINITIONS
The term "beneficiaries" as used in this contract includes direct
beneficiaries, contingent beneficiaries and further payees.
6.2 NAMING AND CHANGE OF BENEFICIARIES
FOR MATURITY BENEFITS BY OWNER. The Owner may name and change the beneficiaries
of maturity benefits before the Maturity Date. If no direct beneficiary is named
by the Owner, the Annuitant will be the direct beneficiary.
FOR DEATH BENEFITS BY OWNER. The Owner may name and change the beneficiaries:
- while the Annuitant is living; or
- during the first 60 days after the date of death of the Annuitant,
if the Annuitant was not the Owner immediately prior to the
Annuitant's death. A change made during this 60 days cannot be
revoked.
FOR WITHDRAWAL AMOUNTS BY OWNER. The Owner may name the beneficiaries at the
time of withdrawal.
FOR DEATH BENEFITS BY DIRECT BENEFICIARY. A direct beneficiary may name and
change the contingent beneficiaries and further payees of the direct
beneficiary's share of the benefits:
- if the direct beneficiary is the Owner;
- if, at any time after the death of the Annuitant, no contingent
beneficiary or further payee of that share is living; or
- if, after the death of the Annuitant, the direct beneficiary elects
a payment plan. The interest of any other beneficiary in the share
of that direct beneficiary will end.
These direct beneficiary rights are subject to the Owner's rights during
the 60 days after the date of death of the Annuitant.
FOR MATURITY BENEFITS OR WITHDRAWAL AMOUNTS BY DIRECT BENEFICIARY. After a
withdrawal or the maturity of the contract, the direct beneficiary may name and
change the contingent beneficiaries and further payees of the direct
beneficiary's share of benefits that is under a payment plan.
FOR MATURITY OR DEATH BENEFITS OR WITHDRAWAL AMOUNTS BY SPOUSE (MARITAL
DEDUCTION PROVISION).
- POWER TO APPOINT. The spouse of the Annuitant will have the power
alone and in all events to appoint all amounts payable to the spouse
under the contract if:
a. just before the Annuitant's death, the Annuitant was the
Owner; and
b. the spouse is a direct beneficiary; and
c. the spouse survives the Annuitant.
- TO WHOM SPOUSE CAN APPOINT. Under this power, the spouse can
appoint:
a. to the estate of the spouse; or
b. to any other persons as contingent beneficiaries and further
payees.
- EFFECT OF EXERCISE. As to the amounts appointed, the exercise of
this power will:
a. revoke any other designation of beneficiaries;
b. revoke any election of payment plan as it applies to them; and
c. cause any provision to the contrary in Section 6 or 10 of this
contract to be of no effect.
EFFECTIVE DATE. A naming or change of a beneficiary will be made on receipt at
the Home Office of a written request that is acceptable to the Company. The
request will then take effect as of the date that it was signed. The Company is
not responsible for any payment or other action that is taken by it before the
receipt of the request. The Company may require that the contract be sent to it
to be endorsed to show the naming or change.
6.3 SUCCESSION IN INTEREST OF BENEFICIARIES
DIRECT BENEFICIARIES. The maturity or death benefits or withdrawal amounts will
be payable in equal shares to the direct beneficiaries who survive and receive
payment. If a direct beneficiary dies before receiving all or part of the direct
beneficiary's full share, the unpaid portion will be payable in equal shares to
the other direct beneficiaries who survive and receive payment.
CONTINGENT BENEFICIARIES. At the death of all of the direct beneficiaries, the
maturity or death benefits, the withdrawal amounts, or the present value of any
unpaid payments under a payment plan, will be payable in equal shares to the
contingent beneficiaries who survive and receive payment. If a contingent
beneficiary dies before receiving all or part of the contingent beneficiary's
full share, the unpaid portion will be payable in equal shares to the other
contingent beneficiaries who survive and receive payment.
FURTHER PAYEES. At the death of all the direct and contingent beneficiaries, the
maturity or death benefits, the withdrawal amounts, or the present value of any
unpaid payments under a payment plan, will be paid in one sum:
- in equal shares to the further payees who survive and receive
payment; or
- if no further payees survive and receive payment, to the estate of
the last to die of all beneficiaries who survive the Annuitant.
9
<PAGE>
OWNER OR THE OWNER'S ESTATE. If no beneficiaries are alive when the Annuitant
dies, the benefits will be paid to the Owner or to the Owner's estate.
6.4 TRUSTEE AS BENEFICIARY
If a trustee is named as a beneficiary and no qualified trustee makes
claim to the proceeds, or to the present value of any unpaid payments under a
payment plan, within one year after payment becomes due to the trustee, or if
satisfactory evidence is furnished to the Company within that year showing that
no trustee can qualify to receive payment, payment will be made as though the
trustee had not been named.
The Company will be fully discharged of liability for any action taken by
the trustee and for all amounts paid to, or at the direction of, the trustee and
will have no obligation as to the use of the amounts. In all dealings with the
trustee the Company will be fully protected against the claims of every other
person. The Company will not be charged with notice of a change of trustee
unless written evidence of the change is received at the Home Office.
6.5 GENERAL
TRANSFER OF OWNERSHIP. A transfer of ownership of itself will not change the
interest of a beneficiary.
CLAIMS OF CREDITORS. So far as allowed by law, no amount payable under this
contract will be subject to the claims of creditors of a beneficiary.
SUCCESSION UNDER PAYMENT PLANS. A direct or contingent beneficiary who succeeds
to an interest in a payment plan will continue under the terms of the plan.
SECTION 7. FEES AND CHARGES
7.1 CONTRACT FEE
On each contract anniversary prior to the Maturity Date, a Contract Fee
will be charged for administrative expenses. The amount of the Contract Fee is
shown on page 4. The Contract Fee will be deducted from the Investment Accounts
in proportion to the Accumulation Value of the Investment Accounts. The
effective date of the Contract Fee will be the contract anniversary. However, if
the New York Stock Exchange is closed the contract anniversary, the effective
date will be the next following Valuation Date.
7.2 SALES LOAD AND PREMIUM TAXES
The Company will deduct from Purchase Payments received the Sales Load
shown on page 4. The Company may also deduct from Purchase Payments received any
Premium Taxes incurred.
7.3 WITHDRAWAL CHARGE
CONDITIONS. Maturity benefits and withdrawals are subject to a Withdrawal Charge
described on page 4. There is no Withdrawal Charge on benefits that are paid
under a variable Installment Income or variable Life Income Payment Plan.
However, the withdrawal of the present value of any unpaid installments under a
variable Installment Income Plan (Option B) will be subject to a withdrawal
charge if the withdrawal is made less than five years after the date that the
payment plan takes effect.
CALCULATIONS. The amount of the Withdrawal Charge on the contract is equal to
the sum of the Withdrawal Charges on all Net Purchase Payments. The Withdrawal
Charge on a Net Purchase Payment is equal to the Withdrawal Charge percentage on
the date the Withdrawal Charge is determined, multiplied by the amount of the
Net Purchase Payment. The Withdrawal Charge percentages are shown on page 4. The
excess of the Accumulation Value of the contract over the total of Net Purchase
Payments paid is not subject to a Withdrawal Charge.
Withdrawal Charges are determined:
- for maturity benefits, as of the Maturity Date.
- for withdrawals under Section 4.5, as of the effective date of the
withdrawal.
- for withdrawals from payment plans, as of the effective date of the
withdrawal.
WITHDRAWAL CHARGE FREE AMOUNT. If the Accumulation Value of the contract is at
least $10,000 on the most recent contract anniversary preceding a withdrawal
under Section 4.5, then the amount withdrawn will be taken first from any
eligible portion of the Accumulation Value of the contract that exceeds the
total of Net Purchase Payments paid. For each Contract Year, the amount eligible
for the Withdrawal Charge Free Amount is the lesser of the following:
- the excess of the Accumulation Value of the contract on the
effective date of the withdrawal over the total of Net Purchase
Payments paid up to the effective date of the withdrawal; and
- 10% of the Accumulation Value of the contract on the most recent
contract anniversary preceding the withdrawal.
ORDER OF WITHDRAWAL. A withdrawal will be taken from the contract in the
following order:
- first, from the Withdrawal Charge Free Amount, if any;
- next, from the Net Purchase Payments in the order that produces the
lowest Withdrawal Charge; and
- last, from any remaining amount by which the Accumulation Value of
the contract exceeds the total of Net Purchase Payments.
10
<PAGE>
SECTION 8. OWNERSHIP
8.1 THE OWNER
The Owner is named on page 3. All contract rights may be exercised by the
Owner, the Owner's successor, or the Owner's transferee without the consent of
any beneficiary. After the Annuitant's death, contract rights may be exercised
only as provided in Sections 6 and 10.
If the contract has more than one Owner, contract rights may be exercised
only by authorization of all Owners.
8.2 TRANSFER Of OWNERSHIP
The Owner may transfer the ownership of this contract. Written proof of
transfer satisfactory to the Company must be received at its Home Office. The
transfer will then take effect as of the date it was signed. The Company may
require that the contract be sent to it for endorsement to show the transfer.
The Company will not be responsible to a transferee Owner for any payment or
other action taken by the Company before receipt of the proof of transfer at its
Home Office.
8.3 COLLATERAL ASSIGNMENT
The Owner may assign this contract as collateral security. The Company is
not responsible for the validity or effect of a collateral assignment. The
Company will not be responsible to an assignee for any payment or other action
taken by the Company before receipt of the assignment in writing at its Home
Office.
The interest of any beneficiary will be subject to any collateral
assignment made either before or after the beneficiary is named.
A collateral assignee is not an Owner. A collateral assignment is not a
transfer of ownership. Ownership can be transferred only by complying with
Section 8.2.
8.4 REPORTS TO OWNERS
At least once each Contract Year, the Company will also send to the Owner
or payee a statement of the Accumulation Values of the Investment Accounts, the
number of units credited to the contract, the dollar value of a unit as of a
date not more than two months previous to the date of mailing, and a statement
of the investments held by the Separate Account.
8.5 TRANSFERABILITY RESTRICTIONS
Notwithstanding any other provisions of this contract, the Owner may not:
- change the ownership of the contract; or
- sell the contract, or assign or pledge the contract as collateral
for a loan or as security for the performance of an obligation or
for any other purpose, to any person other than the Company.
These restrictions will not apply if the Owner is:
- the trustee of an employee trust that is qualified under the
Internal Revenue Code; or
- the custodian of a custodial account treated as an employee trust
that is qualified under the Internal Revenue Code.
The restrictions do not preclude the employer under a non-trusteed plan
from transferring ownership of this contract to the Annuitant or to the employer
or trustee under another plan or trust when required by the plan.
SECTION 9. THE CONTRACT
9.1 GUARANTEES
The Company guarantees that mortality and expense results will not
adversely affect the amount of variable payments.
9.2 VALUATION OF SEPARATE ACCOUNT ASSETS
The value of the shares of each Portfolio held in the Separate Account on
each Valuation Date will be the redemption value of the shares on that date. If
the right to redeem shares of a Portfolio has been suspended, or payment of the
redemption value has been postponed, the shares held in the Separate Account
(and Annuity Units) may be valued at fair value as determined in good faith by
the Board of Trustees of the Company for the sole purpose of computing annuity
payments.
9.3 DETERMINATION OF SEPARATE ACCOUNT VALUES
The method of determination by the Company of the Net Investment Factor,
and the number and value of Accumulation Units and Annuity Units, will be
conclusive upon the Owner, any assignee, the Annuitant, and any beneficiary.
9.4 DEFERMENT OF BENEFIT PAYMENTS
SEPARATE ACCOUNT DIVISIONS. The Company reserves the right to defer
determination of the contract values of the Separate Account portion of this
contract, or the payment of benefits under a variable payment plan, until after
the end of any period during which the right to redeem shares of a Portfolio is
suspended, or payment of the redemption value is postponed. Any deferment would
be in accordance with the provisions of the Investment Company Act of 1940 by
reason of closing of, or restriction of trading on, the New York Stock Exchange,
or other emergency, or as otherwise permitted by the Act. In addition, the
Company reserves the right to defer payment of contract values until seven days
after the end of any deferment in the determination of contract values.
GUARANTEED INTEREST FUND. The Company may defer paying contract values of the
Guaranteed Interest Fund for up to six months from the effective date of the
withdrawal or full surrender. If payment is deferred for 30 days or more,
interest will be paid on the withdrawal amounts at an annual effective rate of
3% from the effective date of the withdrawal or surrender to the date of the
payment.
11
<PAGE>
9.5 DIVIDENDS
This contract will share in the divisible surplus of the Company, except
while payments are being made under a variable payment plan. This surplus will
be determined each year, and the dividend, if any, will be credited on the
contract anniversary. Any dividend credited prior to the Maturity Date will be
applied on the effective date as a Net Purchase Payment unless the Owner elects
to have the dividend paid in cash. The effective date of the dividend will be
the contract anniversary. However, if the New York Stock Exchange is closed on
the contract anniversary, the effective date will be the next following
Valuation Date.
9.6 INCONTESTABILITY
The Company will not contest this contract after it has been in force
during the lifetime of the Annuitant for two years from the Issue Date. This
Issue Date is shown on page 3.
9.7 MISSTATEMENT OF AGE OR SEX
If the age or sex of the Annuitant has been misstated, the amount payable
will be the amount which the Purchase Payments paid would have purchased at the
correct age and sex.
9.8 ENTIRE CONTRACT; CHANGES
This contract with the attached application is the entire contract.
