<PAGE> 1
Registration No. 333-33232
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OF 1933 / /
Pre-Effective Amendment No. 1 /X/
---
Post-Effective Amendment No. / /
---
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940 / /
Amendment No. 26 /X/
(Check appropriate box or boxes.)
NML VARIABLE ANNUITY ACCOUNT B
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(Exact Name of Registrant)
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
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(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
------------
ROBERT J. BERDAN, Vice President and General Counsel
720 East Wisconsin Avenue, Milwaukee, Wisconsin 53202
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(Name and Address of Agent for Service)
Approximate date of proposed public offering: June 30, 2000.
Title of Securities Being Registered: MASON STREET VARIABLE ANNUITY
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
----
on (DATE) pursuant to paragraph (a)(1) of Rule 485
----
this post-effective amendment designates a new effective date for a
---- previously filed post-effective amendment.
IF ANY OF THE SECURITIES BEING REGISTERED ON THIS FORM ARE TO BE
OFFERED ON A DELAYED OR CONTINUOUS BASIS PURSUANT TO RULE 415 UNDER THE
SECURITIES ACT OF 1933 CHECK THE FOLLOWING BOX |_|
The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE> 2
NML VARIABLE ANNUITY ACCOUNT B
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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
<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> 3
JUNE 30, 2000
MASON STREET VARIABLE ANNUITY
Nontax - Qualified Annuities
Individual Retirement Annuities
Roth IRAs
(PHOTO)
NORTHWESTERN MUTUAL The Northwestern Mutual Life
SERIES FUND, INC. AND Insurance Company
RUSSELL INSURANCE FUNDS 720 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
(414) 271-1444
P R O S P E C T U S E S
NORTHWESTERN MUTUAL(TM)
<PAGE> 4
NORTHWESTERN MUTUAL The Northwestern Mutual Life Insurance Company
PROFILE Mason Street Variable Annuity
June 30, 2000
PROFILE OF THE MASON STREET 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 issued by The Northwestern Mutual Life Insurance Company.
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 you invest on a fixed basis earn interest at a rate we declare from
time to time. We guarantee principal and we guarantee the interest rate for each
amount for at least one year.
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
sixteen 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 The minimum initial purchase payment is $50,000. Your Northwestern
Mutual financial representative 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
Russell Insurance Funds, Inc.
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. Each year we deduct a $30 Contract fee. Currently this
fee is waived if the value of your Contract is $25,000 or more.
PROFILE - i
<PAGE> 5
NORTHWESTERN MUTUAL The Northwestern Mutual Life Insurance Company
PROFILE Mason Street Variable Annuity
We also deduct mortality and expense risk charges for the guarantees associated
with your Contract. These charges are at the annual rate of 0.35%. We may
increase these charges to a maximum rate of 0.75%. We will not increase the
charges for at least five years from the date of the prospectus.
The portfolios also bear investment charges that range from an annual rate of
0.20% 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 Contract. The first three columns show the annual
expenses as a percentage of assets including the insurance charges, the
portfolio charges and the total charges. Portfolio expenses are based on 1999
expenses for the portfolios. Expenses for the portfolios reflect fee waivers and
expense reimbursements. 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 and the $30 Contract fee calculated by dividing the annual Contract fees
collected by the average assets of the sub-account. 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.
We do not make any changes for sales expenses. Your Northwestern Mutual agent
who offers the contract represents a broker-dealer or a registered investment
adviser. You will pay the broker-dealer a fee in lieu of sales commissions or
you will pay a fee for investment advisory services. In either case your
Northwestern Mutual agent will disclose the fees to you and receive a portion of
the fees you pay.
For more detailed information, see the Expense Table which begins on page 3 of
the attached prospectus for the Contracts.
<TABLE>
<CAPTION>
EXPENSES
----------------------------------------------------------------------------------------------------------------------------
ANNUAL EXPENSES AS A PERCENTAGE OF ASSETS
EXAMPLES: *
Total Annual Charges At End of
Total Annual Total Total Annual
Portfolio Insurance Charges* Annual Expenses*
Portfolio 1 Year 10 Years
Charges
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Northwestern Mutual Series Fund, Inc.
Small Cap Growth Stock 0.35% (0.30% + 0.05%) 1.00% 1.35% $14 $190
Aggressive Growth Stock 0.35% (0.30% + 0.05%) 0.51% 0.86% $9 $132
International Equity 0.35% (0.30% + 0.05%) 0.74% 1.09% $11 $159
Index 400 Stock 0.35% (0.30% + 0.05%) 0.35% 0.70% $7 $126
Growth Stock 0.35% (0.30% + 0.05%) 0.43% 0.78% $8 $123
Growth and Income Stock 0.35% (0.30% + 0.05%) 0.57% 0.92% $9 $139
Index 500 Stock 0.35% (0.30% + 0.05%) 0.20% 0.55% $6 $96
Balanced 0.35% (0.30% + 0.05%) 0.30% 0.65% $7 $108
High Yield Bond 0.35% (0.30% + 0.05%) 0.50% 0.85% $9 $131
Select Bond 0.35% (0.30% + 0.05%) 0.30% 0.65% $7 $108
Money Market 0.35% (0.30% + 0.05%) 0.30% 0.65% $7 $108
Russell Insurance Funds, Inc.
Multi-Style Equity 0.35% (0.30% + 0.05%) 0.92% 1.27% $13 $183
Aggressive Equity 0.35% (0.30% + 0.05%) 1.25% 1.60% $16 $223
Non-U.S. 0.35% (0.30% + 0.05%) 1.30% 1.65% $17 $239
Real Estate Securities 0.35% (0.30% + 0.05%) 1.15% 1.50% $15 $204
Core Bond 0.35% (0.30% + 0.05%) 0.80% 1.15% $12 $172
----------------------------------------------------------------------------------------------------------------------------
</TABLE>
*THE $30 CONTRACT FEE IS REFLECTED AS 0.00% OF THE ASSETS BASED ON ACTUAL FEES
COLLECTED DIVIDED BY AVERAGE ASSETS OF THE SUB-ACCOUNT. WE MAY INCREASE THE
INSURANCE CHARGES TO A MAXIMUM RATE OF 0.75%. WE WILL NOT INCREASE THE CHARGES
FOR AT LEAST FIVE YEARS FROM THE DATE OF THE PROSPECTUS.
NOTE: THE MINIMUM INITIAL PURCHASE PAYMENT FOR A CONTRACT IS $50,000. THE
NUMBERS ABOVE MUST BE MULTIPLIED BY 50 TO FIND THE EXPENSES FOR A CONTRACT OF
MINIMUM SIZE.
6. TAXES A Contract may be issued as an individual retirement annuity (IRA),
Roth IRA, or nontax-qualified annuity. The Contracts will be subject to certain
contribution limits and/or other requirements depending on their tax
classification. For Roth IRAs and nontax-qualified annuities, purchase payments
are not excluded from income, while for individual retirement annuities (IRAs)
they are excluded from income. In all cases, earnings on your
PROFILE - ii
<PAGE> 6
NORTHWESTERN MUTUAL The Northwestern Mutual Life Insurance Company
PROFILE Mason Street Variable Annuity
Contract are not taxed as they accrue. If the Contract is purchased as an
individual retirement annuity (IRA), 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. You may 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 NML Variable Annuity Account B, during the years shown. Performance is not
shown for the portfolios that have not been in operation for one calendar year.
These numbers reflect the asset-based charges for mortality and expense risks,
the annual Contract fees and investment expenses for each portfolio. The numbers
include the annual Contract fee in the amount of 0.00%. The Contracts described
in this prospectus have not been issued prior to the date of this prospectus,
but the performance numbers have been calculated based on the actual performance
of the investment portfolios and the expense charges for the Contracts. Past
performance does not guarantee future results.
<TABLE>
<CAPTION>
PERFORMANCE
----------------------------------------------------------------------------------------------------------------------------
CALENDAR YEAR
PORTFOLIO 1999 1998 1997 1996 1995 1994 1993 1992 1991 1990
----------------------------------------------------------------------------------------------------------------------------
Northwestern Mutual Series
--------------------------
Fund, Inc.
----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Aggressive Growth Stock 43.78% 7.09 13.37 17.19 38.70 4.95 18.60 5.49 55.07 NA
International Equity 22.90% 4.37 11.80 20.49 14.08 -.53 NA NA NA NA
Growth Stock 22.49% 26.15 29.30 20.38 30.26 NA NA NA NA NA
Growth and Income Stock 7.48% 22.61 29.47 19.45 30.56 NA NA NA NA NA
Index 500 Stock 20.91% 28.17 32.63 22.22 36.66 .76 9.29 6.80 29.00 NA
Balanced 11.20% 18.37 20.99 12.96 25.85 -.45 9.11 4.87 23.40 .61
High Yield Bond -0.46% -2.27 15.35 19.25 16.28 NA NA NA NA NA
Select Bond -1.02% 6.61 8.99 2.87 18.59 -3.25 9.86 6.53 16.37 7.86
Money Market 5.10% 4.97 5.02 4.83 5.37 3.61 2.41 2.90 5.24 7.57
</TABLE>
9. DEATH BENEFIT If you die before age 75, 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. We offer an
enhanced death benefit at extra cost. We increase the enhanced death benefit on
each Contract anniversary, up to age 80, if the Contract value has increased.
The death benefit will be adjusted, of course, for any purchase payments or
withdrawals you have made. The death benefit may be paid as a lump sum, or your
beneficiary may select a monthly annuity payment plan, or the Contract may be
continued in force with a contingent annuitant.
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
PROFILE - iii
<PAGE> 7
NORTHWESTERN MUTUAL The Northwestern Mutual Life Insurance Company
PROFILE Mason Street Variable Annuity
still in the accumulation phase. Our Systematic Withdrawal Plan allows you to
automatically redeem accumulation units to generate monthly payments. Of course
you may have to pay taxes on amounts you receive.
AUTOMATIC REQUIRED MINIMUM DISTRIBUTIONS. For IRAs, you can arrange for annual
required minimum distributions to be sent to you automatically once you turn age
70 1/2.
PORTFOLIO REBALANCING. To help you maintain your asset allocation plan over time
we offer a rebalancing service. This will automatically readjust your current
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, visit us on our Website.
Included are daily unit values, fund performance information and access to
current values for Contracts you own.
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; 1-888-455-2232.
PROFILE - iv
<PAGE> 8
P R O S P E C T U S
MASON STREET VARIABLE ANNUITY
This prospectus describes an individual variable annuity contract (the
"Contract") offered by The Northwestern Mutual Life Insurance Company
("Northwestern Mutual").
We offer the Contract for use in these situations:
- Traditional Individual Retirement Annuities (IRAs).
- Roth IRAs.
- 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. Northwestern Mutual Series Fund, Inc.: Small Cap Growth Stock,
Aggressive Growth Stock, International Equity, Index 400 Stock, Growth Stock,
Growth and Income Stock, Index 500 Stock, Balanced, High Yield Bond, Select
Bond, Money Market. Russell Insurance Funds: Multi-Style Equity, Aggressive
Equity, Non-U.S., Real Estate Securities, Core Bond.
The Account has 16 Divisions that correspond to the 11 Portfolios and 5 Funds in
which you may invest. The Contract also permits you to invest on a fixed basis,
at rates that we determine. This prospectus describes only
the Account and the variable provisions of the Contract except where there are
specific references to the fixed provisions.
This prospectus is a concise description of the information you should know
before you buy a Contract. We have filed additional information about the
Contract 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 following page 14 of this
prospectus.
This prospectus is valid only when accompanied by the current prospectuses for
Northwestern Mutual Series Fund, Inc. and Russell Insurance Funds which are
attached to this prospectus. You should retain this prospectus for future
reference.
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy of this prospectus. Any representation to
the contrary is a criminal offense.
The date of this prospectus and the Statement of Additional Information is June
30, 2000.
1
<PAGE> 9
CONTENTS FOR THIS PROSPECTUS
<TABLE>
<CAPTION>
PAGE PAGE
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<S> <C> <C> <C>
PROSPECTUS......................................1 Substitution and Change...................9
Mason Street Variable Annuity.................1 Fixed Annuity Payment Plans...............9
INDEX OF SPECIAL TERMS..........................3 Performance Data..........................9
EXPENSE TABLE...................................3 Financial Statements.....................10
THE COMPANY.....................................4 THE GUARANTEED INTEREST FUND...................10
NML VARIABLE ANNUITY FEDERAL INCOME TAXES...........................11
ACCOUNT B....................................5 Qualified and Nontax-Qualified Plans.......11
THE FUNDS.......................................5 Contribution Limitations and General
THE CONTRACT....................................5 Requirements Applicable to Contract.......11
Purchase Payments Under the Contract........5 Traditional IRA..........................11
Amount and Frequency......................5 Roth IRA.................................11
Application of Purchase Payments..........5 Nontax-qualified Contract................11
Net Investment Factor.......................6 Taxation of Contract Benefits..............11
Benefits Provided Under the Contract........6 IRAs,....................................11
Withdrawal Amount.........................6 Roth IRAs................................11
Death Benefit.............................6 Nonqualified Contracts...................12
Maturity Benefit..........................7 Premature Withdrawals....................12
Variable Payment Plans......................7 Minimum Distribution Requirements........12
Description of Payment Plans..............7 Taxation of Northwestern Mutual............13
Amount of Annuity Payments................8 Other Considerations.......................13
Assumed Investment Rate...................8 DEDUCTIONS.....................................13
Additional Information......................8 Mortality Rate and Expense Risk Charges........13
Transfers Between Divisions and Contract Fee.............................13
Payment Plans...........................8 Enhanced Death Benefit Charge............13
Owners of the Contract....................9 Premium Taxes............................14
Deferment of Benefit Payments...................9 Expenses for the Portfolios and Funds....14
Dividends.................................9 DISTRIBUTION OF THE CONTRACT...................14
Voting Rights.............................9
</TABLE>
THE TABLE OF CONTENTS FOR THE STATEMENT OF ADDITIONAL INFORMATION
APPEARS ON THE PAGE FOLLOWING PAGE 14 OF THIS PROSPECTUS.
