<PAGE> 1
Registration No. 2-89972
_______________________________________________________________________________
_______________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________
POST-EFFECTIVE AMENDMENT NO. 18
To
FORM S-6
REGISTRATION STATEMENT
Under
The Securities Act of 1933
________________
NORTHWESTERN MUTUAL VARIABLE LIFE ACCOUNT
(Exact Name of Trust)
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
(Name of Depositor)
720 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
(Complete address of depositor's principal executive offices)
JOHN M. BREMER, Senior Vice President, General Counsel and Secretary
The Northwestern Mutual Life Insurance Company
720 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
(Name and complete address of agent for service)
It is proposed that this filing will become effective
immediately upon filing pursuant to paragraph (b)
-----
X on April 30, 1996 pursuant to paragraph (b)
-----
60 days after filing pursuant to paragraph (a)(1)
-----
on (DATE) pursuant to paragraph (a)(1)
of Rule 485
-----
this post-effective amendment designates a new
effective date for a previously filed post-effective amendment
-----
_________________
THE ISSUER HAS REGISTERED AN INDEFINITE AMOUNT OF SECURITIES UNDER THE
SECURITIES ACT OF 1933 PURSUANT TO RULE 24f-2 UNDER THE INVESTMENT COMPANY ACT
OF 1940. THE RULE 24f-2 NOTICE FOR THE ISSUER'S MOST RECENT FISCAL YEAR WAS
FILED ON FEBRUARY 26, 1996.
<PAGE> 2
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
NORTHWESTERN MUTUAL VARIABLE LIFE ACCOUNT
CROSS-REFERENCE SHEET
Cross reference sheet showing location in Prospectus of information
required by Form N-8B-2.
<TABLE>
<CAPTION>
Item Number Heading in Prospectus
------------ -----------------------
<S> <C>
1 . . . . . . . . . . . . Cover Page
2 . . . . . . . . . . . . Cover Page; Northwestern Mutual Life
3 . . . . . . . . . . . . Not Applicable
4 . . . . . . . . . . . . Distribution of the Policies
5 . . . . . . . . . . . . The Account
6 . . . . . . . . . . . . The Account
9 . . . . . . . . . . . . Legal Proceedings
10(a). . . . . . . . . . . Other Policy Provisions:
Owner and Collateral Assignment
10(b). . . . . . . . . . . Annual Dividends
10(c) and (d). . . . . . . Death Benefit, Cash Value, Policy
Loans, Right to Return Policy, Right
to Exchange for a Fixed Benefit
Policy, Payment Plans
10(e). . . . . . . . . . . Grace Period, Extended Term and
Paid-Up Insurance, Reinstatement
10(f). . . . . . . . . . . Voting Rights
10(g). . . . . . . . . . . Voting Rights, Substitution of Fund
Shares and Other Charges
10(h). . . . . . . . . . . Voting Rights, Substitution of Fund
Shares and Other Charges
10(i). . . . . . . . . . . Premiums, Death Benefit, Annual
Dividends, Other Policy Provisions:
Payment Plans
11 . . . . . . . . . . . . The Account, The Fund, Index 500
Stock Portfolio, Select Bond
Portfolio, Money Market Portfolio,
Balanced Portfolio, Growth and
Income Stock Portfolio, Growth
Stock Portfolio, Aggressive Growth
Stock Portfolio, High Yield Bond
Portfolio and International Equity
Portfolio
12 . . . . . . . . . . . . The Fund
13 . . . . . . . . . . . . The Fund, Deductions and Charges,
Deductions from Premiums for Whole
Life and Extra Ordinary Life
Policies, Deductions for Single
Premium Life Policies, Charges
Against the Account Assets
14 . . . . . . . . . . . . Requirements for Insurance
15 . . . . . . . . . . . . Premiums, Allocations to the Account
16 . . . . . . . . . . . . The Account, The Fund, Allocations
to the Account, Transfers Between
Divisions
</TABLE>
-i-
<PAGE> 3
<TABLE>
<S> <C>
17 . . . . . . . . . . . . Same Captions as Items 10(a), (c),
and (d)
18 . . . . . . . . . . . . The Account, Annual Dividends
19 . . . . . . . . . . . . Reports
20 . . . . . . . . . . . . Not Applicable
21 . . . . . . . . . . . . Policy Loans
22 . . . . . . . . . . . . Not Applicable
23 . . . . . . . . . . . . Not Applicable
24 . . . . . . . . . . . . Not Applicable
25 . . . . . . . . . . . . Not Applicable
26 . . . . . . . . . . . . Not Applicable
27 . . . . . . . . . . . . Northwestern Mutual Life
28 . . . . . . . . . . . . Management
29 . . . . . . . . . . . . Not Applicable
30 . . . . . . . . . . . . Not Applicable
31 . . . . . . . . . . . . Not Applicable
32 . . . . . . . . . . . . Not Applicable
33 . . . . . . . . . . . . Not Applicable
34 . . . . . . . . . . . . Not Applicable
35 . . . . . . . . . . . . Northwestern Mutual Life
37 . . . . . . . . . . . . Not Applicable
38 . . . . . . . . . . . . Distribution of the Policies
39 . . . . . . . . . . . . Distribution of the Policies
40 . . . . . . . . . . . . The Fund
41 . . . . . . . . . . . . The Fund, Distribution of the
Policies
42 . . . . . . . . . . . . Not Applicable
43 . . . . . . . . . . . . Not Applicable
44 . . . . . . . . . . . . The Fund, Requirements for
Insurance, Premiums
45 . . . . . . . . . . . . Not Applicable
46 . . . . . . . . . . . . Same Captions as Items 10(c) and (d)
47 . . . . . . . . . . . . Not Applicable
48 . . . . . . . . . . . . Not Applicable
49 . . . . . . . . . . . . Not Applicable
50 . . . . . . . . . . . . The Account
51 . . . . . . . . . . . . Numerous Captions
52 . . . . . . . . . . . . Substitution of Fund Shares and
Other Changes
53 . . . . . . . . . . . . Charges Against the Account Assets
54 . . . . . . . . . . . . Not Applicable
55 . . . . . . . . . . . . Not Applicable
</TABLE>
-ii-
<PAGE> 4
April 30, 1996
P R O S P E C T U S
This prospectus describes three variable life insurance NORTHWESTERN
policies (the "Policies") issued by The Northwestern Mutual Life
Insurance Company: Whole Life, Extra Ordinary Life and Single MUTUAL
Premium Life. Each Policy is designed to provide lifetime insurance
coverage on the insured named in the Policy. A Policy may also be VARIABLE
surrendered for its cash value during the lifetime of the insured.
The death benefit and cash value of a Policy will vary to reflect LIFE
the investment experience of Northwestern Mutual Variable Life
Account (the "Account").
The owner of a Policy may allocate the net premiums to one
or more of the nine divisions of the Account. The assets of
each division will be invested in a corresponding Portfolio of
Northwestern Mutual Variable Life Series Fund, Inc. (the
"Fund"). The prospectus for the Fund, attached to this
prospectus, describes the investment objectives of the nine
Portfolios: the Index 500 Stock Portfolio, the Select Bond
Portfolio, the Money Market Portfolio, the Balanced Portfolio,
the Growth and Income Stock Portfolio, the Growth Stock Portfolio,
Aggressive Growth Stock Portfolio, High Yield Bond Portfolio
and International Equity Portfolio.
Northwestern Mutual Life guarantees that the death benefit
for a Whole Life Policy will never be less than the face amount WHOLE LIFE
of the Policy, regardless of the Account's investment experience,
so long as premiums are paid when due and no Policy debt is EXTRA
outstanding. For an Extra Ordinary Life Policy, the death benefit
will never be less than the Minimum Death Benefit stated in the ORDINARY
Policy, so long as premiums are paid when due and no Policy debt
is outstanding. The Extra Ordinary Life Policy is designed for LIFE
purchasers who intend to use all Policy dividends to purchase
paid-up additions. For a Single Premium Life Policy, the death SINGLE
benefit will never be less than the face amount of the Policy, if
no Policy debt is outstanding. There is no guaranteed minimum cash PREMIUM LIFE
value for any of the three Policies.
In the early years of a Policy it is likely that the cash
value will be less than the premium amounts accumulated at
interest. This is because of the sales and issuance costs for
a new Policy. For a Whole Life Policy or an Extra Ordinary
Life Policy deductions for sales costs are made from premiums.
These deductions are higher during the early Policy years. For
a Single Premium Life Policy deductions for sales costs are made
from the cash values of Policies surrendered during the Translate
early Policy years. Therefore a Policy should be purchased only if
the purchaser intends to keep it in force for a reasonably long
period.
A policy may be returned for a full refund for a limited
period of time. See "Right to Return Policy", p. 16.
THE POLICIES DESCRIBED IN THIS PROSPECTUS ARE NO LONGER BEING ISSUED IN STATES
WHERE NORTHWESTERN MUTUAL LIFE'S VARIABLE COMPLIFE(R) POLICY IS AVAILABLE. THE
VARIABLE COMPLIFE(R) POLICY IS DESCRIBED IN A SEPARATE PROSPECTUS.
IT MAY NOT BE ADVANTAGEOUS TO REPLACE EXISTING INSURANCE WITH A VARIABLE LIFE
INSURANCE POLICY. SEE DEDUCTIONS AND CHARGES AND CASH VALUE.
THIS PROSPECTUS IS VALID ONLY WHEN ACCOMPANIED BY THE CURRENT
PROSPECTUS FOR NORTHWESTERN MUTUAL SERIES FUND, INC. WHICH IS
ATTACHED HERETO, AND SHOULD BE RETAINED FOR FUTURE REFERENCE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE [NORTHWESTERN
SECURITIES AND EXHCHANGE COMMISSION NOR HAS THE COMMISSION LOGO]
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE> 5
CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Summary of the Policies . . . . . . . . . . . . . 3
Variable Life Insurance . . . . . . . . . . . . 3
The Account and its Divisions . . . . . . . . . 3
Deductions and Charges . . . . . . . . . . . . 3
Other Information . . . . . . . . . . . . . . . 4
The Northwestern Mutual Life Insurance Company,
Northwestern Mutual Variable Life Account and
Northwestern Mutual Series Fund, Inc. . . . . . 5
Northwestern Mutual Life . . . . . . . . . . . 5
The Account . . . . . . . . . . . . . . . . . . 5
The Fund . . . . . . . . . . . . . . . . . . . 5
Index 500 Stock Portfolio . . . . . . . . . . 5
Select Bond Portfolio . . . . . . . . . . . . 5
Money Market Portfolio . . . . . . . . . . . 5
Balanced Portfolio . . . . . . . . . . . . . 6
Growth and Income Stock Portfolio . . . . . . 6
Growth Stock Portfolio . . . . . . . . . . . 6
Aggressive Growth Stock Portfolio . . . . . . 6
High Yield Bond Portfolio . . . . . . . . . . 6
International Equity Portfolio . . . . . . . 6
Detailed Information about the Policies . . . . . 6
Requirements for Insurance . . . . . . . . . . 6
Premiums . . . . . . . . . . . . . . . . . . . 6
Grace Period . . . . . . . . . . . . . . . . . 8
Allocations to the Account . . . . . . . . . . 8
Transfers Between Divisions . . . . . . . . . . 8
Deductions and Charges . . . . . . . . . . . . 8
Deductions from Premiums for Whole
Life and Extra Ordinary Life Policies . . . . 8
Deductions for Single Premium
Life Policies . . . . . . . . . . . . . . . . 9
Charges Against the Account Assets . . . . . 10
Guarantee of Premiums, Deductions
and Charges . . . . . . . . . . . . . . . . 10
Death Benefit . . . . . . . . . . . . . . . . 10
Variable Insurance Amount . . . . . . . . . 11
Whole Life Policy and Single
Premium Life Policy . . . . . . . . . . . 11
Extra Ordinary Life Policy . . . . . . . . 12
Cash Value . . . . . . . . . . . . . . . . . 14
Annual Dividends . . . . . . . . . . . . . . 14
Policy Loans . . . . . . . . . . . . . . . . 15
Extended Term and Paid-Up Insurance . . . . . 16
Reinstatement . . . . . . . . . . . . . . . . 16
Right to Return Policy . . . . . . . . . . . 16
Right to Exchange for a Fixed
Benefit Policy . . . . . . . . . . . . . . . 17
Other Policy Provisions . . . . . . . . . . . 17
Owner . . . . . . . . . . . . . . . . . . . 17
Beneficiary . . . . . . . . . . . . . . . . 17
Incontestability . . . . . . . . . . . . . 17
Suicide . . . . . . . . . . . . . . . . . . 17
Misstatement of Age or Sex . . . . . . . . 17
Collateral Assignment . . . . . . . . . . . 17
Payment Plans . . . . . . . . . . . . . . . 17
Deferral of Determination and Payment . . . 17
Voting Rights . . . . . . . . . . . . . . . . 17
Substitution of Fund Shares
and Other Changes . . . . . . . . . . . . . 18
Reports . . . . . . . . . . . . . . . . . . . 18
Special Policy for Employers . . . . . . . . 18
Distribution of the Policies . . . . . . . . 18
Tax Treatment of Policy Benefits . . . . . . 18
Other Information . . . . . . . . . . . . . . . 19
Management . . . . . . . . . . . . . . . . . 19
Regulation . . . . . . . . . . . . . . . . . 21
Legal Proceedings . . . . . . . . . . . . . . 21
Registration Statement . . . . . . . . . . . 21
Experts . . . . . . . . . . . . . . . . . . . 21
Financial Statements . . . . . . . . . . . . . 22
Report of Independent Accountants
(for year ended December 31, 1995) . . . . 22
Financial Statements of the Account
(for year ended December 31, 1995) . . . . 23
Financial Statements of Northwestern Mutual Life
(for the three years ended
December 31, 1995) . . . . . . . . . . . . 29
Report of Independent Accountants
(for the three years ended
December 31, 1995) . . . . . . . . . . . . 45
Appendix . . . . . . . . . . . . . . . . . . . 46
</TABLE>
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT LAWFULLY BE MADE. NO PERSON IS AUTHORIZED TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS.
<PAGE> 6
THE PRIMARY PURPOSE OF THESE VARIABLE LIFE INSURANCE POLICIES IS TO PROVIDE
INSURANCE PROTECTION. NO CLAIM IS MADE THAT THE POLICIES ARE IN ANY WAY
SIMILAR OR COMPARABLE TO A SYSTEMATIC INVESTMENT PLAN OF A MUTUAL FUND.
SUMMARY OF THE POLICIES
VARIABLE LIFE INSURANCE
Variable life insurance is similar in many ways to traditional
fixed-benefit whole life insurance. There are also significant differences.
For both fixed and variable insurance the owner of the policy pays level
premiums for lifetime insurance coverage on the person insured. Both kinds of
insurance provide a cash value payable upon surrender of the policy during the
insured's lifetime. In each case the cash value during the early years is
ordinarily less than the sum of the premiums paid. Various optional benefits
may be added to either kind of policy (except single premium policies) at extra
cost.
The distinctive feature of the variable Policies described in this
prospectus is that the premiums, after certain deductions, are placed in one or
more divisions of Northwestern Mutual Variable Life Account. The death benefit
and cash value of the Policy will increase or decrease to reflect the
investment performance of the division or divisions selected. The death benefit
is adjusted annually on the Policy anniversary. Northwestern Mutual Life
guarantees that the death benefit for a Whole Life Policy will never be less
than the face amount of the Policy, so long as premiums are paid when due and
no Policy debt is outstanding. For an Extra Ordinary Life Policy, Northwestern
Mutual Life guarantees that the death benefit will never be less than the
Minimum Death Benefit stated in the Policy, so long as premiums are paid when
due and no Policy debt is outstanding. The Extra Ordinary Life Policy is
designed for purchasers who intend to use all Policy dividends to purchase
paid-up additions. For a Single Premium Life Policy, Northwestern Mutual Life
guarantees that the death benefit will never be less than the face amount of
the Policy, if no policy debt is outstanding. For all of the Policies, the cash
value is adjusted daily. There is no guaranteed minimum cash value.
THE ACCOUNT AND ITS DIVISIONS
The Account has nine divisions. The owner of the Policy determines how the
net annual premium is to be apportioned. The assets of each division are
invested in a corresponding Portfolio of Northwestern Mutual Series Fund, Inc.
The nine Portfolios are the Index 500 Stock Portfolio, the Select Bond
Portfolio, the Money Market Portfolio, the Balanced Portfolio, the Growth and
Income Stock Portfolio, the Growth Stock Portfolio, the Aggressive Growth Stock
Portfolio, the High Yield Bond Portfolio and the International Equity
Portfolio. The investment objectives of the Portfolios are briefly described
herein. See "The Fund", p. 5. For additional information see the attached
prospectus for the Fund.
DEDUCTIONS AND CHARGES
The net annual premium for a Whole Life Policy and an Extra Ordinary Life
Policy is placed in the Account when the Policy is issued and on the Policy
anniversary each year. This amount is the total premium after deductions for
sales and administrative expenses, state premium taxes and risk charges. For an
Extra Ordinary Life Policy, a deduction is also made for dividends to be paid
or credited in accordance with the dividend scale in effect on the issue date
of the Policy. For the first year there is also a fixed fee for expenses
incurred in issuing the Policy. The net annual premium excludes any extra
premium charged for insureds who do not qualify as select risks and the extra
premium for optional benefits.
For a Single Premium Life Policy an administrative charge of $l50 is made
when the Policy is issued. This is the only deduction from the single premium,
but if a Single Premium Policy is surrendered during the first ten policy years
the cash value payable on surrender is reduced by a deduction for sales costs.
The Account pays a charge at the annual rate of .50% of the Account's
assets for the mortality and expense risks assumed by Northwestern Mutual Life
and a charge at the annual rate of .20% of the Account's assets for federal
income taxes incurred by Northwestern Mutual Life. The Fund pays an investment
advisory fee, and other expenses, which vary depending on the Portfolios
selected.
For additional information, see "Deductions and Charges", p. 8.
3
<PAGE> 7
For a Whole Life Policy or an Extra Ordinary Life Policy the deductions in
the first year for sales and administrative expenses will often amount to more
than 50% of the total annual premium. The percentage varies with the age of the
insured and the size of the Policy. For Whole Life Policies the percentage
ranges from 40% for large Policies at the highest ages to 90% for the smallest
Policies for juveniles. For Extra Ordinary Life Policies the percentage ranges
from 54% for large Policies at the highest ages to 87% for the smallest
Policies for juveniles.
OTHER INFORMATION
For a Whole Life Policy the minimum face amount of insurance for which a
Policy may be issued is $20,000. If the insured is below age 15 or over age 49,
the minimum amount is $10,000. The insured may not be older than age 70 on the
date of issue. For an Extra Ordinary Life Policy the minimum initial amount of
insurance for which a Policy may be issued is $50,000; if the insured is over
age 70, the minimum amount is $25,000. The minimum face amount of insurance for
which a Single Premium Life Policy may be issued is $5,000. For an Extra
Ordinary Life Policy the insured may not be younger than age l5 on the date of
issue. For either an Extra Ordinary Life Policy or a Single Premium Life Policy
the insured may not be older than age 75 on the date of issue.
For a limited time a Policy may be returned for a refund. See "Right to
Return Policy", p. 16.
4
<PAGE> 8
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY,
NORTHWESTERN MUTUAL VARIABLE LIFE ACCOUNT AND
NORTHWESTERN MUTUAL SERIES FUND, INC.
NORTHWESTERN MUTUAL LIFE
The Northwestern Mutual Life Insurance Company is a mutual life insurance
company organized by a special act of the Wisconsin Legislature in 1857. It is
the nation's sixth largest life insurance company, based on total assets in
excess of $54 billion on December 31, 1995 and is licensed to conduct a
conventional life insurance business in the District of Columbia and in all
states of the United States. Northwestern Mutual Life sells life and disability
income insurance policies and annuity contracts through its own field force of
approximately 6,000 full time producing agents.
THE ACCOUNT
Northwestern Mutual Variable Life Account was established by the Trustees
of Northwestern Mutual Life on November 23, 1983, in accordance with the
provisions of Wisconsin insurance law. Under Wisconsin law the income, gains
and losses, realized or unrealized, of the Account are credited to or charged
against the assets of the Account without regard to other income, gains or
losses of Northwestern Mutual Life. The Account is used only for the variable
life insurance Policies.
The Account is registered as a unit investment trust under the Investment
Company Act of 1940. Such registration does not involve supervision of
management or investment practices or policies. The Account has nine divisions.
All of the assets of each division are invested in shares of the corresponding
Portfolio of the Fund described below.
THE FUND
Northwestern Mutual Series Fund, Inc. is a mutual fund of the series type
registered under the Investment Company Act of 1940 as an open-end diversified
management investment company. Shares of each Portfolio of the Fund are
purchased by the corresponding division of the Account at their net asset value
without any sales charge.
The investment adviser for the Fund is Northwestern Mutual Investment
Services, Inc. ("NMIS"), a wholly-owned subsidiary of Northwestern Mutual Life.
The investment advisory agreements for the respective Portfolios provide that
NMIS will provide services and bear certain expenses of the Fund. For providing
investment advisory and other services and bearing Fund expenses, the Fund pays
NMIS a fee at an annual rate which ranges from .20% of the aggregate average
daily net assets of the Index 500 Stock Portfolio to a maximum of .68% for the
International Equity Portfolio, based on 1995 asset size. Other expenses borne
by the Portfolios range from 0% for the Select Bond, Money Market and Balanced
Portfolios to .17% for the International Equity Portfolio. Northwestern Mutual
Life provides certain personnel and facilities used by NMIS in performing its
investment advisory functions and is a party to the investment advisory
agreement. J.P. Morgan Investment Management, Inc. and Templeton Investment
Counsel, Inc. have been retained under investment sub-advisory agreements to
provide investment advice to the Growth and Income Stock Portfolio and the
International Equity Portfolio, respectively.
The investment objectives and types of investments for each of the nine
Portfolios of the Fund are set forth below. There can be no assurance that the
objectives of the Portfolios will be realized. For more information about the
investment objectives and policies, the attendant risk factors and expenses see
the Fund prospectus.
INDEX 500 STOCK PORTFOLIO. The investment objective of the Index 500 Stock
Portfolio is to achieve investment results that approximate the performance of
the Standard & Poor's 500 Composite Stock Price Index ("S&P 500 Index"). The
Portfolio will attempt to meet this objective by investing in stocks included
in the S&P 500 Index. Stocks are generally more volatile than debt securities
and involve greater investment risks.
SELECT BOND PORTFOLIO. The primary investment objective of the Select
Bond Portfolio is to provide as high a level of long-term total rate of return
as is consistent with prudent investment risk. A secondary objective is to seek
preservation of shareholders' capital. The Select Bond Portfolio will invest
primarily in debt securities. The value of debt securities will tend to rise
and fall inversely with the rise and fall of interest rates.
MONEY MARKET PORTFOLIO. The investment objective of the Money Market
Portfolio is to realize maximum current income consistent with liquidity and
stability of capital. The Money Market Portfolio will invest in money market
instruments and other debt securities with maturities generally not exceeding
one year. The return produced by these securities will reflect fluctuations in
short-term interest rates.
5
<PAGE> 9
BALANCED PORTFOLIO. The investment objective of the Balanced Portfolio is to
realize as high a level of long-term total rate of return as is consistent with
prudent investment risk. The Balanced Portfolio will invest in common stocks
and other equity securities, bonds and money market instruments. Investment in
the Balanced Portfolio necessarily involves the risks inherent in stocks and
debt securities of varying maturities, including the risk that the Portfolio
may invest too much or too little of its assets in each type of security at any
particular time.
GROWTH AND INCOME STOCK PORTFOLIO. The investment objective of the Growth and
Income Stock Portfolio is long-term growth of capital and income. Ordinarily
the Portfolio pursues its investment objectives by investing primarily in
dividend-paying common stock.
GROWTH STOCK PORTFOLIO. The investment objective of the Growth Stock Portfolio
is long-term growth of capital; current income is secondary. The Portfolio
will seek to achieve this objective by selecting investments in companies which
have above average earnings growth potential.
AGGRESSIVE GROWTH STOCK PORTFOLIO. The investment objective of the Aggressive
Growth Stock Portfolio is to achieve long-term appreciation of capital
primarily by investing in the common stocks of companies which can reasonably
be expected to increase their sales and earnings at a pace which will exceed
the growth rate of the nation's economy over an extended period.
HIGH YIELD BOND PORTFOLIO. The investment objective of the High Yield
Bond Portfolio is to achieve high current income and capital appreciation by
investing primarily in fixed income securities that are rated below investment
grade by the major rating agencies.
INTERNATIONAL EQUITY PORTFOLIO. The investment objective of the International
Equity Portfolio is long-term capital growth. It pursues its objective through
a flexible policy of investing in stocks and debt securities of companies and
governments outside the United States.
DETAILED INFORMATION ABOUT THE POLICIES
REQUIREMENTS FOR INSURANCE
The minimum face amount for which a Whole Life Policy may be issued is
$20,000. If the insured is below age 15 or over age 49 the minimum amount is
$10,000. The insured may not be older than age 70 on the date of issue. For an
Extra Ordinary Life Policy the minimum initial amount of insurance for which a
Policy may be issued is $50,000; if the insured is over age 70, the minimum
amount is $25,000. The minimum face amount of insurance for which a Single
Premium Life Policy may be issued is $5,000. For an Extra Ordinary Life Policy
the insured may not be younger than age l5 on the date of issue. For the Extra
Ordinary Life Policy and the Single Premium Life Policy, the insured may not be
older than age 75 on the date of issue.
Before issuing a Policy, Northwestern Mutual Life will require satisfactory
evidence of insurability. Non-smokers who meet preferred underwriting
requirements are considered select risks. A higher premium is charged for
insureds who do not qualify as select risks. The amount of additional premium
depends on the risk classification in which the insured is placed. Nonsmokers
in the second best classification are considered standard plus risks. The best
class of smokers are considered standard risks.
PREMIUMS
Payment of the first premium is required to put a Whole Life Policy or an
Extra Ordinary Life Policy in effect. Premiums are level, fixed and payable in
advance during the insured's lifetime on a monthly, quarterly, semiannual or
annual basis. The owner of a Policy may change the premium frequency. The
change will be effective when the premium on the new frequency is accepted.
Premiums paid more often than annually include an extra amount to compensate
Northwestern Mutual Life for the extra processing costs and loss of interest
because the money is received later. The amount of the premium depends on the
amount of insurance for which the Policy was issued and the insured's age and
risk classification. The amount of the premium also reflects the sex of the
insured except where state or federal law requires that premiums and other
charges and values be determined without regard to sex. A notice is sent to the
owner of a Policy not less than two weeks before each premium is due. If the
monthly premium frequency is selected, Northwestern Mutual Life may require
that premium payments be made by preauthorized check.
The following table for Whole Life Policies shows representative premiums
for male select, standard plus, and standard risks for various face amounts of
insurance.
6
<PAGE> 10
<TABLE>
<CAPTION>
% EXCESS OF 12
MONTHLY PREMIUMS
AGE AT FACE ANNUAL MONTHLY OVER ANNUAL
ISSUE AMOUNT PREMIUM PREMIUM PREMIUM
---------------------------------------------------------------
SELECT
<S> <C> <C> <C> <C> <C>
15 $ 50,000 $ 382.50 $ 33.60 5.4%
35 100,000 1,536.00 135.10 5.5%
55 100,000 3,766.00 331.10 5.5%
<CAPTION>
STANDARD PLUS
<S> <C> <C> <C> <C> <C>
15 50,000 406.00 35.60 5.2%
35 100,000 1,683.00 148.10 5.6%
55 100,000 4,125.00 363.10 5.6%
<CAPTION>
STANDARD
<S> <C> <C> <C> <C> <C>
15 50,000 491.50 43.10 5.2%
35 100,000 1,912.00 168.10 5.5%
55 100,000 4,587.00 404.10 5.7%
</TABLE>
The following table for Extra Ordinary Life Policies shows representative
annual premiums for male select and standard risks for various amounts of
insurance. The amounts of insurance shown in the table are the total amounts in
effect when the Extra Ordinary Life Policy is issued, including both the
Minimum Death Benefit which is guaranteed for the lifetime of the insured and
the Extra Life Protection which is guaranteed for a shorter period. See "Death
Benefit", p. 10, and "Extra Ordinary Life Policy", p. 12.
<TABLE>
<CAPTION>
% EXCESS OF 12
MONTHLY PREMIUMS
AGE AT FACE ANNUAL MONTHLY OVER ANNUAL
ISSUE AMOUNT PREMIUM PREMIUM PREMIUM
---------------------------------------------------------------
SELECT
<S> <C> <C> <C> <C> <C>
15 $ 50,000 $ 261.50 $ 23.10 6.0%
35 100,000 1,014.00 89.10 5.4%
55 100,000 2,612.00 230.10 5.7%
<CAPTION>
STANDARD PLUS
<S> <C> <C> <C> <C> <C>
15 50,000 285.00 25.10 5.7%
35 100,000 1,161.00 102.10 5.5%
55 100,000 2,971.00 261.10 5.5%
<CAPTION>
STANDARD
<S> <C> <C> <C> <C> <C>
15 50,000 357.50 31.60 6.1%
35 100,000 1,377.00 121.10 5.5%
55 100,000 3,425.00 301.10 5.5%
</TABLE>
For a Single Premium Life Policy the purchaser may choose either a face
amount of insurance or the amount which a given amount of premium will provide.
The Single Premium Life Policy is available only for applicants who meet select
or standard plus underwriting criteria as determined by Northwestern Mutual
Life. The premiums for these Policies are the same for both select and standard
plus risks, but it is expected that the dividends will be lower for Policies
issued to insureds in the standard plus classification.
The following table for Single Premium Life Policies shows representative
gross single premiums for male select and standard plus risks for various face
amounts of insurance:
<TABLE>
<CAPTION>
FACE
AGE AT AMOUNT GROSS SINGLE
ISSUE OF INSURANCE PREMIUM
----------------------------------------
<S> <C> <C>
15 $10,000 $ 1,498.40
35 25,000 6,443.25
55 50,000 23,502.00
</TABLE>
7
<PAGE> 11
GRACE PERIOD
For the Whole Life and Extra Ordinary Life Policies there is a grace period
of 31 days for any premium that is not paid when due. The Policy remains in
force during this period. If the premium is not paid within the grace period
the Policy will terminate as of the date when the premium was due and will no
longer be in force, unless it is continued as extended term or paid-up
insurance. See "Extended Term and Paid-Up Insurance", p. 16. If a Policy is
surrendered, its cash value will be paid. See "Cash Value", p. 14. If the
insured dies during the grace period any overdue premium will be deducted from
the proceeds of the Policy. If the insured dies after payment of the premium
for the period which includes the date of death, the portion of the premium for
the remainder of that period will be refunded as part of the Policy proceeds.
ALLOCATIONS TO THE ACCOUNT
The net annual premium for a Whole Life Policy or an Extra Ordinary Life
Policy is placed in the Account on the Policy date and on the Policy
anniversary each year. The net annual premium is the annual premium less the
deductions described below.
The owner of a Whole Life or an Extra Ordinary Life Policy determines how
the net annual premium is apportioned among the divisions of the Account. If
any portion of a premium is directed to a division, the division must receive
at least 10% of that premium. The apportionment for future premiums may be
changed upon written request at any time, but the change will be effective only
when the net annual premium is placed in the Account on the next Policy
anniversary, even if premiums are being paid on an other than annual basis.