Statements in the application are representations and not warranties. A change
in the contract is valid only if it is approved by an officer of the Company.
The Company may require that the contract be sent to it for endorsement to show
a change. No agent has the authority to change the contract or to waive any of
its terms.
All payments by the Company under this contract are payable at its Home Office.
Assets of the Separate Account are owned by the Company and the Company is
not a trustee with respect thereto. The Company may from time to time adjust the
amount of assets contained in the Separate Account, by periodic withdrawals or
additions, to reflect the contract deductions and the Company's reserves for
this and other similar contracts.
This contract is subject to the laws of the state in which it is
delivered. All benefits are at least as great as those required by that state.
9.9 TERMINATION OF CONTRACT
At any time after the first contract anniversary, the Company may
terminate the contract and pay the Owner the Accumulation Value of the contract
and be released of any further obligation if:
- prior to the Maturity Date no Purchase Payments have been received
under the contract for a period of two full years and each of the
following is less than the Minimum Accumulation Value shown on page
4:
a. the Accumulation Value of the contract; and
b. total Purchase Payments paid under the contract, less any
amounts withdrawn under Section 4.5; or
- on the Maturity Date the Accumulation Value of the contract is less
than the Minimum Accumulation Value shown on page 4 or would provide
a monthly income the initial amount of which is less than the
minimum payment amount shown on page 4.
SECTION 10. PAYMENT OF CONTRACT BENEFITS
10.1 PAYMENT OF BENEFITS
All or part of the contract benefits may be paid under one or more of the
following:
- a variable payment plan;
- a fixed payment plan; or
- in cash.
The provisions and rate for variable and fixed payment plans are described
in Section 11. Contract benefits may not be placed under a payment plan unless
the plan would provide to each beneficiary a monthly income the initial amount
of which is at least the minimum payment amount shown on page 4. A Withdrawal
Charge will be deducted from contract benefits before their payment under
certain conditions described in Section 7.3.
10.2 PAYMENT AT DEATH
Upon the death of the Annuitant prior to the Maturity Date, the payment at
death will be made under any payment plan previously elected. If no payment plan
has been elected, the payment at death will be made under a payment plan or in
cash as elected by the Owner or beneficiary.
12
<PAGE>
10.3 EFFECTIVE DATE FOR PAYMENT PLAN
A payment plan that is elected for maturity benefits will take effect on
the Maturity Date.
A payment plan that is elected for death benefits will take effect on the
date proof of death of the Annuitant is received at the Home Office if:
- the plan is elected by the Owner; and
- the election is received at the Home Office while the Annuitant is
living.
In all other cases, a payment plan that is elected will take effect:
- On the date the election is received at the Home Office; or
- on a later date, if requested.
10.4 PAYMENT PLAN ELECTIONS
FOR DEATH BENEFITS BY OWNER. The Owner may elect payment plans for death
benefits:
- while the Annuitant is living; or
- during the first 60 days after the date of death of the Annuitant,
if the Annuitant was not the Owner immediately prior to the
Annuitant's death. An election made during the 60 days cannot be
changed.
FOR DEATH BENEFITS BY DIRECT OR CONTINGENT BENEFICIARY. A direct or contingent
beneficiary may elect payment plans for death benefits payable to the direct or
contingent beneficiary if no payment plan that has been elected is in effect.
This right is subject to the Owner's rights during the above 60 days.
FOR MATURITY BENEFITS OR WITHDRAWAL AMOUNTS. The Owner may elect payment plans
for maturity benefits or withdrawal amounts.
TRANSFER BETWEEN PAYMENT PLANS. A beneficiary who is receiving payment under a
payment plan which includes the right to withdraw may transfer the amount
withdrawable to any other payment plan that is available.
SECTION 11. PAYMENT PLANS
11.1 DESCRIPTION OF PAYMENT PLANS
INSTALLMENT INCOME FOR SPECIFIED PERIOD (OPTION B)
The Company will make monthly installment income payments providing for
payment of benefits over a specified period of 5 to 30 years.
LIFE INCOME PLANS
- SINGLE LIFE INCOME (OPTION C). The Company will make monthly
payments for the selected certain period, if any, and thereafter
during the remaining lifetime of the individual upon whose life
income payments depend. The selections available are: (a) no certain
period; or (b) a certain period of 10 or 20 years.
- JOINT AND SURVIVOR LIFE INCOME (OPTION E). The Company will make
monthly payments for a 10-year certain period and thereafter during
the joint lifetime of the two individuals upon whose lives income
payments depend and continuing during the remaining lifetime of the
survivor.
- OTHER SELECTIONS. The Company may offer other selections under the
Life Income Plans.
- LIMITATIONS. A direct or contingent beneficiary who is a natural
person may be paid under a Life Income Plan only if the payments
depend on that beneficiary's life. A corporation may be paid under a
Life Income Plan only if the payments depend on the life of the
Annuitant or, after the death of the Annuitant, on the life of the
Annuitant's spouse or dependent.
These payment plans are available on either a fixed or variable basis.
Under a fixed payment plan the payment remains level. Under a variable payment
plan the payment will increase or decrease as described in Section 11.4.
11.2 ALLOCATION OF BENEFITS
Upon election of a variable payment plan, the Owner or direct or
contingent beneficiary may select the allocation of variable benefits among the
Divisions.
If no selection is made, the allocation of benefits will be as follows:
- for amounts in the Separate Account Divisions, benefits will be
allocated in proportion to the Accumulation Value of each Division
on the effective date of the variable payment plan, and
- for amounts in the Guaranteed Interest Fund, benefits will be
allocated 100% to the Money Market Division.
11.3 ANNUITY UNITS UNDER VARIABLE PAYMENT PLANS
The interest of this contract in the Separate Account after the effective
date of a variable payment plan is represented by Annuity Units. The dollar
value of Annuity Units for each Division will increase or decrease to reflect
the investment experience of the Division. The value of an Annuity Unit on any
Valuation Date is the product of:
- the Annuity Unit value on the, immediately preceding Valuation Date;
- the Net Investment Factor for the period from the immediately
preceding Valuation Date up to and including the current Valuation
Date (the current period); and
- the Daily Adjustment Factor of .99990575 raised to a power equal to
the number of days in the current period to reflect the Assumed
Investment Rate of 3 1/2% used in calculating the monthly payment
rate.
13
<PAGE>
11.4 PAYMENTS UNDER VARIABLE PAYMENT PLANS
FIRST PAYMENT. The first payment under a variable payment plan will be due as of
the effective date of the payment plan.
The amount of the first payment is the sum of payments from each Division,
each determined by multiplying the benefits allocated to the Division under the
variable payment plan by the applicable monthly variable payment rate per $1,000
of benefits.
NUMBER OF ANNUITY UNITS. The number of Annuity Units in each Division under a
variable payment plan is determined by dividing the amount of the first payment
payable from the Division by the Annuity Unit value for the Division at the
close of business on the Valuation Date on which the variable payment plan
becomes effective. The number of Annuity Units will not be changed by any
subsequent change in the dollar value of Annuity Units.
SUBSEQUENT VARIABLE PAYMENTS. The amount of each subsequent payment from each
Division under a variable payment plan will increase or decrease in accord with
the increase or decrease in the value of an Annuity Unit which reflects the
investment experience of that Division of the Separate Account.
The amount of subsequent variable payments is the sum of payments from
each Division, each determined by multiplying the fixed number of Annuity Units
for the Division by the value of an Annuity Unit for the Division on:
- the fifth Valuation Date prior to the payment due date if the
payment due date is a Valuation Date; or
- the sixth Valuation Date prior to the payment due date if the
payment due date is not a Valuation Date.
11.5 TRANSFER BETWEEN VARIABLE PAYMENT PLANS
A payee or joint payees receiving payments under a variable payment plan
may:
- transfer Annuity Units from one Division to another. The number of
Annuity Units in each Division will be adjusted to reflect the
respective value of the Annuity Units in the Divisions on the date
the transfer is effective. A Transfer Fee will be deducted from the
amount transferred. The amount of the Transfer Fee is shown on page
4. Transfers from the Money Market Division may be made at any time.
No transfer from the other Divisions may be made within 90 days of
the effective date of the variable payment plan or within 90 days
from the effective date of the last transfer.
- transfer from an Installment Income Plan (Option B) to either form
of the Life Income Plan (Option C or E).
Other transfers may be permitted subject to conditions set by the Company.
A transfer will be effective on the Valuation Date on which a satisfactory
transfer request is received in the Home Office, or a later date if requested.
However, the transfer will be effective on the following Valuation Date if the
request is received at the Home Office either:
- on a Valuation Date after the close of trading on the New York Stock
Exchange; or
- on a day on which the New York Stock Exchange is closed.
11.6 WITHDRAWAL UNDER PAYMENT PLANS
Withdrawal of the present value of any unpaid income payments may be
elected at any time by the beneficiary, except that withdrawal may not be
elected under a Life Income Plan (Option C or E) until the death of all
individuals upon whose lives income payments depend.
The withdrawal value under the Installment Income Plan (Option B) will be
the present value of any unpaid payments, less any applicable Withdrawal Charge
under Section 7.3. The withdrawal value under a Life Income Plan (Option C or E)
will be the present value of any unpaid payments for the certain period with no
Withdrawal Charge.
For a fixed payment plan, the present value of any unpaid income payments
will be based on the rate of interest used to determine the amount of the
payments. For a variable payment plan, the present value of any unpaid income
payments will be based on interest at the Assumed Investment Rate used in
calculating the amount of the variable payments. The amount of variable payments
used in calculating the present value of unpaid payments will be determined by
multiplying the number of Annuity Units by the value of an Annuity Unit on the
effective date of the withdrawal.
A withdrawal will be effective on the Valuation Date on which the request
is received in the Home Office. However, the withdrawal will be effective on the
following Valuation Date if the request is received at the Home Office either:
- on a Valuation Date after the close of trading on the New York Stock
Exchange; or,
- on a day on which the New York Stock Exchange is closed.
14
<PAGE>
11.7 PAYMENT PLAN RATES
PAYMENT RATE TABLES. The guaranteed monthly payment rates for both a fixed
payment plan and the first payment under a variable payment plan are shown in
the Payment Rate Tables. The tables show rates for the Installment Income Plan
for a Specified Period (Option B) and Life Income Plans (Options C and E). Life
Income Plan (Option C or E) rates are based on the sex and adjusted age of any
individual upon whose life payments depend. The adjusted age is:
- the age on the birthday that is nearest to the date on which the
payment plan takes effect; plus
- the age adjustment shown below for the number of Contract Years that
have elapsed from the Issue Date to the date that the payment plan
takes effect. A part of a Contract Year is counted as a full year.
CONTRACT CONTRACT
YEARS AGE YEARS AGE
ELAPSED ADJUSTMENT ELAPSED ADJUSTMENT
1 to 8 0 33 to 40 -4
9 to 16 -1 41 to 48 -5
17 to 24 -2 49 or more -6
25 to 32 -3
CURRENT FIXED PAYMENT PLAN RATES
- INSTALLMENT INCOME FOR SPECIFIED PERIOD (OPTION 6). The Company may
offer fixed payment plan rates higher than those guaranteed in this
contract with conditions on withdrawal.
- LIFE INCOME PLANS (OPTION C OR E). Payments will be based on rates
declared by the Company which will not be less than the rates
guaranteed in this contract. The declared rates will provide at
least as much income as would the Company's rates, on the date that
the payment plan takes effect, for a single premium immediate
annuity contract.
ALTERNATE VARIABLE RATE BASIS. The Company may from time to time publish higher
initial rates for variable payment plans under this contract. These higher rates
will not be available to increase payments under payment plans already in
effect.
When a variable payment plan is effective on an alternate rate basis, the
Daily Adjustment Factor described in Section 11.3 will be determined based on
the Assumed Investment Rate used in calculating the alternate payment rate.