2
<PAGE> 10
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....................................5 ANNUITANT..........................................7
ANNUITY (or ANNUITY PAYMENTS)........................6 MATURITY DATE......................................6
NET INVESTMENT FACTOR................................6 OWNER..............................................7
PAYMENT PLANS........................................7 WITHDRAWAL AMOUNT..................................6
</TABLE>
--------------------------------------------------------------------------------
EXPENSE TABLE
<TABLE>
<CAPTION>
TRANSACTION EXPENSES FOR CONTRACTOWNERS
---------------------------------------
<S> <C>
Maximum Sales Load (as a percentage
of purchase payments)..........................None ANNUAL CONTRACT FEE
-------------------
Withdrawal Charge..............................None $30; waived if the Contract Value equals or exceeds
$25,000
ANNUAL EXPENSES OF THE ACCOUNT
(AS A PERCENTAGE OF ASSETS)
Current Mortality and Expense Risk Fees*.......0.35%
Maximum Mortality and Expense Risk
Fees*.......................................0.75%
Other Expenses*................................None
Total Current Separate Account Annual
Expenses*...................................0.35%
Total Maximum Separate Account Annual
Expenses*...................................0.75%
</TABLE>
*WE GUARANTEE THE CURRENT MORTALITY AND EXPENSE RISK FEES FOR FIVE YEARS FROM
THE DATE OF THIS PROSPECTUS. THEREAFTER, WE RESERVE THE RIGHT TO INCREASE THE
MORTALITY AND EXPENSE RISK FEES TO A MAXIMUM ANNUAL RATE OF 0.75%.
ANNUAL EXPENSES OF THE PORTFOLIOS AND FUNDS
(AS A PERCENTAGE OF THE ASSETS)
<TABLE>
<CAPTION>
MANAGEMENT TOTAL ANNUAL EXPENSES
FEES (AFTER OTHER (AFTER EXPENSE
FEE WAIVER) EXPENSES REIMBURSEMENT)
----------- -------- --------------
<S> <C> <C> <C>
Northwestern Mutual Series Fund, Inc.
Small Cap Growth Stock* 0.79% 0.21% 1.00%
Aggressive Growth Stock 0.51% 0.00% 0.51%
International Equity 0.67% 0.07% 0.74%
Index 400 Stock* 0.25% 0.10% 0.35%
Growth Stock 0.43% 0.00% 0.43%
Growth and Income Stock 0.57% 0.00% 0.57%
Index 500 Stock 0.20% 0.00% 0.20%
Balanced 0.30% 0.00% 0.30%
High Yield Bond 0.49% 0.01% 0.50%
Select Bond 0.30% 0.00% 0.30%
Money Market 0.30% 0.00% 0.30%
Russell Insurance Funds, Inc.*
Multi-Style Equity 0.77% 0.15% 0.92%
Aggressive Equity 0.86% 0.39% 1.25%
Non-U.S. 0.75% 0.55% 1.30%
Real Estate Securities 0.85% 0.30% 1.15%
Core Bond 0.54% 0.26% 0.80%
</TABLE>
-------------------
* For the Russell Insurance Funds (the "Fund"), the Small Cap Growth Stock
Portfolio and the Index 400 Stock Portfolio (the "Portfolios"), the adviser has
voluntarily agreed to waive a portion of the management fee, up to the full
amount of the fee, equal to the amount by which the Fund's and Portfolios' total
operating expenses exceed the amounts shown above under "Total Annual Expenses
(After Expense Reimbursement)". The adviser has also agreed to reimburse the
Fund and Portfolios for all remaining expenses after fee waivers which exceed
the amounts shown above under that heading. Absent the fee waiver and expense
reimbursement, the management fees and total annual expenses would be 0.78% and
0.93% for the Multi-Style Equity Fund; 0.95% and 1.34% for the Aggressive Equity
Fund; 0.95% and 1.50% for the Non-U.S. Fund; 0.85% and 1.15% for the Real Estate
Securities Fund; 0.60% and 0.86% for the Core Bond Fund; 0.79% and 1.03% for the
Small Cap Growth Stock Portfolio; and 0.25% and 0.46% for the Index 400 Stock
Portfolio.
3
<PAGE> 11
EXAMPLE
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 $14 $43 $75 $190
Aggressive Growth Stock $9 $27 $48 $132
International Equity $11 $35 $60 $159
Index 400 Stock $7 $25 $44 $126
Growth Stock $8 $25 $43 $123
Growth and Income Stock $9 $29 $51 $139
Index 500 Stock $6 $18 $31 $96
Balanced $7 $21 $36 $108
High Yield Bond $9 $27 $47 $131
Select Bond $7 $21 $36 $108
Money Market $7 $21 $36 $108
Russell Insurance Funds, Inc.
Multi-Style Equity $13 $41 $71 $183
Aggressive Equity $16 $52 $91 $223
Non-U.S. $17 $56 $98 $239
Real Estate Securities $15 $47 $82 $204
Core Bond $12 $38 $66 $172
</TABLE>
NOTE: THE MINIMUM INITIAL PURCHASE PAYMENT FOR A CONTRACT IS $50,000. YOU MUST
MULTIPLY THE NUMBERS ABOVE BY 50 TO FIND THE EXPENSES FOR A CONTRACT OF MINIMUM
SIZE.
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. We guarantee the current mortality and expense risk
charges for five years from the date of this prospectus. Thereafter, we reserve
the right to increase the mortality and expense risk charges to a maximum annual
rate of 0.75%. The $30 annual Contract fee is reflected as 0.00% based on
estimated annual contract fees we will collect divided by the estimated
corresponding average assets of the Division. The Contract provides 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. 8 and "Deductions", p. 13, for additional information about
expenses for the Contract. 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 1999 operations for the Portfolios and their predecessors
and the Funds. Expenses for each of the Russell Insurance Funds, and for the
Small Cap Growth Stock Portfolio and the Index 400 Stock Portfolio, reflect fee
waivers and expense reimbursements that the advisers have voluntarily agreed to
make for the year 2000. These may be changed at any time thereafter without
notice. Absent the fee waivers and expense reimbursements the expenses would be
higher. See the disclosure at the bottom of page 3.
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 Contract.
--------------------------------------------------------------------------------
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 fifth largest life
insurance company, based on total assets in excess of $85 billion on December
31, 1999, 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 sells life and disability income insurance policies and annuity contracts
through its own field force of approximately 6,000 full time financial
representatives. The Home Office of Northwestern Mutual is located at 720 East
Wisconsin Avenue, Milwaukee, Wisconsin 53202.
"We" in this prospectus means Northwestern Mutual.
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<PAGE> 12
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 CONTRACT
PURCHASE PAYMENTS UNDER THE CONTRACT
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.
The minimum initial purchase payment is $50,000. The minimum amount for each
subsequent purchase payment is $25. 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. 11.)
APPLICATION OF PURCHASE PAYMENTS We credit your purchase payments, less any
premium taxes for which we make a deduction, 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 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 next 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
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<PAGE> 13
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. The net investment factor takes into account
the investment experience of the Portfolio or Fund, the deduction for mortality
and expense risks we have assumed and a deduction for any applicable taxes or
for any expenses resulting from a substitution of securities. (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. 10.
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.
13.)
The Portfolios and Funds will distribute investment income and realized capital
gains to the Account 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 CONTRACT
The benefits provided under the Contract 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.
The value, which may be either greater or less than the amount you paid is based
on the Accumulation Unit value next determined after we receive 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 a Contract value of less than $2000 remaining; we will treat a
request for such a partial withdrawal as a request to surrender the entire
Contract. Amounts distributed to you upon withdrawal of all or a portion of
Accumulation Units may be subject to federal income tax. (See "Federal Income
Taxes", p. 11.) 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. 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. Required
minimum distributions must be taken from your IRA, after you attain age 70 1/2
or, in certain cases, retire. (See "Minimum Distribution Requirements", p.
12).
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. 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. 7.)
DEATH BENEFIT
1. Amount of the Death Benefit. If the Annuitant dies before the maturity date,
the death benefit will not be less than the Contract value next determined after
we receive proof of death at our Home Office. If the Primary Annuitant dies
before his or her 75th birthday, the death benefit, where permitted by state
law, will not be less than the amount of purchase payments we received, less
withdrawals. There is no death benefit
6
<PAGE> 14
after annuity payments begin. See "Maturity Benefit" and "Variable Payment
Plans" below.
An enhanced death benefit is available at extra cost. Prior to the first
Contract anniversary the enhanced death benefit is equal to the total purchase
payments received less any amounts withdrawn. On any Contract anniversary prior
to the Primary Annuitants 80th birthday, the enhanced death benefit is the
Contract value on that date, but not less than what the enhanced death benefit
was on the last preceding valuation date. On any other valuation date before the
Primary Annuitant's 80th birthday, the enhanced death benefit will be the amount
determined on the most recent Contract anniversary, plus purchase payments we
receive thereafter, less withdrawals. On any valuation date on or after the
Primary Annuitant's 80th birthday the enhanced death benefit will be the
enhanced death benefit on the Contract anniversary immediately prior to the
Primary Annuitant's 80th birthday increased by purchase payments we received and
decreased by any amounts withdrawn after that Contract anniversary. We deduct
the extra cost for the enhanced death benefit from the Contract value on each
Contract anniversary while the enhanced death benefit is in effect. See
"Enhanced Death Benefit Charge", p. 13. The enhanced death benefit is available
for issue ages up to 65 and must be elected when the Contract is issued. The
enhanced death benefit will remain in effect until the maturity date or the
death of the Primary Annuitant or you ask us to remove it from your Contract.
You cannot add it to your Contract again after it has been removed.
2. Distribution of the Death Benefit.
Owner is the Annuitant. If the Owner is the Annuitant and the Owner dies before
the maturity date, the beneficiary becomes entitled to the death benefit. The
beneficiary may elect to receive the death benefit in a lump sum or under a
variable payment plan. The beneficiary automatically becomes the new Owner and
Annuitant and the Contract continues in force. The beneficiary must take
distributions from the Contract pursuant to the applicable minimum distribution
requirements discussed on page 12.
Owner is not the Annuitant. If the Owner is not the Annuitant and the Annuitant
dies before the maturity date, the Contingent Annuitant automatically becomes
the new Annuitant and the Contract continues in force. If no Contingent
Annuitant is named within 60 days after we receive proof of death of the
Annuitant, we pay the death benefit to the Owner.
Adjustment of Contract Value. On the date when the death benefit becomes
payable, if the Contract continues in force we will set the Contract value at an
amount equal to the death benefit.
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 and state law requirements,
including the minimum distribution requirements (See "Minimum Distribution
Requirements", p. 12). 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. The payment plan starts on the maturity date. See
"Maturity Benefit", above. 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. 11.
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 10 to 30 years during the first five Contract years and over a
specified period of 5 to 30 years beginning with the sixth Contract year.
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.
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 an initial
payment of at least $50. A payment plan will continue even if payments fall to
less than $50 after the payment plan begins.
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.
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<PAGE> 15
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.) We will calculate the amount of the first annuity
payment on a basis that takes into account the length of time over which we
expect annuity payments to continue. The first payment will be lower for an
Annuitant who is younger when payments begin, and higher for an Annuitant who is
older, if the payment plan involves life contingencies. The first payment will
be lower if the payment plan includes a longer certain period. 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 Contract 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. 10.
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 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 Contract provides
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
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<PAGE> 16
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 CONTRACT 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. The Primary Annuitant is the person upon whose life
the Contract is initially issued. The Contingent Annuitant is the person who
becomes the Annuitant upon the death of the Annuitant. In this prospectus, "you"
means the Owner or a prospective purchaser of the Contract.
DEFERMENT OF BENEFIT PAYMENTS We reserve the right to defer determination of the
withdrawal value of the 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 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 routine
closings on 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 Contract shares in our divisible surplus, to the extent we
determine annually, except while payments are being made under a variable
payment plan. Distributions of divisible surplus are commonly referred to as
"dividends". Any contributions to our divisible surplus would result from more
favorable expense experience than we have assumed in determining the deductions.
We do not expect the Contract to make a significant contribution to our
divisible surplus and we do not expect to pay dividends on the Contract.
VOTING RIGHTS As long as the Account continues to be registered as a unit
investment trust under the Investment Company Act of 1940, and Account assets
are invested in shares of the 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 Contract 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.
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
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<PAGE> 17
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
the minimum $50,000 initial purchase payment. The standardized performance data
will reflect all applicable charges.
Non-standardized performance 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 appear in the Statement of Additional
Information.
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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, we will declare a new interest rate. 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 Contract 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. 13. 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.
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<PAGE> 18
FEDERAL INCOME TAXES
QUALIFIED AND NONTAX-QUALIFIED PLANS
We offer the Contract 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).
2. Roth IRAs pursuant to the provisions of Section 408A of the Code.
We also offer the Contract for use in non tax-qualified situations (i.e.,
contributions are taxable).
CONTRIBUTION LIMITATIONS AND GENERAL REQUIREMENTS APPLICABLE TO CONTRACT
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 2000 phases out at an adjusted gross income ("AGI")
of between $32,000 - $42,000 (indexed through 2005) for single filers and
between $52,000 - $62,000 (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.
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
but is not subject to a 10% premature withdrawal penalty.
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 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,
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
to the extent the payments are less than certain required minimum amounts. (See
"Minimum Distribution Requirements", p. 12). With certain limited exceptions
benefits from individual retirement annuities Contracts are subject to the
tax-free roll-over provisions of the Code.
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
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<PAGE> 19
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" 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. One
or more nontax-qualified Contracts can be wholly or partially exchanged for one
or more other annuity contracts under Section 1035 of the Code without
recognition of gain or loss.
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, and nonqualified deferred annuities. 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.
MINIMUM DISTRIBUTION REQUIREMENTS All of the Contracts are required to satisfy
some form of minimum distribution requirement. A 50% excise tax applies for each
violation of these requirements. 1. IRAs As a general rule, the Owner of these
Contracts is required to take certain distributions during the Owner's life and
the beneficiary designated by the Owner is required to take the balance of the
Contract value within certain specified periods following the Owner's death.