For a Single Premium Policy the entire single premium, less an
administrative charge of $150, is placed in the Account on the Policy date and
apportioned among the divisions of the Account as determined by the owner of
the Policy.
The Account assets supporting a Policy may be apportioned among as many as
six divisions of the Account at any time.
TRANSFERS BETWEEN DIVISIONS
The owner of a Policy may transfer accumulated amounts from one division of
the Account to another as often as four times in a Policy year. Transfers are
effective on the date a written request is received at the Home Office of
Northwestern Mutual Life. Northwestern Mutual Life reserves the right to charge
a fee to cover administrative costs of transfers. No fee is presently charged.
DEDUCTIONS AND CHARGES
The net premiums placed in the Account for Whole Life, Extra Ordinary Life
and Single Premium Life Policies are the gross premiums after the deductions
described in the next two sections below. The net premiums for Whole Life and
Extra Ordinary Life Policies exclude any extra premium charged for insureds who
do not qualify as select risks and the extra premium for any optional benefits.
A charge for mortality and expense risks is made against the assets of the
Account. There is also a charge for taxes. See "Charges Against the Account
Assets", p. 10. In addition, the Fund in which the Account assets are invested
pays an investment advisory fee and certain other expenses. Fund expenses are
briefly described above on page 5, and in more detail in the attached
prospectus for the Fund.
DEDUCTIONS FROM PREMIUMS FOR WHOLE LIFE AND EXTRA ORDINARY LIFE POLICIES
The deductions described in this section are for Whole Life and Extra
Ordinary Life Policies only. The deductions for Single Premium Life Policies
are described under the next caption below.
For the first Policy year there is a one-time deduction of not more than $5
for each $1,000 of insurance, based on the face amount for Whole Life or the
Minimum Death Benefit stated in the Policy for Extra Ordinary Life. This is for
the costs of processing applications, medical examinations, determining
insurability and establishing records.
There is an annual deduction of $35 for administrative costs to maintain
the Policy. Expenses include costs of premium billing and collection,
processing claims, keeping records and communicating with Policyowners.
There is a deduction each year for sales costs. This amount may be
considered a "sales load". The deduction will be not more than 30% of the basic
premium (as defined below) for the first Policy year, not more than 10% for
each of the next three years and not more than 7% each year thereafter. The
basic premium for a Policy is the gross premium which would be payable if the
premium were paid annually, less the annual deduction of $35 for administrative
costs. The basic premium is based on the cost of insurance for insureds who
qualify as select risks and does not include any extra premium amounts for
insureds who are placed in other risk classifications. The basic premium does
not include the extra premium for any optional benefits. For an Extra Ordinary
Life Policy, the basic premium does not include any extra premium for the Extra
Life Protection; the amount of term insurance included in the Extra Life
Protection affects the dividends payable on the Extra Ordinary Life Policies.
The amount of the deduction for sales costs for any Policy year is not
specifically related to sales costs incurred for that year. Northwestern
Mutual Life expects to recover its total sales expenses from the amounts
deducted for sales
8
<PAGE> 12
costs over the period while the Policies are in force. To the extent that sales
expenses exceed the amounts deducted, Northwestern Mutual Life will pay the
expenses from its other assets. These assets may include, among other things,
any gain realized from the charge against the assets of the Account for the
mortality and expense risks assumed by Northwestern Mutual Life. See "Charges
Against the Account Assets", p. 10. To the extent that the amounts deducted for
sales costs exceed the amounts needed, Northwestern Mutual Life will realize a
gain.
A deduction equal to 2% of each basic premium is made for state premium
taxes. Premium taxes vary from state to state and currently range from .75% to
3.5% of life insurance premiums. The 2% rate is an average. The tax rate for a
particular state may be lower, higher or equal to the 2% deduction.
Northwestern Mutual Life has guaranteed that the death benefit for a Whole
Life Policy will never be less than the face amount of the Policy, regardless
of the investment experience of the Account. For an Extra Ordinary Life Policy,
Northwestern Mutual Life has guaranteed that the death benefit will never be
less than the Minimum Death Benefit stated in the Policy. For both Policies,
there is a deduction of 1-1/2% from each basic premium to compensate
Northwestern Mutual Life for the risk that the insured may die at a point in
time when the death benefit that would ordinarily be paid is less than this
guaranteed minimum amount.
For an Extra Ordinary Life Policy there is a deduction for dividends to be
paid or credited in accordance with the dividend scale in effect on the issue
date of the Policy. This deduction will vary by age of the insured and duration
of the Policy, and is expected to be in the range of approximately 7-17% of the
gross annual premium.
The following tables illustrate the amount of net annual premium, for
select and standard risks, to be placed in the Account at the beginning of each
Policy year after the deductions described above:
WHOLE LIFE
<TABLE>
<CAPTION>
MALE AGE 35 - SELECT RISK
ANNUAL PREMIUM
-----------------------------------
BEGINNING OF POLICY YEAR $500 $1,000 $5,000
------------------------------------------------------------------------
<S> <C> <C> <C>
1 ............................ $154.28 $320.16 $1,647.28
2 through 4 .................. 402.11 834.48 4,293.51
5 and later .................. 416.05 863.41 4,442.36
<CAPTION>
MALE AGE 35 - STANDARD RISK
ANNUAL PREMIUM
-----------------------------------
BEGINNING OF POLICY YEAR $500 $1,000 $5,000
------------------------------------------------------------------------
<S> <C> <C> <C>
1 ............................ $123.37 $256.03 $1,317.30
2 through 4 .................. 321.57 667.33 3,433.44
5 and later .................. 332.71 690.46 3,552.48
</TABLE>
EXTRA ORDINARY LIFE
<TABLE>
<CAPTION>
MALE AGE 35 - SELECT RISK
ANNUAL PREMIUM
-----------------------------------
BEGINNING OF POLICY YEAR $500 $1,000 $5,000
------------------------------------------------------------------------
<S> <C> <C> <C>
1 .......................... $134.23 $278.56 $1,433.21
2 through 4 ................ 369.62 767.07 3,946.64
5 and later ................ 383.58 796.05 4,095.74
<CAPTION>
MALE AGE 35 - STANDARD RISK
ANNUAL PREMIUM
-----------------------------------
BEGINNING OF POLICY YEAR $500 $1,000 $5,000
------------------------------------------------------------------------
<S> <C> <C> <C>
1 .......................... $ 97.92 $203.21 $1,045.54
2 through 4 ................ 269.65 559.59 2,879.11
5 and later ................ 279.83 580.73 2,987.88
</TABLE>
DEDUCTIONS FOR SINGLE PREMIUM LIFE POLICIES
For a Single Premium Life Policy the only deduction from the single premium
is an administrative charge of $150.00. The administrative costs for issuing
and maintaining a Single Premium Life Policy are similar to those incurred with
a Whole Life Policy or an Extra Ordinary Life Policy, except for the costs of
premium billing and collection. See "Deductions from Premiums for Whole Life
and Extra Ordinary Life Policies", p. 8. The entire premium for a Single
Premium Life Policy, after this deduction of $150, is placed in the Account
when the Policy
9
<PAGE> 13
is issued without any of the other deductions which apply to premiums for Whole
Life and Extra Ordinary Life Policies. There is no annual fee for a Single
Premium Life Policy.
For a Single Premium Life Policy during the first ten Policy years, the
cash value payable on surrender of the Policy is reduced by a deduction for
sales costs. The deduction during the first Policy year is not more than 9% of
the Policy's tabular cash value. See "Cash Value", p. 14. The deduction
decreases over time until it is eliminated at the end of the tenth Policy year.
The deduction is intended to recover the costs incurred by Northwestern Mutual
Life in distributing Single Premium Life Policies which are surrendered in
their early years. The deduction will never be more than 9% of the single
premium paid for the Policy, excluding the administrative charge of $150.00.
The following table illustrates the schedule for the decreasing deduction
for sales costs for a policy surrendered at the end of each of the first ten
Policy years. The illustration is for a Single Premium Life Policy, male age
35. The schedule varies slightly by age and sex and amount of insurance.
<TABLE>
<CAPTION>
POLICY YEAR END WHEN DEDUCTION AS % OF
POLICY IS SURRENDERED TABULAR CASH VALUE
--------------------------------------------
<S> <C>
1 ................ 7.9%
2 ................ 7.1
3 ................ 6.3
4 ................ 5.4
5 ................ 4.6
6 ................ 3.7
7 ................ 2.8
8 ................ 1.9
9 ................ 0.9
10 and subsequent years 0
</TABLE>
Since the maximum Policy loan limit for a Single Premium Life Policy is
based on the cash value payable on surrender, the amount which may be borrowed
during the first ten years is reduced to reflect the deduction for sales costs
which would be made if the Policy were surrendered on the date of the Policy
loan. See "Policy Loans", p. 15.
CHARGES AGAINST THE ACCOUNT ASSETS
There is a daily charge to the Account for the mortality and expense risks
assumed by Northwestern Mutual Life. The charge is at the annual rate of .50%
of the assets of the Account. The mortality risk is that insureds may not live
as long as Northwestern Mutual Life estimated. The expense risk is that
expenses of issuing and administering the Policies may exceed the estimated
costs. Northwestern Mutual Life will realize a gain from this charge to the
extent it is not needed to provide benefits and pay expenses under the
Policies. The actual mortality and expense experience under the Policies will
be the basis for determining dividends. See "Annual Dividends", p. 14.
The Policies provide that a charge for taxes may be made against the assets
of the Account. Currently, a daily charge for federal income taxes incurred by
Northwestern Mutual Life is being made at the annual rate of .20% of the assets
of the Account. The charge for taxes may be increased, decreased or eliminated
in the future. In no event will the charge for taxes exceed that portion of the
actual tax expenses of Northwestern Mutual Life which is fairly allocable to
the Policies.
GUARANTEE OF PREMIUMS, DEDUCTIONS AND CHARGES
Northwestern Mutual Life guarantees and may not increase the premiums, the
amounts deducted from premiums and the charge for mortality and expense risks.
These amounts will not increase regardless of future changes in longevity or
increases in expenses. The Extra Ordinary Life Policy provides an opportunity
to pay an additional amount of premium after the guaranteed period for the
Extra Life Protection has expired if the Total Death Benefit would otherwise
fall below the initial amount of insurance. See "Extra Ordinary Life Policy",
p. 12.
DEATH BENEFIT
The death benefit for a variable life insurance policy is, in part, a
guaranteed amount which will not be reduced during the lifetime of the insured
so long as premiums are paid when due and no policy debt is outstanding. The
remainder of the death benefit is the variable insurance amount which
fluctuates in response to actual investment results and is not guaranteed. The
amount of any paid-up additions which have been purchased with dividends is
also included in the total death benefit and, in addition, the Extra Ordinary
Life Policy provides some term insurance during the early Policy years. The
relationships among the guaranteed and variable amounts and any paid-up
additions and term insurance depend on the design of the particular Policy. See
"Whole Life Policy and Single Premium Life Policy", p. 11, and "Extra Ordinary
Life Policy", p. 12.
10
<PAGE> 14
VARIABLE INSURANCE AMOUNT. The variable insurance amount reflects, on a
cumulative basis, the investment experience of the Account divisions in which
the Policy has participated. The variable insurance amount is adjusted annually
on each Policy anniversary. For the first Policy year the variable insurance
amount is zero. For any subsequent year it may be either positive or negative.
If the variable insurance amount is positive, subsequent good investment
results will produce a larger variable insurance amount and therefore an
increase in the death benefit. If the variable insurance amount is negative,
subsequent good investment results will first have to offset the negative
amount before the death benefit will increase.
In setting the premium rates for each Policy it has been assumed that
investment results will cause the Account assets supporting the Policy to grow
at a net annual rate of 4%. If the assets grow at a net rate of exactly 4% for
a Policy year, the variable insurance amount will neither increase nor decrease
on the following anniversary. If the net rate of growth exceeds 4%, the
variable insurance amount will increase. If it is less than 4%, the variable
insurance amount will decrease.
The method for calculating the changes in the death benefit is described in
the Policy. The Policy includes a table of net single premiums used to convert
the investment results for a Policy into increases or decreases in the variable
insurance amount. The insurance rates in the table depend on the sex and the
attained age of the insured for each Policy year. For a Whole Life Policy, the
changes in the death benefit will be smaller for a Policy issued with a higher
premium for extra mortality risk. The net single premium for a particular
variable insurance amount is the price for that amount of paid-up whole life
insurance based on the insured's age at the Policy anniversary.
Because the variable insurance amount is adjusted only on the Policy
anniversary, Northwestern Mutual Life bears the risk that the insured may die
before the next anniversary after an interim period of adverse investment
experience. If investment experience during the interim period is favorable,
the owner of the Policy will forego the benefit and Northwestern Mutual Life
will realize a gain, unless the insured survives to the next Policy
anniversary. However, if at the date of death of the insured the value of the
Policy, considered as a net single premium, would buy more death benefit than
the amount otherwise determined under the Policy, this increased death benefit
will be paid.
The cost of life insurance increases with the advancing age of the insured,
and therefore a larger dollar amount of investment earnings is required to
produce the same increase in the death benefit in the later Policy years. In
general, however, the effect of investment results on the death benefit will
tend to be greater in the later Policy years because the amount of assets
invested for the Policy will tend to increase as the Policy remains in force.
The cost of providing insurance protection under a Policy is reflected in
the cash value of the Policy. See "Cash Value", p. 14. The cost is actuarially
computed for each Policy each year, based on the insured's attained age, the
l980 Commissioners Standard Ordinary Mortality Table and the net insurance
amount at risk under the Policy. The net insurance amount at risk is the total
death benefit for the Policy minus the cash value plus any Policy debt. The
cost of insurance differs each year because the probability of death increases
as the insured advances in age and the net insurance amount at risk decreases
or increases from year to year depending on investment experience. The cost
assumes that all insureds are in the select underwriting risk classification.
The differences in the mortality rates of the various underwriting
classifications are reflected in the different premiums (or different dividend
scales) for those underwriting classifications. The cost of insurance is based
on the mortality table identified above and is guaranteed for the life of a
Policy regardless of any future changes in mortality experience.
WHOLE LIFE POLICY AND SINGLE PREMIUM LIFE POLICY. For a Whole Life
Policy or a Single Premium Life Policy the death benefit is the face amount of
the Policy plus any positive variable insurance amount in force. The death
benefit is adjusted on each Policy anniversary when the variable insurance
amount is determined for the following year. The total death benefit also
includes the amount of insurance provided by any paid-up additions which have
been purchased with dividends and is reduced by the amount of any Policy debt
outstanding. The death benefit for a Whole Life Policy will not be less than the
face amount so long as premiums are paid when due and no Policy debt is
outstanding. For a Single Premium Life Policy the death benefit will not be less
than the face amount so long as no Policy debt is outstanding.
Paid-up additions purchased with dividends are not counted for purposes of
the guarantee that the death benefit of a Whole Life Policy or a Single Premium
Life Policy will never be less than the face amount of the Policy. If the
variable insurance amount is negative, the total death benefit will be the
guaranteed face amount plus the amount of insurance provided by any paid-up
additions less any Policy debt. Paid-up additions are amounts of permanent
insurance, paid for with dividends and added to a basic life insurance policy,
for which the premium for the entire lifetime of the insured has been paid.
Paid-up additions have cash surrender value and loan value.
The following example shows how the death benefit for a Whole Life Policy
could vary based on investment results. Using the Policy illustrated on page 48
and assuming the 12% hypothetical gross investment earnings rate on assets of
the selected Portfolio of the Fund (equivalent to a net rate of 10.80% for the
Account division), and the dividend scale as illustrated, the death benefit
shown at the end of Policy year 5 would change as follows:
11
<PAGE> 15
<TABLE>
<CAPTION>
GUARANTEED VARIABLE TOTAL
FACE INSURANCE PAID-UP DEATH
AMOUNT + AMOUNT + ADDITIONS = BENEFIT
--------------------------------------------------------------
<S> <C> <C> <C> <C>
End of Policy Year 5................... $30,979 $1,064 $556 $32,599
Change................................. 0 +503 +206 +709
------- ------ ---- -------
End of Policy Year 6................... $30,979 $1,567 $762 $33,308
</TABLE>
If instead the gross earnings rate during the sixth Policy year had been 0%
(equivalent to a net rate of -1.20%) the death benefit at the end of Policy
Year 5 would change as follows:
<TABLE>
<CAPTION>
GUARANTEED VARIABLE TOTAL
FACE INSURANCE PAID-UP DEATH
AMOUNT + AMOUNT + ADDITIONS = BENEFIT
--------------------------------------------------------------
<S> <C> <C> <C> <C>
End of Policy Year 5................... $30,979 $1,064 $556 $32,599
Change................................. 0 -385 +141 -244
------- ---- ---- -------
End of Policy Year 6................... $30,979 $679 $697 $32,355
</TABLE>
The following example shows how the death benefit for a Single Premium Life
Policy could vary based on investment results. Using the Policy illustrated on
page 60 and assuming the 12% hypothetical gross annual investment earnings rate
on assets of the selected Portfolio of the Fund (equivalent to a net rate of
10.80% for the Account division), and the dividend scale as illustrated, the
death benefit shown at the end of Policy year 5 would change as follows:
<TABLE>
<CAPTION>
GUARANTEED VARIABLE TOTAL
FACE INSURANCE PAID-UP DEATH
AMOUNT + AMOUNT + ADDITIONS = BENEFIT
--------------------------------------------------------------
<S> <C> <C> <C> <C>
End of Policy Year 5................... $25,000 $9,348 $380 $34,728
Change 0 +2,254 +145 +2,399
------- ------- ---- -------
End of Policy Year 6................... $25,000 $11,602 $525 $37,127
</TABLE>
If instead the gross earnings rate during the sixth Policy year had been 0%
(equivalent to a net rate of -1.20%) the death benefit at the end of Policy
Year 5 would change as follows:
<TABLE>
<CAPTION>
GUARANTEED VARIABLE TOTAL
FACE INSURANCE PAID-UP DEATH
AMOUNT + AMOUNT + ADDITIONS = BENEFIT
--------------------------------------------------------------
<S> <C> <C> <C> <C>
End of Policy Year 5................... $25,000 $9,348 $380 $34,728
Change................................. 0 -1,723 +101 -1,622
------- ------ ---- -------
End of Policy Year 6................... $25,000 $7,625 $481 $33,106
</TABLE>
EXTRA ORDINARY LIFE POLICY. The Total Death Benefit for an Extra Ordinary Life
Policy is the sum of the Minimum Death Benefit plus the amount of Extra Life
Protection in force. The Minimum Death Benefit is 60% of the total amount of
insurance for which the Policy is issued, and is guaranteed for the lifetime of
the insured so long as premiums are paid when due and no Policy debt is
outstanding. The amount of Extra Life Protection is initially 40% of the total
amount of insurance. It may increase but it will not decrease during the
guaranteed period, so long as premiums are paid when due, no Policy debt is
outstanding, all dividends are applied to purchase paid-up additions and no
paid-up additions are surrendered for their cash value.
Extra Life Protection consists of one year term insurance, positive
variable insurance amount and paid-up additions which have been purchased with
dividends. Term insurance is life insurance which pays a death benefit only if
the insured dies during the term for which the insurance has been purchased.
Term insurance is ordinarily purchased on an annual basis at a cost which rises
with the increasing age of the insured. It has no cash surrender value or loan
value. The variable insurance amount and paid-up additions have been described;
see "Variable Insurance Amount", p. 11 and "Whole Life Policy and Single
Premium Life Policy", p. 11.
12
<PAGE> 16
Initially the entire amount of Extra Life Protection is one year term
insurance. As the Policy remains in force one year term insurance is reduced by
any positive variable insurance amount and paid-up additions, so that the term
insurance is reduced to the amount that will maintain the Total Death Benefit
at the amount for which the Policy was issued. The term insurance is eliminated
at any time when the sum of positive variable insurance amount plus the paid-up
additions equals or exceeds the initial amount of Extra Life Protection.
Northwestern Mutual Life guarantees that the amount of Extra Life
Protection will not be reduced during the guaranteed period, regardless of the
Account's investment experience or the amount of any dividends paid on the
Policy, so long as premiums are paid when due, no Policy debt is outstanding,
all dividends are applied to purchase paid-up additions and no paid-up
additions are surrendered for their cash value. The length of the guaranteed
period depends on the age of the insured when the Policy is issued, and ranges
from 37 years at age 15 to 7 years at age 75. At age 35 the guaranteed period
is 27 years.
For an insured age 40 or younger, the sum of positive variable insurance
amount plus paid-up additions will exceed the initial amount of Extra Life
Protection at or before the end of the guaranteed period if the assets of the
Fund which support the Policy produce a gross investment rate of return of 8%
or better and dividends are at least equal to those being paid on the current
dividend scale. However, neither the actual investment results nor the
dividends to be paid on the Policy are guaranteed.
After the guaranteed period expires, if the sum of positive variable
insurance amount plus the paid-up additions is less than the initial amount of
Extra Life Protection on any Policy anniversary, Northwestern Mutual Life may
reduce the amount of term insurance for the Policy year. The owner of the
Policy will be given notice of the reduction and an opportunity to pay an
additional amount of premium in order to keep the initial amount of insurance
in force. The maximum premium rate is set forth in the Policy. The owner's
right to continue to purchase term insurance on this basis will terminate as of
the first Policy anniversary when the owner fails to pay the additional premium
when due.
The following example shows how the components of the Total Death Benefit
for an Extra Ordinary Life Policy could vary based on investment results. Using
the Policy illustrated on page 55 and the assumed 12% hypothetical gross annual
investment earnings rate on assets of the selected Portfolio of the Fund
(equivalent to a net rate of 10.80% for the Account division), and the dividend
scale as illustrated, the amounts shown at the end of Policy year 5 would
change as follows:
<TABLE>
<CAPTION>
EXTRA LIFE PROTECTION
---------------------
MINIMUM VARIABLE TOTAL
DEATH TERM INSURANCE PAID-UP DEATH
BENEFIT + INSURANCE + AMOUNT + ADDITIONS = BENEFIT
------- --------- --------- --------- -------
<S> <C> <C> <C> <C> <C>
End of Policy Year 5 .... $60,000 $36,587 $2,025 $1,388 $100,000
Change .................. 0 -1,526 +965 +561 0
------- ------- ------ ------ --------
End of Policy Year 6 .... $60,000 $35,061 $2,990 $1,949 $100,000
</TABLE>
If instead the gross annual earnings rate during the sixth Policy year had
been 0% (equivalent to a net rate of -1.20%) the amounts at the end of Policy
year 5 would change as follows:
<TABLE>
<CAPTION>
EXTRA LIFE PROTECTION
---------------------
MINIMUM VARIABLE TOTAL
DEATH TERM INSURANCE PAID-UP DEATH
BENEFIT + INSURANCE + AMOUNT + ADDITIONS = BENEFIT
------- --------- --------- --------- -------
<S> <C> <C> <C> <C> <C>
End of Policy Year 5 .... $60,000 $36,587 $2,025 $1,388 $100,000
Change .................. 0 +338 -738 +400 0
------- ------- ------ ------ --------
End of Policy Year 6 .... $60,000 $36,925 $1,287 $1,788 $100,000
</TABLE>
Note that the Total Death Benefit is not affected by either investment
results or the amount of dividends paid, because the Policy is within the
guaranteed period of Extra Life Protection. But the components of Extra Life
Protection are affected by both factors. Good investment results and increases
in dividends increase the likelihood that the Total Death Benefit will begin to
rise before the guaranteed period of Extra Life Protection expires. Adverse
investment results or decreases in dividends could cause the Total Death
Benefit to fall below the amount of insurance which was initially in force,
after the guaranteed period of Extra Life Protection expires, but it cannot
fall below the Minimum Death Benefit so long as premiums are paid when due and
no Policy debt is outstanding.
The Extra Ordinary Life Policy is designed for a purchaser who intends to
use all dividends to purchase paid-up additions. If dividends are used for any
other purpose, or if any paid-up additions are surrendered for their cash
value, the term insurance in force will immediately terminate, any remaining
guaranteed period of Extra Life Protection will
13
<PAGE> 17
terminate and the owner's right to purchase term insurance will terminate. The
amount of Extra Life Protection thereafter will be the sum of positive variable
insurance amount plus any paid-up additions which remain in force.
The following example (using the Policy illustrated on page 55, like the
examples above) shows how the Total Death Benefit would be reduced from
$100,000 to $63,413, by the elimination of $36,587 of term insurance, if
dividends are used during Policy Year 6 to reduce the premium. The premium of
$1,014 would be reduced by the dividend of $118.83, based on the dividend scale
as illustrated, to a net premium of $895.17. The Total Death Benefit during
Policy Year 6 would then be as follows:
<TABLE>
<S> <C>
Minimum Death Benefit .................... $60,000
Variable Insurance Amount ................ +2,025
Variable Paid-Up Additions ............... +1,388
Term Insurance ........................... 0
-------
Total Death Benefit ...................... $63,413
=======
</TABLE>
CASH VALUE
The cash value for the Whole Life Policy, the Extra Ordinary Life Policy and
the Single Premium Life Policy will change daily in response to investment
results. No minimum cash value is guaranteed. Calculation of the cash value for
any date requires three steps. First, the amount shown for the preceding
anniversary in the table of cash values at the front of the Policy is noted and
adjusted for the time elapsed since the last Policy anniversary. The tabular
cash values are based on the assumed net investment rate of 4%, the 1980
Commissioners Standard Ordinary Mortality Table and the deductions from the
premiums. See "Deductions from Premiums for Whole Life and Extra Ordinary Life
Policies", p. 8. For the Single Premium Life Policy the calculation begins with
the adjusted tabular cash value, which reflects the deduction for sales costs
if the Policy is surrendered during the first ten years. See "Deductions for
Single Premium Life Policies", p. 9. Second, the net single premium for the
variable insurance amount is added to the tabular cash value. See the
discussion of net single premiums under "Variable Insurance Amount", p. 11. If
the variable insurance amount is negative, the net single premium is a negative
amount. A table of net single premiums for the insured at each Policy
anniversary is in the Policy. Third, the algebraic sum of the tabular cash
value and the net single premium for the variable insurance amount is adjusted
to reflect investment results from the last Policy anniversary to the date for
which the calculation is being made. The cash value is increased by the value
of any paid-up additions which have been purchased with dividends.
If a portion of the premium for the current Policy year has not been paid,
the cash value of a Whole Life Policy or an Extra Ordinary Life Policy will be
reduced. There is not likely to be any cash value for a Whole Life Policy or an
Extra Ordinary Life Policy during the early part of the first year because of
the first year deductions.
The cash value for the Whole Life Policy, the Extra Ordinary Life Policy
and the Single Premium Life Policy will be reduced by the amount of any Policy
debt outstanding.
The cash value for a Policy is determined at the end of each valuation
period. Each business day, together with any non-business days before it, is a
valuation period. A business day is any day on which the New York Stock
Exchange is open for trading. In accordance with the requirements of the
Investment Company Act of l940, the cash value for a Policy may also be
determined on any other day on which there is sufficient trading in securities
to materially affect the value of the securities held by the Portfolios of the
Fund.
The owner of a Policy may surrender it for the cash value at any time
during the lifetime of the insured. Alternatively, the cash value of a Whole
Life Policy or an Extra Ordinary Life Policy may be applied to provide extended
term insurance or a reduced amount of fixed or variable paid-up insurance. See
"Extended Term and Paid-Up Insurance", p. 16.
The Policies do not include any provision for a partial surrender. By
administrative practice Northwestern Mutual Life will permit the owner of a
Policy to split it into two Policies and surrender one of them, so long as the
new Policy meets the regular minimum size requirements. The Policy which
continues in force will be based on the age and risk classification of the
insured at the time of issuance of the original Policy.
ANNUAL DIVIDENDS
The Policies share in divisible surplus to the extent determined annually
by Northwestern Mutual Life. A Policy's share will be distributed annually as a
dividend payable on each Policy anniversary beginning at the end of the second
year. For Single Premium Life Policies, and some other Policies, the first
distribution will be at the end of the first year. No dividend will be paid on
a Whole Life Policy or an Extra Ordinary Life Policy in force as extended term
insurance.
Dividends under participating policies may be described as refunds of
premiums which adjust the cost of a policy to the actual level of cost emerging
over time after the policy's issue. Thus participating policies generally have
gross
14
<PAGE> 18
premiums which are higher than those for comparable non-participating policies.
Both federal and state tax law recognize that a dividend is considered to be a
refund of a portion of the premium paid.
Dividend illustrations published at the time a life insurance policy is
issued reflect the actual recent experience of the issuing company with respect
to investment earnings, mortality and expenses. State law generally prohibits a
company from projecting or estimating future results. State law also requires
that dividends be paid out of surplus, after certain necessary amounts are set
aside, and that such surplus be apportioned equitably among participating
policies. In summary, dividends must be based on actual experience and cannot
be guaranteed at issue of a policy.
Northwestern Mutual Life's actuary annually examines current and recent
experience and compares these actual results with those which were assumed in
determining premium rates when each class of policies was issued. Classes are
determined by such factors as year of issue, age, plan of insurance and risk
classification. The actuary then determines the amount of dividends to be
equitably apportioned to each class of policies. Following the actuary's
recommendations, the Trustees of Northwestern Mutual Life adopt a dividend
scale each year, thereby authorizing the distribution of the dividend.
Northwestern Mutual Life has no significant actual mortality experience
with variable life insurance policies. For purposes of the current dividend
scale used for the illustrations in this prospectus, it has been assumed that
mortality experience in connection with the Policies will be comparable to that
actually experienced with fixed benefit life insurance.
The prospectus illustrations show dividends being used to purchase variable
paid-up additions. Dividends may also be paid in cash, used to pay premiums or
left to accumulate with interest; but unless all dividends paid on an Extra
Ordinary Life Policy are used to purchase paid-up additions, the term insurance
portion of the Extra Life Protection will be terminated. See "Extra Ordinary
Life Policy", p. 12. Dividends left to accumulate with interest will be held in
the general account of Northwestern Mutual Life and will be credited with a
rate of interest determined annually but not less than an annual effective rate
of 3-l/2%. If a Whole Life Policy or an Extra Ordinary Life Policy is in force
as reduced fixed benefit paid-up insurance, dividends may be used to purchase
fixed benefit paid-up additions. See "Extended Term and Paid-Up Insurance", p.
16.
POLICY LOANS
The owner of a Policy may borrow up to 90% of the Policy's cash value using
the Policy as security. The limit is 75% of the cash value during the first two
Policy years. If a Policy loan is already outstanding, the maximum amount for
any new loan is determined by applying these percentage limitations to the
amount of cash value which the Policy would have if there were no loan. Loan
proceeds may be taken in cash or, for the Whole Life and Extra Ordinary Life
Policies, may be applied to pay premiums on the Policy.
Interest on a Policy loan accrues and is payable on a daily basis. Unpaid
interest is added to the amount of the loan. If the amount of the loan equals
or exceeds the Policy's cash value, the Policy will terminate. The owner will
be given a notice at least 31 days before the termination date. The notice will
show how much must be repaid to keep the Policy in force.
The Policy loan interest rate is selected by the owner. A specified annual
effective rate of 8% is one choice. The other choice is a variable rate based
on a corporate bond yield index. The variable rate will be adjusted annually
and will not be less than 5%.
The amount of a Policy loan, including interest as it accrues, will be
taken from the Account divisions in proportion to the amounts in the divisions.