PAYMENT RATE TABLES
MONTHLY INCOME PAYMENTS PER $1,000 BENEFITS
FIRST PAYMENT UNDER VARIABLE PAYMENT PLAN
INSTALLMENT INCOME PLAN (OPTION B)
<TABLE>
<CAPTION>
PERIOD MONTHLY PERIOD MONTHLY PERIOD MONTHLY
(YEARS) PAYMENT (YEARS) PAYMENT (YEARS) PAYMENT
<S> <C> <C> <C> <C> <C>
Years 1-4 11 $ 9.09 21 $ 5.56
Not Available 12 8.46 22 5.39
13 7.94 23 5.24
14 7.49 24 5.09
5 $ 18.12 15 7.10 25 4.96
6 15.35 16 6.76 26 4.84
7 13.38 17 6.47 27 4.73
8 11.90 18 6.20 28 4.63
9 10.75 19 5.97 29 4.53
10 9.83 20 5.75 30 4.45
</TABLE>
GUARANTEED FIXED PAYMENT PLANS
INSTALLMENT INCOME PLAN (OPTION B)
<TABLE>
<CAPTION>
PERIOD MONTHLY PERIOD MONTHLY PERIOD MONTHLY
(YEARS) PAYMENT (YEARS) PAYMENT (YEARS) PAYMENT
<S> <C> <C> <C> <C> <C>
Years 1-4 11 $ 8.42 21 $ 4.85
Not Available 12 7.80 22 4.67
13 7.26 23 4.51
14 6.81 24 4.36
5 $ 17.49 15 6.42 25 4.22
6 14.72 16 6.07 26 4.10
7 12.74 17 5.77 27 3.98
8 11.25 18 5.50 28 3.87
9 10.10 19 5.26 29 3.77
10 9.18 20 5.04 30 3.68
</TABLE>
15
<PAGE>
PAYMENT RATE TABLES
MONTHLY INCOME PAYMENTS PER $1,000 BENEFITS
LIFE INCOME PLAN (OPTION C)
<TABLE>
<CAPTION>
SINGLE LIFE MONTHLY PAYMENTS
CHOSEN PERIOD (YEARS)
ADJUSTED
AGE* ZERO 10 20
<S> <C> <C> <C>
55 $ 4.17 $ 4.14 $ 4.06
56 4.23 4.20 4.11
57 4.31 4.28 4.17
58 4.39 4.35 4.23
59 4.47 4.43 4.29
60 4.56 4.51 4.35
61 4.65 4.59 4.42
62 4.76 4.69 4.49
63 4.87 4.79 4.56
64 4.98 4.90 4.63
65 5.10 5.00 4.70
66 5.24 5.12 4.77
67 5.38 5.24 4.84
68 5.54 5.37 4.91
69 5.70 5.51 4.98
70 5.88 5.66 5.05
71 6.07 5.81 5.12
72 6.27 5.96 5.19
73 6.49 6.13 5.24
74 6.73 6.30 5.30
75 6.99 6.48 5.36
76 7.27 6.67 5.40
77 7.58 6.86 5.45
78 7.91 7.05 5.49
79 8.26 7.25 5.52
80 8.64 7.45 5.55
81 9.05 7.65 5.58
82 9.50 7.84 5.60
83 9.98 8.02 5.62
84 10.50 8.20 5.63
85 and over. 11.06 8.38 5.64
</TABLE>
LIFE INCOME PLAN (OPTION E)
<TABLE>
<CAPTION>
JOINT AND SURVIVOR MONTHLY PAYMENTS
OLDER LIFE YOUNGER LIFE ADJUSTED AGE*
ADJUSTED
AGE* 55 60 65 70 75 80 85 and over
<S> <C> <C> <C> <C> <C> <C> <C>
55 $ 3.79
60 3.87 $ 4.07
65 3.94 4.18 $ 4.45
70 3.99 4.27 4.61 $ 4.99
75 4.02 4.34 4.73 5.20 $ 5.72
80 4.05 4.38 4.81 5.35 6.00 $ 6.67
85 and over 4.06 4.40 4.86 5.45 6.18 7.00 $ 7.75
</TABLE>
*See Section 10.7.
The amount of the payment for any other combination of ages will be furnished by
the Company on request. The maximum initial monthly income per $l,000 will be
$7.75.
Monthly payment rates are based on an Assumed Investment Rate of 3 1/2% and the
1983 Table a with Projection Scale G.
16
<PAGE>
AMENDMENT TO SECTION 2 AND SECTION 8
FOR FLEXIBLE PAYMENT VARIABLE ANNUITY
ACCOUNT B
AS OF THE ISSUE DATE, THE SECOND PARAGRAPH OF SECTION 2.1 IS AMENDED TO
READ AS FOLLOWS:
The Separate Account is comprised of the Divisions listed on page 3. The
assets allocated to these Divisions are invested in shares of corresponding
mutual funds or portfolios of mutual funds, both of which are referred to in
this policy as Portfolios. Shares of the Portfolios are purchased for the
Separate Account at their net asset value.
AS OF THE ISSUE DATE, THE FIRST PARAGRAPH OF SECTION 8.4 IS AMENDED TO READ
AS FOLLOWS:
As long as the Separate Account continues to be registered as a unit
investment trust under the Investment Company Act of 1940 and the assets of the
Separate Account are invested in shares of a Portfolio, the Company will vote
shares held by the Separate Account in accordance with the instructions received
from the Owners of Accumulation Units or, after payments have commenced under a
variable payment plan, from the payees receiving payments under those payment
plans. Each Owner or payee will receive:
- - periodic reports relating to the Portfolio;
- - proxy material;
- - a form with which to give voting instructions; and
- - information regarding the proportion of shares of each Portfolio held in
the Separate Account corresponding either to the Accumulation Units
credited to this contract or the number of shares held in the Separate
Account representing the Company's actuarial liability under the variable
payment plan.
Secretary
NORTHWESTERN MUTUAL LIFE
INSURANCE COMPANY
QQVB.FUNDS.(0599)
HOL03 116620
<PAGE>
AMENDMENT TO SEPARATE ACCOUNT DIVISIONS
AS OF APRIL 30, 1999, THE SECOND AND THIRD PARAGRAPHS OF THE SEPARATE
ACCOUNT SECTION OF THE CONTRACT RELATING TO THE DIVISIONS OF THE SEPARATE
ACCOUNT AND THE ASSETS ALLOCATED TO THESE DIVISIONS ARE AMENDED TO READ AS
FOLLOWS:
The Separate Account is comprised of the Select Bond, International Equity,
Money Market, Balanced, Index 500 Stock, Aggressive Growth Stock, High Yield
Bond, Growth Stock, Growth and Income Stock, Index 400 Stock, Small Cap Growth
Stock, Russell Multi-Style Equity, Russell Aggressive Equity, Russell Non-US,
Russell Real Estate Securities, and Russell Core Bond Divisions. Assets
allocated to these Divisions are invested in shares of corresponding mutual
funds or portfolios of mutual funds, both of which are referred to in this
policy as Portfolios. Shares of the Portfolios are purchased for the Separate
Account at their net asset value.
The Company may make available additional Divisions and Portfolios.
Secretary
NORTHWESTERN MUTUAL LIFE
INSURANCE COMPANY
VA.FUNDS.(0599)
B
HOL03 116699
<PAGE>
INSURANCE COMPANY
720 E. WISCONSIN AVENUE
MILWAUKEE, WISCONSIN 53202
A
<TABLE>
<CAPTION>
<S><C>
--------------------------
CONTRACT NUMBER
________________________
--------------------------
DEFERRED ANNUITY APPLICATION
- ----------------------------------------------------------------------------------------------------------------------------------
1. Has a Northwestern Mutual policy ever been issued on the annuitant's life? / / Yes / / No
If yes, the last policy number is
-----------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
2. ANNUITANT
/X/ Mr. / / Mrs. / / Ms. / / Dr. / / Other___________________________ /X/ Male / / Female
-----------------------------------------------------------------------------------------------------------------------------
NAME BIRTHDATE (MONTH, DAY, YEAR)
/J/O/H/N/ /J/ /D/O/E/ /0/1/ - /1/5/ - 1/9/6/4/
-----------------------------------------------------------------------------------------------------------------------------
STATE OF BIRTH (OR FOREIGN COUNTRY) TAXPAYER IDENTIFICATION NUMBER
Wisconsin / / / / / / - / / / / - / / / / / / / /
-----------------------------------------------------------------------------------------------------------------------------
PRIMARY RESIDENCE
STREET OR PO BOX 1234 Main Street
-----------------------------------------------------------------------------------------------------------------------------
CITY, STATE, ZIP (COUNTRY IF OTHER THAN U.S.)
Milwaukee, WI 53200
-----------------------------------------------------------------------------------------------------------------------------
E-MAIL ADDRESS
-----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
3. MARKET CATEGORY (SELECT ONE)
NON-TAX QUALIFIED
/X/ Personal
/ / Estate or Business
/ / Net Income Makeup Charitable Remainder Unitrust (NIM-CRUT)
/ / Eligible 457 Deferred Compensation Plan
GO TO QUESTION 4.
TAX QUALIFIED
/ / Traditional IRA
/ / Roth IRA
/ / SIMPLE IRA
/ / IRA Simplified Employee Pension Plan (SEP)
/ / TDA Employee salary reduction only
/ / TDA Employer matching or non-elective contributions included
/ / 401(g) Non-transferable annuity
THE OWNER IS THE ANNUITANT. GO TO QUESTION 5.
/ / Pension and Profit Sharing
----------------------------
If new trust, attach
Trust Number / / / / / / / / / / / / Declaration of Employer (31-3344)
----------------------------
-------------------
MONTH DAY
Contract Anniversary Date / / / / - / / / / Complete only if required by plan.
-------------------
THE OWNER AND BENEFICIARY ARE THE TRUSTEE(S) OF THE PLAN. GO TO QUESTION 6.
- ----------------------------------------------------------------------------------------------------------------------------------
90-1900 (0599) (PAGE 1)
<PAGE>
VARIABLE ANNUITY SECTION
4. OWNER (NOTE: A minor owner limits future contract actions.)
/X/ Annuitant / / See attached information / / Other: (Complete A, B, C below)
-----------------------------------------------------------------------------------------------------------------------
A. / / Mr. / / Mrs. / / Ms. / / Dr. / / Other__________________________ / / Male / / Female
-----------------------------------------------------------------------------------------------------------------------
PERSONAL NAME BIRTHDATE (MONTH, DAY, YEAR)
/ / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / - / / / / - / / / /
-----------------------------------------------------------------------------------------------------------------------
OR
-----------------------------------------------------------------------------------------------------------------------
BUSINESS/TRUST NAME
-----------------------------------------------------------------------------------------------------------------------
B. RELATIONSHIP TO ANNUITANT TAXPAYER IDENTIFICATION NUMBER
/ / / / / / - / / / / - / / / / / / / /
-----------------------------------------------------------------------------------------------------------------------
C. ADDRESS - ANNUITANT'S ADDRESS, OR
STREET OR PO BOX
-----------------------------------------------------------------------------------------------------------------------
CITY, STATE, ZIP (COUNTRY IF OTHER THAN US) E-MAIL ADDRESS
-----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
BENEFICIARY (NOTE: Cannot be annuitant unless "Estate of Annuitant" named.)
5. A. Direct Beneficiary of payment at DEATH: / / Owner /X/ Other
-----------------------------------------------------------------------------------------------------------------------
FIRST MIDDLE INITIAL LAST RELATIONSHIP TO ANNUITANT
Jane J Doe Wife
-----------------------------------------------------------------------------------------------------------------------
FIRST MIDDLE INITIAL LAST RELATIONSHIP TO ANNUITANT
-----------------------------------------------------------------------------------------------------------------------
FIRST MIDDLE INITIAL LAST RELATIONSHIP TO ANNUITANT
-----------------------------------------------------------------------------------------------------------------------
B. Contingent Beneficiary of payment at DEATH:
-----------------------------------------------------------------------------------------------------------------------
FIRST MIDDLE INITIAL LAST RELATIONSHIP TO ANNUITANT
-----------------------------------------------------------------------------------------------------------------------
FIRST MIDDLE INITIAL LAST RELATIONSHIP TO ANNUITANT
-----------------------------------------------------------------------------------------------------------------------
Box (1) or (2) may be selected to include all children or brothers and sisters without naming them, or to add to the
contingent beneficiaries named. Box (3) may be selected to provide for children of a deceased contingent beneficiary; use
only if contingent beneficiaries are named and/or box (1) or (2) is checked. NOTE: The word "children" includes child and
any legally adopted child.
/ / (1) and all (other) children of the Annuitant.
/ / (2) and all (other) brothers and sisters of the Annuitant born of the marriage of or legally adopted by __________
and ______________ before the Annuitant's death.
/ / (3) any amount that would have been paid to a deceased contingent beneficiary, if living, will be paid in one sum
and in equal shares to the children of that contingent beneficiary who survive and receive payment.
C. Further Payee of payment at DEATH:
-----------------------------------------------------------------------------------------------------------------------
FIRST MIDDLE INITIAL LAST RELATIONSHIP TO ANNUITANT
-----------------------------------------------------------------------------------------------------------------------
D. / / See attached information form (Use in place of 5A, 5B, 5C)
- ---------------------------------------------------------------------------------------------------------------------------------
As a result of this purchase will the values or benefits of any other life insurance policy or annuity contract,
6. on any life, be affected in any way? / / Yes /X/ No
NOTE TO AGENT:
VALUES OR BENEFITS ARE AFFECTED IF ANY QUESTION ON THE DEFINITION OF REPLACEMENT SUPPLEMENT COULD BE ANSWERED "YES."
If "yes", this transaction is a replacement of life insurance or annuity.
The agent must:
- submit required papers and sales materials and
- provide required disclosure notices to the applicant.
The applicant must answer the questions:
- on the Definition of Replacement Supplement and
- A, B, and C below.
Will this annuity: A. replace Northwestern Mutual Life? / / Yes /X/ No
B. replace other Companies? / / Yes /X/ No
C. result in 1035 exchange? / / Yes /X/ No
- ---------------------------------------------------------------------------------------------------------------------------------
7. PLAN (Select One) /X/ VARIABLE ANNUITY. Complete Variable Annuity Section (Pages 3-5)
/ / SINGLE PREMIUM RETIREMENT ANNUITY. Complete Single Premium Retirement Annuity Section (Page 6)
- ----------------------------------------------------------------------------------------------------------------------------------
90-1900 (0599) (PAGE 2)
<PAGE>
VARIABLE ANNUITY SECTION
- ----------------------------------------------------------------------------------------------------------------------------------
V1 TYPE /X / Back-end Design
/ / Front-end Design ($10,000 minimum initial purchase payment)
The front-end design may provide better long term financial value than the back-end design. Factors you may want to
consider in making your decision include the expected holding period of the annuity as well as anticipated liquidity
needs.
- ----------------------------------------------------------------------------------------------------------------------------------
V2 MATURITY: Defaults to age 85 unless otherwise specified below.