The Owner must take the first required distribution by the "required beginning
date" and subsequent required distributions by December 31 of that year and each
year thereafter. Payments must be made over the life or life expectancy of the
Owner or the lives or life expectancies of the Owner and the Owner's
beneficiary. The required beginning date for IRAs is April 1 of the calendar
year following the calendar year the Owner attains age 70 1/2.
Upon the death of the Owner, the Owner's beneficiary must take distributions
under one of the following two rules.
If the Owner dies on or after the required beginning date, any remaining
interest in the Contract must be distributed at least as rapidly as it was under
the method of distribution in effect on the date of death. The method of
distribution is determined by the age of the Owner and the beneficiary and
whether their life expectancies are being recalculated each year.
If the Owner dies before the required beginning date, the Owner's entire
interest must be distributed by December 31 of the calendar year containing the
fifth anniversary of the Owner's death. If the Contract value is payable to a
beneficiary designated by the Contract, the Contract value may be paid over the
life or life expectancy of that beneficiary, provided distribution begins by
December 31 of the calendar year following the year of the Owner's death. If the
sole designated beneficiary is the Owner's spouse, the spouse may roll over the
Contract into an IRA owned by the spouse.
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<PAGE> 20
2. Roth IRAs The Owner of a Roth IRA is not required to take required minimum
distributions during the Owner's lifetime. However, the beneficiary designated
by the Owner is required to take distributions pursuant to the minimum
distribution requirements for Owners dying before the required beginning date,
discussed above.
3. Nonqualified Contracts The Owner of a nontax-qualified Contract is not
required to take required minimum distributions during the Owner's lifetime.
However, the designated beneficiary is required to take distributions pursuant
to rules similar to the at death minimum distribution requirements for IRAs.
TAXATION OF NORTHWESTERN MUTUAL
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. 6
and "Deductions", below.
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:
MORTALITY RATE AND EXPENSE RISK CHARGES
Amount of Mortality Rate and Expense Risks Charges. The net investment factor
(see "Net Investment Factor", p. 6) 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. The deduction from
Accumulation Units and Annuity Units is at a current annual rate of 0.35% 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 0.75%. We
will not increase the deduction for mortality and expense risks for at least
five years from the date of this prospectus.
Risks and Expenses. 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 deduction
for these risks 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 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. 9, 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 "Taxation of Northwestern Mutual", p. 13), 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.
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 $25,000 or more.
ENHANCED DEATH BENEFIT CHARGE On each Contract anniversary on which the enhanced
death benefit is in effect, we deduct from the Contract value a charge based on
the amount of the enhanced death benefit on the Contract Anniversary and the age
of the Annuitant when the Contract was issued. The charge is 0.10% of the amount
of the enhanced death benefit for issue age 45 or less, 0.20% for issue age
46-55, and 0.40% for issue age 56-65. This charge is for the risks we assume in
guaranteeing the enhanced death benefit. We deduct the charge from the Divisions
of the Account and the Guaranteed Interest Fund in proportion to the amounts you
have invested.
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<PAGE> 21
PREMIUM TAXES The Contract provides 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 Contract. As a matter of current practice, we do not
deduct premium taxes from purchase payments received under the Contract or from
Contract benefits. However, we reserve the right to deduct premium taxes in the
future.
EXPENSES FOR THE PORTFOLIOS AND FUNDS The expenses borne by the Portfolios and
Funds in which the assets of the Account are invested are described in the
prospectuses for Northwestern Mutual Series Fund, Inc. and the Russell Insurance
Funds. See the prospectuses attached to this prospectus.
--------------------------------------------------------------------------------
DISTRIBUTION OF THE CONTRACT
We sell the Contract through individuals who are licensed insurance agents
appointed by Northwestern Mutual and are registered representatives of a broker
dealer. Where state law requires, these agents will also be licensed securities
salespersons. Our wholly-owned subsidiary, Northwestern Mutual Investment
Services, LLC ("NMIS"), is registered with the Securities and Exchange
Commission and is a member of the National Association of Securities Dealers.
NMIS is the distributor of the Contracts. NMIS has entered into a selling
agreement with Robert W. Baird and Co. Incorporated ("Baird"), another
broker/dealer which we control, and our agents who offer the Contracts will be
registered representatives of Baird. Neither we nor Baird will pay commissions
on sales of the Contracts, but Baird will offer the Contracts to purchasers who
pay quarterly fees to Baird based on the value of the assets in their Baird
accounts, including the Contracts. Baird will pay a portion of the fees to its
registered representatives who sell the Contracts and provide other services to
the owners of the Accounts. The Contract is also offered by Northwestern Mutual
agents who are advisory representatives of registered investment advisers. The
investment advisers charge fees for investment advisory services and pay a
portion of those fees to the advising representatives. We may also offer the
Contracts through other distribution arrangements.
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<PAGE> 22
TABLE OF CONTENTS FOR STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
PAGE PAGE
---- ----
<S> <C> <C> <C>
DISTRIBUTION OF THE FINANCIAL STATEMENTS OF THE
CONTRACT......................................B-2 ACCOUNT (for the two years ended
DETERMINATION OF ANNUITY December 31, 1999)..............................B-5
PAYMENTS......................................B-2 REPORT OF INDEPENDENT
Amount of Annuity Payments..................B-2 ACCOUNTANTS (for the two years ended
Annuity Unit Value..........................B-2 December 31, 1999).........................B-17
Illustrations of Variable Annuity FINANCIAL STATEMENTS OF
Payments..................................B-3 NORTHWESTERN MUTUAL (for
VALUATION OF ASSETS OF THE the three years ended December 31, 1999).....B-18
ACCOUNT.......................................B-3 REPORT OF INDEPENDENT
TRANSFERABILITY RESTRICTIONS....................B-4 ACCOUNTANTS (for the three years
PERFORMANCE DATA................................B-4 ended December 31, 1999)....................B-29
EXPERTS.........................................B-4
</TABLE>
This Prospectus sets forth concisely the information about the Mason Street
Variable Annuity that a prospective investor ought to know before investing.
Additional information about the Mason Street Variable Annuity and NML Variable
Annuity 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
1-888-455-2232.
<TABLE>
<CAPTION>
<S><C>
-------------------------------------------------------------------------------
| 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 the Mason Street
| Variable Annuity to:
|
| Name
| -----------------------------------------------------------------------
|
| Address
| --------------------------------------------------------------------
|
| ---------------------------------------------------------------------------
|
| City State Zip
| -------------------------------------- ---------- ----------
</TABLE>
<PAGE> 23
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 1-888-455-2232. 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
MASON STREET VARIABLE ANNUITY
Nontax-Qualified Annuities
Individual Retirement Annuities
Roth IRAs
NML VARIABLE ANNUITY ACCOUNT B
NORTHWESTERN MUTUAL SERIES FUND, INC.
RUSSELL INSURANCE FUNDS
P R O S P E C T U S E S
Investment Company Act File Nos. 811-3990 and 811-5371
NORTHWESTERN MUTUAL(TM)
PO Box 3095
Milwaukee WI 53201-3095
Change Service Requested
<PAGE> 24
STATEMENT OF ADDITIONAL INFORMATION
VARIABLE ANNUITY CONTRACTS
(for Individual Retirement Annuities, Tax-Deferred Annuities
and Non-Qualified Plans)
NML VARIABLE ANNUITY ACCOUNT B
(the "Account"),
a separate investment account of
The Northwestern Mutual Life Insurance Company
("Northwestern Mutual")
--------------------------------------------------------------------------------
This Statement of Additional Information is not a prospectus but
supplements and should be read in conjunction with the prospectus for the
Contract. 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 June 30, 2000.
The Date of this Statement of Additional Information
is June 30, 2000.
B-1
<PAGE> 25
DISTRIBUTION OF THE CONTRACT
Northwestern Mutual Investment Services, LLC ("NMIS") is the distributor of
the Contract and may be considered the principal underwriter of the Contract.
NMIS is a wholly-owned subsidiary of Northwestern Mutual. NMIS has entered into
a selling agreement with Robert W. Baird & Co. Incorporated ("Baird"), a
broker-dealer controlled by Northwestern Mutual. NMIS may enter into selling
agreements with other affiliated and unaffiliated broker-dealers to distribute
the Contract. The offering will be continuous. No Contracts have been issued
prior to the date of statement of Additional Information.
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. 7, including "Description of Payment Plans", p. 7, "Amount of
Annuity Payments", p. 8, and "Assumed Investment Rate", p. 8; "Dividends", p. 9;
"Net Investment Factor", p. 6; and "Deductions", p. 13.
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.
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.
ANNUITY UNIT VALUE The value of an Annuity Unit for each Division is
established at $1.00 as of the date operations begin 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.
B-2
<PAGE> 26
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). The example is for a Contract with sex-distinct rates.
<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............................................ $5.35
(5) Amount of first payment from Balanced Division,
(3) X (4) divided by $1,000............................................... $267.50
(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)..................................... 178.33
</TABLE>
The $50,000 value at maturity provides a first payment from the Balanced
Division of $267.50, and payments thereafter of the varying dollar value of
178.33 Annuity Units. The amount of subsequent payments from the Balanced
Division is determined by multiplying 178.33 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
178.33 multiplied by $1.501000, or $267.68.
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 178.33 X
$1.499000, or $267.32.
For the sake of simplicity the foregoing example assumes that all of the
Annuity Units are in the Balanced Division. If there are Annuity Units in two or
more Divisions, the annuity payment from each Division is calculated separately,
in the manner illustrated, and the total monthly payment is the sum of the
payments from the Divisions.
VALUATION OF ASSETS OF THE ACCOUNT
The value of Portfolio 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
B-3
<PAGE> 27
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.
TRANSFERABILITY RESTRICTIONS
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) = ERV
Where:
P = a hypothetical initial payment of $1000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1000
payment made at the beginning of the 1, 5
or 10 year periods at the end of the 1, 5,
or 10 year periods (or fractional portion thereof)
Average annual total return is the annual compounded rate of return that would
have produced the ending surrender value under a Contract if the owner had
invested in a specified Division over the stated period and investment
performance had remained constant throughout the period. The calculation assumes
a single $1,000 purchase payment made at the beginning of the period and
surrender of the Contract at the end of the period. It reflects a deduction for
all Account, Fund and Contract level charges. The $30 annual Contract fee is
reflected as 0.00% of the assets based on actual fees collected divided by
average assets of the sub-account. The data will assume a minimum initial
purchase payment of $50,000 and the amounts will be divided by 50 to conform the
presentation to the $1,000 purchase payment assumption required by the
prescribed formula.
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, 1999 and for
each of the two years in the period ended December 31, 1999 and of Northwestern
Mutual as of December 31, 1999 and 1998 and for each of the three years in the
period ended December 31, 1999 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-4
<PAGE> 28
NML VARIABLE ANNUITY ACCOUNT B
Statement of Assets and Liabilities
December 31, 1999
(in thousands)
<TABLE>
<CAPTION>
<S> <C> <C>
ASSETS
Investments at Market Value:
Northwestern Mutual Series Fund, Inc.
Small Cap Growth Stock
27,193 shares (cost $37,604)....................... $ 48,783
Aggressive Growth Stock
215,334 shares (cost $555,089)..................... 1,034,844
International Equity
303,030 shares (cost $504,068)..................... 539,533
Index 400 Stock
21,966 shares (cost $22,628)....................... 24,446
Growth Stock
177,511 shares (cost $317,010)..................... 471,358
Growth and Income Stock
308,439 shares (cost $430,942)..................... 481,356
Index 500 Stock
399,680 shares (cost $819,803)..................... 1,553,169
Balanced
1,297,394 shares (cost $1,973,688)................. 2,882,069
High Yield Bond
139,784 shares (cost $147,597)..................... 114,877
Select Bond
204,593 shares (cost $242,359)..................... 231,339
Money Market
288,940 shares (cost $288,940)..................... 288,865
Russell Insurance Funds
Multi-Style Equity
2,914 shares (cost $47,148)........................ 48,928
Aggressive Equity
1,224 shares (cost $15,133)........................ 16,353
Non-U.S.