The amounts withdrawn will be transferred to Northwestern Mutual Life's general
account and will be credited on a daily basis with an annual earnings rate
equal to the Policy loan interest rate less a charge for the mortality and
expense risks assumed by Northwestern Mutual Life and for expenses, including
taxes. The aggregate charge is currently at the annual rate of .85% for the 8%
specified Policy loan interest rate and .85% for the variable Policy loan
interest rate. For example, the earnings rate corresponding to the specified 8%
Policy loan interest rate is currently 7.15%. A Policy loan, even if it is
repaid, will have a permanent effect on the Policy's variable insurance amount
and cash value because the amounts borrowed will not participate in the
Account's investment results while the loan is outstanding. The effect may be
either favorable or unfavorable depending on whether the earnings rate credited
to the loan amount is higher or lower than the rate credited to the unborrowed
amount left in the Account.
For example, using the Policy illustrated on page 54 and the 6%
hypothetical gross rate for the Account (equivalent to a net rate of 4.80%),
and assuming a Policy loan of $3,120 (90% of the cash value) at the end of
Policy year 5, with the 8% Policy loan interest rate (corresponding to a net
earnings rate of 7.15%), the loan will affect the variable insurance amount and
cash value (before subtracting the loan amount and interest) at the end of the
next three Policy years as follows:
15
<PAGE> 19
<TABLE>
<CAPTION>
VARIABLE INSURANCE AMOUNT CASH VALUE
------------------------- ----------
END OF WITHOUT WITH WITHOUT WITH
POLICY YEAR LOAN LOAN LOAN LOAN
----------- --------------------- ---------------
<S> <C> <C> <C> <C>
5 $223 $ 223 $3,467 $3,467
6 $323 $ 545 $4,440 $4,514
7 $440 $ 876 $5,469 $5,621
8 $574 $1,216 $6,556 $6,791
</TABLE>
The difference results from the fact that the earnings rate for the amount
of the loan is 7.15% rather than the net rate of 4.80% for the Account.
A Policy loan, and any accrued interest outstanding, may be repaid, in
whole or in part, at any time. Payments will be credited as of the date
received and will be transferred from the general account of Northwestern
Mutual Life to the Account divisions, in proportion to the amounts in the
divisions, as of the same date.
EXTENDED TERM AND PAID-UP INSURANCE
If a premium for a Whole Life Policy or an Extra Ordinary Life Policy is
not paid within the 31-day grace period (see "Grace Period", p. 8), the owner
may use the cash value to provide a reduced amount of either fixed or variable
benefit paid-up insurance. If neither of these options is chosen, and the
Policy is not surrendered, the insurance will remain in force as extended term
insurance.
If the cash value is used to provide a reduced amount of fixed benefit
paid-up insurance or for extended term insurance the amount of the cash value
will be transferred from the Account to Northwestern Mutual Life's general
account. Thereafter the Policy will not participate in the Account's investment
results unless the Policy is subsequently reinstated. See "Reinstatement",
below. Variable benefit paid-up insurance may be selected only if the Policy
meets a $1,000 cash value minimum test.
The selection of paid-up insurance must be made within three months after
the due date of the first unpaid premium. The amount of paid-up insurance is
determined by the amount of cash value and the age and sex of the insured,
using the table of net single premiums at the attained age. Fixed benefit
paid-up insurance has guaranteed cash and loan values. Paid-up insurance
remains in force for the lifetime of the insured unless the Policy is
surrendered.
If the Policy remains in force as extended term insurance the amount of
insurance will equal the Total Death Benefit prior to the date the premium was
due. The amount of cash value and the age and sex of the insured will determine
how long the insurance continues. Northwestern Mutual Life will, upon request,
tell the owner of a Policy the amount of insurance and how long the term will
be. Extended term insurance is not available if the Policy was issued with a
higher premium for extra mortality risk. Extended term insurance has a cash
value but no loan value.
Using the Policy illustrated on pages 53 and 55 and assuming the 0% and 12%
hypothetical gross rates for the Account, the cash value of $2,965 or $4,039 at
the end of Policy year 5 would provide the following amounts of reduced paid-up
insurance or $100,000 of extended term insurance for the following periods:
<TABLE>
<CAPTION>
0% 12%
-------------------------------------------
<S> <C> <C>
Reduced Paid-up Insurance .......... $9,999 $13,621
Extended Term Insurance ............ 6 Years and 314 Days 8 Years and 362 Days
</TABLE>
REINSTATEMENT
If a premium for a Whole Life Policy or an Extra Ordinary Life Policy is
due and remains unpaid after the grace period expires, the Policy may be
reinstated within five years after the premium due date. The insured must
provide satisfactory evidence of insurability. A substantial payment may be
required. The Policy may not be reinstated if it has been surrendered for its
cash value.
RIGHT TO RETURN POLICY
A Policy may be returned for a full refund of the premium paid within 45
days after the application for insurance is signed, or within 10 days after the
Policy is received, or within 10 days after a Notice of Cancellation Right is
mailed or delivered to the owner, whichever date is latest. The Policy may be
mailed or delivered to the agent who sold it or to the Home Office of
Northwestern Mutual Life. If returned, the Policy will be considered void from
the beginning.
16
<PAGE> 20
RIGHT TO EXCHANGE FOR A FIXED BENEFIT POLICY
The owner may exchange a Policy for a conventional whole life insurance
policy with benefits that do not vary with the investment experience of a
separate account. The exchange may be elected at any time within twenty-four
months after the issue date of the Policy provided premiums are duly paid.
Evidence of insurability is not required.
The new policy will be on the life of the same insured and will have the
same face amount, policy date and issue age. The premiums and cash values will
be the same as those for policies issued by Northwestern Mutual Life on the
issue date of the Policy.
The exchange will be subject to an equitable cash adjustment. The amount
will recognize the difference in premiums and investment performance of the two
policies.
An exchange will be effective when Northwestern Mutual Life receives a
proper written request, as well as the Policy and any amount due on the
exchange.
The owner of a Policy may also exchange it for a fixed benefit policy if
the Fund changes its investment adviser or if there is a material change in the
investment policies of a Fund portfolio. The owner will be given notice of any
such change and will have 60 days to make the exchange.
OTHER POLICY PROVISIONS
OWNER. The owner is identified in the Policy. The owner may exercise all rights
under the Policy while the insured is living. Ownership may be transferred to
another. Written proof of the transfer must be received by Northwestern Mutual
Life at its Home Office.
BENEFICIARY. The beneficiary is the person to whom the death benefit is
payable. The beneficiary is named in the application. After the Policy is
issued the owner may change the beneficiary in accordance with the Policy
provisions.
INCONTESTABILITY. Northwestern Mutual Life will not contest a Policy after it
has been in force during the lifetime of the insured for two years from the
date of issue.
SUICIDE. If the insured dies by suicide within one year from the date of issue,
the amount payable under the Policy will be limited to the premiums paid.
MISSTATEMENT OF AGE OR SEX. If the age or sex of the insured has been
misstated, benefits under a Policy will be adjusted to reflect the correct age
and sex.
COLLATERAL ASSIGNMENT. The owner may assign a Policy as collateral security.
Northwestern Mutual Life is not responsible for the validity or effect of a
collateral assignment and will not be deemed to know of an assignment before
receipt of the assignment in writing at the Home Office.
PAYMENT PLANS. The Policy provides a variety of payment plans for Policy
benefits. Any Northwestern Mutual Life agent authorized to sell the Policies
can explain these provisions on request.
DEFERRAL OF DETERMINATION AND PAYMENT. So long as premiums have been paid when
due, Northwestern Mutual Life will ordinarily pay Policy benefits within seven
days after receipt of all required documents at its Home Office. However,
determination and payment of benefits may be deferred during any period when it
is not reasonably practicable to value securities because the New York Stock
Exchange is closed or an emergency exists or the Securities and Exchange
Commission, by order, permits deferral for the protection of policyowners.
If a Whole Life Policy or an Extra Ordinary Life Policy is continued in
force as extended term or reduced paid-up insurance, Northwestern Mutual Life
has the right to defer payment of the cash value for up to six months from the
date of a Policy loan or surrender. If payment is deferred for 30 days or more
interest will be paid at an annual effective rate of 4%.
VOTING RIGHTS
Northwestern Mutual Life is the owner of the Fund shares in which all
assets of the Account are invested. As the owner of the shares Northwestern
Mutual Life will exercise its right to vote the shares to elect directors of
the Fund, to vote on matters required to be approved or ratified by mutual fund
shareholders under the Investment Company Act of 1940 and to vote on any other
matters that may be presented to any Fund shareholders' meeting. However,
Northwestern Mutual Life will vote the Fund shares held in the Account in
accordance with instructions from owners of the Policies. Northwestern Mutual
Life will vote the Fund shares held in its general account in the same
proportions as the shares for which voting instructions are received. If the
applicable laws or regulations change so as to permit Northwestern Mutual Life
to vote the Fund shares in its own discretion, it may elect to do so.
The number of Fund shares for each division of the Account for which the
owner of a Policy may give instructions is determined by dividing the amount of
the Policy's cash value apportioned to that division, if any, by the per share
value for the corresponding Fund Portfolio. The number will be determined as of
a date chosen by Northwestern Mutual Life, but not more than 90 days before the
Fund shareholders' meeting. Fractional votes are counted. Voting instructions
will be solicited with written materials at least 14 days before the meeting.
Shares as to
17
<PAGE> 21
which no instructions have been received will be voted in the same proportion
as the shares as to which instructions have been received.
Northwestern Mutual Life may, if required by state insurance officials,
disregard voting instructions which would require Fund shares to be voted for a
change in the sub-classification or investment objectives of a Fund Portfolio,
or to approve or disapprove an investment advisory agreement for the Fund.
Northwestern Mutual Life may also disregard voting instructions that would
require changes in the investment policy or investment adviser for the Fund or a
Fund Portfolio, provided that Northwestern Mutual Life reasonably determines to
take this action in accordance with applicable federal law. If Northwestern
Mutual Life disregards voting instructions a summary of the action and reasons
therefor will be included in the next semiannual report to the owners of the
Policies.
SUBSTITUTION OF FUND SHARES AND OTHER CHANGES
If, in the judgment of Northwestern Mutual Life, a Fund Portfolio becomes
unsuitable for continued use with the Policies because of a change in
investment objectives or restrictions, shares of another Portfolio or another
mutual fund may be substituted. Any substitution of shares will be subject to
any required approval of the Securities and Exchange Commission, the Wisconsin
Commissioner of Insurance or other regulatory authority. Northwestern Mutual
Life has also reserved the right, subject to applicable federal and state law,
to operate the Account or any of its divisions as a management company under
the Investment Company Act of 1940, or in any other form permitted, or to
terminate registration of the Account if registration is no longer required,
and to change the provisions of the Policies to comply with any applicable
laws.
REPORTS
For each Policy year (unless a Whole Life Policy or an Extra Ordinary Life
Policy is in force as extended term or fixed benefit paid-up insurance) the
owner of a Policy will receive a statement showing the death benefit, cash
value and any Policy loan (including interest charged) as of the anniversary
date. Owners will also receive annual and semiannual reports for the Account
and the Fund, including financial statements.
SPECIAL POLICY FOR EMPLOYERS
The premium for the standard Policy is based in part on the sex of the
insured. The standard annuity rates for payment plans which last for the
lifetime of the payee are also based, in part, on the sex of the payee. For
certain situations where the insurance involves an employer sponsored benefit
plan or arrangement, federal law and the laws of certain states may require
that premiums and annuity rates be determined without regard to sex. Special
Whole Life Policies, Extra Ordinary Life Policies and Single Premium Life
Policies are available for this purpose. Prospective purchasers of the Policies
are urged to review any questions in this area with qualified counsel.
DISTRIBUTION OF THE POLICIES
The Policies will be sold through individuals who, in addition to being
licensed life insurance agents of Northwestern Mutual Life, are registered
representatives of Northwestern Mutual Investment Services, Inc. ("NMIS"), a
wholly-owned subsidiary of Northwestern Mutual Life. NMIS is a registered
broker-dealer under the Securities Exchange Act of 1934 and is a member of the
National Association of Securities Dealers.
Commissions paid to the agents on sales of the Whole Life and Extra
Ordinary Life Policies will not exceed 55% of the premium for the first year,
9% of the premium for the second and third years, 6% of the premium for the
fourth through seventh years and 3% of the premium for the eighth through tenth
years. Thereafter a persistency fee of 2% of premiums may be paid to the agent.
For the Single Premium Life Policies commissions are 2-3/4% of the premium.
Agents who meet certain productivity and persistency standards receive
additional compensation. New agents may be paid differently during a training
period. General agents and district agents who are registered representatives
of NMIS and have supervisory responsibility for sales of the Policies receive
commission overrides and other compensation.
TAX TREATMENT OF POLICY BENEFITS
The Policies are "life insurance contracts" as that term is defined in
sections 7702 and 817(h) of the Internal Revenue Code. Increases in cash value
under a Policy are not taxable until actual surrender of the Policy. Upon
surrender, the amount received is taxable at ordinary income rates under
section 72(e) of the Code to the extent it exceeds the amount of the premiums
paid under the Policy less any dividends or other amounts previously received
tax-free (basis of the Policy). Death benefits are excludable from the
beneficiary's gross income under section l0l(a) of the Code.
Northwestern Mutual Life believes that loans received under the Policies
(except certain Single Premium Life Policies) will be construed as indebtedness
of an owner in the same manner as loans under a fixed benefit life insurance
policy and that no part of any loan under a Policy will constitute income to
the owner.
18
<PAGE> 22
For Single Premium Life Policies issued after June 20, 1988, partial
withdrawals, Policy loans and dividends paid in cash are taxable as income to
the extent the cash value of the Policy exceeds the basis of the Policy. The
taxable portion of these distributions would also be subject to a 10% penalty
if received prior to age 59 1/2, disability or annuitization. For purposes of
determining taxable income, all Single Premium Life Policies (including any
fixed dollar single premium policies or other modified endowment contracts
under Section 7702A) issued by Northwestern Mutual Life to the Policy owner
during the same calendar year are aggregated.
Federal estate and state and local estate, inheritance and other tax
consequences of ownership or receipt of Policy proceeds depend upon the
circumstances of each Policy owner or beneficiary.
The foregoing summary does not purport to be complete or to cover all
situations. Counsel and other competent advisers should be consulted for more
complete information.
OTHER INFORMATION
MANAGEMENT
Northwestern Mutual Life is managed by a Board of Trustees. The Trustees
and senior officers of Northwestern Mutual Life and their positions including
Board committee memberships, and their principal occupations, are as follows:
TRUSTEES
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATION DURING LAST FIVE YEARS
- ---- -------------------------------------------
<S> <C>
R. Quintus Anderson (A, IF) .................................... Chairman, The Aarque Companies, Jamestown, NY
(diversified metal products manufacturing)
Edward E. Barr (HR) ............................................ President and Chief Executive Officer, Sun Chemical
Corporation, Fort Lee, New Jersey (graphic arts);
and President and Chief Executive Officer, DIC
Americas, Inc., Fort Lee, NJ
Gordon T. Beaham, III (A, IF) .................................. Chairman of the Board and President, Faultless
Starch/Bon Ami Company, Kansas City, MO (consumer
products manufacturer)
Frank H. Bertsch (IP) .......................................... Chairman of the Executive Committee, Flexsteel
Industries, Inc., Dubuque, IA (upholstered
furniture)
Robert C. Buchanan (E, F, IF) .................................. President and Chief Executive Officer, Fox Valley
Corporation, Appleton, WI (manufacturer of gift wrap
and writing paper)
Robert E. Carlson (E) .......................................... Executive Vice President of Northwestern Mutual Life
Thomas I. Dolan (HR) ........................................... Retired since 1992; prior thereto, Chairman, A. O.
Smith Corporation, Milwaukee, WI
George A. Dickerman (IP) ....................................... President, Spalding Sports Worldwide, Chicopee, MA
(manufacturer of sporting equipment)
Pierre S. du Pont (IP) ......................................... Attorney, Richards, Layton and Finger, Wilmington,
DE
James D. Ericson (E, F, HR, IF, IP) ............................ President and Chief Executive Officer of
Northwestern Mutual Life since 1993; President and
Chief Operating Officer, 1991-1993; prior thereto,
President
J. E. Gallegos (A, IF) ......................................... Attorney at Law; President, Gallegos Law Firm, Santa
Fe, New Mexico
Patricia Albjerg Graham (IP) ................................... Professor, Graduate School of Education, Harvard
University, Cambridge, MA, and President, The
Spencer Foundation (social and behavioral sciences)
</TABLE>
19
<PAGE> 23
<TABLE>
<S> <C>
Richard H. Holton (IP) .......................................... Professor Emeritus, Haas School of Business
Administration, University of California, Berkeley,
CA
Stephen F. Keller (A, IF) ....................................... Chairman, Santa Anita Realty Enterprises since 1992;
prior thereto, President, Santa Anita Operating
Company, Arcadia, CA (thoroughbred racing and real
estate investments) and Attorney at Law, Fulbright &
Jaworski, Los Angeles, CA
J. Thomas Lewis (HR) ............................................ Attorney, Monroe & Lemann, New Orleans, LA
Fred G. Luber (E, F, IF) ........................................ Chairman and Chief Executive Officer, Super Steel
Products Corp., Milwaukee, WI
Daniel F. McKeithan, Jr. (E, F, HR) ............................. President, Tamarack Petroleum Company, Inc.,
Milwaukee, WI (operator of oil and gas wells);
President, Active Investor Management, Inc.,
Milwaukee, WI
Guy A. Osborn (E, F, IF) ........................................ Chairman and Chief Executive Officer of Universal
Foods Corporation, Milwaukee, WI
Donald J. Schuenke (E, F, HR, IF, IP) ........................... Retired since 1994; Chairman of Northwestern Mutual
Life, 1993-1994; Chairman and Chief Executive
Officer, 1990-1993; prior thereto, President and
Chief Executive Officer
H. Mason Sizemore, Jr. (IP) ..................................... President and Chief Operating Officer, The Seattle
Times, Seattle, WA (publishing)
Harold B. Smith (IP) ............................................ Chairman, Executive Committee, Illinois Tool Works,
Inc., Chicago, IL (engineered components and
industrial systems and consumables)
Sherwood H. Smith, Jr. (IP) ..................................... Chairman of the Board and Chief Executive Officer of
Carolina Power & Light since 1992; prior thereto,
Chairman, President and Chief Executive Officer
John E. Steuri (HR) ............................................. Chairman and Chief Executive Officer of ALLTEL
Information Services, Inc., Little Rock, AR
(application software)
John J. Stollenwerk (E, F, IF) .................................. President and Owner, Allen-Edmonds Shoe Corporation,
Port Washington, WI
Barry L. Williams (HR) .......................................... President and Chief Executive Officer, C.N. Flagg
Power, Inc., Meriden, CT (construction services for
electric power plants) and President, Williams
Pacific Ventures, Inc., Redwood City, CA (venture
capital)
Kathryn D. Wriston (A, IF) ...................................... Director of various corporations, New York, NY
</TABLE>
<TABLE>
<S> <C>
A-Member, Audit Committee HR-Member, Human Resources and Public Policy Committee
E-Member, Executive Committee IF-Member, Investment and Finacial Policy Committee
F-Member, Finance Committee IP-Member, Insurance Product and Marketing Committee
</TABLE>
20
<PAGE> 24
SENIOR OFFICERS (OTHER THAN TRUSTEES)
<TABLE>
<CAPTION>
POSITION WITH
NAME NORTHWESTERN MUTUAL LIFEE
-----------------------------------------------------------
<S> <C>
Peter W. Bruce Exeuctive Vice President
Edward J. Zore Executive Vice President
Deborah A. Beck Senior Vice President
John M. Bremer Senior Vice President,
General Counsel and
Secretary
Mark G. Doll Senior Vice President
James W. Ehrenstrom Senior Vice President
Richard L. Hall Senior Vice President
William C. Koenig Senior Vice President
and Chief Actuary
Mason G. Ross Senior Vice President
Frederic H. Sweet Senior Vice President
Dennis Tamcsin Senior Vice President
Walter J. Wojcik Senior Vice President
Gary E. Long Vice President and
Controller
</TABLE>
REGULATION
Northwestern Mutual Life is subject to the laws of Wisconsin governing
insurance companies and to regulation by the Wisconsin Commissioner of
Insurance. An annual statement in a prescribed form is filed with the
Department of Insurance on or before March 1 in each year covering operations
for the preceding year and including financial statements. Regulation by the
Wisconsin Insurance Department includes periodic examination to determine
solvency and compliance with insurance laws. Northwestern Mutual Life is also
subject to the insurance laws and regulations of the other jurisdictions in
which it is licensed to operate.
LEGAL PROCEEDINGS
Northwestern Mutual Life is engaged in litigation of various kinds which in
its judgment is not of material importance in relation to its total assets.
There are no legal proceedings pending to which the Account is a party.
REGISTRATION STATEMENT
A registration statement has been filed with the Securities and Exchange
Commission, Washington, D.C. by Northwestern Mutual Life under the Securities
Act of 1933, as amended, with respect to the Policies. This prospectus does not
contain all the information set forth in the registration statement. A copy of
the omitted material is available from the main office of the SEC in
Washington, D.C. upon payment of the prescribed fee. Further information about
the Policies is also available from the Home Office of Northwestern Mutual
Life. The address and telephone number are on the cover of this prospectus.
EXPERTS
The financial statements of Northwestern Mutual Life as of December 31,
1995 and 1994 and for each of the three years in the period ended December 31,
1995 and of the Account as of December 31, 1995 and for each of the two years
in the period ended December 31, 1995 included in this prospectus have been so
included in reliance on the reports of Price Waterhouse LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting. Actuarial matters included in this prospectus have been examined by
William C. Koenig, F.S.A., Senior Vice President and Chief Actuary of
Northwestern Mutual Life. His opinion is filed as an exhibit to the
registration statement.
21
<PAGE> 25
[PRICE WATERHOUSE LLP LETTERHEAD]
REPORT OF INDEPENDENT ACCOUNTANTS
To The Northwestern Mutual Life Insurance Company and
Policyowners of Northwestern Mutual Variable Life Account
In our opinion, the accompanying combined statement of assets and liabilities
and the related combined and separate statements of operations and changes in
equity present fairly, in all material respects, the financial position of
Northwestern Mutual Variable Life Account and the Index 500 Stock Division,
Growth Stock Division, Growth and Income Stock Division, Aggressive Growth Stock
Division, International Equity Division, Select Bond Division, High Yield Bond
Division, Money Market Division, and Balanced Division thereof at December 31,
1995, the results of their operations and the changes in their equity for the
year then ended and for each of the other periods presented, all in conformity
with generally accepted accounting principles. These financial statements are
the responsibility of the Northwestern Mutual Life Insurance Company's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
direct confirmation of the number of shares owned at December 31, 1995 with
Northwestern Mutual Series Fund, Inc. provide a reasonable basis for the opinion
expressed above.
PRICE WATERHOUSE LLP
Milwaukee, Wisconsin
January 24, 1996
22
<PAGE> 26
NORTHWESTERN MUTUAL VARIABLE LIFE ACCOUNT
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1995
(IN THOUSANDS)
<TABLE>
<S> <C> <C>
ASSETS
Investments at Market Value:
Northwestern Mutual Series Fund, Inc.
Index 500 Stock
21,188 shares (cost $28,990)....................................................... $ 36,486
Growth Stock
4,799 shares (cost $5,179)......................................................... 6,061
Growth and Income Stock
6,992 shares (cost $7,501)......................................................... 8,467
Aggressive Growth Stock
6,461 shares (cost $13,786)........................................................ 17,885
International Equity
10,696 shares (cost $13,371)....................................................... 14,493
Select Bond
3,873 shares (cost $4,466)......................................................... 4,756
High Yield Bond
2,092 shares (cost $2,159)......................................................... 2,147
Money Market
6,919 shares (cost $6,919)......................................................... 6,919
Balanced
54,660 shares (cost $72,775)....................................................... 87,675 $184,889
--------
Due from Sale of Fund Shares........................................................................ 47
Due from Northwestern Mutual Life Insurance Company................................................. 199
--------
Total Assets............................................................................... $185,135
========
LIABILITIES
Due to Northwestern Mutual Life Insurance Company................................................... $ 47
Due on Purchase of Fund Shares...................................................................... 199
--------
Total Liabilities.......................................................................... 246
--------
EQUITY (Note 8)
Policies Issued Before October 11, 1995............................................................. 181,627
Policies Issued On or After October 11, 1995........................................................ 3,262
--------
Total Equity............................................................................... 184,889
--------
Total Liabilities and Equity...................................................................... $185,135
========
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements
23
<PAGE> 27
NORTHWESTERN MUTUAL LIFE VARIABLE LIFE ACCOUNT
STATEMENT OF OPERATIONS AND CHANGES IN EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
INDEX 500
COMBINED STOCK DIVISION GROWTH STOCK DIVISION#
-------------------- ------------------ ----------------------------
EIGHT MONTHS
YEAR ENDED YEAR ENDED YEAR ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
-------------------- ------------------ ------------ ------------
1995 1994 1995 1994 1995 1994
-------- -------- ------- ------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividend Income................................... $ 4,153 $ 2,062 $ 282 $ 611 $ 188 $ 34
Mortality and Expense Risks....................... 736 510 141 103 21 5
Taxes............................................. 314 219 60 44 9 2
-------- -------- ------- ------- ------ ------
Net Investment Income............................. 3,103 1,333 81 464 158 27
-------- -------- ------- ------- ------ ------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Realized Gain on Investments...................... 1,300 14 339 543 16 3
Unrealized Appreciation (Depreciation) of
Investments During the Year..................... 30,929 (1,493) 8,323 (907) 906 (25)
-------- -------- ------- ------- ------ ------
Net Gain (Loss) on Investments.................... 32,229 (1,479) 8,662 (364) 922 (22)
-------- -------- ------- ------- ------ ------
Increase (Decrease) in Equity Derived from
Investment Activity............................. 35,332 (146) 8,743 100 1,080 5
-------- -------- ------- ------- ------ ------
EQUITY TRANSACTIONS
Policyowners' Net Payments........................ 51,813 38,517 11,096 12,089 2,327 696
Policy Loans, Surrenders, and Death Benefits...... (10,909) (7,695) (2,239) (2,126) (251) (51)
Mortality and Other (net)......................... (9,537) (6,812) (2,021) (2,221) (427) (112)
Transfers from Other Divisions.................... 12,075 18,069 1,623 941 1,048 1,976
Transfers to Other Divisions...................... (12,075) (18,069) (2,683) (6,161) (186) (44)
-------- -------- ------- ------- ------ ------
Increase in Equity Derived from Equity
Transactions...................................... 31,367 24,010 5,776 2,522 2,511 2,465
-------- -------- ------- ------- ------ ------
Net Increase in Equity.............................. 66,699 23,864 14,519 2,622 3,591 2,470
Equity
Beginning of Year................................. 118,190 94,326 21,967 19,345 2,470 0
-------- -------- ------- ------- ------ ------
End of Year....................................... $184,889 $118,190 $36,486 $21,967 $6,061 $2,470
======== ======== ======= ======= ====== ======
</TABLE>
# The initial investments in the Aggressive Growth Stock, International Equity,
Growth Stock and Growth and Income Stock, Divisions were made on May 3, 1994.
The Accompanying Notes are an Integral Part of the Financial Statements
24
<PAGE> 28
NORTHWESTERN MUTUAL VARIABLE LIFE ACCOUNT
STATEMENT OF OPERATIONS AND CHANGES IN EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
GROWTH & INCOME AGGRESSIVE GROWTH INTERNATIONAL EQUITY SELECT BOND
STOCK DIVISION# STOCK DIVISION# DIVISION# DIVISION
----------------------------- ----------------------------- ----------------------------- ------------
EIGHT MONTHS EIGHT MONTHS EIGHT MONTHS
YEAR ENDED ENDED YEAR ENDED ENDED YEAR ENDED ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
------------ ------------ ------------ ------------ ------------ ------------ ------------
1995 1994 1995 1994 1995 1994 1995
------------ ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
$ 496 $ 62 $ 54 $ 1 $ 67 $ 170 $ 110
30 7 57 12 52 13 20
13 3 24 5 22 6 9
------ ------ ------- ------ ------- ------ ------
453 52 (27) (16) (7) 151 81
------ ------ ------- ------ ------- ------ ------
25 1 58 11 2 1 13
1,057 (90) 3,798 301 1,389 (267) 596
------ ------ ------- ------ ------- ------ ------
1,082 (89) 3,856 312 1,391 (266) 609
------ ------ ------- ------ ------- ------ ------
1,535 (37) 3,829 296 1,384 (115) 690
------ ------ ------- ------ ------- ------ ------
3,211 1,307 6,744 2,044 6,472 2,308 1,230
(388) (37) (830) (144) (634) (109) (311)
(611) (159) (1,184) (316) (1,156) (362) (234)
1,329 2,731 3,476 4,412 2,112 5,376 335
(312) (102) (368) (74) (750) (33) (513)
------ ------ ------- ------ ------- ------ ------
3,229 3,740 7,838 5,922 6,044 7,180 507
------ ------ ------- ------ ------- ------ ------
4,764 3,703 11,667 6,218 7,428 7,065 1,197
3,703 0 6,218 0 7,065 0 3,559
------ ------ ------- ------ ------- ------ ------
$8,467 $3,703 $ 17,885 $6,218 $ 14,493 $7,065 $4,756
====== ====== ======= ====== ======= ====== ======
<CAPTION>
1994
------------
<S> <C>
$ 195
17
7
------
171
------
11
(288)
------
(277)
------
(106)
------
1,286
(250)
(229)
322
(896)
------
233
------
127
3,432
------
$3,559
======
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements
25
<PAGE> 29
NORTHWESTERN MUTUAL LIFE VARIABLE LIFE ACCOUNT
STATEMENT OF OPERATIONS AND CHANGES IN EQUITY (CONTINUED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
MONEY MARKET
HIGH YIELD BOND DIVISION# DIVISION BALANCED DIVISION
---------------------------- ----------------- ------------------
EIGHT MONTHS
YEAR ENDED ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
------------ ------------ ----------------- ------------------
1995 1994 1995 1994 1995 1994
------------ ------------ ------- ------ ------- -------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividend Income................................. $ 183 $ 52 $ 252 $ 127 $ 2,521 $ 810
Mortality and Expense Risks..................... 8 2 22 15 385 336
Taxes........................................... 3 1 9 7 165 144
------ ---- ------- ------ ------- -------
Net Investment Income........................... 172 49 221 105 1,971 330
------ ---- ------- ------ ------- -------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Realized Gain (Loss) on Investments............. 8 2 -- -- 839 (558)
Unrealized Appreciation (Depreciation) of
Investments During the Year................... 29 (41) -- -- 14,831 (176)
------ ---- ------- ------ ------- -------
Net Gain (Loss) on Investments.................. 37 (39) 0 0 15,670 (734)
------ ---- ------- ------ ------- -------
Increase (Decrease) in Equity Derived from
Investment Activity........................... 209 10 221 105 17,641 (404)
------ ---- ------- ------ ------- -------
EQUITY TRANSACTIONS
Policyowners' Net Payments...................... 761 327 4,335 847 15,637 17,613
Policy Loans, Surrenders, and Death Benefits.... (113) (33) (285) (102) (5,858) (4,843)
Mortality and Other (net)....................... (149) (43) (645) (101) (3,110) (3,269)
Transfers from Other Divisions.................. 687 746 1,210 1,271 255 294
Transfers to Other Divisions.................... (181) (74) (1,738) (856) (5,344) (9,829)
------ ---- ------- ------ ------- -------
Increase (Decrease) in Equity
Derived from Equity Transactions................ 1,005 923 2,877 1,059 1,580 (34)
------ ---- ------- ------ ------- -------
Net Increase (Decrease) in Equity................. 1,214 933 3,098 1,164 19,221 (438)
Equity
Beginning of Year............................... 933 0 3,821 2,657 68,454 68,892
------ ---- ------- ------ ------- -------
End of Year..................................... $2,147 $933 $ 6,919 $3,821 $87,675 $68,454
====== ==== ======= ====== ======= =======
</TABLE>
# The initial investment in the High Yield Bond Division was made on May 3,
1994.