------------ ----------------------------------------
(MONTH, DAY, YEAR)
MATURITY AGE / / / / or MATURITY DATE / / / / - / / / / - / / / / / / / /
------------ ----------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
V3 INDICATE ALLOCATION OF NET PURCHASE PAYMENTS (Use whole %. Total must equal 100%)
NORTHWESTERN MUTUAL SERIES FUNDS RUSSELL INSURANCE FUNDS
Select Bond 20% Multi-Style Equity %
--- ---
International Equity % Aggressive Equity %
--- ---
Money Market % Non-US 10%
--- ---
Balanced 10% Real Estate Securities %
--- ---
Index 500 Stock % Core Bond 10%
--- ---
Aggressive Growth Stock 10%
---
High Yield Bond % FIXED FUND
---
Growth Stock 20% Guaranteed Interest* %
--- ---
Growth and Income Stock 20%
---
Index 400 Stock % TOTAL 100%
---
Small Cap Growth Stock % * Guaranteed Interest Fund not available in all states.
---
- ---------------------------------------------------------------------------------------------------------------------------------
90-1900 (0599) (PAGE 3)
<PAGE>
VARIABLE ANNUITY SECTION (Continued)
- ---------------------------------------------------------------------------------------------------------------------------------
V4 INITIAL PURCHASE PAYMENT
A. METHOD OF PAYMENT
/X/ PREPAID A purchase payment for the contract applied for has been given to the agent in exchange for the receipt
with the same number as this application. NOTE: ALL PURCHASE PAYMENT CHECKS MUST BE MADE PAYABLE TO
NORTHWESTERN MUTUAL LIFE. DO NOT MAKE CHECKS PAYABLE TO AGENT OR LEAVE PAYEE BLANK.
------------------------
AMOUNT
$ 10,000.00
------------------------
/ / NON-PREPAID (NOTE: Contract will not be issued until initial purchase payment is received.)
/ / 1. Collected via Multiple Contract Bill (MCB). RECOMMENDED FOR SIMPLE IRA'S.
/ / 2. Automatic withdrawal from checking account (ISA/EFT). ------------------------------
/ / 3. Check coming from ANOTHER FINANCIAL institution. Estimated Amount: $
------------------------------
B. FOR IRA's (Traditional, SEP, SIMPLE and Roth IRA) enter amount(s) indicating how the initial purchase payment is to
be applied. CAUTION: Accurate selection is needed to assure correct tax reporting.
--------------------------------------------------------------------------------------------------------------
$ CURRENT ( ) TAX YEAR (Date on check matches current tax year.)
--------------------------------------------------------------------------------------------------------------
$ PRIOR ( ) TAX YEAR (One year prior to current calendar year.)
--------------------------------------------------------------------------------------------------------------
$ DIRECT TRANSFER - CHECK PAYABLE TO NORTHWESTERN MUTUAL LIFE for the benefit
of the contract owner.
THE SOURCE MARKET MUST BE INDICATED. CHECK ONE:
/ / Traditional IRA
/ / TDA
/ / Pension/Profit Sharing/401k/Defined Benefit
/ / Roth IRA
/ / SIMPLE IRA - The owner has been a participant in the employer's SIMPLE Plan for:
/ / Two years or LESS. / / More than two years.
/ / SEP
---------------------------------------------------------------------------------------------------------
$ 60-DAY ROLLOVER - PERSONAL CHECK from owner OR check ENDORSED TO
NORTHWESTERN MUTUAL LIFE.
THE SOURCE MARKET MUST BE INDICATED IF THE FOLLOWING IS APPLICABLE.
/ / Traditional IRA (Traditional IRA to Roth IRA)
/ / SIMPLE IRA (SIMPLE IRA to Traditional IRA)
The owner has been a participant in the employer's SIMPLE Plan for:
/ / Two years or LESS. / / More than two years.
---------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
90-1900 (0599) (PAGE 4)
<PAGE>
VARIABLE ANNUITY SECTION (Continued)
- ----------------------------------------------------------------------------------------------------------------------------------
V5 SUBSEQUENT PURCHASE PAYMENTS (Select One) -----------------
/ / None Anticipated. ISA NUMBER
/X/ Send Investment Reminders to Owner with Confirmations and Quarterly Summary Statements. ______________
------------------------- ----------------
ANTICIPATED ANNUAL AMOUNT
$ 3,000.00
-------------------------
/ / Automatic Withdrawal from Checking Account (ISA/EFT).
-------------------------------------------------------------------------------------------------------------------------
AMOUNT DATE OF FIRST DRAFT (MONTH, DAY, YEAR) FREQUENCY
$ / / / / - / / / / - / / / / / / / / / / Monthly / / Quarterly / / Semiannual / / Annual
-------------------------------------------------------------------------------------------------------------------------
NOTE: Subsequent withdrawals will be on the same day of the month (1-28 ONLY) as the initial draft. ATTACH VOID CHECK
IF ONGOING DRAFT DRAWN ON DIFFERENT ACCOUNT THAN INITIAL PAYMENT CHECK OR IF CHECK NOT ATTACHED.
ISA/EFT Payer / / Annuitant at annuitant's address / / Other:
-------------------------------------------------------------------------------------------------------------------------
A. / / Mr. / / Mrs. / / Ms. / / Dr. / / Other:_______________________________ / / Male / / Female
-------------------------------------------------------------------------------------------------------------------------
PERSONAL NAME BIRTHDATE (MONTH, DAY, YEAR)
/ / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / - / / / / - / / / / / / / /
-------------------------------------------------------------------------------------------------------------------------
OR
-------------------------------------------------------------------------------------------------------------------------
BUSINESS/TRUST NAME
-------------------------------------------------------------------------------------------------------------------------
B. TAXPAYER IDENTIFICATION NUMBER DAYTIME TELEPHONE NUMBER
/ / / / / / / / / / / / / / / / / / / / / / ( )
-------------------------------------------------------------------------------------------------------------------------
C. ADDRESS
STREET OR PO BOX
-------------------------------------------------------------------------------------------------------------------------
CITY, STATE, ZIP (COUNTRY IF OTHER THAN US)
-------------------------------------------------------------------------------------------------------------------------
Payer signature below is authorization to the depository institution named on the attached check to pay and charge named
account with electronic funds transfers, or other form of pre-authorized check or withdrawal order transfers, initiated
by the Northwestern Mutual Life Insurance Company to its own order. This authorization will remain in effect until
revoked in writing.
X
----------------------------------------------------------
ISA/EFT PAYER SIGNATURE
/ / Add to Multiple Contract Bill.
-------------------------------------------------------------------------------------------------------------------------
AMOUNT MCB NUMBER MCB PAYER
$
-------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
V6 THE COMPANY IS REQUIRED TO MAKE THE FOLLOWING INQUIRIES FOR PURPOSES OF DETERMINING SUITABILITY OF THIS SALE. THE
APPLICATION WILL NOT BE ACCEPTED WITHOUT THIS INFORMATION.
ANNUITANT'S PURPOSE FOR CONTRACT CURRENT FINANCIAL STATUS
/ / Fund tax-qualified retirement plan Total Annual Income (all sources) $__________________________
/X/ Personal retirement planning Total Net Worth $__________________________
/ / Other. Specify __________________________________ ANTICIPATED NUMBER OF YEARS CONTRACT WILL BE IN FORCE__________
INVESTMENT OBJECTIVES FOR THIS CONTRACT
/ / Preservation of principal / / Moderate risk, moderate return potential
/ / Lower risk, lower return potential / / Higher risk, higher return potential
THE ANSWERS TO V6 ACCURATELY DESCRIBE MY CURRENT FINANCIAL STATUS AND OBJECTIVES.
ON (date of delivery: ___-___-___) THE FOLLOWING PROSPECTUS OR OFFERING CIRCULAR AND REPORT WAS DELIVERED:
/ / Account A Offering Circular dated ___-___-___ and Report dated ___-___-___ (Corporate Pension Plans)
/ / Account A Prospectus dated ___-___-___ (Partnership or Sole Proprietorship Pension Plans)
/X/ Account B Prospectus dated 05-01-99 (all others)
I ACKNOWLEDGE RECEIPT OF THE PROSPECTUS OR OFFERING CIRCULAR AND REPORT AND I UNDERSTAND THAT ALL PAYMENTS AND VALUES
PROVIDED BY THIS CONTRACT, WHEN BASED ON THE INVESTMENT EXPERIENCE OF A SEPARATE ACCOUNT, ARE VARIABLE AND ARE NOT
GUARANTEED AS TO AMOUNT.
X X (Signed) John J. Doe
------------------------------------------------------------- -----------------------------------------------------------
ANNUITANT SIGNATURE (IF OTHER THAN APPLICANT) APPLICANT SIGNATURE
- ----------------------------------------------------------------------------------------------------------------------------------
90-1900 (0599) (PAGE 5)
<PAGE>
- ----------------------------------------------------------------------------------------------------------------------------------
F1 GUARANTEED PERIOD: / / One Year / / Three Year
- ----------------------------------------------------------------------------------------------------------------------------------
-------------
F2 MATURITY AGE / / / If not specified, defaults to age 85.
-------------
- ----------------------------------------------------------------------------------------------------------------------------------
F3 PREMIUM PAYMENT
A. METHOD OF PAYMENT
/ / PREPAID The premium for the contract applied for has been given to the agent in exchange for the receipt with the
same number as this application. NOTE: ALL PREMIUM PAYMENT CHECKS MUST BE MADE PAYABLE TO NORTHWESTERN MUTUAL
LIFE. DO NOT MAKE CHECK PAYABLE TO AGENT OR LEAVE PAYEE BLANK.
-----------------------------
AMOUNT
$
-----------------------------
/ / NON-PREPAID (NOTE: Contract will not be issued until initial premium is received.)
-----------------------------
$ (Estimated amount of check coming from another financial institution.)
-----------------------------
B. FOR IRAS (Traditional, SEP, SIMPLE and Roth IRA) enter amount(s) indicating how the premium payment is to be applied.
CAUTION: Accurate selection is needed to assure correct tax reporting.
Only Direct Transfer or 60-Day Rollover can be selected.
-------------------------------------------------------------------------------------------------------------------------
$ DIRECT TRANSFER - CHECK PAYABLE TO NORTHWESTERN MUTUAL LIFE for the benefit
of the contract owner.
THE SOURCE MARKET MUST BE INDICATED. CHECK ONE:
/ / Traditional IRA
/ / TDA
/ / Pension/Profit Sharing/401k/Defined Benefit
/ / Roth IRA
/ / SIMPLE IRA - The Owner has been a participant in the employer's SIMPLE Plan for:
/ / Two years or LESS. / / More than two years.
/ / SEP
-------------------------------------------------------------------------------------------------------------------------
$ 60-DAY ROLLOVER - PERSONAL CHECK from owner OR check ENDORSED TO
NORTHWESTERN MUTUAL LIFE.
THE SOURCE MARKET MUST BE INDICATED IF THE FOLLOWING IS APPLICABLE.
/ / Traditional IRA (Traditional IRA to Roth IRA)
/ / SIMPLE IRA (SIMPLE IRA to Traditional IRA)
The owner has been a participant in the employer's SIMPLE Plan for:
/ / Two years or LESS. / / More than two years.
-------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
90-1900 (0599) (PAGE 6)
<PAGE>
- ----------------------------------------------------------------------------------------------------------------------------------
THE ANNUITANT CONSENTS TO THIS APPLICATION.
EACH PERSON SIGNING THIS APPLICATION DECLARES THAT THE ANSWERS AND STATEMENTS MADE IN THIS APPLICATION ARE CORRECTLY
RECORDED, COMPLETE AND TRUE TO THE BEST OF HIS OR HER KNOWLEDGE AND BELIEF.
IT IS UNDERSTOOD AND AGREED THAT:
For the purposes of this application, if a Variable Annuity is applied for, the word "policy" means contract and the word
"premium" means purchase payment.
If the Owner is a Trustee or a successor Trustee under a tax qualified plan or the employer under a tax qualified
non-trusteed plan, Northwestern Mutual LIfe will be fully discharged of liability for any action taken by the Owner in the
exercise of any policy right and for all amounts paid to, or at the direction of, the Owner and will have no obligation as
to the use of the amounts. In all dealings with the Owner, Northwestern Mutual Life will be fully protected against the
claims of every other person.
The initial purchase payment will be credited the valuation date coincident with or next following the date it is received
at the Home Office. Receipt of purchase payments at a payment facility designated by Northwestern Mutual Life will be
considered the same as receipt at the Home Office.
If a Tax Qualified Employee Plan, an IRA or TDA is applied for, the Applicant and/or Annuitant have received and reviewed
the appropriate ERISA, IRA or TDA disclosure statements.
BACK-END DESIGN VARIABLE ANNUITY AND SINGLE PREMIUM RETIREMENT ANNUITY POLICIES HAVE PROVISIONS FOR THE ASSESSMENT OF
SURRENDER CHARGES ON CASH WITHDRAWAL.
No agent is authorized to make or alter contracts or to waive the rights or requirements of Northwestern Mutual Life.