1,614 shares (cost $20,196)........................ 22,899
Real Estate Securities
757 shares (cost $6,897)........................... 6,666
Core Bond
1,418 shares (cost $14,136)........................ 13,668 $7,779,153
----------
Due from Sale of Fund Shares.............................. 22,988
Due from Northwestern Mutual Life Insurance Company....... 14,544
----------
Total Assets..................................... $7,816,685
==========
LIABILITIES
Due to Participants....................................... $ 10,731
Due to Northwestern Mutual Life Insurance Company......... 22,988
Due on Purchase of Fund Shares............................ 14,544
----------
Total Liabilities................................ 48,263
----------
EQUITY (NOTE 8)
Contracts Issued Prior to December 17, 1981............... 123,366
Contracts Issued After December 16, 1981 and Prior to
March 31, 1995.......................................... 4,739,831
Contracts Issued On or After March 31, 1995:
Front Load Version...................................... 956,368
Back Load Version....................................... 1,948,857
----------
Total Equity..................................... 7,768,422
----------
Total Liabilities and Equity..................... $7,816,685
==========
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements
B- 5 Account B Financial Statements
<PAGE> 29
NML VARIABLE ANNUITY ACCOUNT B
<TABLE>
<CAPTION>
Statement of Operations SMALL CAP
(in thousands) GROWTH STOCK AGGRESSIVE GROWTH
COMBINED DIVISION# STOCK DIVISION
---------------------------- ------------ ----------------------------
EIGHT MONTHS
YEAR ENDED YEAR ENDED ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1999 1998
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividend Income............................ $ 529,297 $279,975 $ 1,623 $ 27,399 $29,446
Annuity Rate and Expense Guarantees........ 79,966 67,916 114 9,338 9,236
---------- -------- ------- -------- -------
Net Investment Income (Loss)............... 449,331 212,059 1,509 18,061 20,210
---------- -------- ------- -------- -------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Realized Gain on Investments............... 206,068 88,924 152 59,354 27,122
Unrealized Appreciation (Depreciation) of
Investments During the Period............ 384,910 521,055 11,180 227,531 650
---------- -------- ------- -------- -------
Net Gain (Loss) on Investments............. 590,978 609,979 11,332 286,885 27,772
---------- -------- ------- -------- -------
Increase (Decrease) in Equity Derived from
Investment Activity...................... $1,040,309 $822,038 $12,841 $304,946 $47,982
========== ======== ======= ======== =======
</TABLE>
# The initial investment in this Division was made on April 30, 1999.
The Accompanying Notes are an Integral Part of the Financial Statements
Account B Financial Statements B- 6
<PAGE> 30
<TABLE>
<CAPTION>
INDEX 400
STOCK
INTERNATIONAL EQUITY DIVISION DIVISION# GROWTH STOCK DIVISION
----------------------------- ------------ ---------------------------
EIGHT MONTHS
YEAR ENDED YEAR ENDED ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1999 1998
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 69,655 $ 29,263 $ 321 $13,945 $ 4,848
5,699 6,000 76 4,263 2,665
-------- -------- ------ ------- -------
63,956 23,263 245 9,682 2,183
-------- -------- ------ ------- -------
78,270 17,380 14 2,979 1,471
(44,084) (24,915) 1,819 64,234 49,578
-------- -------- ------ ------- -------
34,186 (7,535) 1,833 67,213 51,049
-------- -------- ------ ------- -------
$ 98,142 $ 15,728 $2,078 $76,895 $53,232
======== ======== ====== ======= =======
<CAPTION>
GROWTH & INCOME INDEX 500
STOCK DIVISION STOCK DIVISION
--------------------------- ---------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
--- ---------------------------------------------------------
<S> <C> <C> <C> <C>
$ 51,672 $ 3,489 $ 31,626 $ 32,261
5,158 4,034 15,550 11,266
-------- ------- -------- --------
46,514 (545) 16,076 20,995
-------- ------- -------- --------
5,902 2,454 24,827 15,353
(24,965) 67,034 206,443 198,764
-------- ------- -------- --------
(19,063) 69,488 231,270 214,117
-------- ------- -------- --------
$ 27,451 $68,943 $247,346 $235,112
======== ======= ======== ========
</TABLE>
B- 7 Account B Financial Statements
<PAGE> 31
NML VARIABLE ANNUITY ACCOUNT B
<TABLE>
<CAPTION>
Statement of Operations
(in thousands)
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,
(CONTINUED) 1999 1998 1999 1998 1999 1998
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividend Income.................. $284,717 $143,628 $ 13,571 $ 13,983 $ 20,187 $14,579
Annuity Rate and Expense
Guarantees..................... 32,960 29,061 1,319 1,408 2,641 2,437
-------- -------- -------- -------- -------- -------
Net Investment Income (Loss)..... 251,757 114,567 12,252 12,575 17,546 12,142
-------- -------- -------- -------- -------- -------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Realized Gain (Loss) on
Investments.................... 38,856 24,370 (4,630) 87 294 687
Unrealized Appreciation
(Depreciation) of Investments
During the Period.............. (29,796) 248,726 (9,614) (18,317) (22,857) (465)
-------- -------- -------- -------- -------- -------
Net Gain (Loss) on Investments... 9,060 273,096 (14,244) (18,230) (22,563) 222
-------- -------- -------- -------- -------- -------
Increase (Decrease) in Equity
Derived from Investment
Activity....................... $260,817 $387,663 $ (1,992) $ (5,655) $ (5,017) $12,364
======== ======== ======== ======== ======== =======
</TABLE>
# The initial investments in this Division was made on April 30, 1999.
The Accompanying Notes are an Integral Part of the Financial Statements
Account B Financial Statements B- 8
<PAGE> 32
<TABLE>
<CAPTION>
RUSSELL RUSSELL RUSSELL RUSSELL RUSSELL
MULTI-STYLE EQUITY AGGRESSIVE EQUITY NON-U.S. REAL ESTATE CORE BOND
MONEY MARKET DIVISION DIVISION# DIVISION# DIVISION # SECURITIES DIVISION# DIVISION #
------------------------------- ------------------ ----------------- ------------- -------------------- ------------
EIGHT MONTHS EIGHT MONTHS EIGHT MONTHS EIGHT MONTHS EIGHT MONTHS
YEAR ENDED YEAR ENDED ENDED ENDED ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1999 1999 1999 1999
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$11,719 $8,478 $1,443 $ 64 $ 604 $ 249 $ 502
2,547 1,809 135 48 60 22 36
------- ------ ------ ------ ------ ----- -----
9,172 6,669 1,308 16 544 227 466
------- ------ ------ ------ ------ ----- -----
-- -- -- (17) 130 (62) (1)
-- -- 1,788 1,221 2,706 (231) (465)
------- ------ ------ ------ ------ ----- -----
-- -- 1,788 1,204 2,836 (293) (466)
------- ------ ------ ------ ------ ----- -----
$ 9,172 $6,669 $3,096 $1,220 $3,380 $ (66) $ --
======= ====== ====== ====== ====== ===== =====
</TABLE>
B- 9 Account B Financial Statements
<PAGE> 33
NML VARIABLE ANNUITY ACCOUNT B
<TABLE>
<CAPTION>
Statement of Changes in Equity SMALL CAP
(in thousands) GROWTH STOCK AGGRESSIVE GROWTH
COMBINED DIVISION# STOCK DIVISION
---------------------------- ------------ ----------------------------
EIGHT MONTHS
YEAR ENDED YEAR ENDED ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1999 1998
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
OPERATIONS
Net Investment Income...................... $ 449,331 $ 212,059 $ 1,509 $ 18,061 $ 20,210
Net Realized gain (loss)................... 206,068 88,924 152 59,354 27,122
Net Change in unrealized appreciation
(depreciation)........................... 384,910 521,055 11,180 227,531 650
---------- ---------- ------- ---------- ---------
Increase (Decrease) in Equity................ 1,040,309 822,038 12,841 304,946 47,982
---------- ---------- ------- ---------- ---------
EQUITY TRANSACTIONS
Contract Owners' Net Payments.............. 836,316 804,374 5,800 62,382 94,566
Annuity Payments........................... (14,043) (11,449) (3) (673) (737)
Surrenders and Other (net)................. (478,867) (370,626) (366) (58,870) (55,445)
Transfers from Other Divisions or
Sponsor.................................. 1,766,343 812,385 38,489 64,476 57,046
Transfers to Other Divisions or Sponsor.... (1,783,287) (825,382) (7,980) (155,561) (113,076)
---------- ---------- ------- ---------- ---------
Increase (Decrease) in Equity Derived from
Equity Transactions........................ 326,462 409,302 35,940 (88,246) (17,646)
---------- ---------- ------- ---------- ---------
Net Increase (Decrease) in Equity............ 1,366,771 1,231,340 48,781 216,700 30,336
EQUITY
Beginning of Period........................ 6,401,651 5,170,311 -- 817,218 786,882
---------- ---------- ------- ---------- ---------
End of Period.............................. $7,768,422 $6,401,651 $48,781 $1,033,918 $ 817,218
========== ========== ======= ========== =========
</TABLE>
# The initial investment in this Division was made on April 30, 1999.
The Accompanying Notes are an Integral Part of the Financial Statements
Account B Financial Statements B- 10
<PAGE> 34
<TABLE>
<CAPTION>
INDEX 400
STOCK
INTERNATIONAL EQUITY DIVISION DIVISION# GROWTH STOCK DIVISION
----------------------------- ------------ ---------------------------
EIGHT MONTHS
YEAR ENDED YEAR ENDED ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1999 1998
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 63,956 $ 23,263 $ 245 $ 9,682 $ 2,183
78,270 17,380 14 2,979 1,471
(44,084) (24,915) 1,819 64,234 49,578
--------- --------- ------- -------- --------
98,142 15,728 2,078 76,895 53,232
--------- --------- ------- -------- --------
39,987 60,272 7,316 65,324 54,754
(630) (559) (7) (572) (268)
(33,344) (33,875) (323) (23,057) (12,505)
396,413 56,567 19,597 111,147 56,084
(449,369) (102,582) (4,217) (59,550) (28,461)
--------- --------- ------- -------- --------
(46,943) (20,177) 22,366 93,292 69,604
--------- --------- ------- -------- --------
51,199 (4,449) 24,444 170,187 122,836
487,983 492,432 -- 300,246 177,410
--------- --------- ------- -------- --------
$ 539,182 $ 487,983 $24,444 $470,433 $300,246
========= ========= ======= ======== ========
<CAPTION>
GROWTH & INCOME INDEX 500
STOCK DIVISION STOCK DIVISION
--------------------------- ---------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
--- ---------------------------------------------------------
<S> <C> <C> <C> <C>
$ 46,514 $ (545) $ 16,076 $ 20,995
5,902 2,454 24,827 15,353
(24,965) 67,034 206,443 198,764
-------- -------- ---------- ----------
27,451 68,943 247,346 235,112
-------- -------- ---------- ----------
59,687 73,068 167,133 152,424
(868) (642) (2,567) (1,910)
(27,142) (19,173) (85,802) (53,430)
73,083 63,150 223,692 154,924
(74,859) (46,768) (169,952) (115,601)
-------- -------- ---------- ----------
29,901 69,635 132,504 136,407
-------- -------- ---------- ----------
57,352 138,578 379,850 371,519
423,325 284,747 1,170,970 799,451
-------- -------- ---------- ----------
$480,677 $423,325 $1,550,820 $1,170,970
======== ======== ========== ==========
</TABLE>
B- 11 Account B Financial Statements
<PAGE> 35
NML VARIABLE ANNUITY ACCOUNT B
<TABLE>
<CAPTION>
Statement of Changes in Equity
(in thousands)
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,
(CONTINUED) 1999 1998 1999 1998 1999 1998
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS
Net Investment Income............ $ 251,757 $ 114,567 $ 12,252 $ 12,575 $ 17,546 $ 12,142
Net Realized gain (loss)......... 38,856 24,370 (4,630) 87 294 687
Net Change in unrealized
appreciation (depreciation).... (29,796) 248,726 (9,614) (18,317) (22,857) (465)
---------- ---------- -------- -------- -------- --------
Increase (Decrease) in Equity
Derived from Investment
Activity......................... 260,817 387,663 (1,992) (5,655) (5,017) 12,364
---------- ---------- -------- -------- -------- --------
EQUITY TRANSACTIONS
Contract Owners' Net Payments.... 228,829 220,919 14,760 40,941 27,862 33,881
Annuity Payments................. (7,284) (6,278) (308) (301) (729) (570)
Surrenders and Other (net)....... (176,628) (153,449) (8,909) (8,012) (17,847) (13,382)
Transfers from Other Divisions or
Sponsor........................ 130,806 103,591 17,472 39,779 38,916 50,470
Transfers to Other Divisions or
Sponsor........................ (181,406) (133,506) (42,377) (31,044) (50,320) (36,471)
---------- ---------- -------- -------- -------- --------
Increase (Decrease) in Equity
Derived from Equity
Transactions..................... (5,683) 31,277 (19,362) 41,363 (2,118) 33,928
---------- ---------- -------- -------- -------- --------
Net Increase (Decrease) in
Equity........................... 255,134 418,940 (21,354) 35,708 (7,135) 46,292
EQUITY
Beginning of Period.............. 2,621,697 2,202,757 136,369 100,661 238,257 191,965
---------- ---------- -------- -------- -------- --------
End of Period.................... $2,876,831 $2,621,697 $115,015 $136,369 $231,122 $238,257
========== ========== ======== ======== ======== ========
</TABLE>
# The initial investment in this Division was made on April 30, 1999.
The Accompanying Notes are an Integral Part of the Financial Statements
Account B Financial Statements B- 12
<PAGE> 36
<TABLE>
<CAPTION>
RUSSELL RUSSELL RUSSELL RUSSELL RUSSELL
MULTI-STYLE EQUITY AGGRESSIVE EQUITY NON-U.S. REAL ESTATE SECURITIES CORE BOND
MONEY MARKET DIVISION DIVISION# DIVISION# DIVISION # DIVISION# DIVISION #
------------------------------- ------------------ ----------------- ------------ ---------------------- ------------
EIGHT MONTHS EIGHT MONTHS EIGHT MONTHS EIGHT MONTHS EIGHT MONTHS
YEAR ENDED YEAR ENDED ENDED ENDED ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1999 1999 1999 1999
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 9,172 $ 6,669 $ 1,308 $ 16 $ 544 $ 227 $ 466
-- -- -- (17) 130 (62) (1)
-- -- 1,788 1,221 2,706 (231) (465)
--------- --------- ------- ------- ------- ------ -------
9,172 6,669 3,096 1,220 3,380 (66) --
--------- --------- ------- ------- ------- ------ -------
122,518 73,549 16,904 4,683 5,356 2,060 5,715
(359) (184) (24) (3) (6) (2) (8)
(46,116) (21,355) (279) (12) 8 (96) (84)
568,077 230,774 33,711 11,989 21,654 6,530 10,291
(570,187) (217,873) (4,479) (1,531) (7,493) (1,760) (2,246)
--------- --------- ------- ------- ------- ------ -------
73,933 64,911 45,833 15,126 19,519 6,732 13,668
--------- --------- ------- ------- ------- ------ -------
83,105 71,580 48,929 16,346 22,899 6,666 13,668
205,586 134,006 -- -- -- -- --
--------- --------- ------- ------- ------- ------ -------
$ 288,691 $ 205,586 $48,929 $16,346 $22,899 $6,666 $13,668
========= ========= ======= ======= ======= ====== =======
</TABLE>
B- 13 Account B Financial Statements
<PAGE> 37
NML VARIABLE ANNUITY ACCOUNT B
Notes to Financial Statements
December 31, 1999
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 reported
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. and the
Russell Insurance Funds (collectively known as "the Funds"). The shares are
valued at the Funds' offering and redemption prices per share.
The Funds are open-end investment companies 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 Funds is recorded on the record date of the
dividends. Transactions in Funds shares are accounted for on the trade date. The
basis for determining cost on sale of the Fund shares is identified cost.