The Accompanying Notes are an Integral Part of the Financial Statements
26
<PAGE> 30
NORTHWESTERN MUTUAL VARIABLE LIFE ACCOUNT
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
Note 1 -- Northwestern Mutual Variable Life Account (the "Account") is
registered as a unit investment trust under the Investment Company Act of 1940
and is a segregated asset account of The Northwestern Mutual Life Insurance
Company ("Northwestern Mutual Life") used to fund variable life insurance
policies.
Note 2 -- The preparation of the financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. Principal
accounting policies are summarized below.
Note 3 -- All assets of each Division of the Account are invested in shares of
the corresponding Portfolio of Northwestern Mutual Series Fund, Inc. (the
"Fund"). The shares are valued at the Fund's offering and redemption price per
share. The Northwestern Mutual Series Fund, Inc. is a diversified open-end
investment company registered under the Investment Company Act of 1940.
Note 4 -- Dividend income from the Fund is recorded on the record date of the
dividends. Transactions in Fund shares are accounted for on the trade date. The
basis for determining cost on sale of Fund shares is identified cost. Purchases
and sales of Fund shares for the year ended December 31, 1995 by each Division
are shown below:
<TABLE>
<CAPTION>
PURCHASES SALES
---------- ----------
<S> <C> <C>
Index 500 Stock Division... $7,647,806 $1,791,915
Growth Stock Division...... 2,801,914 133,145
Growth and Income Stock
Division................. 3,878,903 196,027
Aggressive Growth
Division................. 8,108,022 297,582
International Equity
Division................. 6,376,605 340,068
Select Bond Division....... 1,089,897 502,097
High Yield Bond Division... 1,356,905 180,453
Money Market Division...... 4,225,873 1,129,062
Balanced Division.......... 7,958,842 4,407,732
</TABLE>
Note 5 -- A deduction for mortality and expense risks is determined daily and
paid to Northwestern Mutual Life. Generally, for policies issued before October
11, 1995, and policies issued on or after October 11, 1995 the deduction is at
an annual rate of .50% and .60%, respectively, of the net assets of the Account.
The mortality risk is that insureds may not live as long as estimated. The
expense risk is that expenses of issuing and administering the policies may
exceed the estimated costs.
Certain deductions are also made from the annual or single premiums before
amounts are allocated to the Account. These deductions are for (1) sales load,
(2) administrative expenses, (3) taxes and (4) a risk charge for the guaranteed
minimum death benefit.
Additional mortality costs are deducted from the policy annually and are paid to
Northwestern Mutual Life to cover the cost of providing insurance protection.
This cost is actuarially calculated based upon the insured's age, the 1980
Commissioners Standard Ordinary Mortality Table and the amount of insurance
provided under the policy.
Note 6 -- Northwestern Mutual Life is taxed as a "life insurance company" under
the Internal Revenue Code. The variable life insurance policies which are funded
in the Account are taxed as part of the operations of Northwestern Mutual Life.
Policies provide that a charge for taxes may be made against the assets of the
Account. Generally, for policies issued before October 11, 1995, Northwestern
Mutual Life charges the Account at an annual rate of .20% of the Account's net
assets and reserves the right to increase, decrease or eliminate the charge for
taxes in the future. Generally, for policies issued on or after October 11,
1995, there is no charge being made against the assets of the Account for
federal income taxes, but Northwestern Mutual Life reserves the right to charge
for taxes in the future.
Note 7 -- The Account is credited for the policyowners' net annual premiums at
the respective policy anniversary dates regardless of when policyowners actually
pay their premiums. Northwestern Mutual Life's equity represents any unpaid
portion of net annual premiums.
27
<PAGE> 31
NORTHWESTERN MUTUAL VARIABLE LIFE ACCOUNT
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1995
(IN THOUSANDS)
Note 8 -- Equity Values by Division are shown below:
<TABLE>
<CAPTION>
POLICIES ISSUED
BEFORE OCTOBER 11, 1995
EQUITY OF
------------------------- TOTAL
POLICYOWNERS NML EQUITY
------------ ------- --------
<S> <C> <C> <C>
Index 500 Stock Division........................................ $ 31,239 $ 4,970 $ 36,209
Growth Stock Division........................................... 4,863 1,121 5,984
Growth and Income Stock Division................................ 6,823 1,571 8,394
Aggressive Growth Stock Division................................ 14,420 3,212 17,632
International Equity Division................................... 11,376 3,009 14,385
Select Bond Division............................................ 4,198 534 4,732
High Yield Bond Division........................................ 1,767 368 2,135
Money Market Division........................................... 4,148 363 4,511
Balanced Division............................................... 80,975 6,670 87,645
-------- ------- --------
$159,809 $21,818 $181,627
======== ======= ========
</TABLE>
<TABLE>
<CAPTION>
POLICIES ISSUED
ON OR AFTER OCTOBER 11,
1995
EQUITY OF
------------------------- TOTAL
POLICYOWNERS NML EQUITY
------------ ------- --------
<S> <C> <C> <C>
Index 500 Stock Division........................................ $ 6 $ 270 $ 276
Growth Stock Division........................................... 1 76 77
Growth and Income Stock Division................................ 3 71 74
Aggressive Growth Stock Division................................ 18 235 253
International Equity Division................................... 4 104 108
Select Bond Division............................................ (1) 25 24
High Yield Bond Division........................................ (1) 13 12
Money Market Division........................................... 152 2,256 2,408
Balanced Division............................................... (2) 32 30
-------- ------- --------
$ 180 $ 3,082 $ 3,262
======== ======= ========
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements
28
<PAGE> 32
NORTHWESTERN MUTUAL LIFE
INSURANCE COMPANY AND SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS
The following financial statements of Northwestern Mutual should be
considered only as bearing upon the ability of Northwestern Mutual
Life to meet its obligations under the Policies.
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(In millions)
<TABLE>
<CAPTION>
ASSETS
- ------ December 31,
------------------------
1995 1994
<S> <C> <C>
BONDS
United States Government $ 3,282 $ 3,501
Industrial and other 22,236 19,232
------- -------
25,518 22,733
------- -------
STOCKS
Common 2,894 2,192
Unconsolidated subsidiaries 531 504
Preferred 546 511
------- -------
3,971 3,207
------- -------
MORTGAGE LOANS 8,429 7,099
REAL ESTATE
Investment 1,294 1,072
Home office 135 141
------- -------
1,429 1,213
------- -------
LOANS ON POLICIES 6,476 6,144
OTHER INVESTMENTS 1,341 1,301
CASH AND TEMPORARY INVESTMENTS 544 803
DUE AND ACCRUED INVESTMENT
INCOME 721 650
------- -------
Total invested assets 48,429 43,150
------- -------
SEPARATE ACCOUNT BUSINESS 5,000 3,806
OTHER ASSETS 1,447 1,156
------- -------
Total Assets $54,876 $48,112
======= =======
</TABLE>
The accompanying notes are an integral
part of the financial statements
29
<PAGE> 33
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(In millions)
<TABLE>
<CAPTION>
LIABILITIES AND RESERVES December 31,
- ------------------------ ----------------------------------------
1995 1994
------------------- ---------------
<S> <C> <C>
LIABILITY FOR POLICY BENEFITS
Insurance and annuity reserves $39,545 $36,124
Policy benefits left
for future payments 972 866
Premium deposits 427 419
Policy benefits in
process of payment 137 138
Policyowner dividends
payable 2,115 1,950
------- -------
43,196 39,497
------- -------
OTHER LIABILITIES
Interest maintenance reserve 281 11
Income taxes 895 561
Miscellaneous 1,336 822
------- -------
2,512 1,394
------- -------
SEPARATE ACCOUNT BUSINESS 5,000 3,806
------- -------
ASSET VALUATION RESERVE 1,382 1,190
------- -------
Total liabilities and
asset valuation reserve 52,090 45,887
------- -------
GENERAL CONTINGENCY RESERVE 2,786 2,225
------- -------
Total Liabilities and
Contingency Reserves $54,876 $48,112
======= =======
</TABLE>
The accompanying notes are an integral
part of the financial statements
30
<PAGE> 34
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
CONSOLIDATED SUMMARY OF OPERATIONS
(In millions)
<TABLE>
<CAPTION>
For the year ended
December 31,
--------------------------------------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
INCOME
PREMIUMS $ 6,196 $5,743 $5,295
NET INVESTMENT INCOME 3,673 3,106 2,913
POLICY BENEFITS LEFT WITH COMPANY
AND OTHER INCOME 733 636 570
------- ------ ------
Total income 10,602 9,485 8,778
------- ------ ------
DISPOSITION OF INCOME
COSTS
Agents' compensation 508 492 487
Other insurance costs 398 334 361
Premium and other taxes or assessments 120 120 116
------- ------ ------
1,026 946 964
------- ------ ------
BENEFITS TO POLICYOWNERS AND BENEFICIARIES
Death benefits 655 609 526
Matured endowments 48 54 44
Annuity benefits 92 94 85
Disability benefits 174 151 126
Surrender benefits 1,375 904 837
Payments from policy benefits
left with Company 590 568 498
Net transfers to separate accounts 236 344 302
Net additions to policy reserves 3,506 3,313 3,078
------- ------ ------
6,676 6,037 5,496
------- ------ ------
Total disposition of income 7,702 6,983 6,460
------- ------ ------
SAVINGS FROM OPERATIONS BEFORE
INCOME TAXES AND DIVIDENDS 2,900 2,502 2,318
INCOME TAX EXPENSE 467 281 208
------- ------ ------
SAVINGS FROM OPERATIONS BEFORE DIVIDENDS 2,433 2,221 2,110
POLICYOWNER DIVIDENDS 2,111 1,942 1,780
------- ------ ------
NET SAVINGS FROM OPERATIONS 322 279 330
NET REALIZED CAPITAL GAINS, LESS TAX
EXPENSE OF $98, $85 AND $82, RESPECTIVELY 137 119 180
------- ------ ------
CONTRIBUTION TO GENERAL CONTINGENCY
RESERVE FROM OPERATIONS $ 459 $ 398 $ 510
======= ====== ======
</TABLE>
The accompanying notes are an integral
part of the financial statements
31
<PAGE> 35
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENT OF GENERAL CONTINGENCY RESERVE
(In millions)
<TABLE>
<CAPTION>
For the year ended
December 31,
--------------------------------------------
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
BEGINNING OF YEAR BALANCE $2,225 $2,030 $1,850
Contribution to general contingency
reserve from operations 459 398 510
Net unrealized capital gains (losses) 373 (242) (89)
Change in asset valuation reserve (192) 37 (157)
Other - net (79) 2 (84)
------ ------ -----
END OF YEAR BALANCE $2,786 $2,225 $2,030
====== ====== ======
</TABLE>
The accompanying notes are an integral
part of the financial statements
32
<PAGE> 36
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS
(In millions)
<TABLE>
<CAPTION>
For the year ended
December 31,
---------------------------------------------
1995 1994 1993
---------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Insurance premiums, annuities and other
considerations $ 6,864 $ 6,299 $ 5,777
Net investment income received 3,480 3,013 2,813
Net loans on policies (331) (297) (143)
Benefits paid to policyholders and
beneficiaries (2,939) (2,357) (2,116)
Net transfers to separate accounts (236) (344) (302)
Policyowner dividends paid (1,945) (1,777) (1,759)
Expenses and taxes (1,279) (1,033) (1,135)
Other - net 381 89 (81)
------- ------- -------
NET CASH PROVIDED BY OPERATING
ACTIVITIES 3,995 3,593 3,054
CASH FLOWS FROM INVESTING ACTIVITIES
PROCEEDS FROM INVESTMENTS SOLD OR MATURED
Bonds 25,317 27,096 20,221
Stocks 2,465 1,469 1,122
Mortgage loans 431 512 394
Real estate 48 164 43
Other invested assets 149 213 132
Capital gain (tax) benefit (85) 28 (124)
------- ------- -------
28,325 29,482 21,788
COST OF INVESTMENTS ACQUIRED
Bonds 27,596 29,674 22,393
Stocks 2,562 1,606 1,288
Mortgage loans 1,883 1,356 970
Real estate 202 6 46
Other invested assets 336 413 152
------- ------- -------
32,579 33,055 24,849
NET CASH USED IN INVESTING ACTIVITIES (4,254) (3,573) (3,061)
------- ------- -------
NET (DECREASE) INCREASE IN CASH AND
TEMPORARY INVESTMENTS (259) 20 (7)
CASH AND TEMPORARY INVESTMENTS, BEGINNING
OF YEAR 803 783 790
------- ------- -------
CASH AND TEMPORARY INVESTMENTS, END OF YEAR $ 544 $ 803 $ 783
======= ======= =======
</TABLE>
The accompanying notes are an integral
part of the financial statements
33
<PAGE> 37
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
NOTE 1 - PRINCIPAL ACCOUNTING POLICIES
The accompanying consolidated financial statements include the accounts of The
Northwestern Mutual Life Insurance Company (the "Company") and its wholly-owned
life insurance subsidiary. The Company offers life, annuity and disability
income products to the personal, business, estate and tax-qualified markets.
The consolidated financial statements have been prepared using accounting
policies prescribed or permitted by the Insurance Departments of the states in
which the Company and its subsidiary are domiciled. These policies are
considered generally accepted accounting principles for mutual life insurance
companies. The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
In April 1993, the Financial Accounting Standards Board issued Interpretation
No. 40, "Applicability of Generally Accepted Accounting Principles to Mutual
Life Insurance and Other Enterprises," which establishes a different definition
of generally accepted accounting principles for mutual life insurance
companies. Under the Interpretation, financial statements of mutual life
insurance companies for periods beginning after December 15, 1995 which are
prepared on the basis of statutory accounting will no longer be characterized
as in conformity with generally accepted accounting principles.
In order to continue to present financial statements in accordance with
generally accepted accounting principles for general purpose distribution in
1996, the Company is considering presenting its financial statements in
accordance with the requirements of the Interpretation. Management believes
that financial statements prepared on this basis would result in an increase to
its general contingency reserve. The effects of this change in accounting
basis would be reported retroactively through restatement beginning with the
earliest year presented.
INVESTMENTS
The Company's investments are valued on the following bases:
Bonds - Amortized cost using the interest method; loan-
backed and structured securities are amortized
using estimated prepayment rates and the
prospective adjustment method.
Common Stocks - Market value
34
<PAGE> 38
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
Preferred Stocks - Cost
Unconsolidated Subsidiaries - Equity in subsidiaries' net
assets
Mortgage Loans - Amortized cost
Investment Real Estate - Lower of cost, less
depreciation and encumbrances,
or estimated net realizable
value
Home Office Real Estate - Cost, less depreciation
Loans on Policies - Cost
Other Investments - Joint Ventures - Lower of equity in or market
value of ventures' net assets
SEPARATE ACCOUNT BUSINESS
This business consists of annuities funded by specific assets held in separate
accounts. The assets in these accounts are carried at market value. The
policy values reflect the investment performance of the respective accounts.
INSURANCE, ANNUITY AND DISABILITY INCOME RESERVES
Life insurance reserves on substantially all policies issued since 1978 are
based on the Commissioner's Reserve Valuation Method with interest rates
ranging from 3-1/2% to 5-1/2%. Other policy reserves are based primarily on
the net level premium method employing various mortality tables at interest
rates ranging from 2% to 4-1/2%.
Deferred annuity reserves on policies issued since 1985 are valued using the
Commissioner's Annuity Reserve Valuation Method with interest rates ranging
from 3-1/2% to 6-1/4%. Other deferred annuity reserves are based on the
contract value. Immediate annuity reserves are present values of expected
benefit payments at interest rates ranging from 3-1/2% to 7-1/2%.
Active life reserves for disability income ("DI") policies issued since 1987
are primarily based on the two-year preliminary term method using a 4% interest
rate and the 1985 Commissioner's Individual Disability Table A ("CIDA") for
morbidity. Previous DI business used the net level premium method, using a 3%
or 4% interest rate and the 1964 Commissioner's Disability Table for morbidity.
Disabled life reserves for DI policies are based on the present values of
expected benefit payments using primarily the 1985 CIDA (modified for Company
experience in first two years of disability) with interest rates ranging from
3% to 5 1/2%.
Use of these actuarial tables and methods involves estimation of future
mortality and morbidity based on past experience. Actual future experience
could differ from these estimates.
INTEREST MAINTENANCE RESERVE
The Company is required to maintain an interest maintenance reserve ("IMR").
The IMR establishes a reserve for realized gains and losses, net of tax,
resulting from changes in interest
35
<PAGE> 39
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
rates on short and long-term fixed income investments. Net realized gains and
losses charged to the IMR are amortized into investment income over the
approximate remaining life of the investment sold.
ASSET VALUATION RESERVE
The Company is also required to maintain an asset valuation reserve ("AVR").
The AVR establishes a reserve for certain invested assets held by the Company.
In the aggregate, AVR was 82% and 84% of the allowable maximum at December 31,
1995 and 1994, respectively.
PREMIUM INCOME
Life insurance premiums are recognized as income at the beginning of each
policy year.
REINSURANCE
In the normal course of business, the Company seeks to limit its exposure to
loss on any single insured and to recover a portion of benefits paid by ceding
business to other insurance enterprises or reinsurers under excess coverage and
co-insurance contracts. As of December 31, 1995 and 1994, total life insurance
inforce approximated $380 billion and $347 billion, respectively, of which
approximately $113 billion and $104 billion, respectively, comprised
principally of term insurance, had been ceded to various reinsurers. The
Company retains a maximum of $10 million of coverage per individual life.
OPERATING COSTS
Operating costs, including costs of acquiring new policies, are charged to
operations as incurred.
INCOME TAXES
Provisions for income taxes are based on current income tax returns without
recognition of deferred taxes due to timing differences. The portion of the
federal income tax based on mutual life insurance company equity is reflected
as a component of income tax expense, including related adjustments for prior
years.
The Company files a consolidated life-nonlife federal income tax return.
Federal income tax returns for years through 1988 are closed as to further
assessment of taxes. Adequate provision has been made in the financial
statements for any additional taxes which may become due with respect to the
open years.
The Company's effective tax rate on savings from operations before income tax
expense (after dividends) in 1995, 1994 and 1993 was approximately 60%, 50% and
39%, respectively. Two significant factors cause the Company's effective rate
to exceed the federal corporate rate of 35%. First, the Company pays a tax
that is assessed only on mutual life insurance companies, which is
36
<PAGE> 40
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
an amount that purports to equate a portion of policyholder dividends with
nondeductible dividends paid to shareholders of stock companies. Second, the
Company must capitalize and amortize (as opposed to immediately deducting) an
amount deemed to represent the cost of acquiring new business ("DAC tax").
POLICYOWNER DIVIDENDS
Dividends payable in the following year on participating policies are charged
to current operations. All life insurance policies issued by the Company are
participating.
NOTE 2 - DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The following summarizes the bases used by the Company in estimating its fair
value disclosures for financial instruments:
Bonds and preferred stocks - Fair values are based upon quoted market
prices, if available. For securities not actively traded, fair values are
estimated using independent pricing services or internally developed pricing
models.
Mortgage loans - Fair values are derived by discounting the future estimated
cash flows using current interest rates for debt securities with similar
credit risk and maturities, or utilizing net realizable values.
Loans on policies - The carrying amount reported in the statement of
financial position approximates fair value since loans on policies reduce
the amount payable at death or at surrender of the contract.
Cash and temporary investments and due and accrued investment income - The
carrying amounts reported in the statement of financial position approximate
fair value.
Annuity reserves (without mortality/morbidity features) - Fair values are
derived by discounting the future estimated cash flows using current
interest rates with similar maturities.
Other deposit liabilities - The carrying amounts reported in the statement
of financial position approximate fair value.
37
<PAGE> 41
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
NOTE 3 - INVESTMENTS
NET INVESTMENT INCOME
The Company's net investment income for the years ended December 31, 1995, 1994
and 1993 consists of the following:
<TABLE>
<CAPTION>
1995 1994 1993
------- ------ -------
(In millions)
<S> <C> <C> <C>
Interest, dividends, rents, equity
in unconsolidated subsidiaries'
earnings and joint venture income $3,952 $3,395 $3,215
Less: Investment expenses and
depreciation (279) (289) (302)
------ ---- ------
Net investment income $3,673 $3,106 $2,913
====== ====== ======
</TABLE>
REALIZED GAINS AND LOSSES
During 1995, 1994 and 1993, the Company, in its normal course of business, sold
certain invested assets realizing gains and losses before transfer to the IMR
and capital gains tax from such sales as follows:
<TABLE>
<CAPTION>
For the year ended For the year ended For the year ended
December 31, 1995 December 31, 1994 December 31, 1993
--------------------------- ---------------------------- ----------------------------
Net Net Net
Realized Realized Realized
Realized Realized Gains Realized Realized Gains Realized Realized Gains
Gains Losses (Losses) Gains Losses (Losses) Gains Losses (Losses)
-------- -------- --------- -------- -------- --------- -------- -------- ---------
(In millions)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Bonds $ 576 $(130) $ 446 $171 $(535) $ (364) $ 438 $(133) $ 305
Stocks 574 (429) 145 499 (291) 208 297 (36) 261
Mortgage loans 2 (32) (30) - (37) (37) 1 (12) (11)
Real estate 14 (3) 11 16 (7) 9 13 (2) 11
Other invested assets 188 (95) 93 110 (98) 12 100 (54) 46
------ ----- ----- ---- ----- ------ ----- ----- -----
1,354 $(689) $ 665 $ 796 $(968) $ (172) $ 849 $(237) $ 612
====== ===== ===== = ==== ===== ====== ===== ===== =====
</TABLE>
DEBT SECURITIES
Debt securities consist of all bonds, fixed maturity preferred stocks and short
term fixed income investments.
38
<PAGE> 42
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
The statement values, which principally represent amortized cost, and estimated
market values of the Company's debt securities at December 31, 1995 and 1994
are as follows:
<TABLE>
<CAPTION>
December 31, 1995 RECONCILIATION TO ESTIMATED MARKET VALUE
- ----------------- ----------------------------------------
Gross Gross Estimated
Statement Unrealized Unrealized Market
Value Appreciation Depreciation Value
--------- ------------ ------------ ---------
(In millions)
<S> <C> <C> <C> <C>
US Government and
political obligations $ 3,267 $ 296 $ (1) $ 3,562
Mortgage-backed
securities 6,734 336 (12) 7,058
Corporate and other
debt securities 15,999 1,250 (47) 17,202
------- ------ ---- -------
26,000 1,882 (60) 27,822
Preferred stocks 108 3 (2) 109
------- ------ ---- -------
Total $26,108 $1,885 $(62) $27,931
======= ====== ==== =======
</TABLE>
<TABLE>
<CAPTION>
December 31, 1994 RECONCILIATION TO ESTIMATED MARKET VALUE
- ----------------- ----------------------------------------
Gross Gross Estimated
Statement Unrealized Unrealized Market
Value Appreciation Depreciation Value
--------- ------------ ------------ ---------
(In millions)
<S> <C> <C> <C> <C>
US Government and
political obligations $ 3,334 $ 61 $ (41) $ 3,354
Mortgage-backed
securities 5,652 53 (321) 5,384
Corporate and other
debt securities 14,488 203 (515) 14,176
------- ---- ----- -------
23,474 317 (877) 22,914
Preferred stocks 71 1 (7) 65
------- ---- ----- -------
Total $23,545 $318 $(884) $22,979
======= ==== ===== =======
</TABLE>
39
<PAGE> 43
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
The amortized cost and estimated market value of debt securities at December
31, 1995 and 1994, by contractual maturity, are shown below. Expected
maturities may differ from contractual maturities because borrowers may have
the right to call or prepay obligations with or without call or prepayment
penalties.
<TABLE>
<CAPTION>
December 31, 1995 December 31, 1994
------------------ ------------------
Estimated Estimated
Statement Market Statement Market
Value Value Value Value
-------- -------- -------- --------
(In millions)
<S> <C> <C> <C> <C>
Due in one year or less $ 977 $ 979 $ 1,102 $ 1,100
Due after one year
through five years 3,658 3,879 4,491 4,444
Due after five years
through ten years 6,879 7,347 5,787 5,711
Due after ten years 7,860 8,668 6,513 6,340
------- ------- ------- -------
19,374 20,873 17,893 17,595
------- ------- ------- -------
Mortgage-backed securities 6,734 7,058 5,652 5,384
------- ------- ------- -------
$26,108 $27,931 $23,545 $22,979
======= ======= ======= =======
</TABLE>
The fair value of perpetual preferred stocks as of December 31, 1995 and 1994
approximates $578 million and $440 million, respectively, compared to the
statement values of $439 million and $440 million, respectively.
40
<PAGE> 44
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
MORTGAGE LOANS
As of December 31, 1995 and 1994, the mortgage loan portfolio was distributed
as follows:
<TABLE>
<CAPTION>
December 31, 1995 December 31, 1994
---------------------- -----------------------
% of % of
GEOGRAPHIC LOCATION Statement Value Total Statement Value Total
------------------- ---------------- ------ ---------------- ------
(In millions) (In millions)
<S> <C> <C> <C> <C>
Middle Atlantic $ 945 11.2% $ 738 10.4%
South Atlantic 2,346 27.8 1,943 27.4
North Central 1,560 18.5 1,289 18.2
South Central 1,018 12.1 921 13.0
Pacific Northwest 454 5.4 355 5.0
Pacific 1,803 21.4 1,531 21.5
Canada 303 3.6 322 4.5
------ --- ------ -----
$8,429 100.0% $7,099 100.0%
====== ===== ====== =====
PROPERTY TYPE
-------------
Retail $2,897 34.4% $2,475 34.9%
Office Building 2,677 31.8 2,176 30.6
Residential 1,804 21.4 1,526 21.5
Commercial 792 9.4 745 10.5
Other 259 3.0 177 2.5
------ ----- ------ ---
$8,429 100.0% $7,099 100.0%
====== ===== ====== =====
</TABLE>
The fair value of mortgage loans as of December 31, 1995 and 1994 approximates
$8,983 million and $6,879 million, respectively. Decreases in current interest
rates were a major reason for the increase in fair value relative to statement
value in 1995.
41
<PAGE> 45
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
AFFILIATES
The Company has a 19.87% investment in MGIC Investment Corporation ("MGIC"), an
affiliate. At December 31, 1995, the Company's investment in MGIC (11.7
million shares) exceeded the statement value by $420 million.
In July 1995, the Company entered into a forward contract with a brokerage firm
to deliver 4.4 million to 5.4 million shares of MGIC (or cash) in August 1998
for a price determined by the market value of the MGIC shares at that time in
exchange for a fixed cash payment of $247 million ($48 per share). The
Company's objective in entering into the forward contract is to hedge against
depreciation in the value of its MGIC holdings during the contract period below
the initial spot price of $48, while partially participating in appreciation,
if any, during the forward contract's duration.
REAL ESTATE
For real estate and joint venture properties acquired subsequent to December
1990, the Company calculates depreciation using the straight-line method in
accordance with guidelines established by the National Association of Insurance
Commissioners. For properties acquired prior to December 1990, the Company
calculates depreciation using either the straight-line method or the
constant-yield method. Home office real estate is depreciated using the
straight-line method.
At December 31, 1995 and 1994, investment real estate includes $175 million and
$146 million, respectively, of real estate acquired through foreclosure. In
1995, the Company recorded writedowns of $8 million and $28 million for the
excess of carrying value over fair value of certain real estate investments and
mortgage loans, respectively. Valuation allowances for real estate and
mortgage loans with fair values that are less than statement values are
adequately covered by normal AVR reserves and by a $90 million special
investment reserve established by the Company for real estate, mortgage loans
and other invested assets.
DERIVATIVE FINANCIAL INSTRUMENTS
The Company's current utilization of derivative financial instruments is
limited. Most of the Company's derivative transactions are used to reduce or
modify risks of volatility related to currency or interest rate movements.
These hedging strategies use forwards, futures and swaps. At December 31, 1995
and 1994, the Company held foreign currency forward contracts with a notional
value of $889 million and $605 million, respectively, as a partial hedge
against foreign currency exposure of foreign denominated investments. Changes
in the market value of these contracts offset currency gains and losses on the
hedged investments. The capital gains or losses are unrealized before contract
settlement and realized on settlement. These currency hedges and the MGIC
forward contract described above represent most of the Company's derivative
positions. The effect of derivative transactions is not significant to the
Company's results from operations or financial position.
42
<PAGE> 46
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
NOTE 4 - ANNUITIES AND OTHER DEPOSIT LIABILITIES
The fair value of annuities and other deposit liabilities as of December 31,
1995 and 1994 are as follows:
<TABLE>
<CAPTION>
December 31, 1995 December 31, 1994
--------------------- ---------------------
Statement Fair Statement Fair
Value Value Value Value
----------- ------- ------------ -------
(In millions)
<S> <C> <C> <C> <C>
Annuities $2,631 $2,437 $2,474 $2,203
Other deposit liabilities 783 783 727 727
</TABLE>
NOTE 5 - BENEFIT PLANS
The Company maintains non-contributory defined benefit retirement plans for all
eligible employees and agents as well as a 401(k) plan for eligible employees
and a non-contributory defined contribution plan for all full-time agents.
These plans are funded currently and plan assets of $1,152 million at December
31, 1995 are primarily included in the separate accounts of the Company. In
1995, the Company made a contribution of $13 million to the employee retirement
plan; as of January 1, 1995, the most recent actuarial valuation date
available, the defined benefit plans were fully funded.
In addition to pension benefits, the Company provides certain health care and
life insurance benefits ("postretirement benefits") for retired employees.
Substantially all employees may become eligible for these benefits if they
reach retirement age while working for the Company.
Postretirement benefit expenses, which includes the expected cost of
postretirement benefits for newly eligible and vested employees and interest
costs, were $7 million, $7 million and $9 million for the years ended December
31, 1995, 1994 and 1993, respectively. At December 31, 1995 and 1994, the
unfunded postretirement benefit obligation for retirees and other fully
eligible or vested employees was $49 million and $47 million, respectively.
The estimated postretirement benefit obligation for active non-vested employees
was $46 million and $44 million at December 31, 1995 and 1994, respectively.
The discount rate used to determine the postretirement benefit obligation was
7% and the health care cost trend rate was 12% in 1995, declining by 1% per
year to an ultimate rate of 5% over 7 years. If the health care cost trend
rate assumptions were increased by 1%, the postretirement benefit obligation as
of December 31, 1995 would be increased by $6 million.
At December 31, 1995 and 1994, plan assets attributable to postretirement
health care benefits totaled $31 million and $25 million, respectively.