X X (signed) John J. Doe
------------------------------------------------------------- ---------------------------------------------------------------
SIGNATURE OF ANNUITANT (IF OTHER THAN APPLICANT) SIGNATURE APPLICANT (INDICATE RELATIONSHIP BELOW IF APPLICABLE)
/ / TRUSTEE / / EMPLOYER
SIGNED at Milwaukee Milwaukee WI DATE 05 - 01 - 1999
----------------------------------------------------------- -------------------------------------------
CITY COUNTY STATE MONTH DAY YEAR
X (signed) Norm W. Western
----------------------------------------------------------
SIGNATURE OF LICENSED AGENT
- ----------------------------------------------------------------------------------------------------------------------------------
90-1900 (0599) (PAGE 7)
</TABLE>
<PAGE>
IT IS RECOMMENDED THAT YOU ...
read your contract.
notify your Northwestern Mutual agent or the Company at
720 E. Wisconsin Avenue, Milwaukee, Wis. 53202, of an
address change.
call your Northwestern Mutual agent for information
-- particularly on a suggestion to terminate or exchange
this contract for another contract or plan.
ELECTION OF TRUSTEES
The members of The Northwestern Mutual Life Insurance
Company are its policyholders of insurance policies and
deferred annuity contracts. The members exercise control
through a Board of Trustees. Elections to the Board are
held each year at the annual meeting of members. Members
are entitled to vote in person or by proxy.
FLEXIBLE PAYMENT VARIABLE ANNUITY-ACCOUNT B
AMOUNTS ALLOCATED TO THE SEPARATE ACCOUNT DIVISIONS AND
VARIABLE PAYMENTS PROVIDED BY THIS CONTRACT ARE NOT
GUARANTEED AS TO FIXED DOLLAR AMOUNT BUT ARE VARIABLE
AND MAY INCREASE OR DECREASE TO REFLECT THE INVESTMENT
EXPERIENCE OF THE SEPARATE ACCOUNT.
QQV.ACCT.A.(0196)
[NORTHWESTERN
MUTUAL LIFE(R) LOGO]
<PAGE>
EX-99.B(4)(c)
PAYMENT RATE TABLES
MONTHLY INCOME PAYMENTS PER $1,000 BENEFITS
GUARANTEED FIXED PAYMENT OR FIRST PAYMENT UNDER VARIABLE PAYMENT PLAN LIFE
INCOME PLAN (OPTION C)
<TABLE>
<CAPTION>
SINGLE LIFE MONTHLY PAYMENTS
MALE CHOSEN PERIOD (YEARS) FEMALE CHOSEN PERIOD (YEARS)
ADJUSTED ADJUSTED
AGE* ZERO 10 20 AGE* ZERO 10 20
<S> <C> <C> <C> <C> <C> <C> <C>
55 $ 4.48 $ 4.43 $ 4.28 55 $ 4.09 $ 4.07 $ 4.00
56 4.56 4.50 4.34 56 4.15 4.13 4.05
57 4.65 4.59 4.40 57 4.22 4.20 4.11
58 4.75 4.68 4.46 58 4.30 4.27 4.17
59 4.85 4.77 4.52 59 4.38 4.34 4.23
60 4.96 4.87 4.59 60 4.46 4.42 4.29
61 5.07 4.97 4.66 61 4.55 4.50 4.36
62 5.20 5.08 4.72 62 4.65 4.59 4.43
63 5.33 5.19 4.79 63 4.75 4.69 4.50
64 5.48 5.32 4.86 64 4.86 4.79 4.57
65 5.63 5.44 4.92 65 4.97 4.89 4.64
66 5.80 5.58 4.99 66 5.10 5.01 4.71
67 5.97 5.72 5.05 67 5.23 5.12 4.79
68 6.16 5.86 5.12 68 5.38 5.25 4.86
69 6.36 6.01 5.18 69 5.53 5.39 4.93
70 6.58 6.17 5.23 70 5.70 5.53 5.01
71 6.81 6.33 5.29 71 5.88 5.68 5.08
72 7.05 6.49 5.34 72 6.08 5.83 5.15
73 7.31 6.66 5.38 73 6.29 6.00 5.21
74 7.59 6.83 5.43 74 6.52 6.17 5.27
75 7.89 7.01 5.46 75 6.77 6.35 5.33
76 8.21 7.19 5.50 76 7.04 6.54 5.38
77 8.56 7.37 5.53 77 7.33 6.73 5.43
78 8.93 7.55 5.56 78 7.65 6.93 5.47
79 9.32 7.72 5.58 79 7.99 7.13 5.51
80 9.75 7.90 5.60 80 8.36 7.34 5.54
81 10.20 8.07 5.62 81 8.76 7.54 5.57
82 10.69 8.23 5.63 82 9.20 7.74 5.59
83 11.21 8.39 5.64 83 9.67 7.93 5.61
84 11.76 8.54 5.65 84 10.18 8.12 5.63
85 and over 12.35 8.68 5.66 85 and over 10.74 8.30 5.64
</TABLE>
LIFE INCOME PLAN (OPTION E)
<TABLE>
<CAPTION>
JOINT AND SURVIVOR MONTHLY PAYMENTS
MALE FEMALE ADJUSTED AGE*
ADJUSTED
AGE* 55 60 65 70 75 80 85 and over
<S> <C> <C> <C> <C> <C> <C> <C>
55 $ 3.79 $ 3.93 $ 4.07 $ 4.19 $ 4.29 $ 4.35 $ 4.39
60 3.87 4.07 4.27 4.46 4.61 4.73 4.80
65 3.94 4.18 4.45 4.73 4.98 5.19 5.32
70 3.99 4.27 4.61 4.99 5.37 5.70 5.94
75 4.02 4.34 4.73 5.20 5.72 6.21 6.60
80 4.05 4.38 4.81 5.35 6.00 6.67 7.24
85 and over 4.06 4.40 4.86 5.45 6.18 7.00 7.75
</TABLE>
*See Section 11-7.
The amount of the payment for any other combination of ages will be furnished by
the Company on request. The maximum initial monthly income per $1,000 will be
$7.75.
Monthly payment rates are based on an Assumed Investment Rate of 3 1/2% and the
1983 Table with a Projection Scale G.
16
<PAGE>
Exhibit B(8)(a)
PARTICIPATION AGREEMENT
AMONG
RUSSELL INSURANCE FUNDS,
RUSSELL FUND DISTRIBUTORS, INC.
AND
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
THIS AGREEMENT is made and entered into as of this ____ day of
______________,by and among THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY a
Wisconsin life insurance company (hereinafter the "Company"), on its own behalf
and on behalf of each segregated asset account of the Company set forth on
Schedule A hereto as such schedule may be amended from time to time (each such
account hereinafter referred to as the "Account" and collectively as the
"Accounts"), and RUSSELL INSURANCE FUNDS, a Massachusetts Business Trust
(hereinafter the "Investment Company"), and RUSSELL FUND DISTRIBUTORS, INC. a
Washington corporation (hereinafter the "Underwriter").
WHEREAS, Investment Company engages in business as a diversified open-end
management investment company and is available to act as the investment vehicle
for separate accounts established for variable life insurance policies and
variable annuity contracts (collectively, the "Variable Insurance Products");
and
WHEREAS, the beneficial interest in the Investment Company is divided into
several series of shares, referred to individually as "Funds" and representing
the interest in a particular managed portfolio of securities and other assets;
and
WHEREAS, Investment Company is registered as an open-end management
investment company under the 1940 Act, and its shares are registered under the
Securities Act of 1933, as amended (hereinafter the "1933 Act"); and
WHEREAS, Frank Russell Investment Management Company (the "Adviser") is
registered as an investment adviser under the federal Investment Advisers Act of
1940 and any applicable state securities law; and
WHEREAS, the Company has registered or will register certain variable life
or annuity contracts or both under the 1933 Act, and offers or will offer for
sale certain variable life or annuity contracts or both which are or will be
exempt from registration; and
WHEREAS, each Account is a duly organized, validly existing, segregated
asset account, established by resolution of the Board of Trustees of the
Company, on the date shown for such Account on Schedule A hereto, to set aside
and invest assets attributable to one or more variable life or annuity
contracts; and
WHEREAS, the Company has registered or will register some of the Accounts
as unit investment trusts under the 1940 Act and other Accounts are exempt from
registration; and
1
<PAGE>
WHEREAS, Investment Company has received "mixed and shared funding"
exemptive relief from the Securities and Exchange Commission permitting it to
offer its shares to life insurers in connection with variable annuity contracts
and variable life insurance policies offered by such insurers which may or may
not be affiliated with each other (SEC Release IC-16160, Dec. 7, 1987); and
WHEREAS, the Underwriter is registered as a broker/dealer with the SEC
under the Securities Exchange Act of 1934, as amended (hereinafter the "1934
Act") and is a member in good standing of the National Association of Securities
Dealers, Inc. (hereinafter the "NASD"); and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in the Funds on behalf of
each Account to fund certain of the aforesaid variable life or annuity contracts
or both, and the Underwriter is authorized to sell such shares to unit
investment trusts such as each Account at net asset value.
NOW THEREFORE, in consideration of the premises and of the mutual covenants
herein contained and other good and valuable consideration the receipt of which
is hereby acknowledged, the parties hereto, intending to be legally bound
hereby, agree as follows:
ARTICLE 1. SALE OF INVESTMENT COMPANY SHARES
1.1 The Underwriter agrees to sell to the Company those shares of Investment
Company which each Account orders, executing such orders on a daily basis at the
net asset value next computed after receipt by the Investment Company or its
designee of the order for the shares of the Investment Company. For purposes of
this Section 1.1, the Company shall be the designee of the Investment Company
for receipt of such orders from each Account and receipt by such designee shall
constitute receipt by the Investment Company; provided that the Investment
Company receives notice of such order by 8:00 a.m. Pacific time on the next
following Business Day. "Business Day" shall mean any day on which the New York
Stock Exchange is open for trading and on which Investment Company calculated
its net asset value pursuant to the rules of the Securities and Exchange
Commission.
1.2 The Investment Company agrees to make its shares available indefinitely for
purchase at the applicable net asset value per share by the Company and its
Accounts on those days on which the Investment Company calculates its net asset
value pursuant to rules of the Securities and Exchange Commission, and the
Investment Company shall use reasonable efforts to calculate such net asset
value on each day on which the New York Stock Exchange is open for trading.
Notwithstanding the foregoing, the Board of Directors of the Investment Company
(hereinafter the "Board") may refuse to sell shares of any Fund, or suspend or
terminate the offering of shares of any Fund if such action is required by law
or by regulatory authorities having jurisdiction or is, in the sole discretion
of the Board acting in good faith and in light of their fiduciary duties under
federal and any applicable state laws, necessary in the best interests of the
shareholders of such Fund.
1.3 The Investment Company and the Underwriter agree that no shares of any Fund
will be sold to the general public.
2
<PAGE>
1.4 The Investment Company agrees to redeem for cash, on the Company's request,
any full or fractional shares of the Investment Company held by the Company,
executing such requests on a daily basis at the net asset value next computed
after receipt by the Investment Company or its designee of the request for
redemption. For purposes of this Section 1.4, the Company shall be the designee
of the Investment Company for receipt of requests for redemption from each
Account, and receipt by such designee shall constitute receipt by the Investment
Company; provided that the Investment Company receives notice of such request
for redemption by 8:00 a.m. Pacific time on the next following Business Day.
1.5 The Company agrees to purchase and redeem the shares of selected Funds
offered by the then-current prospectus of the Investment Company and in
accordance with the provisions of such prospectus. The parties agree that all
net amounts available under the variable life and annuity contracts with the
form number(s) which are listed on Schedule B attached hereto and incorporated
herein by this reference, as such Schedule B may be amended from time to time
hereafter by mutual written agreement of all the parties hereto (the
"Contracts"), may be invested in the Investment Company, in other separate
accounts of the Company, in other investment companies, in the Company's general
account, or in other funding vehicles.
1.6 The Company shall pay for Investment Company shares on the next Business Day
after an order to purchase Investment Company shares is made in accordance with
the provisions of Section 1.1 hereof. Payment shall be in federal funds
transmitted by wire.
1.7 Issuance and transfer of the Investment Company's shares will be by book
entry only. Stock certificates will not be issued to the Company or any Account.
Shares ordered from the Investment Company will be recorded in an appropriate
title for each Account.
1.8 The Investment Company shall furnish same day notice (by wire or telephone,
followed by written confirmation) to the Company of any income dividends or
capital gain distributions payable on the Investment Company's shares. The
Company hereby elects to receive all such income dividends and capital gain
distributions as are payable on the Fund shares in additional shares of that
Fund. The Company reserves the right to revoke this election and to receive all
such income dividends and capital gain distributions in cash. Investment Company
shall furnish same day notice to the Company of the number of shares so issued
as payment of such dividends and distributions.
1.9 The Investment Company shall make the net asset value per share for each
Fund available to the Company on a daily basis as soon as reasonably practical
after the net asset value per share is calculated.
ARTICLE II. REPRESENTATIONS AND WARRANTIES
2.1 The Company represents and warrants that the Contracts are registered under
the 1933 Act or are exempt from registration thereunder; that the Contracts will
be issued and sold in compliance in all material respects with all applicable
Federal and State laws and that the sale of the Contracts shall comply in all
material respects with state insurance suitability requirements. The Company
further represents and warrants that it is an insurance company duly organized
and in good standing under applicable law and that it has legally and validly
established each
3
<PAGE>
Account prior to any issuance or sale of Contracts funded thereby as a
segregated asset account under applicable state insurance law and that each
Account is or will be registered as a unit investment trust in accordance with
the provisions of the 1940 Act to serve as a segregated investment account for
the Contracts or is exempt from registration thereunder.