Purchases and sales of the Funds shares for the period ended December 31, 1999
by each Division are shown below:
<TABLE>
<CAPTION>
DIVISIONS PURCHASES SALES
--------- --------- -----
<S> <C> <C>
Small Cap Growth
Stock................. $ 38,296,546 $ 845,567
Aggressive Growth
Stock................. 34,771,762 104,562,461
International Equity.... 384,796,045 367,729,044
Index 400 Stock......... 23,338,058 724,505
Growth Stock............ 108,687,411 5,055,604
Growth & Income Stock... 95,275,712 18,290,526
Index 500 Stock......... 182,480,585 33,272,697
Balanced................ 353,238,684 105,669,410
High Yield Bond......... 17,862,405 24,902,416
Select Bond............. 38,088,064 22,743,183
Money Market............ 442,385,056 359,078,119
Russell Multi-Style
Equity Fund........... 47,166,840 18,127
Russell Aggressive
Equity Fund........... 15,399,751 250,029
Russell Non-U.S. Fund... 21,739,048 1,672,878
Russell Real Estate
Securities Fund....... 7,618,762 659,336
Russell Core Bond
Fund.................. 14,168,221 31,074
</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.
Notes to Financial Statements B- 14
<PAGE> 38
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- 15 Notes to Financial Statements
<PAGE> 39
NML VARIABLE ANNUITY ACCOUNT B
Notes to Financial Statements
December 31, 1999
(in thousands)
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>
Small Cap Growth Stock.................. $1.851783 215 $ 398 $1.845580 13,315 $ 24,574
Aggressive Growth Stock................. 5.679928 987 5,606 5.427804 118,954 645,659
International Equity.................... 2.375600 1,529 3,632 2.297694 143,591 329,928
Index 400 Stock......................... 1.122676 66 74 1.118909 7,870 8,806
Growth Stock............................ 3.099518 595 1,844 3.012947 66,688 200,927
Growth and Income Stock................. 2.600855 645 1,678 2.528256 83,677 211,557
Index 500 Stock......................... 5.146736 9,856 50,727 4.918509 165,311 813,084
Balanced................................ 8.176347 5,216 42,649 7.473141 281,204 2,101,477
High Yield Bond......................... 1.563339 128 200 1.519653 25,580 38,873
Select Bond............................. 7.656679 844 6,462 6.996057 17,091 119,570
Money Market............................ 2.767058 1,360 3,763 2.528768 52,169 131,923
Russell Multi-Style Equity.............. 1.070614 244 261 1.067018 14,784 15,775
Russell Aggressive Equity............... 1.103591 108 119 1.099895 6,268 6,894
Russell Non-U.S. ....................... 1.247160 34 42 1.242993 7,403 9,202
Russell Real Estate Securities.......... 0.922768 2 2 0.919674 2,244 2,064
Russell Core Bond....................... 0.986452 2 2 0.983142 3,415 3,357
-------- ----------
Equity................................ 117,459 4,663,670
Annuity Reserves...................... 5,907 76,161
-------- ----------
Total Equity.......................... $123,366 $4,739,831
======== ==========
</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>
Small Cap Growth Stock.................. $1.856086 5,929 $ 11,005 $1.845580 6,829 $ 12,603
Aggressive Growth Stock................. 2.661899 38,181 101,634 5.427804 50,370 273,398
International Equity.................... 1.964300 32,351 63,547 2.297694 59,168 135,950
Index 400 Stock......................... 1.125296 6,253 7,036 1.118909 7,577 8,478
Growth Stock............................ 2.898070 29,613 85,821 3.012947 58,031 174,844
Growth and Income Stock................. 2.431081 34,269 83,311 2.528256 69,826 176,538
Index 500 Stock......................... 3.127888 64,985 203,266 4.918509 93,537 460,064
Balanced................................ 2.117903 102,079 216,192 7.473141 60,554 452,529
High Yield Bond......................... 1.483036 17,636 26,155 1.519653 31,364 47,662
Select Bond............................. 1.331215 29,870 39,763 6.996057 8,674 60,684
Money Market............................ 1.259407 57,765 72,750 2.528768 30,819 77,934
Russell Multi-Style Equity.............. 1.073107 14,702 15,777 1.067018 15,269 16,292
Russell Aggressive Equity............... 1.106159 4,174 4,617 1.099895 4,194 4,613
Russell Non-U.S......................... 1.250059 5,811 7,264 1.242993 4,937 6,137
Russell Real Estate Securities.......... 0.924920 2,829 2,617 0.919674 2,073 1,906
Russell Core Bond....................... 0.988747 5,501 5,439 0.983142 4,595 4,518
-------- ----------
Equity................................ 946,194 1,914,150
Annuity Reserves...................... 10,174 34,707
-------- ----------
Total Equity.......................... $956,368 $1,948,857
======== ==========
</TABLE>
Notes to Financial Statements B- 16
<PAGE> 40
[PRICEWATERHOUSECOOPERS LETTERHEAD]
Report of Independent Accountants
To The Northwestern Mutual Life Insurance Company and
Contract Owners of NML Variable Annuity Account B
In our opinion, the accompanying combined statement of assets and liabilities
and the related combined and separate statements of operations and of changes in
equity present fairly, in all material respects, the financial position of NML
Variable Annuity Account B and the Small Cap Growth Stock Division, Aggressive
Growth Stock Division, International Equity Division, Index 400 Stock Division,
Growth Stock Division, Growth & Income Stock Division, Index 500 Stock Division,
Balanced Division, High Yield Bond Division, Select Bond Division, Money Market
Division, Russell Multi-Style Equity Division, Russell Aggressive Equity
Division, Russell Non-U.S. Division, Russell Real Estate Securities Division and
Russell Core Bond Division thereof at December 31, 1999, the results of each of
their operations for each of the two years on the period then ended and the
changes in each of their equity for the two years or the period then ended in
conformity with accounting principles generally accepted in the United States.
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 auditing standards generally
accepted in the United States 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, 1999 with Northwestern Mutual Series Fund, Inc. and the Russell
Insurance Funds, provide a reasonable basis for the opinion expressed above.
[PRICEWATERHOUSECOOPERS LLP]
Milwaukee, Wisconsin
January 27, 2000
B- 17 Accountants' Report
<PAGE> 41
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,
---------------------
1999 1998
-------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Bonds..................................................... $36,792 $34,888
Common and preferred stocks............................... 7,108 6,062
Mortgage loans............................................ 13,416 12,250
Real estate............................................... 1,666 1,481
Policy loans.............................................. 7,938 7,580
Other investments......................................... 3,443 2,353
Cash and temporary investments............................ 1,159 1,275
------- -------
TOTAL INVESTMENTS....................................... 71,522 65,889
Due and accrued investment income......................... 893 827
Other assets.............................................. 1,409 1,313
Separate account assets................................... 12,161 9,966
------- -------
TOTAL ASSETS............................................ $85,985 $77,995
======= =======
LIABILITIES AND SURPLUS
Reserves for policy benefits.............................. $56,246 $51,815
Policy benefit and premium deposits....................... 1,746 1,709
Policyowner dividends payable............................. 3,100 2,870
Interest maintenance reserve.............................. 491 606
Asset valuation reserve................................... 2,371 1,994
Income taxes payable...................................... 1,192 1,161
Other liabilities......................................... 3,609 3,133
Separate account liabilities.............................. 12,161 9,966
------- -------
TOTAL LIABILITIES....................................... 80,916 73,254
Surplus................................................... 5,069 4,741
------- -------
TOTAL LIABILITIES AND SURPLUS........................... $85,985 $77,995
======= =======
</TABLE>
The Accompanying Notes are an Integral Part of these Financial Statements
Consolidated Statement of Financial Position
B- 18
<PAGE> 42
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
Consolidated Statement of Operations
(in millions)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
-------------------------------
1999 1998 1997
---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUE
Premiums and deposits..................................... $ 8,344 $ 8,021 $ 7,294
Net investment income..................................... 4,766 4,536 4,171
Other income.............................................. 970 922 861
------- ------- -------
TOTAL REVENUE......................................... 14,080 13,479 12,326
------- ------- -------
BENEFITS AND EXPENSES
Benefit payments to policyowners and beneficiaries........ 4,023 3,602 3,329
Net additions to policy benefit reserves.................. 4,469 4,521 4,026
Net transfers to separate accounts........................ 516 564 566
------- ------- -------
TOTAL BENEFITS........................................ 9,008 8,687 7,921
Operating expenses........................................ 1,287 1,297 1,138
------- ------- -------
TOTAL BENEFITS AND EXPENSES........................... 10,295 9,984 9,059
------- ------- -------
GAIN FROM OPERATIONS BEFORE DIVIDENDS AND TAXES....... 3,785 3,495 3,267
Policyowner dividends....................................... 3,091 2,869 2,636
------- ------- -------
GAIN FROM OPERATIONS BEFORE TAXES..................... 694 626 631
Income tax expense.......................................... 203 301 356
------- ------- -------
NET GAIN FROM OPERATIONS.............................. 491 325 275
Net realized capital gains.................................. 846 484 414
------- ------- -------
NET INCOME............................................ $ 1,337 $ 809 $ 689
======= ======= =======
</TABLE>
The Accompanying Notes are an Integral Part of these Financial Statements
B- 19 Consolidated Statement of Operations
<PAGE> 43
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
Consolidated Statement of Changes in Surplus
(in millions)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31,
--------------------------------
1999 1998 1997
------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
BEGINNING OF YEAR........................................... $4,741 $4,101 $3,515
Net income................................................ 1,337 809 689
Increase (decrease) in net unrealized gains............... 213 (147) 576
Increase in investment reserves........................... (377) (20) (526)
Charge-off of goodwill (Note 7)........................... (842) -- --
Other, net................................................ (3) (2) (153)
------ ------ ------
NET INCREASE IN SURPLUS................................... 328 640 586
------ ------ ------
END OF YEAR BALANCE......................................... $5,069 $4,741 $4,101
====== ====== ======
</TABLE>
The Accompanying Notes are an Integral Part of these Financial Statements
Consolidated Statement of Changes in Surplus
B- 20
<PAGE> 44
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
Consolidated Statement of Cash Flows
(in millions)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
-----------------------------------
1999 1998 1997
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Insurance and annuity premiums............................ $ 9,260 $ 8,876 $ 8,093
Investment income received................................ 4,476 4,216 3,928
Disbursement of policy loans, net of repayments........... (358) (416) (360)
Benefits paid to policyowners and beneficiaries........... (4,012) (3,572) (3,316)
Net transfers to separate accounts........................ (516) (564) (565)
Policyowner dividends paid................................ (2,862) (2,639) (2,347)
Operating expenses and taxes.............................. (1,699) (1,749) (1,722)
Other, net................................................ (56) (83) 124
------- ------- -------
NET CASH PROVIDED BY OPERATING ACTIVITIES............ 4,233 4,069 3,835
------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
PROCEEDS FROM INVESTMENTS SOLD OR MATURED
Bonds.................................................. 20,788 28,720 38,284
Common and preferred stocks............................ 13,331 10,359 9,057
Mortgage loans......................................... 1,356 1,737 1,012
Real estate............................................ 216 159 302
Other investments...................................... 830 768 398
------- ------- -------
36,521 41,743 49,053
------- ------- -------
COST OF INVESTMENTS ACQUIRED
Bonds.................................................. 22,849 30,873 41,169
Common and preferred stocks............................ 13,794 9,642 9,848
Mortgage loans......................................... 2,500 3,135 2,309
Real estate............................................ 362 268 202
Other investments...................................... 1,864 567 359
------- ------- -------
41,369 44,485 53,887
------- ------- -------
Net increase (decrease) in securities lending and other... 499 (624) 440
------- ------- -------
NET CASH USED IN INVESTING ACTIVITIES................ (4,349) (3,366) (4,394)
------- ------- -------
NET (DECREASE) INCREASE IN CASH AND TEMPORARY
INVESTMENTS......................................... (116) 703 (559)
Cash and temporary investments, beginning of year........... 1,275 572 1,131
------- ------- -------
Cash and temporary investments, end of year................. $ 1,159 $ 1,275 $ 572
======= ======= =======
</TABLE>
The Accompanying Notes are an Integral Part of these Financial Statements
B- 21 Consolidated Statement of Cash Flows
<PAGE> 45
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
Notes to Consolidated Statutory Financial Statements
December 31, 1999, 1998 and 1997
NOTE 1 -- BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying consolidated statutory financial statements include the
accounts of The Northwestern Mutual Life Insurance Company ("Company") and its
wholly-owned 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 ("Codification") guidance,
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 Codification that would also be effective upon implementation.
Codification provides guidance for areas where statutory accounting has been
silent and changes current statutory accounting in some areas (e.g., deferred
income taxes are recorded). The Office of the Commissioner of Insurance of the
State of Wisconsin ("OCI") intends to adopt Codification effective January 1,
2001. The Company has not determined the potential effect of Codification, and
the eventual effect of adoption could differ if changes are made prior to the
effective date of January 1, 2001.
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:
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
TEMPORARY INVESTMENTS
Temporary investments consist of debt securities that have maturities of one
year or less at acquisition.
NET INVESTMENT INCOME AND CAPITAL GAINS
Net investment income includes interest and dividends received or due and
accrued on investments, 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.
Realized investment gains and losses are reported in income based upon specific
identification of securities sold. Unrealized investment gains and losses
include changes in the fair
Notes to Consolidated Statutory Financial Statements
B- 22
<PAGE> 46
value of common stocks and changes in valuation allowances made for bonds,
preferred stocks, mortgage loans and other investments considered by management
to be impaired.
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 each of December 31,
1999 and 1998 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.
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 OCI. (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 1998 and 1997 have been reclassified to
conform to the current year presentation.
Notes to Consolidated Statutory Financial Statements
B- 23
<PAGE> 47
NOTE 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.