43
<PAGE> 47
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
NOTE 6 - REINSURANCE
The amounts shown in the accompanying consolidated financial statements are net
of reinsurance activity. The effect of reinsurance on premiums and benefits
for the years ended December 31, 1995, 1994 and 1993 are as follows (in
millions):
<TABLE>
<CAPTION>
1995 1994 1993
------- -------- -------
<S> <C> <C> <C>
Direct premiums $6,452 $5,977 $5,508
Reinsurance ceded (256) (234) (213)
------ ------ ------
Net premiums $6,196 $5,743 $5,295
====== ====== ======
Benefits to policyholders and beneficiaries $6,818 $6,178 $5,600
Reinsurance recoveries (142) (141) (104)
------ ------ ------
Net benefits to policyholders and beneficiaries $6,676 $6,037 $5,496
====== ====== ======
</TABLE>
In addition, during 1995, 1994 and 1993, the Company received credits of $67
million, $63 million and $59 million, respectively, from reinsurers
representing reimbursements of commissions and other expenses. These credits
are included in other income in the consolidated summary of operations.
Reinsurance contracts do not relieve the Company from its obligations to
policyholders. Failure of reinsurers to honor their obligations could result
in losses to the Company; consequently, allowances are established for amounts
deemed uncollectible. The Company evaluates the financial condition of its
reinsurers and monitors concentrations of credit risk arising from similar
geographic regions, activities, or economic characteristics of the reinsurers
to minimize its exposure to significant losses from reinsurer insolvencies.
NOTE 7 - CONTINGENCIES
In the normal course of business, the Company enters into transactions to
reduce its exposure to fluctuations in interest rates and market volatility.
These instruments may involve credit risk and may also be subject to risk of
loss due to interest rate fluctuations.
The Company has guaranteed certain obligations of its affiliates. These
guarantees totaled approximately $126 million and $83 million at December 31,
1995 and 1994, respectively, and are generally supported by the underlying net
asset values of the affiliates.
The Company is engaged in various legal actions in the normal course of its
investment and insurance operations. In the opinion of management, any losses
resulting from such actions would not have a material effect on the Company's
financial condition.
44
<PAGE> 48
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
Price Waterhouse LLP
100 East Wisconsin Avenue
Suite 1500
Milwaukee, WI 53202
Telephone: 414-276-9500
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Trustees and Policyowners of
The Northwestern Mutual Life Insurance Company
In our opinion, the accompanying consolidated statement of financial position
and the related consolidated summary of operations, statement of general
contingency reserve and statement of cash flows present fairly, in all material
respects, the financial position of The Northwestern Mutual Life Insurance
Company and its subsidiary at December 31, 1995 and 1994, and the results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1995, in conformity with generally accepted accounting
principles (practices prescribed or permitted by insurance regulatory
authorities - see Note 1). These financial statements are the responsibility
of the Company's management; our responsibility is to express an opinion on
these financial statements based on our audits. We conducted our audits of
these statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
Price Waterhouse LLP
January 24, 1996
45
<PAGE> 49
APPENDIX
ILLUSTRATIONS OF DEATH BENEFITS, CASH VALUES AND ACCUMULATED PREMIUMS. The
tables on the following pages illustrate how the death benefit and cash value
for a Whole Life Policy, an Extra Ordinary Life Policy and a Single Premium
Life Policy would vary over time based on hypothetical investment results. The
tables assume gross (after tax) investment return rates of 0%, 6% and 12% on
assets of the Fund. The Policies illustrated are for male insureds, select
risks, ages 15, 35 and 55. The illustrations for Whole Life Policies are on
pages 47 through 49. The illustrations for Extra Ordinary Life Policies are on
pages 50 through 58. The illustrations for Single Premium Life Policies are on
pages 59 through 61.
The death benefits and cash values would be different from those shown if
the gross investment return rate averaged 0%, 6% or 12%, but fluctuated over
and under the average rate at various points in time. The values would also be
different, depending on the Account divisions selected by the owner of the
Policy, if the return rate for the nine Fund Portfolios averaged 0%, 6% or 12%,
but the rates for each individual Portfolio varied over and under the average.
The amounts shown as the death benefits and cash values reflect the
deductions from premiums, the charge at the annual rate of .50% of the
Account's assets for mortality and expense risks and the charge at the annual
rate of .20% of the Account's assets for taxes. The amounts shown as the cash
values for Single Premium Life Policies reflect the deduction for sales costs
during the first ten Policy years. The amounts shown also reflect the average
of the investment advisory fees and the other Fund expenses applicable to each
of the nine Portfolios of the Fund during 1995 at the annual rate of .50% of
the Fund's net assets. See "Deductions and Charges", p. 8. Thus the 0%, 6% and
12% gross hypothetical return rates on the Fund's assets are equivalent to the
net rates of -1.20%, 4.80% and 10.80% on the assets of the Account.
The second column of each table shows the amount which would accumulate if
an amount equal to the annual or single premium were invested to earn interest,
after taxes, at the stated interest rate compounded annually.
The death benefits and corresponding cash values shown for paid-up
additions purchased with dividends illustrate benefits which would be paid if
investment returns of 0%, 6% and 12% are realized, if mortality and expense
experience in the future is as currently experienced and if the current
dividend scale remains unchanged. See "Annual Dividends," p. 14. HOWEVER, THERE
IS NO GUARANTEE AS TO THE AMOUNT OF DIVIDENDS, IF ANY, THAT WILL BE PAID UNDER
A POLICY. Although the tables are based on the assumption that dividends will
be used to purchase additional paid-up death benefits, other dividend options
are available. The Extra Ordinary Life Policy is designed for a purchaser who
intends to use all dividends to purchase paid-up additions. See "Extra Ordinary
Life Policy," p. 12.
A comparable illustration based on a proposed insured's age, sex and risk
classification and proposed face amount or premium is available upon request.
46
<PAGE> 50
VARIABLE WHOLE LIFE INSURANCE POLICY
MALE ISSUE AGE 15
$300 ANNUAL PREMIUM FOR SELECT UNDERWRITING RISK
FACE AMOUNT $38,129
DIVIDENDS USED TO PURCHASE PAID-UP ADDITIONS
<TABLE>
<CAPTION>
12%
0% 6% DEATH BENEFIT*
DEATH BENEFIT* DEATH BENEFIT* ASSUMING HYPOTHETICAL
ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT
PREMIUMS GROSS ANNUAL INVESTMENT GROSS ANNUAL INVESTMENT RATE OF RETURN
ACCUMULATED RATE OF RETURN RATE OF RETURN
AT -----------------------------------------------------------------------------------
END OF 5% INTEREST BASE PAID-UP TOTAL BASE PAID-UP TOTAL BASE PAID-UP TOTAL
POLICY YEAR PER YEAR POLICY ADDITIONS POLICY ADDITIONS POLICY ADDITIONS
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 315 $38,129 $ 104 $38,233 $38,131 $ 104 $38,235 $ 38,148 $ 104 $ 38,252
2 646 38,129 227 38,356 38,143 233 38,376 38,252 239 38,491
3 993 38,129 356 38,485 38,164 376 38,540 38,442 397 38,839
4 1,358 38,129 473 38,602 38,194 517 38,711 38,720 563 39,283
5 1,741 38,129 584 38,713 38,234 661 38,895 39,092 744 39,836
6 2,143 38,129 688 38,817 38,283 808 39,091 39,562 941 40,503
7 2,565 38,129 792 38,921 38,341 965 39,306 40,135 1,162 41,297
8 3,008 38,129 888 39,017 38,407 1,124 39,531 40,817 1,401 42,218
9 3,473 38,129 981 39,110 38,482 1,290 39,772 41,613 1,665 43,278
10 3,962 38,129 1,068 39,197 38,566 1,460 40,026 42,530 1,953 44,483
15 6,797 38,129 1,438 39,567 39,112 2,384 41,496 49,189 3,831 53,020
20 (age 35) 10,416 38,129 1,622 39,751 39,861 3,349 43,210 60,076 6,600 66,676
35 (age 50) 28,451 38,129 1,940 40,069 43,152 8,149 51,301 134,220 30,499 164,719
50 (age 65) 65,945 38,129 1,067 39,196 47,691 16,610 64,301 338,740 127,960 466,700
</TABLE>
<TABLE>
<CAPTION>
0% 6% 12%
CASH VALUE* CASH VALUE* CASH VALUE*
ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL
PREMIUMS GROSS ANNUAL INVESTMENT GROSS ANNUAL INVESTMENT GROSS ANNUAL INVESTMENT
ACCUMULATED RATE OF RETURN RATE OF RETURN RATE OF RETURN
AT -----------------------------------------------------------------------------------
END OF 5% INTEREST BASE PAID-UP TOTAL BASE PAID-UP TOTAL BASE PAID-UP TOTAL
POLICY YEAR PER YEAR POLICY ADDITIONS POLICY ADDITIONS POLICY ADDITIONS
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 315 $ 14 $ 14 $ 28 $ 16 $ 14 $ 31 $ 19 $ 14 $ 33
2 646 183 33 216 199 33 232 214 35 249
3 993 345 52 397 383 56 439 424 59 483
4 1,358 501 71 572 573 78 651 653 85 738
5 1,741 660 92 752 778 103 881 912 116 1,028
6 2,143 817 111 928 991 130 1,121 1,197 151 1,348
7 2,565 973 131 1,104 1,214 160 1,374 1,512 193 1,705
8 3,008 1,128 152 1,280 1,449 192 1,641 1,861 240 2,101
9 3,473 1,284 172 1,456 1,697 228 1,925 2,249 293 2,542
10 3,962 1,440 194 1,634 1,959 265 2,224 2,679 355 3,034
15 6,797 2,224 307 2,531 3,493 508 4,001 5,643 817 6,460
20 (age 35) 10,416 2,975 408 3,383 5,420 843 6,263 10,508 1,662 12,170
35 (age 50) 28,451 4,637 785 5,422 13,778 3,295 17,073 50,605 12,334 62,939
50 (age 65) 65,945 5,134 643 5,777 26,310 10,016 36,326 201,815 77,161 278,976
</TABLE>
* Assumes no policy loan has been made.
DIVIDENDS ILLUSTRATED ARE BASED ON CURRENT SCALE AND EXPERIENCE AND ARE NOT
GUARANTEED. IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RESULTS ARE
ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE
INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE
SHOWN AND WILL DEPEND UPON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT
ALLOCATIONS MADE BY AN OWNER AND THE DIFFERENT RATES OF RETURN OF THE FUND
PORTFOLIOS. THE DEATH BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT
FROM THOSE SHOWN IF THE ACTUAL INVESTMENT RATES OF RETURN AVERAGED 0%, 6% AND
12% OVER A PERIOD OF YEARS, BUT FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR
INDIVIDUAL POLICY YEARS. NO REPRESENTATIONS CAN BE MADE THAT THESE HYPOTHETICAL
RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER A PERIOD OF
TIME.
47
<PAGE> 51
VARIABLE WHOLE LIFE INSURANCE POLICY
MALE ISSUE AGE 35
$500 ANNUAL PREMIUM FOR SELECT UNDERWRITING RISK
FACE AMOUNT $30,979
DIVIDENDS USED TO PURCHASE PAID-UP ADDITIONS
<TABLE>
<CAPTION>
0% 6% 12%
DEATH BENEFIT* DEATH BENEFIT* DEATH BENEFIT*
ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL
PREMIUMS GROSS ANNUAL INVESTMENT GROSS ANNUAL INVESTMENT GROSS ANNUAL INVESTMENT
ACCUMULATED RATE OF RETURN RATE OF RETURN RATE OF RETURN
AT ----------------------------- ----------------------------- -------------------------------
END OF 5% INTEREST BASE PAID-UP BASE PAID-UP BASE PAID-UP
POLICY YEAR PER YEAR POLICY ADDITIONS TOTAL POLICY ADDITIONS TOTAL POLICY ADDITIONS TOTAL
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 525 $30,979 $ 56 $31,035 $30,983 $ 56 $31,039 $31,011 $ 56 $ 31,067
2 1,076 30,979 129 31,108 30,997 133 31,130 31,131 136 31,267
3 1,655 30,979 220 31,199 31,021 233 31,254 31,340 245 31,585
4 2,263 30,979 328 31,307 31,054 356 31,410 31,642 384 32,026
5 2,901 30,979 451 31,430 31,097 502 31,599 32,043 556 32,599
6 3,571 30,979 585 31,564 31,149 669 31,818 32,546 762 33,308
7 4,275 30,979 730 31,709 31,210 859 32,069 33,155 1,006 34,161
8 5,013 30,979 883 31,862 31,280 1,070 32,350 33,874 1,289 35,163
9 5,789 30,979 1,042 32,021 31,358 1,301 32,659 34,708 1,615 36,323
10 6,603 30,979 1,203 32,182 31,444 1,549 32,993 35,661 1,983 37,644
15 11,329 30,979 1,973 32,952 31,991 3,029 35,020 42,424 4,589 47,013
20 (age 55) 17,359 30,979 2,459 33,438 32,713 4,754 37,467 53,194 8,763 61,957
30 (age 65) 34,880 30,979 2,334 33,313 34,597 9,262 43,859 92,229 26,413 118,642
</TABLE>
<TABLE>
<CAPTION>
0% 6% 12%
CASH VAULE* CASH VALUE* CASH VALUE*
ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL
PREMIUMS GROSS ANNUAL INVESTMENT GROSS ANNUAL INVESTMENT GROSS ANNUAL INVESTMENT
ACCUMULATED RATE OF RETURN RATE OF RETURN RATE OF RETURN
AT ----------------------------- ----------------------------- -------------------------------
END OF 5% INTEREST BASE PAID-UP BASE PAID-UP BASE PAID-UP
POLICY YEAR PER YEAR POLICY ADDITIONS TOTAL POLICY ADDITIONS TOTAL POLICY ADDITIONS TOTAL
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 525 $ 91 $ 14 $ 105 $ 98 $ 14 $ 113 $ 106 $ 14 $ 120
2 1,076 419 34 453 454 36 490 490 37 527
3 1,655 739 61 800 823 65 888 911 69 980
4 2,263 1,051 94 1,145 1,204 103 1,307 1,373 111 1,484
5 2,901 1,368 133 1,501 1,614 148 1,762 1,894 165 2,059
6 3,571 1,676 179 1,855 2,036 205 2,241 2,464 234 2,698
7 4,275 1,975 231 2,206 2,473 271 2,744 3,088 318 3,406
8 5,013 2,265 288 2,553 2,923 350 3,273 3,770 421 4,191
9 5,789 2,546 351 2,897 3,388 438 3,826 4,516 544 5,060
10 6,603 2,817 418 3,235 3,867 539 4,406 5,333 689 6,022
15 11,329 4,039 798 4,837 6,494 1,225 7,719 10,713 1,856 12,569
20 (age 55) 17,359 5,024 1,148 6,172 9,513 2,220 11,733 19,078 4,093 23,171
30 (age 65) 34,880 6,190 1,407 7,597 16,568 5,585 22,153 51,320 15,928 67,248
</TABLE>
* Assumes no policy loan has been made.
DIVIDENDS ILLUSTRATED ARE BASED ON CURRENT SCALE AND EXPERIENCE AND ARE NOT
GUARANTEED. IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RESULTS ARE
ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE
INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE
SHOWN AND WILL DEPEND UPON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT
ALLOCATIONS MADE BY AN OWNER AND THE DIFFERENT RATES OF RETURN OF THE FUND
PORTFOLIOS. THE DEATH BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT
FROM THOSE SHOWN IF THE ACTUAL INVESTMENT RATES OF RETURN AVERAGED 0%, 6% AND
12% OVER A PERIOD OF YEARS, BUT FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR
INDIVIDUAL POLICY YEARS. NO REPRESENTATIONS CAN BE MADE THAT THESE HYPOTHETICAL
RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER A PERIOD OF
TIME.
48
<PAGE> 52
VARIABLE WHOLE LIFE INSURANCE POLICY
MALE ISSUE AGE 55
$800 ANNUAL PREMIUM FOR SELECT UNDERWRITING RISK
FACE AMOUNT $20,504
DIVIDENDS USED TO PURCHASE PAID-UP ADDITIONS
<TABLE>
<CAPTION>
0% 6% 12%
DEATH BENEFIT* DEATH BENEFIT* DEATH BENEFIT*
ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL
PREMIUMS GROSS ANNUAL INVESTMENT GROSS ANNUAL INVESTMENT GROSS ANNUAL INVESTMENT
ACCUMULATED RATE OF RETURN RATE OF RETURN RATE OF RETURN
AT ----------------------------- ----------------------------- -------------------------------
END OF 5% INTEREST BASE PAID-UP BASE PAID-UP BASE PAID-UP
POLICY YEAR PER YEAR POLICY ADDITIONS TOTAL POLICY ADDITIONS TOTAL POLICY ADDITIONS TOTAL
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 840 $20,504 $ 213 $20,717 $20,509 $ 213 $20,722 $20,546 $ 213 $ 20,759
2 1,722 20,504 438 20,942 20,521 451 20,972 20,652 463 21,115
3 2,648 20,504 672 21,176 20,540 713 21,253 20,823 753 21,576
4 3,621 20,504 914 21,418 20,566 999 21,565 21,061 1,086 22,147
5 4,642 20,504 1,161 21,665 20,599 1,308 21,907 21,376 1,465 22,841
6 5,714 20,504 1,412 21,916 20,639 1,641 22,280 21,770 1,894 23,664
7 6,839 20,504 1,665 22,169 20,686 1,998 22,684 22,246 2,377 24,623
8 8,021 20,504 1,921 22,425 20,740 2,381 23,121 22,808 2,922 25,730
9 9,262 20,504 2,179 22,683 20,800 2,792 23,592 23,458 3,536 26,994
10 10,565 20,504 2,440 22,944 20,867 3,234 24,101 24,200 4,228 28,428
15 18,126 20,504 3,556 24,060 21,288 5,759 27,047 29,438 8,950 38,388
20 (age 75) 27,775 20,504 3,756 24,260 21,836 8,442 30,278 37,725 16,055 53,780
</TABLE>
<TABLE>
<CAPTION>
0% 6% 12%
CASH VAULE* CASH VALUE* CASH VALUE*
ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL
PREMIUMS GROSS ANNUAL INVESTMENT GROSS ANNUAL INVESTMENT GROSS ANNUAL INVESTMENT
ACCUMULATED RATE OF RETURN RATE OF RETURN RATE OF RETURN
AT ----------------------------- ----------------------------- -------------------------------
END OF 5% INTEREST BASE PAID-UP BASE PAID-UP BASE PAID-UP
POLICY YEAR PER YEAR POLICY ADDITIONS TOTAL POLICY ADDITIONS TOTAL POLICY ADDITIONS TOTAL
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 840 $ 189 $ 102 $ 291 $ 206 $ 102 $ 309 $ 224 $ 102 $ 326
2 1,722 610 216 826 673 222 895 737 229 966
3 2,648 1,012 341 1,353 1,146 361 1,507 1,289 382 1,671
4 3,621 1,395 475 1,870 1,626 519 2,145 1,883 565 2,448
5 4,642 1,823 620 2,443 2,181 698 2,879 2,596 781 3,377
6 5,714 2,232 773 3,005 2,746 898 3,644 3,365 1,037 4,402
7 6,839 2,620 935 3,555 3,320 1,121 4,441 4,195 1,334 5,529
8 8,021 2,988 1,105 4,093 3,902 1,369 5,271 5,091 1,681 6,772
9 9,262 3,334 1,284 4,618 4,489 1,645 6,134 6,055 2,083 8,138
10 10,565 3,657 1,472 5,129 5,082 1,950 7,032 7,092 2,550 9,642
15 18,126 4,956 2,390 7,346 8,110 3,871 11,981 13,588 6,015 19,603
20 (age 75) 27,775 5,744 2,773 8,517 11,176 6,232 17,408 22,906 11,853 34,759
</TABLE>
* Assumes no policy loan has been made.
DIVIDENDS ILLUSTRATED ARE BASED ON CURRENT SCALE AND EXPERIENCE AND ARE NOT
GUARANTEED. IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RESULTS ARE
ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE
INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE
SHOWN AND WILL DEPEND UPON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT
ALLOCATIONS MADE BY AN OWNER AND THE DIFFERENT RATES OF RETURN OF THE FUND
PORTFOLIOS. THE DEATH BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT
FROM THOSE SHOWN IF THE ACTUAL INVESTMENT RATES OF RETURN AVERAGED 0%, 6% AND
12% OVER A PERIOD OF YEARS, BUT FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR
INDIVIDUAL POLICY YEARS. NO REPRESENTATIONS CAN BE MADE THAT THESE HYPOTHETICAL
RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER A PERIOD OF
TIME.
49
<PAGE> 53
EXTRA ORDINARY VARIABLE LIFE INSURANCE POLICY
MALE ISSUE AGE 15
$50,000 OF INSURANCE ($30,000 GUARANTEED MINIMUM
+ $20,000 OF EXTRA LIFE PROTECTION GUARANTEED FOR 37 YEARS (1))
ANNUAL PREMIUM FOR SELECT UNDERWRITING RISK: $261.50 (2)
DIVIDENDS USED TO PURCHASE PAID-UP ADDITIONS (1)
ASSUMING 0% HYPOTHETICAL GROSS ANNUAL INVESTMENT RATE OF RETURN
<TABLE>
<CAPTION>
DEATH BENEFIT (3) CASH VALUE (3)
----------------------------------------------------------------------------------
PREMIUMS EXTRA LIFE PROTECTION
ACCUMULATED --------------------------------- CASH CASH
AT TOTAL MINIMUM VARIABLE VARIABLE VALUE VALUE OF TOTAL
END OF 5% INTEREST DEATH DEATH INSURANCE PAID-UP TERM OF BASE PAID-UP CASH
POLICY YEAR PER YEAR BENEFIT BENEFIT AMOUNT ADDITIONS INSURANCE POLICY ADDITIONS VALUE
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 275 $50,000 $30,000 $ - 9 $ 5 $19,995 $ 5 $ 0 $ 5
2 563 50,000 30,000 - 68 34 19,966 138 4 142
3 866 50,000 30,000 - 171 72 19,928 265 10 275
4 1,183 50,000 30,000 - 314 104 19,896 388 15 403
5 1,517 50,000 30,000 - 496 139 19,861 514 21 535
6 1,868 50,000 30,000 - 713 185 19,815 638 29 667
7 2,236 50,000 30,000 - 963 251 19,749 760 41 801
8 2,622 50,000 30,000 - 1,243 326 19,674 883 55 938
9 3,028 50,000 30,000 - 1,551 419 19,581 1,006 73 1,079
10 3,454 50,000 30,000 - 1,885 528 19,472 1,129 95 1,224
15 5,925 50,000 30,000 - 3,881 1,207 18,793 1,748 257 2,005
20 (age 35) 9,079 50,000 30,000 - 6,253 1,647 18,353 2,340 414 2,754
35 (age 50) 24,800 50,000 30,000 - 13,810 1,937 18,063 3,652 783 4,435
50 (age 65) 57,482 30,947 30,000 - 20,093 899 48(4) 4,044 542 4,586
</TABLE>
(1) Extra Life Protection is guaranteed to be at least $20,000 for 37 years, so
long as all premiums are paid when due, no policy loan is outstanding, all
dividends are applied to purchase paid-up additions and no paid-up
additions are surrendered for their cash value. Extra Life Protection is
the sum of any positive variable insurance amount plus variable paid-up
additions plus term insurance.
(2) If premiums were paid monthly, the monthly payments would be $23.10. The
death benefit and cash values would not be affected.
(3) Assumes no policy loan has been made.
(4) After the guaranteed period of 37 years for Extra Life Protection, the
amount of term insurance depends on the dividend scale. The amount
illustrated is based on current scale and experience and is not guaranteed.
DIVIDENDS ILLUSTRATED ARE BASED ON CURRENT SCALE AND EXPERIENCE AND ARE NOT
GUARANTEED. IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RESULTS ARE
ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE
INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE
SHOWN AND WILL DEPEND UPON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT
ALLOCATIONS MADE BY AN OWNER AND THE DIFFERENT RATES OF RETURN OF THE FUND
PORTFOLIOS. THE DEATH BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT
FROM THOSE SHOWN IF THE ACTUAL INVESTMENT RATE OF RETURN AVERAGED 0% OVER A
PERIOD OF YEARS, BUT FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL
POLICY YEARS. NO REPRESENTATIONS CAN BE MADE THAT THIS HYPOTHETICAL RATE OF
RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER A PERIOD OF TIME.
50
<PAGE> 54
EXTRA ORDINARY VARIABLE LIFE INSURANCE POLICY
MALE ISSUE AGE 15
$50,000 OF INSURANCE ($30,000 GUARANTEED MINIMUM
+ $20,000 OF EXTRA LIFE PROTECTION GUARANTEED FOR 37 YEARS (1))
ANNUAL PREMIUM FOR SELECT UNDERWRITING RISK: $261.50 (2)
DIVIDENDS USED TO PURCHASE PAID-UP ADDITIONS (1)
ASSUMING 6% HYPOTHETICAL GROSS ANNUAL INVESTMENT RATE OF RETURN
<TABLE>
<CAPTION>
DEATH BENEFIT (3) CASH VALUE (3)
------------------------------------------------------------------------------------------
PREMIUMS EXTRA LIFE PROTECTION
ACCUMULATED --------------------- CASH CASH
AT TOTAL MINIMUM VARIABLE VARIABLE VALUE VALUE OF TOTAL
END OF 5% INTEREST DEATH DEATH INSURANCE PAID-UP TERM OF BASE PAID-UP CASH
POLICY YEAR PER YEAR BENEFIT BENEFIT AMOUNT ADDITIONS INSURANCE POLICY ADDITIONS VALUE
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 275 $50,000 $30,000 $ 1 $ 5 $19,994 $ 6 $ 0 $ 6
2 563 50,000 30,000 10 34 19,956 149 4 153
3 866 50,000 30,000 26 75 19,899 294 11 305
4 1,183 50,000 30,000 50 114 19,836 442 17 459
5 1,517 50,000 30,000 81 159 19,760 604 24 628
6 1,868 50,000 30,000 119 220 19,661 771 35 806
7 2,236 50,000 30,000 164 307 19,529 947 50 997
8 2,622 50,000 30,000 216 410 19,374 1,132 70 1,202
9 3,028 50,000 30,000 275 538 19,187 1,328 94 1,422
10 3,454 50,000 30,000 341 691 18,968 1,533 125 1,658
15 5,925 50,000 30,000 769 1,761 17,470 2,740 375 3,115
20 (age 35) 9,079 50,000 30,000 1,358 2,899 15,743 4,256 729 4,985
35 (age 50) 24,800 50,000 30,000 3,942 7,561 8,497 10,831 3,057 13,888
50 (age 65) 57,482 52,502 30,000 7,514 14,988 0 20,692 9,037 29,729
</TABLE>
- ----------------------------
(1) Extra Life Protection is guaranteed to be at least $20,000 for 37 years, so
long as all premiums are paid when due, no policy loan is outstanding, all
dividends are applied to purchase paid-up additions and no paid-up
additions are surrendered for their cash value. Extra Life Protection is
the sum of any positive variable insurance amount plus variable paid-up
additions plus term insurance.
(2) If premiums were paid monthly, the monthly payments would be $23.10. The
death benefit and cash values would not be affected.
(3) Assumes no policy loan has been made.
DIVIDENDS ILLUSTRATED ARE BASED ON CURRENT SCALE AND EXPERIENCE AND ARE NOT
GUARANTEED. IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RESULTS ARE
ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE
INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE
SHOWN AND WILL DEPEND UPON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT
ALLOCATIONS MADE BY AN OWNER AND THE DIFFERENT RATES OF RETURN OF THE FUND
PORTFOLIOS. THE DEATH BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT
FROM THOSE SHOWN IF THE ACTUAL INVESTMENT RATE OF RETURN AVERAGED 6% OVER A
PERIOD OF YEARS, BUT FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL
POLICY YEARS. NO REPRESENTATIONS CAN BE MADE THAT THIS HYPOTHETICAL RATE OF
RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER A PERIOD OF TIME.
51
<PAGE> 55
EXTRA ORDINARY VARIABLE LIFE INSURANCE POLICY
MALE ISSUE AGE 15
$50,000 OF INSURANCE ($30,000 GUARANTEED MINIMUM
+ $20,000 OF EXTRA LIFE PROTECTION GUARANTEED FOR 37 YEARS (1))
ANNUAL PREMIUM FOR SELECT UNDERWRITING RISK: $261.50 (2)
DIVIDENDS USED TO PURCHASE PAID-UP ADDITIONS (1)
ASSUMING 12% HYPOTHETICAL GROSS ANNUAL INVESTMENT RATE OF RETURN
<TABLE>
<CAPTION>
DEATH BENEFIT (3) CASH VALUE (3)
--------------------------------------------------------------------------------
PREMIUMS
ACCUMULATED EXTRA LIFE PROTECTION CASH CASH
AT -------------------------- VALUE VALUE OF TOTAL
END OF 5% INTEREST TOTAL MINIMUM VARIABLE VARIABLE TERM OF BASE PAID-UP CASH
POLICY YEAR PER YEAR DEATH DEATH INSURANCE PAID-UP INSURANCE POLICY ADDITIONS VALUE
BENEFIT BENEFIT AMOUNT ADDITIONS
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 275 $50,000 $30,000 $ 12 $ 5 $19,983 $ 8 $ 0 $ 8
2 563 50,000 30,000 90 35 19,875 160 5 165
3 866 50,000 30,000 235 78 19,687 325 11 336
4 1,183 50,000 30,000 449 124 19,427 504 18 522
5 1,517 50,000 30,000 737 181 19,082 706 28 734
6 1,868 50,000 30,000 1,102 261 18,637 929 42 971
7 2,236 50,000 30,000 1,548 374 18,078 1,176 62 1,238
8 2,622 50,000 30,000 2,079 516 17,405 1,450 88 1,538
9 3,028 50,000 30,000 2,700 696 16,604 1,755 122 1,877
10 3,454 50,000 30,000 3,416 917 15,667 2,092 166 2,258
15 5,925 50,000 30,000 8,622 2,675 8,703 4,415 570 4,985
20 (age 35) 9,079 52,555 30,000 17,145 5,410 0 8,230 1,361 9,591
35 (age 50) 24,800 132,504 30,000 75,246 27,258 0 39,666 11,023 50,689
50 (age 65) 57,482 377,343 30,000 235,574 111,769 0 158,214 67,397 225,611
</TABLE>
(1) Extra Life Protection is guaranteed to be at least $20,000 for 37 years, so
long as all premiums are paid when due, no policy loan is outstanding, all
dividends are applied to purchase paid-up additions and no paid-up
additions are surrendered for their cash value. Extra Life Protection is
the sum of any positive variable insurance amount plus variable paid-up
additions plus term insurance.
(2) If premiums were paid monthly, the monthly payments would be $23.10. The
death benefit and cash values would not be affected.
(3) Assumes no policy loan has been made.
DIVIDENDS ILLUSTRATED ARE BASED ON CURRENT SCALE AND EXPERIENCE AND ARE
NOT GUARANTEED. IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RESULTS ARE
ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE
INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE
SHOWN AND WILL DEPEND UPON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT
ALLOCATIONS MADE BY AN OWNER AND THE DIFFERENT RATES OF RETURN OF THE FUND
PORTFOLIOS. THE DEATH BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT
FROM THOSE SHOWN IF THE ACTUAL INVESTMENT RATE OF RETURN AVERAGED 12% OVER A
PERIOD OF YEARS, BUT FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL
POLICY YEARS. NO REPRESENTATIONS CAN BE MADE THAT THIS HYPOTHETICAL RATE OF
RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER A PERIOD OF TIME.