2.2 The Investment Company represents and warrants that Investment Company
shares sold pursuant to this Agreement shall be registered under the 1933 and
1940 Acts, duly authorized for issuance and sold in compliance with the laws of
the State of Washington and all applicable federal and state securities laws and
that the Investment Company is and shall remain registered under the 1940 Act.
The Investment Company shall amend the Registration Statement for its shares
under the 1933 and the 1940 Acts from time to time as required in order to
effect the continuous offering of its shares. The Investment Company shall
register and qualify the shares for sale in accordance with the laws of the
various states only if and to the extent deemed advisable by the Investment
Company or the Underwriter.
2.3 The Investment Company represents that it is currently qualified as a
Regulated Investment Company under Subchapter M of the Internal Revenue Code of
1986, as amended, (the "Code") and that it will make every effort to maintain
such qualification (under Subchapter M or any successor or similar provision)
and that it will notify the Company immediately upon having a reasonable basis
for believing that it has ceased to so qualify or that it might not so qualify
in the future.
2.4 The Company represents that the Contracts are currently treated as
endowment, annuity or life insurance contracts, under applicable provisions of
the Code and that it will make every effort to maintain such treatment and that
it will notify the Investment Company and the Underwriter immediately upon
having a reasonable basis for believing that the Contracts have ceased to be so
treated or that they might not be so treated in the future.
2.5 The Investment Company currently does not intend to make any payments to
finance distribution expenses pursuant to Rule l2b-1 under the 1940 Act or
otherwise, although it may make such payments in the future. To the extent that
it decides to finance distribution expenses pursuant to Rule 12b-1, the
Investment Company undertakes to have its board of trustees, a majority of whom
are not interested persons of the Investment Company, formulate and approve any
plan under Rule l2b-1 to finance distribution expenses.
2.6 The Investment Company makes no representation as to whether any aspect of
its operations (including, but not limited to, fees and expenses and investment
policies) complies with the insurance laws or regulations of the various states.
2.7 The Underwriter represents and warrants that it is a member in good standing
of the NASD and is registered as a broker-dealer with the SEC. The Underwriter
further represents that it will sell and distribute the Investment Company
shares in accordance with any applicable state laws and federal securities laws,
including without limitation the 1933 Act, the 1934 Act, and the 1940 Act.
2.8 The Investment Company represents that it is lawfully organized and validly
existing under the laws of the Commonwealth of Massachusetts and that it does
and will comply in all material respects with the 1940 Act.
4
<PAGE>
2.9 The Underwriter represents and warrants that the Adviser is and shall remain
duly registered in all material respects under all applicable federal and state
securities laws and that the Adviser shall perform its obligations for the
Investment Company in compliance in all material respects any applicable state
laws and federal securities laws.
2.10 The Investment Company and Underwriter represent and warrant that all of
their directors, officers, employees, investment advisers, and other
individuals/entities dealing with the money or securities of the Investment
Company are and shall continue to be at all times covered by a blanket fidelity
bond or similar coverage for the benefit of the Investment Company in an amount
not less than the minimal coverage as required currently by Rule 17g-(1) of the
1940 Act or related provisions as may be promulgated from time to time. The
aforesaid Bond shall include coverage for larceny and embezzlement and shall be
issued by a reputable bonding company.
2.11 The Company represents and warrants that all of its directors, officers,
employees, investment advisers, and other entities dealing with the money or
securities of the Investment Company are and shall continue to be at all times
covered by a blanket fidelity bond or similar coverage for the benefit of the
Investment Company in an amount not less than five million dollars ($5 million).
The aforesaid Bond shall include coverage for larceny and embezzlement and shall
be issued by a reputable bonding company.
ARTICLE III. PROSPECTUSES AND PROXY STATEMENTS: VOTING
3.1 The Underwriter shall provide the Company with as many printed copies of the
Investment Company's current prospectus and Statement of Additional Information
as the Company may reasonably request. If requested by the Company in lieu
thereof, the Investment Company shall provide camera-ready film or computer
diskettes containing the Investment Company's prospectus and Statement of
Additional Information and such other assistance as is reasonably necessary in
order for the Company once each year (or more frequently if the prospectus
and/or Statement of Additional Information for the Investment Company is amended
during the year) to have the prospectus for the Contracts and the Investment
Company's prospectus printed together in one document, and to have the Statement
of Additional Information for the Investment Company and the Statement of
Additional Information for the Contracts printed together in one document.
Alternatively, the Company may print the Investment Company's prospectus and/or
its Statement of Additional Information in combination with other fund
companies' prospectuses and statements of additional information. Except as
provided in the following three sentences, all expenses of printing and
distributing Investment Company prospectuses and Statements of Additional
Information distributed by the Company shall be the expense of the Company. For
Prospectuses and Statement of Additional Information provided by the Company to
its existing owners of Contracts in order to update disclosure as required by
the 1933 Act and/or the 1940 Act, the cost of printing shall be borne by the
Investment Company. If the Company chooses to receive camera-ready film or
computer diskettes in lieu of receiving printed copies of the Investment
Company's prospectus, the Investment Company will reimburse the Company in an
amount equal to the product of A and B where A is the number of such
prospectuses distributed to owners of the Contracts, and B is the Investment
Company's per unit cost of typesetting and printing the Investment Company's
5
<PAGE>
prospectus. The same procedures shall be followed with respect to the Investment
Company's Statement of Additional Information.
The Company agrees to provide the Investment Company or its designee with
such information as may be reasonably requested by the Investment Company to
assure that the Investment Company's expenses do not include the cost of
printing any prospectuses or Statements of Additional Information other than
those actually distributed to existing owners of the Contracts.
3.2 The Investment Company's prospectus shall state that the Statement of
Additional Information for the Investment Company is available from the
Underwriter or the Company (or in the Fund's discretion, the Prospectus shall
state that such Statement is available from the Investment Company).
3.3 The Investment Company, at its expense, shall provide the Company with
copies of its proxy statements, reports to shareholders, and other required
communications (except for prospectuses and Statement of Additional Information,
which are covered in Section 3.1) to shareholders in such quantity as the
Company shall reasonably require for distributing to Contract owners.
3.4 The Company will provide pass-through voting privileges to all Contract
owners to the extent that and so long as the SEC continues to interpret the
Investment Company Act of 1940 as requiring pass-through voting privileges for
Contract owners. Accordingly, the Company, where applicable, will vote shares of
the Fund held in its Separate Accounts in a manner consistent with voting
instructions timely received from its Contract owners. The Company will be
responsible for assuring that each of its separate accounts that participates in
the Investment Company calculates voting privileges in a manner consistent with
other participating insurance companies. The Company will vote shares for which
it has not received timely voting instructions, as well as shares it owns, in
the same proportion as it votes those shares for which it has received voting
instructions.
3.5 If and to the extent Rule 6e-2 and Rule 6e-3(T) are amended, or if Rule 6e-3
is adopted, to provide exemptive relief from any provision of the Investment
Company Act of 1940 or the rules thereunder with respect to mixed and shared
funding on terms and conditions materially different from any exemptions granted
in the Investment Company's mixed and shared funding exemptive order, then the
Investment Company, and/or the Company, as appropriate, shall take such steps as
may be necessary to comply with Rule 6e-2 and Rule 6e-3(T), as amended, and Rule
6e-3, as adopted, to the extent such Rules are applicable.
3.6 The Investment Company will comply with all provisions of the 1940 Act
requiring voting by shareholders, and in particular the Investment Company will
either provide for annual or special meetings or comply with the requirements of
Section 16(c) of the 1940 Act (although the Investment Company is not one of the
trusts described in Section 16(c) of that Act) as well as with Sections 16(a)
and, if and when applicable, 16(b). Further, the Investment Company will act in
accordance with the SEC's interpretation of the requirements of Section 16(a)
with respect to periodic elections of directors and with whatever rules the SEC
may promulgate with respect thereto.
6
<PAGE>
ARTICLE IV. SALES MATERIAL AND INFORMATION
4.1 The Company shall furnish, or shall cause to be furnished, to the Investment
Company or its designee, each piece of sales literature or other promotional
material, or component thereof, in which the Investment Company, the Adviser, or
the Underwriter is named, at least fifteen Business Days prior to its use. No
such material shall be used if the Investment Company or its designee object to
such use within fifteen Business Days after receipt of such material. Once any
such material has been so furnished to the Investment Company or its designee
and fifteen Business days have elapsed, such materials need not again be so
furnished absent any subsequent changes to such material that affect the
materials' discussion or presentation relating to the Investment Company, its
advisor, the Underwriter, or any of their affiliates (other than the Company or
persons that are deemed affiliates only by virtue of being controlled by the
Company). In particular, materials that have been changed merely to update
performance or financial information need not be so furnished.
4.2 The Company shall not give any information or make any representations or
statements on behalf of the Investment Company or concerning the Investment
Company in connection with the sale of the Contracts other than the information
or representations contained in the registration statement or prospectus for the
Investment Company shares, as such registration statement and prospectus may be
amended or supplemented from time to time, or in reports or proxy statements for
the Investment Company, or in sales literature or other promotional material
approved by the Investment Company or its designee or by the Underwriter, except
with the permission of the Investment Company or the Underwriter or the designee
of either.
4.3 The Investment Company, the Underwriter, or their designees shall furnish,
or shall cause to be furnished, to the Company or its designee, each piece of
sales literature or other promotional material, or component thereof, in which
the Company or its separate Accounts are named at least fifteen Business Days
prior to its use. No such material shall be used if the Company or its designee
objects to such use within fifteen Business Days after receipt of such material.
4.4 The Investment Company and the Underwriter shall not give any information or
make any representations on behalf of the Company or concerning the Company,
each Account, or the Contracts other than the information or representations
contained in a registration statement, prospectus or offering materials for the
Contracts, as such may be amended or supplemented from time to time, or in
published reports for each Account which are in the public domain or approved by
the Company for distribution to Contract owners, or in sales literature or other
promotional material approved by the Company or its designee, except with the
permission of the Company.
4.5 The Investment Company will provide to the Company at least one complete
copy of all registration statements, prospectuses, Statements of Additional
Information, reports, proxy statements, sales literature and other promotional
materials, applications for exemptions, requests for no-action letters, and all
amendments to any of the above, that relate to the Investment Company or its
shares, contemporaneously with the filing of such document with the Securities
and Exchange Commission or other regulatory authorities.
7
<PAGE>
4.6 The Company will provide to the Investment Company at least one complete
copy of all registration statements, prospectuses, Statements of Additional
Information, reports, solicitations for voting instructions, sales literature
and other promotional materials, applications for exemptions, requests for
no-action letters, and all amendments to any of the above, that relate to the
Contracts or each Account, contemporaneously with the filing of such document
with the SEC or other regulatory authorities. In the case of unregistered
Contracts, in lieu of providing prospectuses and Statements of Additional
Information, the Company shall provide the Investment Company with one complete
copy of the offering materials for the Contracts.
4.7 For purposes of this Article IV, the phrase "sales literature or other
promotional material" includes, but is not limited to, advertisements (such as
material published, or designed for use in, a newspaper, magazine, or other
periodical, radio, television, telephone or tape recording, videotape display,
signs or billboards, motion pictures, electronic media, or other public media),
sales literature (i.e., any written communication distributed or made generally
available to customers or the public, including brochures, circulars, research
reports, market letters, form letters, seminar texts, reprints or excerpts of
any other advertisement, sales literature, or published article), educational or
training materials or other communications distributed or made generally
available to some or all agents or employees, and registration statements,
prospectuses, Statements of Additional Information, shareholder reports, and
proxy materials.
ARTICLE V. POTENTIAL CONFLICTS
5.1 The parties acknowledge that Investment Company has received a "mixed and
shared funding "exemptive order from the SEC granting relief from various
provisions of the Investment Company Act of 1940 and the rules thereunder to the
extent necessary to permit Investment Company shares to be sold to and held by
Variable Insurance Products separate accounts of both affiliated and
unaffiliated participating insurance companies. The exemptive order requires the
Investment Company and each participating insurance company to comply with
conditions and undertakings substantially as provided in this Article V. The
Investment Company will not enter into a participation agreement with any other
participating insurance company unless it imposes the same conditions and
undertakings as are imposed on the Company.
5.2 The Investment Company's Board of Trustees ("Board") will monitor the
Investment Company for the existence of any material irreconcilable conflict
between the interests of Contract owners of all separate accounts investing in
the Investment Company. An irreconcilable material conflict may arise for a
variety of reasons, which may include: (a) an action by any state insurance
regulatory authority; (b) a change in applicable federal or state insurance,
tax, or securities laws or regulations, or a public ruling, private letter
ruling or any similar action by insurance, tax or securities regulatory
authorities; (c) an administrative or judicial decision in any relevant
proceeding; (d) the manner in which the investments of the Investment Company
are being managed; (e) a difference in voting instructions given by Contract
owners; and (f) a decision by a participating insurance company to disregard the
voting instructions of Contract owners.
5.3 The Company will report any potential or existing conflicts to the
Investment Company's Board. The Company will be responsible for assisting the
Board in carrying out its duties in this regard by providing the Board with all
information reasonably necessary for the Board to
8
<PAGE>
consider any issues raised. The responsibility includes, but is not limited to,
an obligation by the Company to inform the Board whenever it has determined to
disregard Contract owner voting instructions. These responsibilities of the
Company will be carried out with a view only to the interests of the Contract
owners.