Statement value, which principally represents amortized cost, and estimated fair
value of the Company's debt securities at December 31, 1999 and 1998 were as
follows:
<TABLE>
<CAPTION>
RECONCILIATION TO ESTIMATED FAIR VALUE
-----------------------------------------------
GROSS GROSS ESTIMATED
STATEMENT UNREALIZED UNREALIZED FAIR
DECEMBER 31, 1999 VALUE GAINS LOSSES VALUE
----------------- --------- ---------- ---------- ---------
(IN MILLIONS)
<S> <C> <C> <C> <C>
U.S. Government and
political
obligations........ $ 3,855 $ 72 $ (167) $ 3,760
Mortgage-backed
securities......... 7,736 65 (256) 7,545
Corporate and other
debt securities.... 25,201 249 (1,088) 24,362
------- ------ ------- -------
36,792 386 (1,511) 35,667
Preferred stocks..... 85 2 -- 87
------- ------ ------- -------
Total........... $36,877 $ 388 $(1,511) $35,754
======= ====== ======= =======
</TABLE>
<TABLE>
<CAPTION>
RECONCILIATION TO ESTIMATED FAIR VALUE
-----------------------------------------------
GROSS GROSS ESTIMATED
STATEMENT UNREALIZED UNREALIZED FAIR
DECEMBER 31, 1998 VALUE GAINS LOSSES VALUE
----------------- --------- ---------- ---------- ---------
(IN MILLIONS)
<S> <C> <C> <C> <C>
U.S. 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
======= ====== ======= =======
</TABLE>
The statement value and estimated fair value of debt securities by contractual
maturity at December 31, 1999 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>
STATEMENT ESTIMATED
VALUE FAIR VALUE
--------- ----------
(IN MILLIONS)
<S> <C> <C>
Due in one year or less.......... $ 931 $ 942
Due after one year through five
years.......................... 5,420 5,412
Due after five years through ten
years.......................... 11,168 10,796
Due after ten years.............. 11,622 11,059
------- -------
29,141 28,209
Mortgage-backed securities....... 7,736 7,545
------- -------
$36,877 $35,754
======= =======
</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.
The adjusted cost of common and preferred stock held by the Company at December
31, 1999 and 1998 was $4.9 billion and $4.3 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, 1999 and 1998 was $13.2
billion and $12.9 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, 1999 and 1998, real estate includes $39 million and $61 million,
respectively, acquired through foreclosure and $114 million and $120 million,
respectively, of home office real estate.
Notes to Consolidated Statutory Financial Statements
B- 24
<PAGE> 48
REALIZED AND UNREALIZED GAINS AND LOSSES
Realized investment gains and losses for the years ended December 31, 1999, 1998
and 1997 were as follows:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31, 1999
--------------------------------
NET
REALIZED
REALIZED REALIZED GAINS
GAINS LOSSES (LOSSES)
-------- -------- --------
(IN MILLIONS)
<S> <C> <C> <C>
Bonds..................... $ 219 $(404) $ (185)
Common and preferred
stocks.................. 1,270 (255) 1,015
Mortgage loans............ 22 (12) 10
Real estate............... 92 -- 92
Other invested assets..... 308 (189) 119
------ ----- ------
$1,911 $(860) 1,051
====== ===== ------
Less: Capital gains
taxes................... 244
Less: IMR (losses)
gains................... (39)
------
Net realized capital
gains................... $ 846
======
</TABLE>
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31, 1998
--------------------------------
NET
REALIZED
REALIZED REALIZED GAINS
GAINS LOSSES (LOSSES)
-------- -------- --------
(IN MILLIONS)
<S> <C> <C> <C>
Bonds..................... $ 514 $(231) $ 283
Common and preferred
stocks.................. 885 (240) 645
Mortgage loans............ 18 (11) 7
Real estate............... 41 -- 41
Other invested assets..... 330 (267) 63
------ ----- ------
$1,788 $(749) 1,039
====== ===== ------
Less: Capital gains
taxes................... 358
Less: IMR (losses)
gains................... 197
------
Net realized capital
gains................... $ 484
======
</TABLE>
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31, 1997
--------------------------------
NET
REALIZED
REALIZED REALIZED GAINS
GAINS LOSSES (LOSSES)
-------- -------- --------
(IN MILLIONS)
<S> <C> <C> <C>
Bonds..................... $ 518 $(269) $249
Common and preferred
stocks.................. 533 (150) 383
Mortgage loans............ 14 (14) --
Real estate............... 100 (2) 98
Other invested assets..... 338 (105) 233
------ ----- ----
$1,503 $(540) 963
====== ===== ----
Less: Capital gains
taxes................... 340
Less: IMR (losses)
gains................... 209
----
Net realized capital
gains................... $414
====
</TABLE>
Changes in unrealized net investment gains and losses for the years ended
December 31, 1999, 1998 and 1997 were as follows:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31,
----------------------
1999 1998 1997
---- ---- ----
(IN MILLIONS)
<S> <C> <C> <C>
Bonds......................... $(178) $ (97) $ 43
Common and preferred stocks... 415 29 528
Mortgage loans................ (10) (16) (7)
Real estate................... (2) -- --
Other......................... (12) (63) 12
----- ----- ----
$ 213 $(147) $576
===== ===== ====
</TABLE>
SECURITIES LENDING
The Company has entered into securities lending agreements whereby certain
securities are loaned to third parties, primarily major brokerage firms. The
Company's policy requires a minimum of 102% 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 $2.1 billion and $1.5 billion, respectively, are included in
the consolidated statements of financial position at December 31, 1999 and 1998,
and approximate the statement value of securities loaned at those dates.
INVESTMENT IN MGIC
The Company owns 11.3% (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, 1999 and 1998, the fair value of the Company's
investment in MGIC exceeded the statement value of $201 million and $180
million, respectively, by $518 million and $296 million, respectively.
In August 1998, the Company delivered 8.9 million shares of MGIC to a brokerage
firm to settle a 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.
Notes to Consolidated Statutory Financial Statements
B- 25
<PAGE> 49
The Company held the following positions for hedging purposes at December 31,
1999 and 1998:
<TABLE>
<CAPTION>
NOTIONAL AMOUNTS
---------------------------
DECEMBER 31, DECEMBER 31,
DERIVATIVE FINANCIAL INSTRUMENT 1999 1998 RISKS REDUCED
------------------------------- ------------ ------------ -------------
(IN MILLIONS)
<S> <C> <C> <C>
Foreign Currency
Forward Contracts...................... $967 $601 Currency exposure on foreign-denominated
investments
Common Stock Futures..................... 620 657 Stock market price fluctuation.
Bond Futures............................. 50 379 Bond market price fluctuation.
Options to acquire Interest Rate Swaps... 419 419 Interest rates payable on certain annuity
and insurance contracts.
Foreign Currency and
Interest Rate Swaps.................... 203 94 Interest rates on variable rate notes and
currency exposure on foreign-denominated
bonds.
Default Swaps............................ 52 -- Default exposure on certain bond
investments.
</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 1999 and 1998. The notional amount of equity
swaps outstanding at December 31, 1999 and 1998 was $136 million and $138
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 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 1999
and 1998, net realized and unrealized gains on investments were partially offset
by net realized losses of $55 million and $104 million, respectively, and net
unrealized gains (losses) of $17 million and $(58) million, respectively, on
derivative instruments. The effect of derivative instruments in 1997 was not
material to the Company's results of operations.
NOTE 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 four 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. Actual future experience could differ from these
estimates.
NOTE 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 are funded. As of
Notes to Consolidated Statutory Financial Statements
B- 26
<PAGE> 50
January 1, 1999, the most recent actuarial valuation date available, the
qualified defined benefit plans were fully funded. The Company recorded a
liability of $109 million and $98 million for nonqualified defined benefit plans
at December 31, 1999 and 1998, 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
$31 million, $29 million and $27 million of total expense related to its defined
benefit and defined contribution plans for the years ended December 31, 1999,
1998 and 1997, respectively. The defined benefit and defined contribution plans'
assets of $2.2 billion and $1.9 billion at December 31, 1999 and 1998,
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, 1999, 1998 and 1997 were a net expense
(benefit) of $5.0 million, $1.8 million and ($1.3) million, respectively.
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1999 1998
------------------ ------------------
<S> <C> <C>
Unfunded postretirement
benefit obligation
for retirees and
other fully eligible
employees (Accrued in
statement of
financial
position)............ $40 million $35 million
Estimated
postretirement
benefit obligation
for active non-vested
employees (Not
accrued until
employee vests)...... $68 million $56 million
Discount rate.......... 7% 7%
Health care cost trend 10% to an ultimate 10% to an ultimate
rate................. 5%, declining 1% 5%, declining 1%
for 5 years for 5 years
</TABLE>
If the health care cost trend rate assumptions were increased by 1%, the accrued
postretirement benefit obligation as of December 31, 1999 and 1998 would have
been increased by $6 million and $5 million, respectively.
At December 31, 1999 and 1998, the recorded postretirement benefit obligation
was reduced by $28 million and $23 million, respectively, for health care
benefit plan assets. These assets were primarily invested in the separate
accounts of the Company.
NOTE 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
coverage type.
The amounts shown in the accompanying consolidated financial statements are net
of reinsurance. Reserves for policy benefits at December 31, 1999 and 1998 were
reported net of ceded reserves of $584 million and $518 million, respectively.
The effect of reinsurance on premiums and benefits for the years ended December
31, 1999, 1998 and 1997 was as follows:
<TABLE>
<CAPTION>
1999 1998 1997
------ ------ ------
(IN MILLIONS)
<S> <C> <C> <C>
Direct premiums and
deposits................... $8,785 $8,426 $7,647
Premiums ceded............... (441) (405) (353)
------ ------ ------
Net premium and deposits..... $8,344 $8,021 $7,294
====== ====== ======
Benefits to policyowners and
beneficiaries.............. 9,205 $8,869 $8,057
Benefits ceded............... (197) (182) (136)
------ ------ ------
Net benefits to policyowners
and beneficiaries.......... $9,008 $8,687 $7,921
====== ====== ======
</TABLE>
In addition, the Company received $133 million, $121 million and $115 million
for the years ended December 31, 1999, 1998 and 1997, 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
Notes to Consolidated Statutory Financial Statements
B- 27
<PAGE> 51
of its reinsurers and monitors concentrations of credit risk arising from
similar geographic regions, activities or economic characteristics of the
reinsurers to minimize its exposure to significant losses from reinsurer
insolvencies.
NOTE 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 1995 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 taxable income can vary significantly from gain from operations
before taxes due to differences between book and tax valuation of assets and
liabilities (e.g., investments and policy benefit reserves). The Company pays a
tax that is assessed only on the surplus of mutual life insurance companies
("equity tax"), and also, the Company must capitalize and amortize, as opposed
to immediately deducting, an amount deemed to represent the cost of acquiring
new business ("DAC tax").
The Company's effective tax rate on gains from operations before taxes for the
years ended December 31, 1999, 1998 and 1997 was 29%, 48%, and 56% respectively.
In 1999, the effective rate was less than the federal corporate rate of 35% due
primarily to differences between book and tax investment income. In 1998 and
1997, the effective rate was greater than 35% due primarily to the equity tax
and DAC tax.
NOTE 7 -- RELATED PARTY TRANSACTIONS
The Company acquired Frank Russell Company ("Frank Russell") 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. This investment is accounted for using the
equity method and is included in common stocks in the consolidated statement of
financial position. In 1999, the Company charged-off directly from surplus
approximately $842 million, representing the total goodwill associated with the
acquisition. The Company has received permission from the OCI for this
charge-off. The Company has unconditionally guaranteed certain debt obligations
of Frank Russell, including $350 million of senior notes and up to $150 million
of other credit facilities.
During 1999, the Company transferred appreciated equity investments to a
wholly-owned subsidiary as a capital contribution to the subsidiary. A realized
capital gain of $287 million was recorded on this transaction based on the fair
value of the assets upon transfer.
NOTE 8 -- CONTINGENCIES
The Company has guaranteed certain obligations of its other affiliates. These
guarantees totaled approximately $101 million at December 31, 1999 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 $1.9 billion at December 31, 1999 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.
Notes to Consolidated Statutory Financial Statements
B- 28
<PAGE> 52
[PRICEWATERHOUSECOOPERS LLP - LETTERHEAD]
R EPORT 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, 1999 and 1998, 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, 1999. 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 auditing standards generally accepted
in the United States. 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 to the financial statements, the Company prepared these
consolidated financial statements using 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
accounting principles generally accepted in the United States. 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 as of December 31, 1999 and 1998, or the results of their operations
or their cash flows for each of the three years in the period ended December 31,
1999 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 as of December 31, 1999 and 1998 and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 1999, on the basis of accounting described in Note 1.
/s/ PriceWaterhousecoopers LLP
January 24, 2000
Accountants' Report B- 29
<PAGE> 53
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-2
Illustrations of Variable Annuity Payments....................................................B-3
VALUATION OF ASSETS OF THE ACCOUNT..................................................................B-3
TRANSFERABILITY RESTRICTIONS........................................................................B-4
PERFORMANCE DATA....................................................................................B-4
EXPERTS.............................................................................................B-4
FINANCIAL STATEMENTS OF THE ACCOUNT.................................................................B-5
(for the two years ended December 31, 1999)
REPORT OF INDEPENDENT ACCOUNTANTS..................................................................B-17
(for the two years ended December 31, 1999)
FINANCIAL STATEMENTS OF NORTHWESTERN MUTUAL........................................................B-18
(for the three years ended December 31, 1999)
REPORT OF INDEPENDENT ACCOUNTANTS..................................................................B-29
(for the three years ended December 31, 1999)
</TABLE>
B-30
<PAGE> 54
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, 1999)
Statement of Assets and Liabilities
Statement of Operations
Statement of Changes in Equity
Notes to Financial Statements
Report of Independent Accountants
The Northwestern Mutual Life Insurance Company
(for the three years ended December 31, 1999)
Consolidated Statement of Financial Position
Consolidated Statement 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(9) Opinion and Consent of Robert J. Berdan, Esq.