52
<PAGE> 56
EXTRA ORDINARY VARIABLE LIFE INSURANCE POLICY
MALE ISSUE AGE 35
$100,000 OF INSURANCE ($60,000 GUARANTEED MINIMUM
+ $40,000 OF EXTRA LIFE PROTECTION GUARANTEED FOR 27 YEARS (1))
ANNUAL PREMIUM FOR SELECT UNDERWRITING RISK: $1,014.00 (2)
DIVIDENDS USED TO PURCHASE PAID-UP ADDITIONS (1)
ASSUMING 0% HYPOTHETICAL GROSS ANNUAL INVESTMENT RATE OF RETURN
<TABLE>
<CAPTION>
DEATH BENEFIT (3) CASH VALUE (3)
-------------------------------------------------------------------------------------
PREMIUMS EXTRA LIFE PROTECTION
ACCUMULATED ------------------------------- CASH CASH
AT TOTAL MINIMUM VARIABLE VARIABLE VALUE VALUE OF TOTAL
END OF 5% INTEREST DEATH DEATH INSURANCE PAID-UP TERM OF BASE PAID-UP CASH
POLICY YEAR PER YEAR BENEFIT BENEFIT AMOUNT ADDITIONS INSURANCE POLICY ADDITIONS VALUE
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 1,065 $100,000 $60,000 $ - 44 $ 103 $39,897 $ 153 $ 26 $ 179
2 2,183 100,000 60,000 - 211 275 39,725 788 73 861
3 3,356 100,000 60,000 - 491 511 39,489 1,406 142 1,548
4 4,589 100,000 60,000 - 873 803 39,197 2,010 230 2,240
5 5,883 100,000 60,000 - 1,353 1,145 38,855 2,626 339 2,965
6 7,242 100,000 60,000 - 1,922 1,526 38,474 3,225 467 3,692
7 8,669 100,000 60,000 - 2,570 1,942 38,058 3,806 614 4,420
8 10,167 100,000 60,000 - 3,290 2,382 37,618 4,370 777 5,147
9 11,740 100,000 60,000 - 4,074 2,839 37,161 4,914 956 5,870
10 13,392 100,000 60,000 - 4,914 3,303 36,697 5,443 1,147 6,590
15 22,975 100,000 60,000 - 9,754 5,514 34,486 7,816 2,229 10,045
20 (age 55) 35,205 100,000 60,000 - 15,210 6,507 33,493 9,729 3,039 12,768
30 (age 65) 70,737 84,757 60,000 - 26,283 4,587 20,170(4) 11,997 2,766 14,763
- -----------------
</TABLE>
(1) Extra Life Protection is guaranteed to be at least $40,000 for 27 years, so
long as all premiums are paid when due, no policy loan is outstanding, all
dividends are applied to purchase paid-up additions and no paid-up
additions are surrendered for their cash value. Extra Life Protection is
the sum of any positive variable insurance amount plus variable paid-up
additions plus term insurance.
(2) If premiums were paid monthly, the monthly payments would be $89.10. The
death benefit and cash values would not be affected.
(3) Assumes no policy loan has been made.
(4) After the guaranteed period of 27 years for Extra Life Protection, the
amount of term insurance depends on the dividend scale. The amount
illustrated is based on current scale and experience and is not guaranteed.
DIVIDENDS ILLUSTRATED ARE BASED ON CURRENT SCALE AND EXPERIENCE AND ARE NOT
GUARANTEED. IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RESULTS ARE
ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE
INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE
SHOWN AND WILL DEPEND UPON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT
ALLOCATIONS MADE BY AN OWNER AND THE DIFFERENT RATES OF RETURN OF THE FUND
PORTFOLIOS. THE DEATH BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT
FROM THOSE SHOWN IF THE ACTUAL INVESTMENT RATE OF RETURN AVERAGED 0% OVER A
PERIOD OF YEARS, BUT FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL
POLICY YEARS. NO REPRESENTATIONS CAN BE MADE THAT THIS HYPOTHETICAL RATE OF
RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER A PERIOD OF TIME.
53
<PAGE> 57
EXTRA ORDINARY VARIABLE LIFE INSURANCE POLICY
MALE ISSUE AGE 35
$100,000 OF INSURANCE ($60,000 GUARANTEED MINIMUM
+ $40,000 OF EXTRA LIFE PROTECTION GUARANTEED FOR 27 YEARS (1))
ANNUAL PREMIUM FOR SELECT UNDERWRITING RISK: $1,014.00 (2)
DIVIDENDS USED TO PURCHASE PAID-UP ADDITIONS (1)
ASSUMING 6% HYPOTHETICAL GROSS ANNUAL INVESTMENT RATE OF RETURN
<TABLE>
<CAPTION>
DEATH BENEFIT (3) CASH VALUE (3)
----------------------------------------------------------------------------------
EXTRA LIFE PROTECTION
PREMIUMS ------------------------------- CASH CASH
AT TOTAL MINIMUM VARIABLE VARIABLE VALUE VALUE OF TOTAL
END OF 5% INTEREST DEATH DEATH INSURANCE PAID-UP TERM OF BASE PAID-UP CASH
POLICY YEAR PER YEAR BENEFIT BENEFIT AMOUNT ADDITIONS INSURANCE POLICY ADDITIONS VALUE
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 1,065 $100,000 $60,000 $ 7 $ 103 $39,890 $ 167 $ 26 $ 193
2 2,183 100,000 60,000 33 281 39,686 853 75 928
3 3,356 100,000 60,000 78 535 39,387 1,565 148 1,713
4 4,589 100,000 60,000 141 862 38,997 2,301 247 2,548
5 5,883 100,000 60,000 223 1,260 38,517 3,094 373 3,467
6 7,242 100,000 60,000 323 1,723 37,954 3,913 527 4,440
7 8,669 100,000 60,000 440 2,251 37,309 4,758 711 5,469
8 10,167 100,000 60,000 574 2,836 36,590 5,631 925 6,556
9 11,740 100,000 60,000 724 3,477 35,799 6,530 1,171 7,701
10 13,392 100,000 60,000 890 4,166 34,944 7,460 1,447 8,907
15 22,975 100,000 60,000 1,947 8,210 29,843 12,547 3,320 15,867
20 (age 55) 35,205 100,000 60,000 3,342 12,422 24,236 18,395 5,801 24,196
30 (age 65) 70,737 100,000 60,000 6,994 22,013 10,993(4) 32,063 13,274 45,337
</TABLE>
(1) Extra Life Protection is guaranteed to be at least $40,000 for 27 years, so
long as all premiums are paid when due, no policy loan is outstanding, all
dividends are applied to purchase paid-up additions and no paid-up
additions are surrendered for their cash value. Extra Life Protection is
the sum of any positive variable insurance amount plus variable paid-up
additions plus term insurance.
(2) If premiums were paid monthly, the monthly payments would be $89.10. The
death benefit and cash values would not be affected.
(3) Assumes no policy loan has been made.
(4) After the guaranteed period of 27 years for Extra Life Protection, the
amount of term insurance depends on the dividend scale. The amount
illustrated is based on current scale and experience and is not guaranteed.
DIVIDENDS ILLUSTRATED ARE BASED ON CURRENT SCALE AND EXPERIENCE AND ARE NOT
GUARANTEED. IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RESULTS ARE
ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE
INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE
SHOWN AND WILL DEPEND UPON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT
ALLOCATIONS MADE BY AN OWNER AND THE DIFFERENT RATES OF RETURN OF THE FUND
PORTFOLIOS. THE DEATH BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT
FROM THOSE SHOWN IF THE ACTUAL INVESTMENT RATE OF RETURN AVERAGED 6% OVER A
PERIOD OF YEARS, BUT FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL
POLICY YEARS. NO REPRESENTATIONS CAN BE MADE THAT THIS HYPOTHETICAL RATE OF
RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER A PERIOD OF TIME.
54
<PAGE> 58
EXTRA ORDINARY VARIABLE LIFE INSURANCE POLICY
MALE ISSUE AGE 35
$100,000 OF INSURANCE ($60,000 GUARANTEED MINIMUM
+ $40,000 OF EXTRA LIFE PROTECTION GUARANTEED FOR 27 YEARS (1))
ANNUAL PREMIUM FOR SELECT UNDERWRITING RISK: $1,014.00 (2)
DIVIDENDS USED TO PURCHASE PAID-UP ADDITIONS (1)
ASSUMING 12% HYPOTHETICAL GROSS ANNUAL INVESTMENT RATE OF RETURN
<TABLE>
<CAPTION>
DEATH BENEFIT (3) CASH VALUE (3)
------------------------------------------------------------------------------------
PREMIUMS EXTRA LIFE PROTECTION
ACCUMULATED ------------------------------- CASH CASH
AT TOTAL MINIMUM VARIABLE VARIABLE VALUE VALUE OF TOTAL
END OF 5% INTEREST DEATH DEATH INSURANCE PAID-UP TERM OF BASE PAID-UP CASH
POLICY YEAR PER YEAR BENEFIT BENEFIT AMOUNT ADDITIONS INSURANCE POLICY ADDITIONS VALUE
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 1,065 $100,000 $60,000 $ 57 $ 103 $39,840 $ 180 $ 26 $ 206
2 2,183 100,000 60,000 282 288 39,430 920 77 997
3 3,356 100,000 60,000 680 561 38,759 1,733 155 1,888
4 4,589 100,000 60,000 1,257 926 37,817 2,622 265 2,887
5 5,883 100,000 60,000 2,025 1,388 36,587 3,628 411 4,039
6 7,242 100,000 60,000 2,990 1,949 35,061 4,731 596 5,327
7 8,669 100,000 60,000 4,160 2,618 33,222 5,935 827 6,762
8 10,167 100,000 60,000 5,543 3,396 31,061 7,253 1,108 8,361
9 11,740 100,000 60,000 7,148 4,291 28,561 8,694 1,445 10,139
10 13,392 100,000 60,000 8,984 5,307 25,709 10,272 1,844 12,116
15 22,975 100,000 60,000 22,022 12,566 5,412 20,666 5,081 25,747
20 (age 55) 35,205 126,879 60,000 42,807 24,072 0 36,826 11,242 48,068
30 (age 65) 70,737 247,671 60,000 118,181 69,490 0 99,110 41,903 141,013
</TABLE>
(1) Extra Life Protection is guaranteed to be at least $40,000 for 27 years, so
long as all premiums are paid when due, no policy loan is outstanding, all
dividends are applied to purchase paid-up additions and no paid-up
additions are surrendered for their cash value. Extra Life Protection is
the sum of any positive variable insurance amount plus variable paid-up
additions plus term insurance.
(2) If premiums were paid monthly, the monthly payments would be $89.10. The
death benefit and cash values would not be affected.
(3) Assumes no policy loan has been made.
DIVIDENDS ILLUSTRATED ARE BASED ON CURRENT SCALE AND EXPERIENCE AND ARE
NOT GUARANTEED. IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RESULTS ARE
ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE
INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE
SHOWN AND WILL DEPEND UPON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT
ALLOCATIONS MADE BY AN OWNER AND THE DIFFERENT RATES OF RETURN OF THE FUND
PORTFOLIOS. THE DEATH BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT
FROM THOSE SHOWN IF THE ACTUAL INVESTMENT RATE OF RETURN AVERAGED 12% OVER A
PERIOD OF YEARS, BUT FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL
POLICY YEARS. NO REPRESENTATIONS CAN BE MADE THAT THIS HYPOTHETICAL RATE OF
RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER A PERIOD OF TIME.
55
<PAGE> 59
EXTRA ORDINARY VARIABLE LIFE INSURANCE POLICY
MALE ISSUE AGE 55
$100,000 OF INSURANCE ($60,000 GUARANTEED MINIMUM
+ $40,000 OF EXTRA LIFE PROTECTION GUARANTEED FOR 17 YEARS (1))
ANNUAL PREMIUM FOR SELECT UNDERWRITING RISK: $2,612.00 (2)
DIVIDENDS USED TO PURCHASE PAID-UP ADDITIONS (1)
ASSUMING 0% HYPOTHETICAL GROSS ANNUAL INVESTMENT RATE OF RETURN
<TABLE>
<CAPTION>
DEATH BENEFIT (3) CASH VALUE (3)
--------------------------------------------------------------------------------------------------
PREMIUMS EXTRA LIFE PROTECTION
ACCUMULATED ------------------------------------ CASH CASH
AT TOTAL MINIMUM VARIABLE VARIABLE VALUE VALUE OF TOTAL
END OF 5% INTEREST DEATH DEATH INSURANCE PAID-UP TERM OF BASE PAID-UP CASH
POLICY YEAR PER YEAR BENEFIT BENEFIT AMOUNT ADDITIONS INSURANCE POLICY ADDITIONS VALUE
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $2,743 $100,000 $60,000 $ - 86 $ 488 $39,512 $ 466 $ 234 $ 700
2 5,622 100,000 60,000 - 302 1,229 38,771 1,684 606 2,290
3 8,646 100,000 60,000 - 635 2,196 37,804 2,844 1,112 3,956
4 11,821 100,000 60,000 - 1,073 3,287 36,713 3,948 1,709 5,657
5 15,155 100,000 60,000 - 1,627 4,404 35,596 5,212 2,350 7,562
6 18,655 100,000 60,000 - 2,285 5,543 34,457 6,419 3,034 9,453
7 22,330 100,000 60,000 - 3,037 6,692 33,308 7,568 3,755 11,323
8 26,189 100,000 60,000 - 3,872 7,853 32,147 8,654 4,516 13,170
9 30,241 100,000 60,000 - 4,781 9,022 30,978 9,675 5,314 14,989
10 34,496 100,000 60,000 - 5,755 10,201 29,799 10,630 6,151 16,781
15 59,181 100,000 60,000 - 11,323 15,230 24,770 14,474 10,235 24,709
20 (age 75) 90,687 100,000 60,000 - 17,509 15,476 24,524(4) 16,814 11,425 28,239
</TABLE>
(1) Extra Life Protection is guaranteed to be at least $40,000 for 17 years, so
long as all premiums are paid when due, no policy loan is outstanding, all
dividends are applied to purchase paid-up additions and no paid-up
additions are surrendered for their cash value. Extra Life Protection is
the sum of any positive variable insurance amount plus variable paid-up
additions plus term insurance.
(2) If premiums were paid monthly, the monthly payments would be $230.10. The
death benefit and cash values would not be affected.
(3) Assumes no policy loan has been made.
(4) After the guaranteed period of 17 years for Extra Life Protection, the
amount of term insurance depends on the dividend scale. The amount
illustrated is based on current scale and experience and is not guaranteed.
DIVIDENDS ILLUSTRATED ARE BASED ON CURRENT SCALE AND EXPERIENCE AND ARE NOT
GUARANTEED. IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RESULTS ARE
ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE
INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE
SHOWN AND WILL DEPEND UPON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT
ALLOCATIONS MADE BY AN OWNER AND THE DIFFERENT RATES OF RETURN OF THE FUND
PORTFOLIOS. THE DEATH BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT
FROM THOSE SHOWN IF THE ACTUAL INVESTMENT RATE OF RETURN AVERAGED 0% OVER A
PERIOD OF YEARS, BUT FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL
POLICY YEARS. NO REPRESENTATIONS CAN BE MADE THAT THIS HYPOTHETICAL RATE OF
RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER A PERIOD OF TIME.
56
<PAGE> 60
EXTRA ORDINARY VARIABLE LIFE INSURANCE POLICY
MALE ISSUE AGE 55
$100,000 OF INSURANCE ($60,000 GUARANTEED MINIMUM
+ $40,000 OF EXTRA LIFE PROTECTION GUARANTEED FOR 17 YEARS (1))
ANNUAL PREMIUM FOR SELECT UNDERWRITING RISK: $2,612.00 (2)
DIVIDENDS USED TO PURCHASE PAID-UP ADDITIONS (1)
ASSUMING 6% HYPOTHETICAL GROSS ANNUAL INVESTMENT RATE OF RETURN
<TABLE>
<CAPTION>
DEATH BENEFIT (3) CASH VALUE (3)
--------------------------------------------------------------------------------------------------
PREMIUMS EXTRA LIFE PROTECTION
ACCUMULATED ------------------------------------ CASH CASH
AT TOTAL MINIMUM VARIABLE VARIABLE VALUE VALUE OF TOTAL
END OF 5% INTEREST DEATH DEATH INSURANCE PAID-UP TERM OF BASE PAID-UP CASH
POLICY YEAR PER YEAR BENEFIT BENEFIT AMOUNT ADDITIONS INSURANCE POLICY ADDITIONS VALUE
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $2,743 $100,000 $60,000 $ 13 $ 488 $39,499 $ 514 $ 234 $ 748
2 5,622 100,000 60,000 47 1,260 38,693 1,856 621 2,477
3 8,646 100,000 60,000 101 2,305 37,594 3,217 1,167 4,384
4 11,821 100,000 60,000 174 3,539 36,287 4,596 1,840 6,436
5 15,155 100,000 60,000 269 4,875 34,856 6,224 2,601 8,825
6 18,655 100,000 60,000 385 6,320 33,295 7,881 3,459 11,340
7 22,330 100,000 60,000 521 7,866 31,613 9,564 4,414 13,978
8 26,189 100,000 60,000 677 9,525 29,798 11,270 5,478 16,748
9 30,241 100,000 60,000 852 11,303 27,845 12,993 6,658 19,651
10 34,496 100,000 60,000 1,045 13,212 25,743 14,731 7,966 22,697
15 59,181 100,000 60,000 2,266 24,179 13,555 23,607 16,249 39,856
20 (age 75) 90,687 100,020 60,000 3,864 36,156 0 32,593 26,693 59,286
</TABLE>
(1) Extra Life Protection is guaranteed to be at least $40,000 for 17 years, so
long as all premiums are paid when due, no policy loan is outstanding, all
dividends are applied to purchase paid-up additions and no paid-up
additions are surrendered for their cash value. Extra Life Protection is
the sum of any positive variable insurance amount plus variable paid-up
additions plus term insurance.
(2) If premiums were paid monthly, the monthly payments would be $230.10. The
death benefit and cash values would not be affected.
(3) Assumes no policy loan has been made.
DIVIDENDS ILLUSTRATED ARE BASED ON CURRENT SCALE AND EXPERIENCE AND ARE
NOT GUARANTEED. IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RESULTS ARE
ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE
INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE
SHOWN AND WILL DEPEND UPON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT
ALLOCATIONS MADE BY AN OWNER AND THE DIFFERENT RATES OF RETURN OF THE FUND
PORTFOLIOS. THE DEATH BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT
FROM THOSE SHOWN IF THE ACTUAL INVESTMENT RATE OF RETURN AVERAGED 6% OVER A
PERIOD OF YEARS, BUT FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL
POLICY YEARS. NO REPRESENTATIONS CAN BE MADE THAT THIS HYPOTHETICAL RATE OF
RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER A PERIOD OF TIME.
57
<PAGE> 61
EXTRA ORDINARY VARIABLE LIFE INSURANCE POLICY
MALE ISSUE AGE 55
$100,000 OF INSURANCE ($60,000 GUARANTEED MINIMUM
+ $40,000 OF EXTRA LIFE PROTECTION GUARANTEED FOR 17 YEARS (1))
ANNUAL PREMIUM FOR SELECT UNDERWRITING RISK: $2,612.00 (2)
DIVIDENDS USED TO PURCHASE PAID-UP ADDITIONS (1)
ASSUMING 12% HYPOTHETICAL GROSS ANNUAL INVESTMENT RATE OF RETURN
<TABLE>
<CAPTION>
DEATH BENEFIT (3) CASH VALUE (3)
-------------------------------------------------------------------------------------------------
PREMIUMS EXTRA LIFE PROTECTION
ACCUMULATED -------------------------------- CASH CASH
AT TOTAL MINIMUM VARIABLE VARIABLE VALUE VALUE OF TOTAL
END OF 5% INTEREST DEATH DEATH INSURANCE PAID-UP TERM OF BASE PAID-UP CASH
POLICY YEAR PER YEAR BENEFIT BENEFIT AMOUNT ADDITIONS INSURANCE POLICY ADDITIONS VALUE
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 2,743 $100,000 $60,000 $ 112 $ 488 $39,400 $ 561 $ 234 $ 795
2 5,622 100,000 60,000 407 1,289 38,304 2,034 635 2,669
3 8,646 100,000 60,000 889 2,416 36,695 3,617 1,223 4,840
4 11,821 100,000 60,000 1,562 3,806 34,632 5,318 1,979 7,297
5 15,155 100,000 60,000 2,460 5,395 32,145 7,394 2,878 10,272
6 18,655 100,000 60,000 3,590 7,208 29,202 9,635 3,945 13,580
7 22,330 100,000 60,000 4,960 9,262 25,778 12,055 5,198 17,253
8 26,189 100,000 60,000 6,579 11,594 21,827 14,664 6,668 21,332
9 30,241 100,000 60,000 8,456 14,240 17,304 17,473 8,388 25,861
10 34,496 100,000 60,000 10,601 17,248 12,151 20,493 10,400 30,893
15 59,181 124,322 60,000 25,780 38,542 0 39,410 25,902 65,312
20 (age 75) 90,687 179,981 60,000 49,844 70,137 0 66,539 51,780 118,319
</TABLE>
(1) Extra Life Protection is guaranteed to be at least $40,000 for 17 years, so
long as all premiums are paid when due, no policy loan is outstanding, all
dividends are applied to purchase paid-up additions and no paid-up
additions are surrendered for their cash value. Extra Life Protection is
the sum of any positive variable insurance amount plus variable paid-up
additions plus term insurance.
(2) If premiums were paid monthly, the monthly payments would be $230.10. The
death benefit and cash values would not be affected.
(3) Assumes no policy loan has been made.
DIVIDENDS ILLUSTRATED ARE BASED ON CURRENT SCALE AND EXPERIENCE AND ARE
NOT GUARANTEED. IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RESULTS ARE
ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE
INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE
SHOWN AND WILL DEPEND UPON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT
ALLOCATIONS MADE BY AN OWNER AND THE DIFFERENT RATES OF RETURN OF THE FUND
PORTFOLIOS. THE DEATH BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT
FROM THOSE SHOWN IF THE ACTUAL INVESTMENT RATE OF RETURN AVERAGED 12% OVER A
PERIOD OF YEARS, BUT FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL
POLICY YEARS. NO REPRESENTATIONS CAN BE MADE THAT THIS HYPOTHETICAL RATE OF
RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER A PERIOD OF TIME.
58
<PAGE> 62
SINGLE PREMIUM VARIABLE LIFE INSURANCE POLICY
MALE ISSUE AGE 15
FACE AMOUNT $10,000
SINGLE PREMIUM FOR SELECT UNDERWRITING RISK: $1,498.40
DIVIDENDS USED TO PURCHASE PAID-UP ADDITIONS
<TABLE>
<CAPTION>
0% 6% 12%
DEATH BENEFIT* DEATH BENEFIT* DEATH BENEFIT*
ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL
PREMIUMS GROSS ANNUAL INVESTMENT GROSS ANNUAL INVESTMENT GROSS ANNUAL INVESTMENT
ACCUMULATED RATE OF RETURN RATE OF RETURN RATE OF RETURN
AT ----------------------------- ----------------------------- -------------------------------
END OF 5% INTEREST BASE PAID-UP BASE PAID-UP BASE PAID-UP
POLICY YEAR PER YEAR POLICY ADDITIONS TOTAL POLICY ADDITIONS TOTAL POLICY ADDITIONS TOTAL
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 1,573 $10,000 $ 37 $10,037 $10,077 $ 37 $10,114 $ 10,657 $ 37 $ 10,694
2 1,652 10,000 69 10,069 10,155 76 10,231 11,357 83 11,440
3 1,735 10,000 92 10,092 10,233 116 10,349 12,103 136 12,239
4 1,821 10,000 104 10,104 10,312 152 10,464 12,898 193 13,091
5 1,912 10,000 107 10,107 10,392 186 10,578 13,746 255 14,001
6 2,008 10,000 103 10,103 10,472 219 10,691 14,649 324 14,973
7 2,108 10,000 98 10,098 10,553 251 10,804 15,611 401 16,012
8 2,214 10,000 94 10,094 10,635 281 10,916 16,636 485 17,121
9 2,325 10,000 90 10,090 10,717 310 11,027 17,728 578 18,306
10 2,441 10,000 86 10,086 10,800 338 11,138 18,892 681 19,573
15 3,115 10,000 68 10,068 11,223 451 11,674 25,959 1,336 27,295
20 (age 35) 3,976 10,000 53 10,053 11,663 546 12,209 35,664 2,365 38,029
35 (age 50) 8,265 10,000 28 10,028 13,090 1,253 14,343 92,540 13,341 105,881
50 (age 65) 17,183 10,000 13 10,013 14,695 2,783 17,478 240,661 65,011 305,672
</TABLE>
<TABLE>
<CAPTION>
0% 6% 12%
DEATH BENEFIT* DEATH BENEFIT* DEATH BENEFIT*
ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL
PREMIUMS GROSS ANNUAL INVESTMENT GROSS ANNUAL INVESTMENT GROSS ANNUAL INVESTMENT
ACCUMULATED RATE OF RETURN RATE OF RETURN RATE OF RETURN
AT ----------------------------- ----------------------------- -------------------------------
END OF 5% INTEREST BASE PAID-UP BASE PAID-UP BASE PAID-UP
POLICY YEAR PER YEAR POLICY ADDITIONS TOTAL POLICY ADDITIONS TOTAL POLICY ADDITIONS TOTAL
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 1,573 $ 1,211 $ 5 $ 1,216 $ 1,292 $ 5 $ 1,297 $ 1,372 $ 5 $ 1,378
2 1,652 1,191 10 1,201 1,354 11 1,365 1,526 12 1,538
3 1,735 1,172 14 1,186 1,418 17 1,435 1,694 20 1,714
4 1,821 1,154 16 1,170 1,484 23 1,507 1,877 30 1,907
5 1,912 1,137 17 1,154 1,554 29 1,583 2,078 40 2,118
6 2,008 1,122 17 1,139 1,627 35 1,662 2,299 52 2,351
7 2,108 1,109 17 1,126 1,703 42 1,745 2,542 67 2,609
8 2,214 1,099 16 1,115 1,785 48 1,833 2,810 83 2,893
9 2,325 1,090 16 1,106 1,870 55 1,925 3,105 102 3,207
10 2,441 1,085 15 1,100 1,961 62 2,023 3,431 124 3,555
15 3,115 984 15 999 2,394 96 2,490 5,538 285 5,823
20 (age 35) 3,976 898 14 912 2,935 138 3,073 8,977 596 9,573
35 (age 50) 8,265 666 11 677 5,293 507 5,800 37,423 5,395 42,818
50 (age 65) 17,183 458 8 466 8,861 1,678 10,539 145,120 39,203 184,323
</TABLE>
* Assumes no policy loan has been made.
DIVIDENDS ILLUSTRATED ARE BASED ON CURRENT SCALE AND EXPERIENCE AND ARE NOT
GUARANTEED. IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RESULTS ARE
ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE
INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE
SHOWN AND WILL DEPEND UPON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT
ALLOCATIONS MADE BY AN OWNER AND THE DIFFERENT RATES OF RETURN OF THE FUND
PORTFOLIOS. THE DEATH BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT
FROM THOSE SHOWN IF THE ACTUAL INVESTMENT RATES OF RETURN AVERAGED 0%, 6% AND
12% OVER A PERIOD OF YEARS, BUT FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR
INDIVIDUAL POLICY YEARS. NO REPRESENTATIONS CAN BE MADE THAT THESE HYPOTHETICAL
RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER A PERIOD OF
TIME.
59
<PAGE> 63
SINGLE PREMIUM VARIABLE LIFE INSURANCE POLICY
MALE ISSUE AGE 35
FACE AMOUNT $25,000
SINGLE PREMIUM FOR SELECT UNDERWRITING RISK: $6,443.25
DIVIDENDS USED TO PURCHASE PAID-UP ADDITIONS
<TABLE>
<CAPTION>
0% 6% 12%
DEATH BENEFIT* DEATH BENEFIT* DEATH BENEFIT*
ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL
PREMIUMS GROSS ANNUAL INVESTMENT GROSS ANNUAL INVESTMENT GROSS ANNUAL INVESTMENT
ACCUMULATED RATE OF RETURN RATE OF RETURN RATE OF RETURN
AT ------------------------------------------------------------------------------------------------------
END OF 5% INTEREST BASE PAID-UP BASE PAID-UP BASE PAID-UP
POLICY YEAR PER YEAR POLICY ADDITIONS TOTAL POLICY ADDITIONS TOTAL POLICY ADDITIONS TOTAL
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 6,765 $25,000 $ 39 $25,039 $25,193 $ 39 $25,232 $26,640 $ 39 $ 26,679
2 7,104 25,000 71 25,071 25,387 84 25,471 28,387 94 28,481
3 7,459 25,000 97 25,097 25,583 136 25,719 30,249 167 30,416
4 7,832 25,000 117 25,117 25,780 195 25,975 32,233 261 32,494
5 8,223 25,000 132 25,132 25,979 261 26,240 34,348 380 34,728
6 8,635 25,000 141 25,141 26,180 334 26,514 36,602 525 37,127
7 9,066 25,000 145 25,145 26,382 415 26,797 39,004 703 39,707
8 9,520 25,000 142 25,142 26,586 503 27,089 41,564 915 42,479
9 9,996 25,000 136 25,136 26,791 599 27,390 44,292 1,166 45,458
10 10,495 25,000 130 25,130 26,998 701 27,699 47,200 1,457 48,657
15 13,395 25,000 104 25,104 28,057 1,293 29,350 64,873 3,698 68,571
20 (age 55) 17,096 25,000 83 25,083 29,159 2,007 31,166 89,183 7,780 96,963
30 (age 65) 27,847 25,000 54 25,054 31,497 4,068 35,565 168,711 27,903 196,614
- ---------------------------------
</TABLE>
<TABLE>
<CAPTION>
0% 6% 12%
CASH VALUE* CASH VALUE* CASH VALUE*
ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL
PREMIUMS GROSS ANNUAL INVESTMENT GROSS ANNUAL INVESTMENT GROSS ANNUAL INVESTMENT
ACCUMULATED RATE OF RETURN RATE OF RETURN RATE OF RETURN
AT ------------------------------------------------------------------------------------------------------
END OF 5% INTEREST BASE PAID-UP BASE PAID-UP BASE PAID-UP
POLICY YEAR PER YEAR POLICY ADDITIONS TOTAL POLICY ADDITIONS TOTAL POLICY ADDITIONS TOTAL
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 6,765 $5,663 $10 $5,673 $ 6,040 $ 10 $ 6,050 $ 6,416 $ 10 $ 6,426
2 7,104 5,588 19 5,607 6,350 22 6,372 7,156 26 7,182
3 7,459 5,518 27 5,545 6,674 38 6,712 7,971 46 8,017
4 7,832 5,454 33 5,487 7,013 56 7,069 8,866 75 8,941
5 8,223 5,394 40 5,434 7,367 78 7,445 9,849 113 9,962
6 8,635 5,341 43 5,384 7,737 102 7,839 10,929 161 11,090
7 9,066 5,294 45 5,339 8,122 132 8,254 12,114 222 12,336
8 9,520 5,253 46 5,299 8,525 164 8,689 13,414 298 13,712
9 9,996 5,218 46 5,264 8,944 202 9,146 14,839 392 15,231
10 10,495 5,191 45 5,236 9,381 243 9,624 16,401 506 16,907
15 13,395 4,669 42 4,711 11,346 523 11,869 26,234 1,496 27,730
20 (age 55) 17,096 4,167 39 4,206 13,618 937 14,555 41,652 3,633 45,285
30 (age 65) 27,847 3,210 32 3,242 18,993 2,453 21,446 101,734 16,826 118,560
- ---------------------------------
</TABLE>
* Assumes no policy loan has been made.