5.4 If a majority of the Board or majority of its disinterested Trustees,
determines that a material irreconcilable conflict exists affecting the Company,
then the Company, at its expense and to the extent reasonably practicable (as
determined by a majority of the Board's disinterested Trustees), will take any
steps necessary to remedy or eliminate the irreconcilable material conflict,
including: (a) withdrawing the assets allocable to some or all of the separate
accounts from the Investment Company or any Fund thereof and reinvesting those
assets in a different investment medium, which may include another Fund of the
Investment Company, or another investment company; (b) submitting the question
as to whether such segregation should be implemented to a vote of all affected
Contract owners and as appropriate, segregating the assets of any appropriate
group (i.e., variable annuity or variable life insurance contract owners of one
or more participating insurance companies) that votes in favor of such
segregation, or offering to the affected Contract owners the option of making
such a change; and (c) establishing a new registered management investment
company (or series thereof) or managed separate account. If a material
irreconcilable conflict arises because of the Company's decision to disregard
Contract owner voting instructions, and that decision represents a minority
position or would preclude a majority vote, the Company may be required at the
election of the Investment Company, to withdraw its separate accounts'
investment in the Investment Company, and no charge or penalty will be imposed
as a result of such withdrawal. The responsibility to take such remedial action
shall be carried out with a view only to the interests of the Contract owners.
For the purposes of this Section 5.4, a majority of the disinterested
members of the Board shall determine whether or not any proposed action
adequately remedies any irreconcilable material conflict but in no event will
the Investment Company or any investment adviser of the Investment Company be
required to establish a new funding medium for any Contract. Further, the
Company shall not be required by this Section 5.4 to establish a new funding
medium for any Contract if any offer to do so has been declined by a vote of a
majority of Contract owners materially and adversely affected by the
irreconcilable material conflict.
5.5 The Board's determination of the existence of an irreconcilable material
conflict and its implications shall be made known promptly and in writing to the
Company.
5.6 No less than annually, the Company shall submit to the Board such reports,
materials or data as the Board may reasonably request so that the Board may
fully carry out its obligations. Such reports, materials, and data shall be
submitted more frequently if deemed appropriate by the Board.
ARTICLE VI. FEES AND EXPENSES
6.1 The Investment Company and the Underwriter shall pay no fee or other
compensation to the Company under this Agreement, except that if the Investment
Company or any Fund adopts and implements a plan pursuant to Rule l2b-1 to
finance distribution expenses, then the Underwriter may make payments to the
Company or to the underwriter for the Contracts if and in amounts agreed to by
the Underwriter in writing and such payments will be made out of
9
<PAGE>
existing fees otherwise payable to the Underwriter, past profits of the
Underwriter, or other resources available to the Underwriter. No such payments
shall be made directly by the Investment Company. Currently, no such payments
are contemplated.
6.2 All expenses incident to performance by the Investment Company under this
Agreement shall be paid by the Investment Company. The Investment Company shall
ensure that all its shares are registered and authorized for issuance in
accordance with applicable federal law and, if and to the extent deemed
advisable by the Investment Company, in accordance with applicable state laws
prior to their sale. The Investment Company shall bear the expenses for the cost
of registration and qualification of the Investment Company's shares,
preparation and filing of the Investment Company's prospectus and registration
statement, proxy materials and reports, setting the prospectus in type, setting
in type and printing the proxy materials and reports to shareholders (including
the costs of printing a prospectus that constitutes an annual report), the
preparation of all statements and notices required by any federal or state law,
and all taxes and fees on the issuance or transfer of the Investment Company's
shares.
6.3 The Company shall bear the expenses of distributing the Investment Company's
prospectus, proxy materials, and reports to owners of Contracts issued by the
Company.
ARTICLE VII. DIVERSIFICATION
7.1 The Investment Company will at all times invest money from the Contracts in
such a manner as to ensure that the Contracts will be treated as variable
contracts under the Internal Revenue Code and the regulations issued thereunder.
Without limiting the scope of the foregoing, the Investment Company will at all
times comply with Section 817(h) of the Code and Treasury Regulation 1.817-5,
relating to the diversification requirements for variable annuity, endowment, or
life insurance contracts and any amendments or other modifications to such
Section or Regulations.
ARTICLE VIII. INDEMNIFICATION
8.1 INDEMNIFICATION BY THE COMPANY
8.1(a). The Company agrees to indemnify and hold harmless the Investment Company
and each member of the Board and officers and each person, if any, who controls
the Investment Company within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 8.1)
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of the Company) or litigation (including
legal and other expenses), to which the Indemnified Parties may become subject
under any statute, regulation, at common law or otherwise, insofar as such
losses, claims, damages, liabilities or expenses (or action in respect thereof)
or settlements are related to the Company's sale or acquisition of the
Investment Company's shares or the Contracts and:
(i) arise out of or are based upon any untrue statements or alleged untrue
statements of any material fact contained in any Registration Statement,
prospectus or other offering materials for the Contracts or contained in the
Contracts or sales literature for the Contracts (or any amendment or supplement
to any of the foregoing), or arise out of or are based upon the omission or the
alleged omission to state therein a material fact required to be stated therein
or
10
<PAGE>
necessary to make the statements therein not misleading, provided that this
agreement to indemnify shall not apply as to any Indemnified Party if such
statement or omission or such alleged statement or omission was made in reliance
upon and in conformity with information furnished to the Company by or on behalf
of the Investment Company for use in any Registration Statement or prospectus
for the Contracts or in the Contracts or sales literature (or any amendment or
supplement) or otherwise for use in connection with the sale of the Contracts or
Investment Company's shares; or
(ii) arise out of or as a result of statements or representations (other
than statements or representations contained in the Registration Statement,
prospectus or sales literature of the Investment Company not supplied by the
Company, or persons under its control) or wrongful conduct of the Company or
persons under its control, with respect to the sale or distribution of the
Contracts or Investment Company shares; or
(iii) arise out of any untrue statement or alleged untrue statement of a
material fact contained in a Registration Statement, prospectus, or sales
literature of the Investment Company or any amendment thereof or supplement
thereto or the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading if such a statement or omission was made in reliance upon information
furnished to the Investment Company by or on behalf of the Company; or
(iv) arise as a result of any failure by the Company to provide the
services and furnish the materials under the terms of this Agreement; or
(v) arise out of a result from any material breach of any representation or
warranty made by the Company in this Agreement or arise out of or result from
any other material breach of this Agreement by the Company, as limited by and in
accordance with the provisions of Sections 8.1(b) and 8.1(c) hereof.
8.1(b). The Company shall not be liable under this indemnification provision
with respect to any losses, claims, damages, liabilities or litigation incurred
or assessed against an Indemnified Party as such may arise from such Indemnified
Party's willful misfeasance, bad faith, or gross negligence in the performance
of such Indemnified Party's duties or by reason of such Indemnified Party's
reckless disregard of obligations or duties under this Agreement or to the
Investment Company, whichever is applicable.
8.1(c). The Company shall not be liable under this indemnification provision
with respect to any claim made against an Indemnified Party unless such
Indemnified Party shall have notified the Company in writing within a reasonable
time after the summons or other first legal process giving information of the
nature of the claim shall have been served upon such Indemnified Party (or after
such Indemnified Party shall have received notice of such service on any
designated agent), but failure to notify the Company of any such claim shall not
relieve the Company from any liability which it may have to the Indemnified
Party against whom such action is brought otherwise than on account of this
indemnification provision. In case any such action is brought against the
Indemnified Parties, the Company shall be entitled to participate, at its own
expense, in the defense of such action. The Company also shall be entitled to
assume the defense thereof, with counsel satisfactory to the party named in the
action. After notice from the Company to such party of the Company's election to
assume the defense thereof, the Indemnified Party shall
11
<PAGE>
bear the fees and expenses of any additional counsel retained by it, and the
Company will not be liable to such party under this Agreement for any legal or
other expenses subsequently incurred by such party independently in connection
with the defense thereof other than reasonable costs of investigation.
8.1(d). The Indemnified Parties will promptly notify the Company of the
commencement of any litigation or proceedings against them in connection with
the issuance or sale of the Investment Company shares or the Contracts or the
operation of the Investment Company.
8.2 INDEMNIFICATION BY THE UNDERWRITER
8.2(a). The Underwriter agrees to indemnify and hold harmless the Company and
each of its directors and officers and each person, if any, who controls or is
controlled by the Company within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 8.2)
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of the Underwriter) or litigation
expenses (including legal and other expenses) to which the Indemnified Parties
may become subject under any statute, at common law or otherwise, insofar as
such losses, claims, damages, liabilities or expenses (or actions in respect
thereof) or settlements are related to the sale or acquisition of the Investment
Company's shares or the Contracts and;
(i) arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in the Registration Statement or
prospectus or sales literature of the Investment Company (or any amendment
or supplement to any of the foregoing), or arise out of or are based upon
the omission or the alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein
not misleading, provided that this agreement to indemnify shall not apply
as to any Indemnified Party if such statement or omission or such alleged
statement or omission was made in reliance upon and in conformity with
information furnished to the Underwriter or Investment Company by or on
behalf of the Company for use in the Registration Statement or prospectus
for the Investment Company or in the sales literature (or any amendment or
supplement) or otherwise for use in connection with the sale of the
Contracts or Investment Company shares; o
(ii) arise out of or as a result of statements or representations (other
than statements or representations contained in any Registration Statement,
prospectus, other offering materials or sales literature for the Contracts
not supplied by the Underwriter or persons under its control) or wrongful
conduct of the Investment Company, Adviser, or Underwriter or persons under
their control, with respect to the sale or distribution of the Contracts or
Investment Company shares; or
(iii) arise out of any untrue statement or alleged untrue statement of a
material fact contained in any Registration Statement, prospectus, other
offering materials or sales literature covering the Contracts, or any
amendment thereof or supplement thereto, or the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statement or statements therein not misleading, if
such statement or omission was made in reliance upon information furnished
to the Company by or on behalf of the Investment Company; or
12
<PAGE>
(iv) arise as a result of any failure by the Investment Company to provide
the services and furnish the materials under the terms of this Agreement
(including a failure, whether unintentional or in good faith or otherwise,
to comply with the diversification requirements specified in Article VII of
this Agreement); or
(v) arise out of or result from any material breach of any representation
or warranty made by the Underwriter in this Agreement or arise out of or
result from any other material breach of this Agreement by the Underwriter;
as limited by and in accordance with the provisions of Sections 8.2(b) and
8.2(c) hereof.
8.2(b). The Underwriter shall not be liable under this indemnification provision
with respect to any losses, claims, damages, liabilities or litigation to which
an Indemnified Party would otherwise be subject by reason of such Indemnified
Party's willful misfeasance, bad faith, or gross negligence in the performance
of such Indemnified Party's duties or by reason of such Indemnified Party's
reckless disregard of obligations and duties under this Agreement or to the
Company or each Account, whichever is applicable.
8.2(c). The Underwriter shall not be liable under this indemnification provision
with respect to any claim made against an Indemnified Party unless such
Indemnified Party shall have notified the Underwriter in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Underwriter of
any such claim shall not relieve the Underwriter from any liability which it may
have to the Indemnified Party against whom such action is brought otherwise than
on account of this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Underwriter will be entitled to
participate, at its own expense, in the defense thereof. The Underwriter also
shall be entitled to assume the defense thereof, with counsel satisfactory to
the party named in the action. After notice from the Underwriter to such party
of the Underwriter's election to assume the defense thereof, the Indemnified
Party shall bear the fees and expenses of any additional counsel retained by it,
and the Underwriter will not be liable to such party under this Agreement for
any legal or other expenses subsequently incurred by such party independently in
connection with the defense thereof other than reasonable costs of
investigation.
8.2(d). The Company agrees promptly to notify the Underwriter of the
commencement of any litigation or proceedings against it or any of its officers
or directors in connection with the issuance or sale of the Contracts or the
operation of any Account.
8.3 INDEMNIFICATION BY THE INVESTMENT COMPANY
8.3(a). The Investment Company agrees to indemnify and hold harmless the Company
and each of its directors and officers and each person, if any, who controls or
is controlled by the Company within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 8.3)
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of the Investment Company) or litigation
expenses (including legal and other expenses) to which the Indemnified Parties
may become subject under any statute, at common law or otherwise, insofar as
such losses, claims,
13
<PAGE>
damages, liabilities or expenses (or actions in respect thereof) or settlements
result from the gross negligence, bad faith or willful misconduct of the Board
or any member thereof, are related to the operations of the Investment Company
and:
(i) arise as a result of any failure by the Investment Company to provide
the services and furnish the materials under the terms of this Agreement
(including a failure to comply with the diversification requirements
specified in Article VII of this Agreement); or
(ii) arise out of or result from any material breach of any representation
or warranty made by the Investment Company in this Agreement or arise out
of or result from any other material breach of this Agreement by the
Investment Company, as limited by and in accordance with the provisions of
Sections 8.3(b) and 8.3(c) hereof.
8.3(b). The Investment Company shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
incurred or assessed against an Indemnified Party as such may arise from such
Indemnified Party's will misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations and duties under this Agreement or to
the Company, the Investment Company, the Underwriter or any Account, which ever
is applicable.
8.3(c). The Investment Company shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Investment Company in writing
within a reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Investment
Company of any such claim shall not relieve the Investment Company from any
liability which it may have to the Indemnified Party against whom such action is
brought otherwise than on account of this indemnification provision. In case any
such action is brought against the Indemnified Parties, the Investment Company
will be entitled to participate, at its own expense, in the defense thereof. The
Investment Company also shall be entitled to assume the defense thereof, with
counsel satisfactory to the party named in the action. After notice from the
Investment Company to such party of the Investment Company's election to assume
the defense thereof, the Indemnified Party shall bear the fees and expenses of
any additional counsel retained by it, and the Investment Company will not be
liable to such party under this Agreement for any legal or other expenses
subsequently incurred by such party independently in connection with the defense
thereof other than reasonable costs of investigation.