Exhibit B(10) Consent of PricewaterhouseCoopers LLP
The following exhibits were filed in electronic format with the
initial Registration Statement on Form N-4 for NML Variable Annuity
Account B, File No. 333-33232, CIK 0000072176, dated March 24, 2000,
and are incorporated herein by reference:
Exhibit B(3) Form of Distribution Agreement between Northwestern
Mutual Investment Services, LLC and Robert W. Baird &
Co. Incorporated
Exhibit B(4)(a) Flexible Payment Variable Annuity Contract,
RR.V.B.MSNST. (032000), including Amendment to
Qualify as an Annuity for non-tax qualified business
(sex neutral)
Exhibit B(4)(b) Variable Annuity Contract Payment Rate Tables,
RR.V.A.B.MSNST. (032000), included in Exhibit B(4)(a)
above (sex distinct)
Exhibit B(4)(c) Enhanced Death Benefit, VA.EDB.(032000), included in
Exhibit B(4)(a) above
Exhibit B(4)(d) Waiver of Withdrawal Charge, VA.WWC.(032000),
included in Exhibit B(4)(a) above
Exhibit B(5) Application form, included in Exhibit B(4)(a) above
C-1
<PAGE> 55
The following exhibits were filed in electronic format with
Post-Effective Amendment No. 57 on Form N-4 for NML Variable Annuity
Account B, File No. 2-29240, CIK 0000072176, dated February 25, 1999,
and are incorporated herein by reference:
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
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
The following exhibits were filed in electronic format with the
Registration Statement on Form N-4 for NML Variable Annuity Account A,
File No. 333-22455, CIK 0000790162, dated February 27, 1997, and are
incorporated herein by reference:
Exhibit 99(b) Resolution of the Board of Trustees of The
Northwestern Mutual Life Insurance Company creating
the Account and resolution of the Executive Committee
designating the formations of "NML Variable Annuity
Account A" and "NML Variable Annuity Account B"
Exhibit A(3)(A) Distribution Contract
The following exhibit was filed in electronic format with
Post-Effective Amendment No. 52 on Form N-4 for NML Variable Annuity
Account B, File No. 2-29240, CIK 0000072176, dated November 13, 1995,
and is incorporated herein by reference:
EX-99.B1 Restated Articles of Incorporation of The
Northwestern Mutual Life Insurance Company
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 May
1, 2000 without regard to their activities relating to variable annuity
contracts or their authority to act or their status as "officers" as that term
is used for certain purposes of the federal securities laws and rules
thereunder.
TRUSTEES
Name Business Address
---- ----------------
R. Quintus Anderson Aarque Capital Corporation
20 West Fairmount Avenue
P.O. Box 109
Lakewood, NY 14750-0109
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<PAGE> 56
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
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
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
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<PAGE> 57
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 Diageo plc
8 Henrietta Place
London W1M 9AG
United Kingdom
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
Peter M. Sommerhauser Godfrey & Kahn, S.C.
780 North Water Street
Milwaukee, WI 53202-3590
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
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<PAGE> 58
Edward J. Zore The Northwestern Mutual Life
Insurance Company
720 East Wisconsin Avenue
Milwaukee, WI 53202
EXECUTIVE OFFICERS
<TABLE>
<CAPTION>
Name Title
---- -----
<S> <C>
Deborah A. Beck Executive Vice President
William H. Beckley Executive Vice President
Robert J. Berdan Vice President and General Counsel
John M. Bremer Senior Executive Vice President and Secretary
Peter W. Bruce Senior Executive Vice President
Steven T. Catlett Vice President
Mark G. Doll Senior Vice President
Thomas E. Dyer Vice President
James D. Ericson Chairman and Chief Executive Officer, Trustee
Christina H. Fiasca Vice President
Richard L. Hall Senior Vice President
William C. Koenig, FSA Senior Vice President and Chief Actuary
Gary E. Long Vice President and Controller
Susan A. Lueger Vice President
Meridee J. Maynard Vice President
Donald L. Mellish Senior Vice President
Bruce L. Miller Executive Vice President
Gregory C. Oberland Vice President
Barbara F. Piehler Vice President
James F. Reiskytl Vice President
Lora A. Rosenbaum Vice President
Mason G. Ross Senior Vice President
John E. Schlifske Senior Vice President
Leonard F. Stecklein Senior Vice President - Annuities & Accumulation Products
Frederic H. Sweet Senior Vice President
J. Edward Tippets Vice President
Martha M. Valerio Vice President
David B. Wescoe Vice President
W. Ward White Vice President
Walt J. Wojcik Senior Vice President
Edward J. Zore President and Trustee
</TABLE>
OTHER OFFICERS
<TABLE>
<CAPTION>
Name Title
---- -----
<S> <C>
John M. Abbott Director - Benefits Resources
Carl G. Amick Director - Disability Products/Standards
Thomas R. Anderson Director - Trust Services
Maria J. Avila Associate Director - Investment Accounting
Michael J. Backus Associate Director - Information Systems
John E. Bailey Senior Actuary
Nicholas H. Bandow Assistant Director - Information Systems
</TABLE>
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<PAGE> 59
<TABLE>
<S> <C>
Margaret A. Barkley Director - Agency
Walter L. Barlow Assistant Director - Education
Rebekah B. Barsch Director NML Foundation
Sandra L. Barton Assistant Director - Marketing Review
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 - Controllers
D. Rodney Bluhm Assistant General Counsel
Jessica J. Borgmann Assistant Director - Agency
Willette Bowie Employee Relations Director
Martin R. Braasch Director - Disability Underwriting Standards
Patricia R. Braeger Associate Director - Information Systems
James A. Brewer Investment Research Officer
William J. Buholzer Director - Employee Benefits
Michael S. Bula Assistant General Counsel
Jerry C. Burg Director - Field Benefits
Pency P. Byhardt Assistant Director - New Business
Gregory B. Bynan Director - Corporate Services
Kim M. Cafaro Assistant Director - Annuity Marketing
John E. Cain Assistant Director - Life Benefits
Gwen C. Canady Assistant Director-Mutual Funds
Shanklin B. Cannon, M.D. Medical Director - Life Products/Research
Terese J. Capizzi Director - Long Term Care
Kurt P. Carbon Associate Director - Underwriting Standards
John P. Carrick Assistant Director - Information Systems
Michael G. Carter Director - Corporate Planning & Projects
William W. Carter Associate Actuary
John E. Caspari Assistant Director - Advertising & Corporate
Information
Walter J. Chossek Associate Controller
Thomas R. Christenson Director - Employee Product Services
Eric P. Christophersen Director - Annuity Marketing
Alan E. Close Associate Controller
Carolyn M. Colbert Assistant Director - New Business
Margaret Winter Combe Director - Agency Development
Robyn S. Cornelius Assistant Director - Field Financial Services
Virginia A. Corwin Assistant Director - New Business
Barbara E. Courtney Associate Director - Mutual Funds
Dennis J. Darland Assistant Director - Disability Income
Thomas H. Davis Associate Director - Information Systems
Nicholas De Fino Assistant Director - Real Estate Investments
Carol A. Detlaf Director - Annuity Administration
Colleen Devlin Assistant Director - Communications
Glen W. DeZeeuw Director - Agency Services
Jennifer L. Docea Assistant Actuary
Lisa C. Dodd Director - Policyowner Services
Richard P. Dodd Assistant Director - Agency Development
Daniel C. Dougherty Director - Personal Markets
Margaret T. Dougherty Associate Director - Information Systems
John R. Dowell Director - Workforce Diversity
William O. Drehfal Assistant Director - Media Services
Steven J. Dryer Assistant Director - Annuity Marketing
</TABLE>
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<PAGE> 60
<TABLE>
<S> <C>
John E. Dunn Assistant General Counsel & Assistant Secretary
Somayajulu Durvasula Director - Field Financial Services
James R. Eben Assistant General Counsel and Assistant
Secretary
Magda El Sayed Assistant Director - Information Systems
Michael S. Ertz Director - Agency
Thomas F. Fadden Assistant Director - Information Systems
Zenia J. Fieldbinder Assistant Director - Annuity Accumulation Products
Richard F. Fisher Senior Actuary
Marcia L. Fitzgerald Assistant Director - New Business
Dennis J. Fitzpatrick Director - Advanced Marketing
Jon T. Flaschner Director - Agency
Kate M. Fleming Assistant General Counsel and Assistant Secretary
Carol J. Flemma Director - Long Term Care
Laurie Flessas Assistant Director - Life Marketing
John E. Fobes II Assistant Director - Agency Development
Donald Forecki Investment Officer - Treasury Operations
Phillip B. Franczyk Vice President - Agency
Stephen H. Frankel Vice President - Actuarial
James Frasher Assistant General Counsel and Assistant Secretary
Anne A. Frigo Assistant Director - New Business
Richard R. Garthwait Vice President - Field Financial Services
David L. Georgenson Director - Agent Development
Timothy L. Gergens Financial Officer - Underwriting Standards
Paulette A. Getschman Assistant Director - Policyowner Services
James W. Gillespie Vice President - Information Systems
Walter M. Givler Director - New Business
Edwin P. Glass, Jr. Vice President - Trust Services
Robert P. Glazier Products Officer - Actuarial
Robert K. Gleeson, M.D. Vice President - Medical Director
Mark J. Gmach Director - Agency
Jason G. Goetze Assistant Director - Long Term Care
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 Associate Director - Information Systems
Ronald D. Hagen Vice President - Long Term Care
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
Susan J. Heinzelman Assistant Actuary
Jacquelyn F. Heise Associate Director - Information Systems
Robert L. Hellrood Director - New Business
Herbert F. Hellwig Assistant Director - Individual Annuity Marketing
Jane A. Herman Director - Term Upgrade
Gary M. Hewitt Vice President & Treasurer
John G. Hickmann Assistant Director - Field Financial Services
Donna R. Higgins Associate Director - Information Systems
</TABLE>
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<PAGE> 61
<TABLE>
<S> <C>
David L. Hilbert Investment Officer
Karla D. Hill Human Resource Officer
Susan G. Hill Assistant Director - New Business
John D. Hillmer Assistant Director - Information Systems
Hugh L. Hoffman Assistant Director - Information Systems
Richard S. Hoffmann Vice President - Audit
Terence J. Holahan Assistant Director - Long Term Care
Bruce Holmes Associate Actuary
Sharon A. Hyde Assistant Director - Disability Income
Elizabeth S. Idleman Assistant General Counsel and Assistant Secretary
Scott C. Iodice Assistant Director - Agency Development
Joseph P. Jansky Assistant Director - Corporate Planning & Development
Michael D. Jaquint Assistant Actuary
Dolores A. Juergens Associate Director - Agency Events
Mark A. Kaprelian Assistant General Counsel and Assistant Secretary
Marilyn J. Katz Assistant Director - Medical Consultants
John C. Kelly Associate Controller
Kevin C. Kennedy Assistant Director - Architecture
James B. Kern Director - Disability Income
Donald C. Kiefer Vice President - Actuarial
Jason T. Klawonn Assistant Actuary
Allen B. Kluz Director - Human Resources
Beatrice C. Kmiec Assistant Director - New Business
James A. Koelbl Assistant General Counsel and Assistant Secretary
John L. Kordsmeier Director - Policyowner Services
Robert J. Kowalsky Chief Architect - Information Systems
Carol L. Kracht Assistant General Counsel & Assistant Secretary
Martha Krawczak Life and Disability Products Officer - Policyowner
Services
Patricia A. Krueger Assistant Director - Annuity Products
Jeffrey J. Krygiel Associate Actuary
Todd L. Laszewski Associate Actuary
Patrick J. Lavin Assistant Director - New Business
James L. Lavold Associate Director of Meetings - Agency
Donna L. Lemanczyk Assistant Closing Director - Real Estate Investments
Elizabeth J. Lentini Assistant General Counsel & Assistant 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 Associate Director - Information Systems
Melissa C. Lloyd Assistant Director - Advanced Marketing
James Lodermeier Assistant Director - Tax Planning
Kurt W. Lofgren Assistant General Counsel
George R. Loxton Assistant General Counsel & Assistant Secretary
Mary M. Lucci Director - Compliance & Best Practices
Christine M. Lucia Human Resources Officer - Policyowner Services
Mark J. Lucius Corporate Information Officer
Merrill C. Lundberg Assistant General Counsel & Assistant Secretary
Jon K. Magalska Associate Actuary
Jean M. Maier Vice President - Policyowner Services
Joseph Maniscalco Associate Director - Information Systems
Raymond J. Manista Assistant General Counsel
</TABLE>
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<PAGE> 62
<TABLE>
<S> <C>
Steven C. Mannebach Director of Field Development - Field Financial
Services
Jeffrey S. Marks Director - Underwriting Standards
Steve Martinie Assistant General Counsel & Assistant Secretary
Ted A. Matchulat Actuarial Products Officer
Shawn P. Mauser Assistant Director Personal Markets
Margaret McCabe Director - Disability Income
Richard A. McComb Director - Human Resources
William L. McCown Vice President & Investment Counsel
Paul E. McElwee Assistant General Counsel & Assistant Secretary
Allen J. McDonell Assistant Director - Compliance
James L. McFarland Assistant General Counsel & Assistant Secretary
Daniel E. McGinley Director - Field Management Development
Mark J. McLennon Assistant Director
Arthur J. Mees, Jr. Assistant Actuary
Robert J. Meiers Ad Valorem Tax Manager
Larry S. Meihsner Assistant General Counsel & Assistant Secretary
Robert G. Meilander Vice President - Actuarial
Richard E. Meyers Assistant General Counsel
Patricia A. Michel Assistant Director - Policyowner Services
Lynn A. Milewski Assistant Director - Annuity Products
Jay W. Miller Vice President & Tax Counsel
Sara K. Miller Vice President - Life Marketing
Jill Mocarski Associate Medical Director
Tom M. Mohr Long Term Care Officer
Richard C. Moore Associate Actuary
Scott J. Morris Assistant General Counsel and Assistant Secretary
Sharon A. Morton Investment Officer - Treasury & Investment Operations
Adrian J. Mullin Assistant Director - Personal Markets
Timothy P. Murphy Assistant Marketing Director - Disability Income
Randolph J. Musil Assistant Director - Advanced Marketing