DIVIDENDS ILLUSTRATED ARE BASED ON CURRENT SCALE AND EXPERIENCE AND ARE NOT
GUARANTEED. IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RESULTS ARE
ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE
INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE
SHOWN AND WILL DEPEND UPON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT
ALLOCATIONS MADE BY AN OWNER AND THE DIFFERENT RATES OF RETURN OF THE FUND
PORTFOLIOS. THE DEATH BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT
FROM THOSE SHOWN IF THE ACTUAL INVESTMENT RATES OF RETURN AVERAGED 0%, 6% AND
12% OVER A PERIOD OF YEARS, BUT FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR
INDIVIDUAL POLICY YEARS. NO REPRESENTATIONS CAN BE MADE THAT THESE HYPOTHETICAL
RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER A PERIOD OF
TIME.
60
<PAGE> 64
SINGLE PREMIUM VARIABLE LIFE INSURANCE POLICY
MALE ISSUE AGE 55
FACE AMOUNT $50,000
SINGLE PREMIUM FOR SELECT UNDERWRITING RISK: $23,502.00
DIVIDENDS USED TO PURCHASE PAID-UP ADDITIONS
<TABLE>
<CAPTION>
0% 6% 12%
DEATH BENEFIT* DEATH BENEFIT* DEATH BENEFIT*
ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL
PREMIUMS GROSS ANNUAL INVESTMENT GROSS ANNUAL INVESTMENT GROSS ANNUAL INVESTMENT
ACCUMULATED RATE OF RETURN RATE OF RETURN RATE OF RETURN
AT -------------------------------------------------------------------------------------------
END OF 5% INTEREST BASE PAID-UP BASE PAID-UP BASE PAID-UP
POLICY YEAR PER YEAR POLICY ADDITIONS TOTAL POLICY ADDITIONS TOTAL POLICY ADDITIONS TOTAL
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $24,677 $50,000 $ 302 $50,302 $50,387 $ 302 $50,689 $ 53,288 $ 302 $ 53,590
2 25,911 50,000 562 50,562 50,777 623 51,400 56,793 668 57,461
3 27,207 50,000 778 50,778 51,170 962 52,132 60,529 1,105 61,634
4 28,567 50,000 951 50,951 51,566 1,320 52,886 64,512 1,623 66,135
5 29,995 50,000 1,081 51,081 51,965 1,698 53,663 68,758 2,231 70,989
6 31,495 50,000 1,169 51,169 52,367 2,097 54,464 73,284 2,942 76,226
7 33,070 50,000 1,212 51,212 52,773 2,517 55,290 78,109 3,767 81,876
8 34,723 50,000 1,212 51,212 53,182 2,963 56,145 83,253 4,726 87,979
9 36,459 50,000 1,169 51,169 53,594 3,437 57,031 88,738 5,838 94,576
10 38,282 50,000 1,123 51,123 54,009 3,943 57,952 94,586 7,127 101,713
15 48,859 50,000 921 50,921 56,137 6,826 62,963 130,172 16,722 146,894
20 (age 75) 62,358 50,000 753 50,753 58,352 9,906 68,258 179,225 32,774 211,999
</TABLE>
<TABLE>
<CAPTION>
0% 6% 12%
CASH VALUE* CASH VALUE* CASH VALUE*
ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL
PREMIUMS GROSS ANNUAL INVESTMENT GROSS ANNUAL INVESTMENT GROSS ANNUAL INVESTMENT
ACCUMULATED RATE OF RETURN RATE OF RETURN RATE OF RETURN
AT -------------------------------------------------------------------------------------------
END OF 5% INTEREST BASE PAID-UP BASE PAID-UP BASE PAID-UP
POLICY YEAR PER YEAR POLICY ADDITIONS TOTAL POLICY ADDITIONS TOTAL POLICY ADDITIONS TOTAL
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $24,677 $21,039 $145 $21,184 $22,432 $ 145 $22,577 $ 23,824 $ 145 $ 23,969
2 25,911 20,617 277 20,894 23,418 308 23,726 26,386 329 26,715
3 27,207 20,212 394 20,606 24,438 487 24,925 29,178 560 29,738
4 28,567 19,826 494 20,320 25,490 687 26,177 32,223 844 33,067
5 29,995 19,460 577 20,037 26,579 905 27,485 35,540 1,191 36,731
6 31,495 19,117 640 19,757 27,703 1,148 28,851 39,153 1,610 40,763
7 33,070 18,797 680 19,477 28,864 1,413 30,277 43,084 2,114 45,198
8 34,723 18,501 697 19,198 30,062 1,704 31,766 47,358 2,718 50,076
9 36,459 18,230 689 18,919 31,296 2,025 33,321 51,999 3,439 55,438
10 38,282 17,988 677 18,665 32,567 2,378 34,945 57,036 4,297 61,333
15 48,859 15,476 619 16,095 37,727 4,587 42,314 87,483 11,238 98,721
20 (age 75) 62,358 13,120 556 13,676 43,080 7,313 50,393 132,318 24,196 156,514
</TABLE>
* Assumes no policy loan has been made.
DIVIDENDS ILLUSTRATED ARE BASED ON CURRENT SCALE AND EXPERIENCE AND ARE NOT
GUARANTEED. IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RESULTS ARE
ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE
INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE
SHOWN AND WILL DEPEND UPON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT
ALLOCATIONS MADE BY AN OWNER AND THE DIFFERENT RATES OF RETURN OF THE FUND
PORTFOLIOS. THE DEATH BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT
FROM THOSE SHOWN IF THE ACTUAL INVESTMENT RATES OF RETURN AVERAGED 0%, 6% AND
12% OVER A PERIOD OF YEARS, BUT FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR
INDIVIDUAL POLICY YEARS. NO REPRESENTATIONS CAN BE MADE THAT THESE HYPOTHETICAL
RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER A PERIOD OF
TIME.
61
<PAGE> 65
NORTHWESTERN MUTUAL VARIABLE LIFE
NORTHWESTERN MUTUAL VARIABLE LIFE ACCOUNT
NORTHWESTERN MUTUAL SERIES FUND, INC.
P R O S P E C T U S
<PAGE> 66
PART II
CONTENTS OF REGISTRATION STATEMENT
This amendment to the registration statement comprises the following
papers and documents:
The facing sheet
The cross-reference sheet
The prospectus consisting of 61 pages
The signatures
Written consents of the following persons:
Price Waterhouse LLP (filed herewith as Exhibit
99.C1)
William C. Koenig, F.S.A. (included in his opinion
filed herewith as Exhibit 99.C6)
The following exhibits:
EX-99.C1 Consent of Price Waterhouse LLP
EX-99.C6 Opinion of William C. Koenig, F.S.A.
EX-27 Financial Data Schedule for period
ended December 31, 1995
The following documents, previously included in the
Registration Statement and amendments thereto, are
herein restated in electronic format:
EX-99.A1 Restated Articles of Incorporation
of The Northwestern Mutual Life
Insurance Company
EX-99.A6 By-Laws of The Northwestern Mutual
Life Insurance Company
II-1
<PAGE> 67
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant, Northwestern Mutual Variable Life Account, certifies that it meets
all the requirements for effectiveness of this Amended Registration Statement
pursuant to Rule 485 (b) under the Securities Act of 1933 and has duly caused
this Amended Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Milwaukee, and State of
Wisconsin, on the 26th day of April, 1996.
NORTHWESTERN MUTUAL VARIABLE LIFE ACCOUNT
(Registrant)
By THE NORTHWESTERN MUTUAL LIFE
INSURANCE COMPANY
(Depositor)
Attest: JOHN M. BREMER By: JAMES D. ERICSON
------------------------------ --------------------------------
John M. Bremer, Senior Vice James D. Ericson, President and
President, General Counsel Chief Executive Officer
and Secretary
By NORTHWESTERN MUTUAL INVESTMENT
SERVICES, INC.
(Depositor)
Attest: MERRILL C. LUNDBERG By: MARK G. DOLL
---------------------- --------------
Merrill C. Lundberg, Secretary Mark G. Doll, President
Pursuant to the requirements of the Securities Act of 1933, the
depositors have duly caused this Amended Registration Statement to be signed on
their behalf by the undersigned, thereunto duly authorized, and their seals to
be hereunto affixed, all in the City of Milwaukee, and State of Wisconsin, on
the 26th day of April, 1996.
THE NORTHWESTERN MUTUAL LIFE
INSURANCE COMPANY (Depositor)
Attest: JOHN M. BREMER By: JAMES D. ERICSON
----------------------------- --------------------------------
John M. Bremer, Senior Vice James D. Ericson, President and
President, General Counsel Chief Executive Officer
and Secretary
NORTHWESTERN MUTUAL INVESTMENT
SERVICES, INC. (Depositor)
Attest: MERRILL C. LUNDBERG By: MARK G. DOLL
------------------------------ --------------
Merrill C. Lundberg, Secretary Mark G. Doll, President
Pursuant to the requirements of 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
- --------- -----
JAMES D. ERICSON Trustee, President and Dated April
- ---------------- Principal Executive and 26, 1996
James D. Ericson Financial Officer
II-2
<PAGE> 68
GARY E. LONG Vice President, Controller
- ------------------------------ and Principal Accounting
Gary E. Long Officer
RICHARD H. HOLTON* Trustee
- ------------------------------
Richard H. Holton
HAROLD B. SMITH* Trustee
- ------------------------------
Harold B. Smith
J. THOMAS LEWIS* Trustee
- ------------------------------
J. Thomas Lewis
FRANK H. BERTSCH* Trustee Dated April
- ------------------------------ 26, 1996
Frank H. Bertsch
PATRICIA ALBJERG GRAHAM* Trustee
- ------------------------------
Patricia Albjerg Graham
DONALD J. SCHUENKE* Trustee
- ------------------------------
Donald J. Schuenke
FRED G. LUBER* Trustee
- ------------------------------
Fred G. Luber
R. QUINTUS ANDERSON* Trustee
- ------------------------------
R. Quintus Anderson
STEPHEN F. KELLER* Trustee
- ------------------------------
Stephen F. Keller
II-3
<PAGE> 69
PIERRE S. du PONT* Trustee
- ------------------------------
Pierre S. du Pont
J. E. GALLEGOS* Trustee
- ------------------------------
J. E. Gallegos
THOMAS I. DOLAN* Trustee
- ------------------------------
Thomas I. Dolan
KATHRYN D. WRISTON* Trustee
- ------------------------------
Kathryn D. Wriston
BARRY L. WILLIAMS* Trustee
- ------------------------------
Barry L. Williams
GORDON T. BEAHAM III* Trustee
- ------------------------------
Gordon T. Beaham III
DANIEL F. McKEITHAN, JR.* Trustee Dated April
- ------------------------------ 26, 1996
Daniel F. McKeithan, Jr.
ROBERT E. CARLSON* Trustee
- ------------------------------
Robert E. Carlson
Trustee
- ------------------------------
Edward E. Barr
ROBERT C. BUCHANAN* Trustee
- ------------------------------
Robert C. Buchanan
SHERWOOD H. SMITH, JR.* Trustee
- ------------------------------
Sherwood H. Smith, Jr.
II-4
<PAGE> 70
H. MASON SIZEMORE, JR.* Trustee
- ------------------------------
H. Mason Sizemore, Jr.
JOHN J. STOLLENWERK* Trustee
- ------------------------------
John J. Stollenwerk
GEORGE A. DICKERMAN* Trustee Dated April
- ------------------------------ 26, 1996
George A. Dickerman
GUY A. OSBORN* Trustee
- ------------------------------
Guy A. Osborn
JOHN E. STEURI* Trustee
- ------------------------------
John E. Steuri
*By: JAMES D. ERICSON
----------------------------------
James D. Ericson, Attorney in fact,
pursuant to the Power of Attorney
attached hereto
II-5
<PAGE> 71
CONSENT OF ACTUARY
The Consent of William C. Koenig, F.S.A., is contained in his opinion
filed as Exhibit 99.C6.
CONSENT OF INDEPENDENT ACCOUNTANTS
The Consent of Price Waterhouse LLP is filed as Exhibit 99.C1.
II-6
<PAGE> 72
POWER OF ATTORNEY
The undersigned Trustees of THE NORTHWESTERN MUTUAL LIFE INSURANCE
COMPANY hereby constitute and appoint James D. Ericson and Robert E. Carlson,
or either of them, their true and lawful attorneys and agents to sign the names
of the undersigned Trustees to (1) the registration statement or statements to
be filed under the Securities Act of 1933 and to any instrument or document
filed as part thereof or in connection therewith or in any way related thereto,
and any and all amendments thereto in connection with variable contracts issued
or sold by The Northwestern Mutual Life Insurance Company or any separate
account credited therein and (2) the Form 10-K Annual Report or Reports of The
Northwestern Mutual Life Insurance Company and/or its separate accounts for its
or their fiscal year ended December 31, 1995 to be filed under the Securities
Exchange Act of 1934 and to any instrument or document filed as part thereof or
in connection therewith or in any way related thereto, and any and all
amendments thereto. "Variable contracts" as used herein means any contracts
providing for benefits or values which may vary according to the investment
experience of any separate account maintained by The Northwestern Mutual Life
Insurance Company, including variable annuity contracts and variable life
insurance policies. Each of the undersigned hereby ratifies and confirms all
that said attorneys and agents shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, each of the undersigned has subscribed these
presents this 26th day of July, 1995.
R. QUINTUS ANDERSON Trustee
-------------------------------
R. Quintus Anderson
Trustee
-------------------------------
Edward E. Barr
GORDON T. BEAHAM III Trustee
-------------------------------
Gordon T. Beaham III
FRANK H. BERTSCH Trustee
-------------------------------
Frank H. Bertsch
ROBERT C. BUCHANAN Trustee
-------------------------------
Robert C. Buchanan
ROBERT E. CARLSON Trustee
-------------------------------
Robert E. Carlson
II-7
<PAGE> 73
GEORGE A. DICKERMAN Trustee
-------------------------------
George A. Dickerman
THOMAS I. DOLAN Trustee
-------------------------------
Thomas I. Dolan
PIERRE S. du PONT IV Trustee
-------------------------------
Pierre S. du Pont IV
JAMES D. ERICSON Trustee
-------------------------------
James D. Ericson
J. E. GALLEGOS Trustee
-------------------------------
J. E. Gallegos
PATRICIA ALBJERG GRAHAM Trustee
-------------------------------
Patricia Albjerg Graham
RICHARD H. HOLTON Trustee
-------------------------------
Richard H. Holton
STEPHEN F. KELLER Trustee
-------------------------------
Stephen F. Keller
J. THOMAS LEWIS Trustee
-------------------------------
J. Thomas Lewis
FRED G. LUBER Trustee
-------------------------------
Fred G. Luber
DANIEL F. McKEITHAN, JR. Trustee
-------------------------------
Daniel F. McKeithan, Jr.
GUY A. OSBORN Trustee
-------------------------------
Guy A. Osborn
II-8
<PAGE> 74
DONALD J. SCHUENKE Trustee
-------------------------------
Donald J. Schuenke
H. MASON SIZEMORE, JR. Trustee
-------------------------------
H. Mason Sizemore, Jr.
HAROLD B. SMITH Trustee
-------------------------------
Harold B. Smith
SHERWOOD H. SMITH, JR. Trustee
-------------------------------
Sherwood H. Smith, Jr.
JOHN E. STEURI Trustee
-------------------------------
John E. Steuri
JOHN J. STOLLENWERK Trustee
-------------------------------
John J. Stollenwerk
BARRY L. WILLIAMS Trustee
-------------------------------
Barry L. Williams
KATHRYN D. WRISTON Trustee
-------------------------------
Kathryn D. Wriston
II-9
<PAGE> 1
EX-99.C1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of
this Post-Effective Amendment No. 18 to the Registration Statement on Form S-6
(the "Registration Statement") of our report dated January 24, 1996, relating
to the financial statements of The Northwestern Mutual Life Insurance Company,
and of our report dated January 24, 1996, relating to the financial statements
of Northwestern Mutual Variable Life Account, which appear in such Prospectus.
We also consent to the reference to us under the heading "Experts" in such
Prospectus.
PRICE WATERHOUSE LLP
Milwaukee, Wisconsin
April 24, 1996
<PAGE> 1
EX-99.C6
April 26, 1996
The Northwestern Mutual Life Insurance Company
720 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
Gentlemen:
This opinion is furnished in connection with Post-Effective Amendment No. 18 to
the Registration Statement on Form S-6 of Northwestern Mutual Variable Life
Account (File No. 2-89972). The prospectus included in Post-Effective
Amendment No. 18 ("Prospectus") describes three variable life insurance
policies which are issued in connection with the Account ("Policies"): Whole
Life, Extra Ordinary Life Policies and Single Premium Life Policies. The
Policy forms were prepared under my direction, and I am familiar with the
Registration Statement and Amendments and Exhibits thereto. In my opinion:
l. The illustrations of death benefits included on pages 12 and 13 of the
Prospectus, based on the assumptions stated in the illustrations, are
consistent with the provisions of the Policies.
2. The illustration of the effect of a Policy loan on the death benefit
and cash value included on page 16, based on the assumptions stated in
the illustration, is consistent with the provisions of the Policies.
3. The illustration of reduced paid-up insurance and extended term in-
surance included on page 16 of the Prospectus, based on the
assumptions stated in the illustration, is consistent with the
provisions of the Policies.
4. The illustrations of cash values and death benefits included on pages
46 through 61 of the Prospectus, in the Appendix thereto, including
the amounts shown for the Base Policy and as Paid-Up Additions, based
on the assumptions stated in the illustrations, are consistent with
the provi- sions of the Policies and current dividend scale and
experience. The rate structure of the Policies has not been designed
so as to make the relationship between premiums and benefits, as shown
in the illustra- tions, appear more favorable to a prospective
purchaser of a Policy for male age l5, 35 or 55, than to prospective
purchasers of Policies for a male at other ages or for a female.
I hereby consent to the use of this opinion as an exhibit to the Registration
Statement and to the reference to my name under the heading "Experts" in the
Prospectus.
Sincerely,
WILLIAM C. KOENIG
William C. Koenig, F.S.A.
Senior Vice President and Chief Actuary
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A)
NORTHWESTERN MUTUAL VARIABLE LIFE ACCOUNT DECEMBER 31, 1995 FINANCIAL STATEMENTS
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH (B) POST-EFFECTIVE
AMENDMENT #1.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 155,146
<INVESTMENTS-AT-VALUE> 184,889
<RECEIVABLES> 246
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 185,135
<PAYABLE-FOR-SECURITIES> 199
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 47
<TOTAL-LIABILITIES> 246
<SENIOR-EQUITY> 184,889
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 184,889
<DIVIDEND-INCOME> 4,153
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 1,050
<NET-INVESTMENT-INCOME> 3,103
<REALIZED-GAINS-CURRENT> 1,300
<APPREC-INCREASE-CURRENT> 30,929
<NET-CHANGE-FROM-OPS> 35,332
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<PAGE> 1
EXHIBIT-99.A1
RESTATED ARTICLES OF INCORPORATION
OF
THE NORTHWESTERN MUTUAL
LIFE INSURANCE COMPANY
a Wisconsin corporation
(Adopted July 26, 1972)
ARTICLE I
NAME
The name of the Company shall be The Northwestern Mutual Life
Insurance Company.
ARTICLE II
PERIOD OF EXISTENCE
The period of existence of the Company shall be perpetual.
ARTICLE III
PRINCIPLES AND PURPOSES
The Company is a mutual insurance company, without capital stock,
incorporated in 1857 by special act of the Wisconsin Legislature. The Company
is organized and operated for the mutual protection and benefit of those
persons who hold insurance policies or annuity contracts issued by the Company
or who have beneficial interests in such policies or contracts. Neither such
persons nor the policies or contracts are or shall be subject to assessment for
any purpose whatsoever.
The purposes of the Company are to engage in any lawful activity for
which insurance corporations may be organized under the Wisconsin Statutes,
including without limitation the conducting of an insurance business and
businesses incidental thereto, the making of investments and the ownership and
operation of subsidiaries, all as and to the extent authorized by the Wisconsin
Statutes.
ARTICLE IV
PRINCIPAL OFFICE
The location of the principal office of the Company shall be
determined by the board of trustees. At the date of adoption of these Articles
the principal office is located in the City of Milwaukee, Wisconsin.
ARTICLE V
MEMBERS
The members of the Company shall be those persons who are
policyholders of one or more insurance policies or deferred annuity contracts
issued by the Company, then in force and not matured by death of the insured or
annuitant or attainment of maturity date.
<PAGE> 2
The rights of members shall be as provided under the Wisconsin
Statutes, these Articles and the By-laws of the Company. The rules governing
voting by a member, including eligibility to vote and voting procedures, shall
be as provided in the Wisconsin Statutes and the By-laws.
ARTICLE VI
BOARD OF TRUSTEES
The board of trustees of the Company shall consist of such individual
members of the Company, not less than nine, as may be provided in the By-laws.
The By-laws may prescribe other qualifications for the trustees and may divide
them into classes according to their terms of office. The method of election
or appointment of the trustees and their terms of office shall be as provided
in the By-laws. The term "trustee" may be changed to "director" by an
amendment to the By-laws.
ARTICLE VII
MEMBERS' MEETINGS
Regular and special meetings of the members of the Company shall be
held as provided in the By-laws. The Company may make reasonable expenditures
in support of candidates nominated by the board for election as trustees and
the position of its management at any meeting.
ARTICLE VIII
AMENDMENTS
These Articles may be amended in the manner authorized by law at the
time of adoption of the amendment.
<PAGE> 1
EXHIBIT-99.A6
BY-LAWS
OF
THE NORTHWESTERN MUTUAL
LIFE INSURANCE COMPANY
MILWAUKEE, WISCONSIN
(Appendix--Restated Articles of Incorporation)
<PAGE> 2
BY-LAWS
OF
THE NORTHWESTERN MUTUAL
LIFE INSURANCE COMPANY
AS AMENDED
JULY 22, 1987
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I--Meetings of Members; Voting by Members; Nominations
of Board Candidates
Section 1.1 Annual Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.2 Special Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.3 Place of Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.4 Notice of Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.5 Quorum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.6 Voting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
(a) Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
(b) Furnishing Proxies and Other Materials . . . . . . . . . . . . . . . . 2
(c) Effect of Furnishing Proxies . . . . . . . . . . . . . . . . . . . . . 2
(d) Voting Inspectors . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
(e) Tabulation of Voting . . . . . . . . . . . . . . . . . . . . . . . . . 2
(f) Certificate of Election . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 1.7 Voting Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(a) Record Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(b) Number of Votes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(c) Eligibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 1.8 Nominations of Candidates for the Board . . . . . . . . . . . . . . . . . . . 3
(a) Filing of Board's Proposed Nominees . . . . . . . . . . . . . . . . . . 3
(b) Substitution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
(c) Nomination at Meeting . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 1.9 Inspection of Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE II--Board of Trustees and Committees
Section 2.1 General Powers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 2.2 Composition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(a) Number and Tenure . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(b) Classification . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(c) Retirement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 2.3 Qualifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(a) Citizenship, Age, Other Offices . . . . . . . . . . . . . . . . . . . . 5
(b) Non-attendance . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 2.4 Committees of the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 2.5 Executive Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(a) Composition and Powers . . . . . . . . . . . . . . . . . . . . . . . . 6
(b) Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 2.6 Finance Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(a) Composition and Powers . . . . . . . . . . . . . . . . . . . . . . . . 6
(b) Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 2.7 Vacancies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 2.8 Alternate Members on Standing Committees
of the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(a) Election . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(b) Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 2.9 Compensation of Trustees . . . . . . . . . . . . . . . . . . . . . . . . . . 7
</TABLE>
ii
<PAGE> 4
ARTICLE III--Meetings of the Board and Committees of the Board
Section 3.1 Regular Meetings . . . . . . . . . . . . . . . . . 8
Section 3.2 Special Meetings . . . . . . . . . . . . . . . . . 8
Section 3.3 Quorum . . . . . . . . . . . . . . . . . . . . . . 8
Section 3.4 Manner of Acting . . . . . . . . . . . . . . . . . 8
Section 3.5 Notice of Special Meetings . . . . . . . . . . . . 8
Section 3.6 Waiver of Notice . . . . . . . . . . . . . . . . . 8
Section 3.7 Action Without a Meeting . . . . . . . . . . . . . 9
ARTICLE IV--Executive and Other Officers
Section 4.1 Executive Officers . . . . . . . . . . . . . . . . 9
Section 4.2 Powers and Duties of Executive Officers . . . . . . 9
Section 4.3 Other Officers . . . . . . . . . . . . . . . . . . 9
Section 4.4 Vacancies and Absences . . . . . . . . . . . . . 10
Section 4.5 Compensation . . . . . . . . . . . . . . . . . . 10
Section 4.6 Election and Appointment of Officers . . . . . . 10
ARTICLE V--Examining Committee
Section 5.1 Selection of the Examining Committee . . . . . . 10
Section 5.2 Functions of the Examining Committee . . . . . . 11
ARTICLE VI--Official Bonds; Checks; Other Instruments
Section 6.1 Official Bonds . . . . . . . . . . . . . . . . . 11
Section 6.2 Checks . . . . . . . . . . . . . . . . . . . . . 11
Section 6.3 Other Instruments . . . . . . . . . . . . . . . . 11
iii
<PAGE> 5
ARTICLE VII--Indemnification
Section 7.1 Indemnification of Trustees, Officers and Employees . 11
(a) Successful Defense . . . . . . . . . . . . . . 11
(b) Other Cases . . . . . . . . . . . . . . . . . . 12
Section 7.2 Determination of Right to Indemnification . . . . . . 12
Section 7.3 Allowance of Expenses as Incurred . . . . . . . . . . 13
Section 7.4 Additional Rights to Indemnification and Allowance
of Expenses . . . . . . . . . . . . . . . . . . . . . 13
Section 7.5 Insurance . . . . . . . . . . . . . . . . . . . . . . 13
Section 7.6 General . . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE VIII--Emergency Provisions
Section 8.1 Continuity of Management . . . . . . . . . . . . . . 14
(a) Acting President . . . . . . . . . . . . . . . 14
(b) Powers of Acting President . . . . . . . . . . 14
(c) Executive Committee . . . . . . . . . . . . . . 14
(d) Committee Quorum . . . . . . . . . . . . . . . 15
(e) Board Quorum . . . . . . . . . . . . . . . . . 15
ARTICLE IX--Offices
Section 9.1 Offices . . . . . . . . . . . . . . . . . . . . . . . 15
ARTICLE X--Corporate Seal
Section 10.1 Corporate Seal . . . . . . . . . . . . . . . . . . . . 15
ARTICLE XI--Amendments
iv
<PAGE> 6
Section 11.1 Amendment or Repeal of the By-laws . . . . 16
(a) By Members . . . . . . . . . . . . . 16
(b) By Board . . . . . . . . . . . . . . 16
APPENDIX--Restated Articles of Incorporation . . . . . . . . . . . . 16
v
<PAGE> 7
BY-LAWS
OF
THE NORTHWESTERN MUTUAL
LIFE INSURANCE COMPANY
AS AMENDED
JULY 22, 1987
ARTICLE I
MEETINGS OF MEMBERS; VOTING BY MEMBERS;
NOMINATIONS OF BOARD CANDIDATES
Section 1.1. ANNUAL MEETINGS.
An annual meeting of the members of the Company shall be held at such
time during normal business hours as may be fixed by the board of trustees (the
"board") or executive committee for the purpose of electing trustees and for
the transaction of such other business as may come before the meeting. The
board or executive committee may postpone the date of the annual meeting for
not more than 60 days, but such postponement shall not change the record date
for such annual meeting.
Section 1.2 SPECIAL MEETINGS.
A special meeting of members may be called by the president, the board,
the executive committee or members having 5% of the votes entitled to be cast
at such meeting.
Section 1.3 PLACE OF MEETINGS.
The board may designate any place, either within or without the State of
Wisconsin, as the place of any annual meeting or of any special meeting called
by the board. If no designation is made or if a special meeting is otherwise
called, the place of meeting shall be the principal office of the Company.
Section 1.4 NOTICE OF MEETINGS.
Notice of the time and place of an annual or special meeting shall be
published once in each of 2 weeks, the first publication to be not more than
120 and the second publication to be not less than 10 days prior to the date of
the meeting, in at least 2 newspapers of general circulation, one published in
the City of Madison, Wisconsin, and one published in the City of Milwaukee,
Wisconsin, and in such other newspapers, if any, as the board or executive
committee may determine. Written notice of the time and place of an annual or
special meeting shall also be given by mailing a copy thereof, not more than
120 nor less than 10 days prior to the date of the meeting, to the
policyholders constituting substantially all of the members entitled to vote at
the meeting. In the case of a special meeting or when required by law, the
published and mailed notice of meeting shall include a statement of the purpose
or purposes for which the meeting is to be held. In case the date of the
annual meeting is postponed after published and mailed notices have begun, a
published notice of the postponement shall be made as in the case of the
initial published notice but no mailed notice of the postponement need be
given.
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<PAGE> 8
Section 1.5 QUORUM.
Members having at least 5% of the votes entitled to be cast at any
meeting, present in person or by proxy at such meeting, shall constitute a
quorum at such meeting. If a quorum is not present at any meeting, a majority
of the members present may adjourn the meeting from time to time without
further notice.
Section 1.6 VOTING.
(a) PROCEDURES. All voting by members at annual and special meetings
shall be in person or by proxy executed in writing by the member or
his duly authorized attorney-in-fact and delivered to the secretary
of the Company on or before a day specified in the notice of meeting
which shall be at least 5 days prior to the date of the meeting. A
majority of the votes entitled to be cast by the members present in
person or by proxy at a meeting at which a quorum is present shall
be sufficient for the election of any trustee or for the adoption of
any other matter voted on at such meeting unless a greater portion
is required by law. Unless sooner revoked, proxies shall be valid
for 11 months from the date of execution and for such additional
period, if any, as may be provided therein.
(b) FURNISHING PROXIES AND OTHER MATERIAL. The Company may include the
notice of meeting pursuant to Section 1.4 with or as a part of its
annual report for the preceding year or may send such notice
separately. The Company may provide proxies to any or all of the
members together with such information as the Company deems
pertinent with respect to the candidates or matters being voted upon
at the meeting.
(c) EFFECT OF FURNISHING PROXIES. The fact that the Company, by mail or
otherwise, furnishes a proxy to any person shall not constitute nor
be construed as an admission of the validity of any policy or
contract or that such person is a member entitled to vote at the
meeting; and such fact shall not be competent evidence in any action
or proceeding in which the validity of any policy or contract or any
claim under it is at issue.