8.3(d). The Company and the Underwriter agree promptly to notify the Investment
Company of the commencement of any litigation or proceeding against it or any of
its respective officers or directors in connection with this Agreement, the
issuance or sale of the Contracts, with respect to the operation of any Account,
or the sale or acquisition of shares of the Investment Company.
14
<PAGE>
ARTICLE IX. APPLICABLE LAW
9.1 This Agreement shall be construed and the provisions hereof interpreted
under and in accordance with the laws of the State of Washington.
9.2 To the extent they are applicable, this Agreement shall be subject to the
provisions of the 1933, 1934 and 1940 acts, and the rules and regulations and
rulings thereunder, including such exemptions from those statutes, rules and
regulations as the Securities and Exchange Commission may grant and the terms
hereof shall be interpreted and construed in accordance therewith.
ARTICLE X. TERMINATION OF AGREEMENT
10.1 This Agreement shall continue in full force and effect until the first to
occur of:
(a) termination by any party for any reason by sixty (60) days advance
written notice delivered to the other parties; or
(b) termination by the Company by written notice to the Investment Company
and the Underwriter with respect to any fund based upon the Company's
determination that shares of such Fund are not reasonably available to meet the
requirements of the Contracts; or
(c) termination by the Company by written notice to the Investment Company
and the Underwriter with respect to any Fund in the event any of the Fund's
shares are not registered, issued, or sold materially in accordance with
applicable state or federal law or such law precludes the use of such shares as
the underlying investment media of the Contracts issued or to be issued by the
Company; or
(d) Termination by the Company by written notice to the Investment Company
and the Underwriter with respect to any Fund in the event that such Fund ceases
to qualify as a Regulated Investment Company under Subchapter M of the Code or
under any successor or similar provision, or if the Company reasonably believes
that the Investment Company may fail to so qualify; or
(e) termination by the Company by written notice to the Investment Company
and the Underwriter with respect to any Fund in the event that such Fund fails
to meet the diversification requirements specified in Article VII hereof; or
(f) termination by either the Investment Company or the Underwriter by
written notice to the Company, if either one or both of the Investment Company
or the Underwriter respectively, shall determine, in their sole judgment
exercised in good faith, that the Company or its affiliated companies has
suffered a material adverse change in its business, operations, financial
condition, or prospects since the date of this Agreement or is the subject of
material adverse publicity; or
(g) termination by the Company by written notice to the Investment Company
and the Underwriter, if the Company shall determine, in its sole judgment
exercised in good faith, that either the Investment Company or the Underwriter
has suffered a material adverse change in its
15
<PAGE>
business, operations, financial condition, or prospects since the date of this
Agreement or is the subject of material adverse publicity.
10.2 Notwithstanding any termination of this Agreement, the Investment Company
and the Underwriter shall at the option of the Company, continue to make
available additional shares of the Investment Company pursuant to the terms and
conditions of this Agreement, for all Contracts in effect on the effective date
of termination of this Agreement (hereinafter referred to as "Existing
Contracts"). Specifically, without limitation, the owners of the Existing
Contracts shall be permitted to reallocate investment in the Investment Company,
redeem investments in the Investment Company, or invest in the Investment
Company upon the making of additional purchase payments under the Existing
Contracts.
10.3 The Company shall not redeem Investment Company shares attributable to the
Contracts (as opposed to Investment Company shares attributable to the Company's
assets held in any of the Accounts) except (i) as necessary to implement
Contract Owner initiated transactions, or (ii) as required by state or federal
laws or regulations or judicial or other legal precedent of general application
(hereinafter referred to as a "Legally Required Redemption"). Upon request, the
Company will promptly furnish to the Investment Company and the Underwriter the
opinion of counsel for the Company (which counsel shall be reasonably
satisfactory to the Investment Company and the Underwriter) to the effect that
any redemption pursuant to clause (ii) above is a Legally Required Redemption.
Furthermore, except in cases where permitted under the terms of the Contracts,
the Company shall not prevent Existing Contract Owners from allocating payments
to a Fund that was otherwise available under the Contracts without first giving
the Investment Company or the Underwriter sixty (60) days notice of its
intention to do so.
ARTICLE XI. NOTICES
Any notice shall be sufficiently given when sent by registered or certified
mail to the other party at the address of such party set forth below or at such
other address as such party may from time to time specify in writing to the
other party.
If to the Investment Company:
909 A. Street
Tacoma, Washington 98402
Attention: Karl J. Ege, Esq.
If to the Company:
720 East Wisconsin Avenue
Milwaukee, Wisconsin 53202-4797
Attention: _________________________
If to the Underwriter:
909 A. Street
Tacoma, Washington 98402
Attention: Karl J. Ege, Esq.
16
<PAGE>
ARTICLE XII. MISCELLANEOUS
12.1 All persons dealing with the Investment Company must look solely to the
property of the Investment Company for the enforcement of any claims against the
investment Company as neither the Board, officers, agents or shareholders assume
any personal liability for obligations entered into on behalf of the Investment
Company.
12.2 Subject to the requirements of legal process and regulatory authority, each
party hereto shall treat as confidential the names and addresses of the owners
of the Contracts and all information reasonably identified as confidential in
writing by any other party hereto and, except as permitted by this Agreement,
shall not disclose, disseminate or utilize such names and addresses and other
confidential information until such time as it may come into the public domain
without the express written consent of the affected party.
12.3 The captions in this Agreement are included for convenience of reference
only and in no way define or delineate any of the provisions hereof or otherwise
affect their construction or effect.
12.4 This Agreement may be executed simultaneously in two or more counterparts,
each of which taken together shall constitute one and the same instrument.
12.5 If any provisions of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of the Agreement shall
not be affected thereby.
12.6 Each party hereto shall cooperate with each other party and all appropriate
governmental authorities (including without limitation the SEC, the NASD and
state insurance regulators) and shall permit such authorities reasonable access
to its books and records in connection with any investigation or inquiry
relating to this Agreement or the transactions contemplated hereby.
Notwithstanding the generality of the foregoing, each party hereto further
agrees to furnish the California Insurance Commissioner with any information or
reports in connection with services provided under this Agreement which such
Commissioner may request in order to ascertain whether the variable life
insurance operations of the Company are being conducted in a manner consistent
with the California Variable Life Insurance Regulations and any other applicable
law or regulations.
12.7 The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies and obligations,
at law or in equity, which the parties hereto are entitled to under state and
federal laws.
12.8 This Agreement or any of the rights and obligations hereunder may not be
assigned by any party without the prior written consent of all parties hereto;
provided, however, that the Underwriter may assign this Agreement or any rights
or obligations hereunder to any affiliate of or company under common control
with the Underwriter, if such assignee is duly licensed and registered to
perform the obligations of the Underwriter under this Agreement.
17
<PAGE>
12.9 The Company shall furnish, or shall cause to be furnished, to the
Investment Company or its designee copies of the following reports:
(a) the Company's annual statement prepared under statutory accounting
principles, as soon as practical and in any event within 90 days after the end
of each fiscal year;
(b) the Company's quarterly statement (statutory), as soon as practical and
in any event within 45 days after the end of each quarterly period; and
(c) any financial statement, proxy statement, notice or report of the
Company sent to stockholders or policyholders, as soon as practical after the
delivery thereof; and
12.10 The Master Trust Agreement dated 11 July 1996, as amended from time to
time, establishing the Investment Company, which is hereby referred to and a
copy of which is on file with the Secretary of The Commonwealth of
Massachusetts, provides that the name Russell Insurance Funds means the Trustees
from time to time serving (as Trustees but not personally) under said Master
Trust Agreement. It is expressly acknowledged and agreed that the obligations of
the Investment Company hereunder shall not be binding upon any of the
shareholders, Trustees, officers, employees or agents of the Investment Company,
personally, but shall bind only the trust property of the Investment Company as
provided in its Master Trust Agreement. The execution and delivery of this
Agreement have been authorized by the Trustees of the Investment Company and
signed by the President of the Investment Company, acting as such, and neither
such authorization by such Trustees nor such execution and delivery by such
officer shall be deemed to have been made by any of them individually or to
impose any liability on any of them personally, but shall bind only the trust
property of the Investment Company as provided in its Master Trust Agreement.
IN WITNESS WHEREOF, each of the parties hereto have caused this Agreement
to be executed in its name and on behalf by its duly authorized representative
and its seal to be hereunder affixed hereto as of the date first written above.
THE NORTHWESTERN MUTUAL LIFE
INSURANCE COMPANY
ATTEST: BY:
- ----------------------------------- ------------------------------------
Secretary Title:
RUSSELL INSURANCE FUNDS
ATTEST: BY:
- ----------------------------------- ------------------------------------
Secretary President
RUSSELL FUND DISTRIBUTORS, INC.
18
<PAGE>
ATTEST: BY:
- ----------------------------------- ------------------------------------
Secretary President
19
<PAGE>
SCHEDULE A
ACCOUNTS
<TABLE>
<CAPTION>
Name of Account Date of Resolution of Company's
Board that established the Account
<S> <C>
NML Variable Annuity Account A February 14, 1968
NML Variable Annuity Account B February 14, 1968
NML Variable Annuity Account C July 22, 1970
Northwestern Mutual Variable Life Account November 23, 1983
</TABLE>
20
<PAGE>
SCHEDULE B
CONTRACTS
1. Contract Form Numbers:
Variable Life:
RR.VJL.(1298) RR Series Variable Joint Life
RR.VEL.(0398) RR Series Variable Executive Life
QQ.VCL QQ Series Variable CompLife
MM 15 MM Series Variable Whole Life
MM 16 MM Series Variable Single Premium Life
MM 17 MM Series Variable Extraordinary Life
Individual Variable Annuity:
QQV.ACCT.A QQV.ACCT.B QQ Series VAs
MM V 1A MM V 1B MM V 1 MM Series VAs
LL V 1A LL V 1B LL V 1 LL Series VAs
KK V 1A KK V 1B KK V 1 KK Series VAs
JJ V 1A JJ V 1B JJ Series VAs
Group Variable Annuity
NPV.1C NN Series GPA
MP V 1C MM Series GPA
LL V 1C LL Series GPA
KK V 1C KK Series GPA
JJ V 1C JJ Series GPA
2. Funds currently available to act as investment vehicles for the above-listed
contracts:
Russell Insurance Funds: Multi-Style Equity Fund
Aggressive Equity Fund
Non-U.S. Fund
Core Bond Fund
Russell Real Estate Securities Fund
21
<PAGE>
Exhibit B(8)(b)
February __, 1999
The Northwestern Mutual Life Insurance Company
720 East Wisconsin Avenue
Milwaukee, WI 53202
Re: Administrative Service Fee
Gentlemen:
The purpose of this letter is to confirm certain financial arrangements
between Frank Russell Investment Management Company ("FRIMCo"), the investment
adviser to Russell Insurance Funds, a registered investment company (the
"Trust"), and The Northwestern Mutual Life Insurance Company ("NML") in
connection with NML's investment in the Trust. FRIMCo or its affiliates will pay
an administrative services fee to NML equal, on an annualized basis, to 0.10% of
the aggregate net assets of the Trust attributable to NML (other than assets
attributable to NML employee and agent qualified plans). Such fee shall be
paid quarterly (on a calendar year basis) in arrears for as long as NML owns
shares in the Trust.
Sincerely,
FRANK RUSSELL INVESTMENT
MANAGEMENT COMPANY
By:
-----------------------------------
Lynn L. Andersen
Chief Executive Officer
Agreed to and accepted:
THE NORTHWESTERN MUTUAL LIFE
INSURANCE COMPANY
By:
---------------------------
Mark G. Doll
Senior Vice President
<PAGE>
Exhibit B(10)
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Statement of Additional Information
constituting part of this Post-Effective Amendment No. 57 to the registration
statement on Form N-4 (the "Registration Statement") of our report dated January
25, 1999, relating to the financial statements of The Northwestern Mutual Life
Insurance Company, and of our report dated January 25, 1999, relating to the
financial statements of NML Variable Annuity Account B, which appear in such
Statement of Additional Information, and to the incorporation by reference of
such reports into the Prospectus which constitutes part of this Registration
Statement. We also consent to the reference to us under the heading "Experts" in
such Statement of Additional Information.
PricewaterhouseCoopers LLP
Milwaukee, Wisconsin
February 25, 1999
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM NORTHWESTERN
MUTUAL LIFE VARIABLE ANNUITY ACCOUNT B DECEMBER 31, 1998 FINANCIAL STATEMENTS
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-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 4,457,355
<INVESTMENTS-AT-VALUE> 6,410,318
<RECEIVABLES> 4,571
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 6,414,889
<PAYABLE-FOR-SECURITIES> 2,021
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 11,217
<TOTAL-LIABILITIES> 13,238
<SENIOR-EQUITY> 6,401,651
<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> 6,401,651
<DIVIDEND-INCOME> 279,975
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 67,916
<NET-INVESTMENT-INCOME> 212,059
<REALIZED-GAINS-CURRENT> 88,924
<APPREC-INCREASE-CURRENT> 521,055
<NET-CHANGE-FROM-OPS> 822,038
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 67,916
<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>