John E. Muth Assistant Director - Advanced Marketing
David K. Nelson Assistant General Counsel
Ronald C. Nelson Director - Annuity Products
Timothy Nelson Assistant Marketing Director - Compliance & Best
Practices
Leon W. Nesbitt Vice President-Agency
Jeffrey J. Niehaus Assistant Director - Annuity Products
Karen M. Niessing Director - Policyowner Services
Daniel J. O'Meara Director - Field Financial Services
Mary Joy O'Meara Director - Field Financial Services
Mary S. Ogorchock Assistant General Counsel and Assistant Secretary
Kathleen A. Oman Director - Policyowner Services
Timothy A. Otto Assistant General Counsel & Assistant Secretary
Thomas A. Pajewski Investment Research Officer - Treasury & Investment
Operations
Arthur V. Panighetti Director - Tax and Financial Planning
Christen L. Partleton Associate Director - Policyowner Services
Jeffrey L. Pawlowski Assistant Director - Agency Development
David W. Perez Assistant General Counsel
Judith L. Perkins Assistant General Counsel & Assistant Secretary
Wilson D. Perry Assistant General Counsel & Assistant Secretary
Peter T. Petersen Assistant Director - Long Term Care
</TABLE>
C-9
<PAGE> 63
<TABLE>
<S> <C>
Gary N. Peterson Actuary
John C. Peterson Director of Policyowner Services
Harvey W. Pogoriler Assistant General Counsel & Assistant Secretary
Randolph R. Powell, M.D. Medical Director
Brian D. Powers Director - Trust Services
Mark A. Prange Associate Director - Information Systems
Brian R. Pray Assistant Regional Director - New Business
Thomas O. Rabenn Assistant General Counsel and Assistant Secretary
Steven M. Radke Legislative Representative
David R. Remstad Senior Actuary
David R. Retherford Assistant Director - Disability Income
Stephen M. Rhode Assistant Director - Annuity Products
Richard R. Richter Vice President - Agency
Daniel A. Riedl Assistant General Counsel
Marcia Rimai Vice President - Litigation Counsel
Kathleen M. Rivera Vice President - Insurance Counsel
Bethany M. Rodenhuis Assistant General Counsel and Assistant Secretary
Faith B. Rodenkirk Assistant Director - Group Marketing
James S. Rolfsmeyer Assistant Director - Information Systems
Robert K. Roska Associate Director - Information Systems
Sue M. Roska Director - New Business
Harry L. Ruppenthal Assistant Director of Policyowner Services
Stephen G. Ruys Associate Director - Information Systems
Mary Ann Schachtner Director - Field Training & Development
Linda Ann Schaefer Associate Marketing Director - Policyowner Services
Timothy G. Schaefer Assistant Director - Information Systems
Thomas F. Scheer Assistant General Counsel & Assistant Secretary
Carlen A. Schenk Associate Director - Compliance & Best Practices
Jane A. Schiltz Vice President - Life Marketing
Kathleen H. Schluter Assistant General Counsel & Assistant Secretary
Calvin R. Schmidt Associate Director - Information Systems
Rodd Schneider Assistant General Counsel and Assistant Secretary
Sarah R. Schneider Assistant Director - Corporate Planning & Development
John O. Schnorr Assistant Director - Compliance & Best Practices
Margaret R. Schoewe Vice President - Information Systems
John F. Schroeder Associate Director of Field Office Real Estate
Donna L. Schwartz Assistant Director - New Business
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 - Agency 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
Mark W. Smith Assistant General Counsel & Assistant Secretary
Warren L. Smith, Jr. Investment Officer - Architecture
Steven W. Speer Director - Annuity Products Marketing
Robert J. Spellman, M.D. Vice President & Chief Medical Director
Steve P. Sperka Associate Actuary
Mark A. Stalsberg Assistant Director - Field Financial Services
Barbara J. Stansberry Projects Director - New Business
</TABLE>
C-10
<PAGE> 64
<TABLE>
<S> <C>
Bonnie L. Steindorf Director of Department Operations - Agency
Steven H. Steidinger Assistant Director - Life Marketing
Karen J. Stevens Assistant General Counsel & Assistant Secretary
Steven J. Stribling Senior Actuary
Stephen J. Strommen Associate Actuary
Theodore H. Strupp Associate Director - Communications
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 and Financial Planning
Paul B. Tews Director of Investment Planning - Treasury &
Investment Operations
Deanna L. Tillisch Assistant Director - Media Relations
Susan M. Tompkins Director - Field Training & Development
Thomas W. Towers Director - Public Relations
Gloria E. Tracy Assistant Director - Life Marketing
Linda K. Tredupp Assistant Director - Information Systems
Chris G. Trost Actuary
Mark J. Van Cleave Assistant Director of Marketing Research - Corporate
Planning & Development
Michael T. Van Grinsven Assistant Director - Agency
Mary Beth Van Groll Vice President - Information Systems
Gloria J. Venski Associate Director - Disability Income
Janine L. Wagner Assistant Director - Information Systems
Harlan M. Wahrman Director - Corporate Planning & Development
Scott E. Wallace Assistant Director - Policyowner Services
Hal W. Walter Vice President - Agency
P. Andrew Ware Vice President - Actuarial
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 -
Communications
Catherine A. Wilbert Assistant General Counsel & Assistant Secretary
David L. Wild Director - Corporate Services
Donald R. Wilkinson Vice President - Agency
Becki L. Williams Assistant Director - Life Marketing
Jeffrey B. Williams Corporate Risk Manager
John K. Wilson Director - Disability Income
Scott J. Witt Assistant Actuary
Penelope A. Woodcock Associate Director - Disability Income
Richard W. Woody Assistant Director - Agency Development
Robert J. Wright Industry Trends Officer
Stanford A. Wynn Assistant Director - Advanced Marketing
Catherine M. Young Assistant General Counsel & Assistant Secretary
Michael L. Youngman Vice President - Legislative Representative
James A. Youngquist Associate Actuary
Richard S. Zakrzewski Associate Research Officer - Information Systems
John Zao Assistant Director - Information Systems
Diana M. Zawada Associate Director - Controllers
Rick T. Zehner Director - Corporate Planning & Development
</TABLE>
C-11
<PAGE> 65
<TABLE>
<S> <C>
Patricia A. Zimmermann Investment Officer - Treasury & Investment Operations
Ray Zimmermann Director - Field Financial Services
Philip R. Zwieg Vice President of Technical Support - Information
Systems
Robert E. Zysk Director - Tax and Financial Planning
</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"), as of December 31, 1999 are set forth on pages C-13 and
C-14. In addition to the subsidiaries set forth on pages C-13 and C-14, the
following separate investment accounts (which include the Registrant) may be
deemed to be either controlled by, or under common control with, Northwestern
Mutual:
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. and Russell Insurance Funds (the
"Funds"), shown on page C-13 as subsidiaries of Northwestern Mutual, are
investment companies, registered under the Investment Company Act of 1940,
offering their shares to the separate accounts identified above; and the shares
of the Funds held in connection with certain of the accounts are voted by
Northwestern Mutual in accordance with voting instructions obtained from the
persons who own, or are receiving payments under, variable annuity contracts or
variable life insurance policies issued in connection with the accounts, or in
the same proportions as the shares which are so voted.
C-12
<PAGE> 66
NORTHWESTERN MUTUAL CORPORATE STRUCTURE*
(AS OF DECEMBER 31, 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%
Northwestern Foreign Holdings B.V. - 100%
Saskatoon Centre, Limited - 100% (inactive)
Northwestern Mutual Series Fund, Inc. (and its 11 portfolios) - 100%
Russell Insurance Funds (and its 5 funds) - 70.8%
Mason Street Funds, Inc. (and its 11 funds) - 77.03%
MGIC Investment Corporation - 11%. 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 80% of
the voting stock of Robert W. Baird & Co., Incorporated and various
subsidiaries.
Northwestern Mutual Investment Services, LLC - 100%
Northwestern Reinsurance Holdings N.V. - 100%
Northwestern Financial Group LLC - 100% (inactive)
NML - CBO, LLC - 49%
NML REAL ESTATE HOLDINGS, LLC - 100%
The Grand Avenue Corporation - 98.54% Mitchell, Inc. - 100%
Marina Pacific, Ltd. - 100% Cass Corporation - 100%
Solar Resources, Inc. - 100% Burgundy, Inc. - 100%
Rocket Sports, Inc. - 100% (inactive) Amber, Inc. - 100%
Summit Sports, Inc. - 100% (inactive) Olive, Inc. - 100%
Greenway Sports, Inc. - 100% (inactive) Bayridge, Inc. - 100%
RE Corporation - 100% Ryan, Inc. - 100%
INV Corp. - 100% Pembrook, Inc. - 100%
Buffalo Promotions, Inc. - 100% (inactive) PBClub, Inc. - 100%
NW Greenway #1 - 100% (inactive) Diversey, Inc. - 100%
NW Greenway #9 - 100% (inactive) Larkin, Inc. - 100% (inactive)
Logan, Inc. - 100% Russet, Inc. - 100% (inactive)
* 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> 67
NORTHWESTERN MUTUAL CORPORATE STRUCTURE, CONTINUED*
(AS OF DECEMBER 31, 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% KerryAnne International Sales, Inc. - 100%
Stadium and Arena Management, Inc. - 100% Regina International Sales, 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%
Lydell, Inc. - 100%
Klode, Inc. - 100%
Chateau, Inc. - 100% (inactive)
Lake Bluff, Inc. - 100% (inactive)
Nicolet, Inc. - 100% (inactive)
Tupelo, Inc. - 100% (inactive)
</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-14
<PAGE> 68
Item 27. Number of Contract Owners
As of May 31, 2000, 245,832 variable annuity contracts issued in
connection with NML Variable Annuity Account B were outstanding. 199,659 such
contracts were issued as contracts for plans qualifying for special treatment
under various provisions of the Internal Revenue Code. 46,173 such contracts
were not so issued.
Item 28. Indemnification
That portion of the By-laws of Northwestern Mutual relating to
indemnification of Trustees and officers is set forth in full in Article VII of
the By-laws of Northwestern Mutual, 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
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>
Ronald C. Alberts Vice President - Fixed Income Securities
Maria J. Avila Assistant Treasurer
Barbara Bay Assistant Director, Equity Compliance, NMIS
Office of Supervisory Jurisdiction
Deborah A. Beck Director and Vice President, Variable Life
Administration
William H. Beckley Executive Vice President, Sales
Peter W. Bruce Director
Thomas A. Carroll Vice President - Common Stocks
Walter J. Chossek Treasurer
Timothy S. Collins Vice President - Fixed Income Securities
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 Vice President, Variable Life Marketing
Lisa M. Heise Assistant Director, Equity Compliance, NMIS
Office of Supervisory Jurisdiction
Laila V. Hick 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 President and CEO
Varun Mehta Vice President - Fixed Income Securities
Allan J. McDonell Vice President and Chief Compliance Officer
</TABLE>
C-15
<PAGE> 69
<TABLE>
<S> <C>
Ignatius L. Smetek Vice President - Common Stocks
Leonard F. Stecklein Vice President, Trust Services
Steven P. Swanson Vice President
Carla A. Thoke Director, Equity Compliance, NMIS Office of
Supervisory Jurisdiction
J. Edward Tippetts Vice President, Sales Support
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 1999 life insurance agents of Northwestern Mutual who are
also registered representatives of NMIS received commissions, including general
agent overrides, in the aggregate amount of $21,569,657 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 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
C-16
<PAGE> 70
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the registered
securities, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
(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.
C-17
<PAGE> 71
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 15th day of June, 2000.
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, Chairman
Senior Executive Vice President and Chief Executive Officer
and Secretary
By NORTHWESTERN MUTUAL
INVESTMENT SERVICES, LLC
(Depositor)
Attest: MERRILL C. LUNDBERG By: MERIDEE J. MAYNARD
------------------------------- ---------------------------
Merrill C. Lundberg, Secretary Meridee J. Maynard, President
and CEO
As required by the Securities Act of 1933, this Amended Registration
Statement has been signed by the depositors on the 15th day of June, 2000.
THE NORTHWESTERN MUTUAL LIFE
INSURANCE COMPANY
(Depositor)
Attest: JOHN M. BREMER By: JAMES D. ERICSON
------------------------------- ---------------------------
John M. Bremer James D. Ericson, Chairman and
Senior Executive Vice President Chief Executive Officer
and Secretary
NORTHWESTERN MUTUAL INVESTMENT
SERVICES, LLC
(Depositor)
Attest: MERRILL C. LUNDBERG By: MERIDEE J. MAYNARD
------------------------------- ---------------------------
Merrill C. Lundberg, Secretary Meridee J. Maynard, President
and CEO
As required by the Securities Act of 1933, this Amended Registration
Statement has been signed by the following persons in the capacities with the
depositor and on the dates indicated:
Signature Title
--------- -----
Trustee, Chairman and
JAMES D. ERICSON Principal Executive and Dated June 15,
---------------------
James D. Ericson Financial Officer 2000
EDWARD J. ZORE Trustee and President
---------------------
Edward J. Zore
C-18
<PAGE> 72
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
R. QUINTUS ANDERSON* Trustee
-----------------------------
R. Quintus Anderson
STEPHEN F. KELLER* Trustee Dated
-----------------------------
Stephen F. Keller June 15, 2000
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.
C-19
<PAGE> 73
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
-----------------------------
H. Mason Sizemore, Jr. June 15, 2000
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
PETER M. SOMMERHAUSER* Trustee
-----------------------------
Peter M. Sommerhauser
*By: JAMES D. ERICSON
-------------------------------------------
James D. Ericson, Attorney in Fact pursuant
to the Power of Attorney previously filed on
January 27, 2000
C-20
<PAGE> 74
EXHIBIT INDEX
EXHIBITS FILED WITH FORM N-4
PRE-EFFECTIVE AMENDMENT NO. 1 TO
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
FOR
MASON STREET VARIABLE ANNUITY
Exhibit Number Exhibit Name
-------------- ------------
Exhibit B(9) Opinion and Consent of Robert J. Berdan, Esq.
Exhibit B(10) Consent of PricewaterhouseCoopers LLP