(d) VOTING INSPECTORS. Prior to each meeting of members the board shall
appoint, from among members who are not trustees, candidates for
trustee, officers, employees or agents of the Company, 1 or more
voting inspectors and shall fix their fees. If an inspector so
appointed is unable or unwilling to act the chief executive officer
may appoint a substitute from among members eligible as aforesaid.
The Company shall provide such clerical and mechanical assistance to
the inspectors as they may reasonably require and shall pay the fees
and reasonable expenses of the inspectors.
(e) TABULATION OF VOTING. All voting at a meeting of members, including
voting by holders of proxies, shall be by written ballot. The votes
shall
2
<PAGE> 9
be tabulated by the voting inspectors and shall be subject to such
verification and ascertainment of the validity thereof and of the
qualification of the voters as the inspectors deem appropriate. The
inspectors may employ such mechanical equipment as they deem
advisable to assist in the tabulation. In the absence of challenge
the inspectors may assume that the signature appearing on a proxy or
ballot is the valid signature of a member entitled to vote, that any
person signing in a representative capacity is duly authorized so to
do, and that the proxy, if not older than permitted thereby, is
valid. After the tabulation has been completed, all proxies and
ballots shall be placed in sealed packages and preserved by the
secretary of the Company for at least 4 months from the date of the
meeting.
(f) CERTIFICATE OF ELECTION. Promptly after each meeting of members the
inspectors shall sign and file with the secretary of the Company and
the Wisconsin Commissioner of Insurance a certificate of the results
of the voting at such meeting.
Section 1.7 VOTING RIGHTS.
(a) RECORD DATE. Only those persons who are members of the Company at
the close of business on the record date for a meeting of members
shall be entitled to vote at such meeting. The record date for an
annual or special meeting shall be such business day not more than
120 days prior to the date of the meeting as may be established by
the board or executive committee.
(b) NUMBER OF VOTES. Each member shall be entitled to one vote on each
matter presented at a meeting for a vote by members, regardless of
the number or amount of, or the number of lives insured by, policies
or contracts owned by such member.
(c) ELIGIBILITY. All questions concerning the eligibility of members to
vote and the validity of the votes cast at any meeting shall be
determined by the voting inspectors on the basis of the records of
the Company. If a question concerning eligibility to vote arises as
between a person identified as the owner of the policy or contract
on the records of the Company and a person otherwise claiming to
control such policy or contract, the person shown on the records of
the Company as the owner at the close of business on the record date
for the meeting shall be deemed to be the member entitled to vote at
such meeting.
Section 1.8 NOMINATIONS OF CANDIDATES FOR THE BOARD.
(a) FILING OF BOARD'S PROPOSED NOMINEES. Before each annual meeting of
members, the board shall propose for nomination at such meeting a
member as candidate for every vacancy on the board to be filled at
the ensuing annual meeting as provided in Section 2.2 and shall
cause to be filed with the records of the Company and the Wisconsin
Commissioner of Insurance a certificate of such proposed nomination
3
<PAGE> 10
signed by the secretary of the Company, giving the names,
occupations and addresses of such proposed nominees and the terms
for which they are to be nominated and stating that such proposed
nominees meet the eligibility requirements then pertaining to
trustees prescribed by Section 2.3(a) and will accept office if
elected.
(b) SUBSTITUTION. In the event any candidate proposed by the board for
nomination pursuant to Section (a) above withdraws as a candidate
prior to the annual meeting, the board may propose a member for
nomination in substitution for the withdrawing candidate and shall
make such filings as are required pursuant to Section (a) above
promptly after such substitution.
(c) NOMINATION AT MEETING. Subject to Section 2.3(a), nominations of
members as candidates for any vacancy on the board to be filled at
an annual meeting of members, including nomination of the board's
proposed nominees, shall be made at the meeting; and such nomination
may be made by any member who is present in person or by proxy and
is entitled to vote at such meeting.
Section 1.9 INSPECTION OF RECORDS.
The Company shall keep on file after the record date for each meeting and
until the tabulation of voting at such meeting has been completed, a record for
voting purposes of the names and addresses of the persons shown as the premium
payers as of the close of business on such record date with respect to the
policies and contracts of the members. Subject to provisions of the Wisconsin
Statutes and with due regard to the Company's status as an insurance company
and financial institution, a member, or his agent or attorney, may inspect such
record at any reasonable time for the purpose of communicating with other
members in regard to nomination or election of candidates for the board or any
other matter being submitted for vote at a meeting of the members. No person
may, directly or indirectly, use any information obtained from any such
inspection for any other purpose, and the Company may impose reasonable rules
to insure that such information is not used for any other purpose.
ARTICLE II
BOARD OF TRUSTEES AND COMMITTEES
Section 2.1 GENERAL POWERS.
The business and affairs of the Company shall be managed by the board.
Section 2.2 COMPOSITION.
(a) NUMBER AND TENURE. The number of trustees of the Company shall be
not more than 30 or if permitted by law such other number, not less
than 9, as the board may establish from time to time. The regular
term of office of a trustee shall commence immediately after the
annual meeting of members at which such trustee is elected and end
4
<PAGE> 11
on the date of the fourth succeeding annual meeting of members. The
vacancies on the board to be filled at each annual meeting of
members shall be the offices of those trustees whose regular terms
are scheduled to expire on the date of such meeting and the offices
of any other trustees that become vacant during the 12 months ending
on the January 1 preceding such meeting. All elections shall be for
the regular term except those to fill the offices of trustees that
become vacant during the 12 months ending on the January 1 preceding
such meeting which shall be for the unexpired regular term of such
vacant offices. Except as provided in paragraph (c), each trustee
elected at an annual meeting shall hold office for the term for
which elected and until his successor has been elected or appointed
and qualified.
(b) CLASSIFICATION. Trustees shall be divided into 4 classes, which may
but need not be equal, according to the expiration date of the
regular terms of offices. The regular term of office of one of the
classes of trustees shall expire on the date of each annual meeting
of members. On July 26, 1972, the 4 classes of trustees shall be
those whose regular terms are scheduled to expire on the date of the
annual meeting of members in 1973, 1974, 1975 and 1976,
respectively.
(c) RETIREMENT. The board may by resolution provide for mandatory
retirement of trustees and members of the committees of the board.
A trustee or member of a committee of the board shall be retired on
the date provided in the resolution even though elected for a term
extending beyond such date.
Section 2.3 QUALIFICATIONS.
(a) CITIZENSHIP, AGE, OTHER OFFICES. Only those members of the Company
shall be eligible to be nominated or elected or to serve as a
trustee who are citizens of the United States of America, are not
less than 25 years of age nor more than the retirement age, if any,
as then established by resolution of the board pursuant to Section
2.2(c), are not ineligible under paragraph (b) and have no
relationship which would create a conflict of interest or impair
independence of judgment in regard to the affairs of the Company in
violation of the rules then prescribed by the board or executive
committee. Except for the chairman of the board, the president and
2 other executive officers, no trustee shall be an executive
officer, officer, other employee or agent of the Company.
(b) NON-ATTENDANCE. The failure of a trustee to attend at least 1
meeting of the board within a period of 9 consecutive calendar
months shall thereupon result in an automatic forfeiture of his
office, unless such forfeiture is avoided as provided below; and
such trustee shall not be eligible to be nominated or elected or to
serve as a trustee until at least 6 months have elapsed following
such forfeiture. Any such forfeiture shall result in a vacancy to
be filled as in the case of other
5
<PAGE> 12
vacancies on the board. A trustee may avoid such forfeiture if
during said 9 month period he attends a meeting of the executive
committee even though not a member of that committee, but no trustee
may so avoid forfeiture more than once during the term he is then
serving without the express approval of the executive committee.
Section 2.4 COMMITTEES OF THE BOARD.
The standing committees of the board shall be an executive committee and
a finance committee and such other standing committees as the board may
establish and designate as such. The board may from time to time establish
such other committees as it deems advisable; and the members of such other
committees shall be appointed by or in the manner provided by the board. Any
trustee may attend and participate in any meeting of a standing committee of
the board, except that no trustee who is not a member of or an alternate on a
standing committee may vote upon any matter before such committee.
Section 2.5 EXECUTIVE COMMITTEE.
(a) COMPOSITION AND POWERS. The executive committee shall consist of
such number of trustees as the board may determine, to be elected
annually by the board, plus the chairman of the board, if any, and
the president, if a trustee. When the board is not in session, the
executive committee shall have and may exercise all of the powers of
the board except (i) the powers granted to the finance committee by
Section 2.6, (ii) the power to adopt, amend or repeal by-laws, (iii)
the power to elect a chairman of the board, president or other
executive officer, and (iv) the power to fill vacancies in the board
or any of its standing committees or, except as provided in Section
4.4, in the office of chairman of the board, president or other
executive officer.
(b) RECORDS. The executive committee shall keep a record of its
transactions which record shall be made available to each member of
the board, and so much thereof shall be read at the next regular
meeting of the board as it may order.
Section 2.6 FINANCE COMMITTEE.
(a) COMPOSITION AND POWERS. The finance committee shall consist of such
number of trustees as the board may determine, to be elected
annually by the board, plus the chairman of the board, if any, and
the president, if a trustee. When the board is not in session, the
finance committee shall have and may exercise all of the powers of
the board in regard to the assets and investments of the Company
(except assets used in the operation of the Company's principal
office and agencies) including, without limitation, the power
directly or by delegation to do all such acts and things as it may
deem necessary and proper to (i) establish the Company's financial
and investment policy, (ii) invest, reinvest, manage, select, sell
and otherwise dispose of the Company's assets, (iii) designate
depositories for the Company's funds and authorize persons to make
deposits in and withdrawals from such depositories,
6
<PAGE> 13
(iv) appoint one or more managers of the Company's regional loan and
real estate offices, (v) borrow money for the use and benefit of the
Company in such amount and on such terms as it shall determine, and
(vi) pledge the Company's assets as security for the payment of such
loans or other proper purposes.
(b) RECORDS. The finance committee shall keep a record of its
transactions which record shall be made available to each member of
the board and all standing committees of the board and so much
thereof shall be read at the next regular meeting of the board as it
may order.
Section 2.7 VACANCIES.
Vacancies in the board or any committee of the board may be filled by the
board at any meeting. A person appointed to fill a vacancy in the board shall
hold office until the next annual meeting of members and until his successor
has been elected or appointed and qualified, except that any person appointed
to fill any such vacancy occurring after January 1 of any year but prior to the
next following meeting of members shall hold office until the second annual
meeting of members following his appointment and until his successor has been
elected or appointed and qualified. A person appointed to fill a vacancy on a
committee shall hold office until the next annual meeting of the board.
Section 2.8 ALTERNATE MEMBERS ON STANDING COMMITTEES OF THE BOARD.
(a) ELECTION. The board shall elect annually trustees to serve as
alternate members on any standing committee of the board, when so
designated by the committee or the chairman of the board or the
president to take the place of absent members, or to fill vacancies
on such committees until the next meeting of the board.
(b) COMPENSATION. An alternative member on any committee shall receive,
during his period of service, compensation as fixed by the board.
The board may determine by a generally applicable resolution to what
extent, if any, the compensation of absent members shall be withheld
or reduced during the period of service of alternates.
Section 2.9 COMPENSATION OF TRUSTEES.
By resolution of the board, each trustee may be paid his reasonable
expenses, if any, for attendance at each meeting of the board and its
committees and, if not an executive officer, may be paid a stated compensation
as trustee and committee member or a fixed sum for attendance at each meeting
of the board or its committees or both. Such payment shall not prevent the
payment of reasonable compensation to a trustee (other than an executive
officer) for the authorized performance of professional, appraisal, or other
technical or special service outside the scope of his regular duties as trustee
or member of a committee.
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<PAGE> 14
ARTICLE III
MEETINGS OF THE BOARD AND
COMMITTEES OF THE BOARD
Section 3.1 REGULAR MEETINGS.
An annual meeting of the board for the election of standing committees
and the officers specified in Section 4.6(a), and the transaction of such other
business as may properly come before the meeting, shall be held annually at
such time and place, either within or without the State of Wisconsin, as
designated by resolution of the board and upon such notice as the board may
determine. Additional regular meetings of the board and regular meetings of a
committee may be held at such times and places and upon such notice as the
board or committee may determine.
Section 3.2 SPECIAL MEETINGS.
Special meetings of the board or a committee may be called at any time by
or at the request of the chairman of the board or the president, and in
addition, special meetings of the board may be called at any time by or at the
request of the executive committee or 9 or more trustees.
Section 3.3 QUORUM.
A quorum for the transaction of business at any meeting of the board or
any committee shall consist of a majority of the board or of the committee,
except that a quorum for a committee composed of an even number of persons
shall consist of 50% of the committee. Less than a quorum may adjourn the
meeting from time to time until a quorum is present.
Section 3.4 MANNER OF ACTING.
The act of a majority of the board or a committee present at a meeting at
which a quorum is present shall be the act of the board or committee, unless
the board or the committee determines a greater number is required.
Section 3.5 NOTICE OF SPECIAL MEETINGS.
Notice of special meetings of the board or a committee shall be given in
writing or by telegram to each trustee or committee member at his last known
address as it appears on the Company's records. Such notice shall be given at
least 6 days prior to the meeting date except in the case of finance and
executive committee meetings for which 2 days prior notice shall suffice. If
mailed, such notice shall be deemed to be given when deposited in the United
States mail, so addressed, with postage prepaid. If sent by telegram, such
notice shall be deemed to be given when the telegram is delivered to the
telegraph company. Neither the business to be transacted at, nor the purpose
of, any special meeting of the board or a committee need be specified in the
notice of such meeting except as provided in Section 11.1(b) in regard to
amendment or repeal of the By-laws.
Section 3.6 WAIVER OF NOTICE.
Any notice of the time or place of any special meeting of the board or a
committee may be dispensed with if every member of the board or committee
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attends such meeting or if at any time every absent member of the board or
committee signs a written waiver of notice or waives notice by telegram.
Neither the business to be transacted at, nor the purpose of, any meeting of
the board or committee need be specified in the waiver of such meeting.
Section 3.7 ACTION WITHOUT A MEETING.
Any action required or permitted to be taken at a meeting by the board or
a committee may be taken without a meeting if a consent in writing, setting
forth the action so taken, is signed by every member of the board or committee.
ARTICLE IV
EXECUTIVE AND OTHER OFFICERS
Section 4.1 EXECUTIVE OFFICERS.
The executive officers of the Company shall consist of a president and
such other executive officers with such titles, powers and duties as may be
prescribed from time to time by the board. The board may from time to time
elect from among its members a chairman of the board, who shall be an executive
officer of the Company with such powers and duties as may be prescribed by the
board. Any 2 or more offices may be held by the same person except the offices
of president and secretary and the offices of president and vice president.
The executive officers shall hold office during the pleasure of the board. For
the purposes of the Wisconsin Statutes the principal officers shall be the
chairman of the board, if any, the president and the other executive officers.
There shall be at all times at least 3 principal officers.
Section 4.2 POWERS AND DUTIES OF EXECUTIVE OFFICERS.
The chairman of the board, if any, shall be chairman of and preside at
the meetings of the members and of the board and shall exercise such other
powers and perform such other duties as may be required by the board. In the
absence of action by the board vesting such powers in the chairman of the
board, the president shall be the chief executive officer and have the general
direction and management of the Company's affairs, and shall exercise such
powers and perform such duties as are incident to his office or as may be
required of him by the board or the executive or finance committees. The chief
executive officer, if a member of the Board, shall be chairman of and preside
at the meetings of the executive and finance committees. In the absence of, or
if there is no chairman of the board, the president shall preside at the
meetings of the members and, if a member of the board, at meetings of the
board. All other executive officers of the Company shall exercise such powers
and perform such duties as are usually incident to their office and such other
duties, including presiding at meetings of the members in the absence of the
chairman of the board and the president, as shall be assigned to or required of
them, from time to time, by the board, the executive committee, the finance
committee or the president or, if authorized by the board, the chairman of the
board.
Section 4.3 OTHER OFFICERS.
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The other officers of the Company shall include a secretary, a treasurer
and such assistants to the several executive officers and such other officers
as the board or executive committee may from time to time designate as such,
all of whom shall hold office during the pleasure of the board or executive
committee. Any such officer may be designated an executive officer by the
board or executive committee. Each officer of the Company shall perform such
duties as may be assigned to or required of him from time to time, by the
executive committee, the finance committee, the president, the head of his
department or, if authorized by the board, the chairman of the board.
Section 4.4 VACANCIES AND ABSENCES.
Any vacancy in the office of chairman of the board, president or other
executive officers may be filled at any meeting of the board, or until the next
meeting of the board, by the executive committee. In the event of the death,
prolonged absence or inability or refusal to act of a chairman of the board who
has been designated by the board as the chief executive officer, the president
shall be the chief executive officer of the Company. In the prolonged absence
of the president or in the event of his death, inability or refusal to act, an
individual designated by the board or the executive committee shall exercise
the powers and perform the duties of the president. Such designation, if made
by the executive committee, shall not extend beyond the next meeting of the
board.
Section 4.5 COMPENSATION.
Compensation of executive officers, officers and other employees of the
Company shall be fixed by or in the manner provided by the board.
Section 4.6 ELECTION AND APPOINTMENT OF OFFICERS.
Officers shall be elected or appointed from time to time, but at least
annually, as follows:
(a) The chairman of the board, if any, the president and other
executive officers shall be elected by the board.
(b) Other officers shall be appointed by the board or in a
manner provided by resolution of the board.
ARTICLE V
EXAMINING COMMITTEE
Section 5.1 SELECTION OF THE EXAMINING COMMITTEE.
An examining committee, consisting of not more than 5 or less than 3
individuals who are either members of the Company or whose lives are insured by
the Company, who are not trustees, agents, executive officers, officers or
other employees of the Company, shall be elected annually by the board, and the
board shall designate the chairman of such committee. Not more than 2 members
of any examining committee shall have been members of the previous examining
committee. A vacancy in the examining committee may be filled at any time by
the board or one of its standing committees.
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Section 5.2 FUNCTIONS OF THE EXAMINING COMMITTEE.
The purpose of the examining committee shall be to make an investigation
of and to inquire into the general policies, operations and management of the
Company. The committee shall have such powers as may be determined from time
to time by the board and shall make its reports to the board.
ARTICLE VI
OFFICIAL BONDS; CHECKS; OTHER INSTRUMENTS
Section 6.1 OFFICIAL BONDS.
The board, the executive committee or the finance committee may require a
bond from any executive officer, officer, other employee or agent of the
Company, in such sum and with such sureties as it may deem proper.
Section 6.2 CHECKS.
Disbursement of the funds of the Company shall be made upon the check of
the Company signed by such persons and in such manner as may be determined by
the finance committee. Such persons as may be designated by the finance
committee shall each have authority to endorse checks and other instruments
received by the Company or to execute powers of attorney authorizing other
persons to make such endorsements.
Section 6.3 OTHER INSTRUMENTS.
The chairman of the board, if any, the president and other executive
officers, the vice presidents, and such other persons as the board, the
executive committee or the finance committee may designate shall each have
authority to execute and acknowledge on behalf of the Company all instruments
executed in the name of the Company; and the chairman of the board, the
president and other executive officers, and the vice presidents shall each have
authority to execute powers of attorney authorizing other persons to execute
and acknowledge such instruments in specific instances. The secretary and any
associate or assistant secretary shall each have authority to attest,
countersign and acknowledge all such instruments requiring attestation,
countersignature or acknowledgment. Insurance policies and annuity contracts
issued by the Company and endorsements thereto shall be executed in the manner
provided by the board or executive committee.
ARTICLE VII
INDEMNIFICATION
Section 7.1 INDEMNIFICATION OF TRUSTEES, OFFICERS AND EMPLOYEES.
(a) SUCCESSFUL DEFENSE. The Company shall indemnify a trustee,
officer, employee or member of a committee, to the extent he or
she has been successful on the merits or otherwise in the defense
of a proceeding, for all reasonable expenses incurred in the
proceeding if the trustee, officer, employee or member of a
committee was a party because he
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or she is a trustee, officer, employee or member of a committee
of the Company.
(b) OTHER CASES. In cases not included under (a) above, the Company
shall indemnify a trustee, officer, employee or member of a
committee against liability incurred in a proceeding to which the
trustee, officer, employee or member of a committee was a party
because he or she is a trustee, officer, employee or member of a
committee of the Company or was serving at the Company's request as
a director, officer, employee, agent, partner, trustee, member of
any governing or decision-making committee of another corporation,
partnership, joint venture, trust or other enterprise, unless
liability was incurred because the trustee, officer, employee or
member of a committee breached or failed to perform a duty owed to
the Company and the breach or failure to perform constitutes any of
the following: (i) a wilful failure to deal fairly with the Company
or its members in connection with a matter in which the trustee,
officer, employee or member of a committee has a material conflict
of interest, (ii) a violation of criminal law, unless the trustee,
officer, employee or member of a committee had reasonable cause to
believe his or her conduct was lawful or no reasonable cause to
believe his or her conduct was unlawful; (iii) a transaction from
which the trustee, officer, employee or member of a committee
derived an improper personal profit; or (iv) wilful misconduct. The
termination of a proceeding by judgment, order, settlement,
conviction or upon a plea of no contest or its equivalent, does not,
by itself, create a presumption that indemnification is not required
pursuant to this section. A trustee, officer, employee or member of
a committee who seeks indemnification under this section shall make
a written request to the Company. Indemnification under this
section is not required if the trustee, officer, employee or member
of a committee previously received indemnification or allowance of
expenses in connection with the same proceeding.
Section 7.2 DETERMINATION OF RIGHT TO INDEMNIFICATION.
Any indemnification under Section 7.1, unless ordered by a court, shall
be made by the Company only as authorized in the specific case upon a
determination that indemnification of the trustee, officer, employee or member
of a committee is proper in the circumstances because he or she has met the
applicable standard of conduct. Such determination shall be made by one of the
following means selected by the person seeking indemnification:
(a) By majority vote of a quorum of the Board consisting of
trustees not at the time parties to the same or related
proceedings. If a quorum of disinterested trustees cannot be
obtained, by majority vote of a committee duly appointed by the
Board and consisting solely of two or more trustees not at the
time parties to the same or related proceedings. Trustees who are
parties to the same or related proceedings may participate in the
designation of members of the committee.
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(b) By independent legal counsel selected by a quorum of the
Board or its committee in the manner described in (a) or, if
unable to obtain such a quorum or committee, by majority vote of
the full Board, including trustees who are parties to the same or
related proceedings.
(c) By a panel of three arbitrators consisting of one arbitrator
selected by those trustees entitled under (b) to select
independent legal counsel, one arbitrator selected by the person
seeking indemnification, and one arbitrator selected by the two
arbitrators previously selected.
Section 7.3 ALLOWANCE OF EXPENSES AS INCURRED.
Upon written request by a trustee, officer, employee or member of a
committee who is party to a proceeding, the Company may pay or reimburse his or
her reasonable expenses as incurred, if such advance payment is authorized in a
manner provided in Section 7.2, and if the person provides the Company with the
following:
(a) A written affirmation of his or her good faith belief that
he or she has not breached or failed to perform his or her duties
to the Company; and
(b) A written undertaking, executed personally or on his or her
behalf, to repay the allowance to the extent that it is
ultimately determined under Section 7.2 that indemnification is
not required and that indemnification is not ordered by a court.
The undertaking under this section shall be an unlimited, general
obligation of the person involved, may be secured or unsecured,
and may be accepted without reference to his or her ability to
repay.
Section 7.4 ADDITIONAL RIGHTS TO INDEMNIFICATION AND ALLOWANCE OF EXPENSES.
Except as limited by law, the indemnification and allowance of expenses
provided by this article do not preclude any additional right to
indemnification or allowance of expenses that a trustee, officer, employee,
member of a committee, or other person serving at the request of the Company as
a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise may have under any written agreement
between such person and the Company, resolution of the Board, or resolution
adopted by the members.
Section 7.5 INSURANCE.
The Company may purchase and maintain insurance on behalf of any person
who is or was a trustee, officer, employee or member of a committee of the
Company or is or was serving at the request of the Company as a director,
officer, employee or agent of another corporation, or a partnership, joint
venture, trust or other enterprise, against any liability asserted against him
and incurred by him in any such capacity or arising out of his status as such,
whether or not the Company would have the power to indemnify him against such
liability under this article.
Section 7.6 GENERAL.
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For purposes of this article, the definitions contained in Section
181.041 of the Wisconsin Statutes are incorporated herein by this reference
except that "trustee" shall be used wherever the term "director" appears in the
statute. The term "employee" shall mean a natural person who is or was an
employee of the Company or who, while an employee of the Company, is or was
serving at the Company's request as a director, officer, partner, trustee,
member of any decision-making committee, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, and, unless
the context requires otherwise, the estate or personal representative of the
employee. "Member of a committee" shall mean a member of the examining
committee described in Article V. The provisions of this article shall apply
from the date of adoption of this By-Law, regardless of the date of the
occurrence for which indemnification is sought. Any right to indemnification
under any prior By-Law of the Company is terminated as of the date of adoption
of this By-Law.
ARTICLE VIII
EMERGENCY PROVISIONS
Section 8.1 CONTINUITY OF MANAGEMENT.
To insure continuity of management in the event of a national emergency
caused by military attack or by a nuclear, atomic or other disaster, the
following delegation of executive authority and responsibility is provided on a
temporary basis pursuant to the Wisconsin Statutes until the executive
committee or a board of trustees can act:
(a) ACTING PRESIDENT. In the event such emergency results in
the disability or absence of the chairman of the board and the
president, then an executive officer in the order specified in the
latest resolution of the board relating to powers and duties of
executive officers shall be and is hereby designated as acting
president and chief executive officer, but if no executive officer
is then available, the trustee senior in point of service on the
board of trustees, who is able and willing to act, shall be and is
hereby designated the acting president and chief executive
officer.
(b) POWERS OF ACTING PRESIDENT. The acting president shall
exercise the powers and perform the duties of the president,
except as otherwise provided in the By-laws, and shall have
authority to relocate the principal office within the United
States, to take charge of all Company property and records,
including copies of such records as may be deposited outside the
principal office, and to sign all instruments relating to the
business of the Company, including checks.
(c) EXECUTIVE COMMITTEE. The acting president shall immediately call
a meeting of the executive committee, and such committee shall
have authority to designate substitutes for absent or disabled
executive officers to act until the next meeting of the board,
and shall have
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authority to determine a suitable location within the United States
for the Company's principal office.
(d) COMMITTEE QUORUM. If by reason of such emergency a quorum of either
the executive committee or finance committee cannot be obtained,
then the acting president shall have authority to designate such
number of trustees as may be required for a quorum, to serve as
substitutes on such committee. If sufficient substitutes are not
available, the acting president may reduce the number constituting a
quorum or any committee to not less than 3.
(e) BOARD QUORUM. If by reason of such emergency a quorum of the board
cannot be obtained, 3 trustees shall constitute a quorum for the
transaction of business at all meetings of the board. Any vacancy
in the board may be filled by a majority of the remaining trustees,
though less than a quorum, or by a sole remaining trustee. If there
are no surviving trustees but at least 3 executive officers of the
Company survive, then the president if he survives and 2 (or 3 if
the president does not survive) other executive officers in the
order listed in the latest resolution of the board relating to
powers and duties of executive officers shall be the trustees and
shall possess all of the powers of the previous board and such
powers as are granted herein. By majority vote such emergency board
of trustees may elect other trustees. If there are not at least 3
surviving executive officers, the Wisconsin Commissioner of
Insurance or duly designated person exercising the powers of the
Commissioner of Insurance shall appoint 3 persons as trustees who
shall possess all of the powers of the previous board and such
powers as are granted herein, and these persons by majority vote may
elect other trustees.
ARTICLE IX
OFFICES
Section 9.1 OFFICES.
The location of the principal office of the Company shall be
determined by the board. The Company may have other offices at such locations
as may be necessary or convenient for the conduct of its business.
ARTICLE X
CORPORATE SEAL
Section 10.1 CORPORATE SEAL.
The board may prescribe a corporate seal for the Company, which shall
contain the name of the Company, the words "Corporate Seal" and such other
devices, if any, as the board may determine.
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ARTICLE XI
AMENDMENTS
Section 11.1 AMENDMENT OR REPEAL OF THE BY-LAWS.
(a) BY MEMBERS. The members may, at any regular or special meeting of
the members at which a quorum is present, amend or repeal these
By-laws or adopt new By-laws by the affirmative vote of at least
two-thirds of the votes entitled to be cast by the members present
in person or by proxy at such meeting.
(b) BY BOARD. The board may, at any regular or special meeting of the
board, amend or repeal these By-laws or adopt new By-laws, except
that no by-law adopted by the members shall be subject to amendment
or repeal by the board. Written notice setting forth the substance
of the proposed action shall be given in the manner provided in
Section 3.5 to every member of the board at least 6 days prior to
the meeting date.
APPENDIX
RESTATED ARTICLES OF INCORPORATION
OF
THE NORTHWESTERN MUTUAL
LIFE INSURANCE COMPANY
a Wisconsin corporation
(Adopted July 26, 1972)
ARTICLE I
NAME
The name of the Company shall be The Northwestern Mutual Life Insurance
Company.
ARTICLE II
PERIOD OF EXISTENCE
The period of existence of the Company shall be perpetual.
ARTICLE III
PRINCIPLES AND PURPOSES
The Company is a mutual insurance company, without capital stock,
incorporated in 1857 by special act of the Wisconsin Legislature. The Company
is organized and operated for the mutual protection and benefit of those
persons who hold insurance policies or annuity contracts issued by the Company
or who have beneficial interests in such policies or contracts. Neither such
persons nor the
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policies or contracts are or shall be subject to assessment for any purpose
whatsoever.
The purposes of the Company are to engage in any lawful activity for
which insurance corporations may be organized under the Wisconsin Statutes,
including without limitation the conducting of an insurance business and
businesses incidental thereto, the making of investments and the ownership and
operation of subsidiaries, all as and to the extent authorized by the Wisconsin
Statutes.
ARTICLE IV
PRINCIPAL OFFICE
The location of the principal office of the Company shall be determined
by the board of trustees. At the date of adoption of these Articles the
principal office is located in the City of Milwaukee, Wisconsin.
ARTICLE V
MEMBERS
The members of the Company shall be those persons who are policyholders
of one or more insurance policies or deferred annuity contracts issued by the
Company, then in force and not matured by death of the insured or annuitant or
attainment of maturity date.
The rights of members shall be as provided under the Wisconsin Statutes,
these Articles and the By-laws of the Company. The rules governing voting by a
member, including eligibility to vote and voting procedures, shall be as
provided in the Wisconsin Statutes and the By-laws.
ARTICLE VI
BOARD OF TRUSTEES
The board of trustees of the Company shall consist of such individual
members of the Company, not less than nine, as may be provided in the By-laws.
The By-laws may prescribe other qualifications for the trustees and may divide
them into classes according to their terms of office. The method of election
or appointment of the trustees and their terms of office shall be as provided
in the By-laws. The term "trustee" may be changed to "director" by an
amendment to the By-laws.
ARTICLE VII
MEMBERS' MEETINGS
Regular and special meetings of the members of the Company shall be held
as provided in the By-laws. The Company may make reasonable expenditures in
support of candidates nominated by the board for election as trustees and the
position of its management at any meeting.
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ARTICLE VIII
AMENDMENTS
These Articles may be amended in the manner authorized by law at the time
of adoption of the amendment.
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