<PAGE> 1
Registration No. 33-89188
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
________________
POST-EFFECTIVE AMENDMENT NO. 1 TO
FORM S-6
FOR REGISTRATION
UNDER
THE SECURITIES ACT OF 1933 OF SECURITIES
OF UNIT INVESTMENT TRUSTS REGISTERED
ON FORM N-8B-2
________________
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.
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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.
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<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 and its Divisions
6 . . . . . . . . . . . . . . . . . . The Account and its Divisions
7 . . . . . . . . . . . . . . . . . . Not Applicable
8 . . . . . . . . . . . . . . . . . . Not Applicable
9 . . . . . . . . . . . . . . . . . . Legal Proceedings
10(a) . . . . . . . . . . . . . . . . . Other Policy Provisions: Owner
10(b) . . . . . . . . . . . . . . . . . Annual Dividends
10(c) and (d) . . . . . . . . . . . . . Death Benefit, Cash Value, Loans
and Withdrawals, Right to Return
Policy, Right to Exchange for a Fixed
Benefit Policy, Payment Plans
10(e) . . . . . . . . . . . . . . . . . Premiums, Paid-Up Insurance,
Reinstatement
10(f) . . . . . . . . . . . . . . . . . Voting Rights
10(g) . . . . . . . . . . . . . . . . . Voting Rights, Substitution of Fund
Shares and Other Changes
10(h) . . . . . . . . . . . . . . . . . Voting Rights, Substitution of Fund
Shares and Other Changes
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 . . . . . . . . . . . . . . . . . . Summary, The Fund, Deductions and
Charges, Distribution of the Policies
14 . . . . . . . . . . . . . . . . . . Requirements for Insurance
15 . . . . . . . . . . . . . . . . . . Premiums, Allocations to the Account
16 . . . . . . . . . . . . . . . . . . The Account, The Fund, Allocations to
the Account
17 . . . . . . . . . . . . . . . . . . Same Captions as Items 10(a), (c),
and (d)
18 . . . . . . . . . . . . . . . . . . The Account, Annual Dividends
19 . . . . . . . . . . . . . . . . . . Reports
-ii-
</TABLE>
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<TABLE>
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20 . . . . . . . . . . . . . . . . . . Not Applicable
21 . . . . . . . . . . . . . . . . . . Loans and Withdrawals
22 . . . . . . . . . . . . . . . . . . Not Applicable
23 . . . . . . . . . . . . . . . . . . . Not Applicable
24 . . . . . . . . . . . . . . . . . . Not Applicable
25 . . . . . . . . . . . . . . . . . . Northwestern Mutual Life
26 . . . . . . . . . . . . . . . . . . The Fund, Deductions and Charges
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
36 . . . . . . . . . . . . . . . . . . Not Applicable
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, Death Benefit, Cash Value
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 . . . . . . . . . . . . . . . . . . Not Applicable
54 . . . . . . . . . . . . . . . . . . Not Applicable
55 . . . . . . . . . . . . . . . . . . Not Applicable
56 . . . . . . . . . . . . . . . . . . Not Applicable
57 . . . . . . . . . . . . . . . . . . Not Applicable
58 . . . . . . . . . . . . . . . . . . Not Applicable
59 . . . . . . . . . . . . . . . . . . Financial Statements
</TABLE>
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<PAGE> 4
April 30, 1996
P R O S P E C T U S
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This prospectus describes the Variable CompLife(R) Policy (the "Policy") Northwestern
offered by The Northwestern Mutual Life Insurance Company. The Policy is Mutual
designed to provide lifetime insurance coverage on the insured named in the Variable
Policy. Both the death benefit and the cash value provided by the Policy CompLife(R)
will vary daily to reflect 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 Series Fund,
Inc. (the "Fund"). The prospectus for the Fund, attached to this Variable Whole Life
prospectus, describes the investment objectives of the nine portfolios: the Policy with
Index 500 Stock Portfolio, the Select Bond Portfolio, the Money Market Additional Protection
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 Policy provides for a scheduled premium payable at least annually,
but the owner of a Policy may pay more than the scheduled amount. In some
situations the owner may pay less than the scheduled amount. Northwestern
Mutual Life guarantees that the death benefit will never be less than the COMPLIFE(R) IS A
Policy's initial amount of whole life insurance, regardless of the Account's REGISTERED SERVICE MARK
investment experience, so long as scheduled premiums are paid when due and OF THE NORTHWESTERN
no Policy debt is outstanding. The Policy may include insurance which is MUTUAL LIFE INSURANCE
guaranteed for only a specified number of years. There is no guaranteed COMPANY.
minimum cash value.
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 insurance costs for a new Policy. Deductions for sales costs
and administrative expenses are made from the cash values of Policies NORTHWESTERN
surrendered during the early Policy years. Therefore a Policy should be MUTUAL LIFE(*)
purchased only if the purchaser intends to keep it in force for a reasonably 720 East Wisconsin
long period. Avenue
Milwaukee, Wisconsin
A Policy may be returned for a full refund for a limited period of time. 53202
See "Right to Return Policy", p.15. (414) 271-1444
The assets of the High Yield Bond Division of the Account are invested
in shares of the High Yield Bond Portfolio of the Fund, which invests
primarily in fixed income securities that are rated below investment grade
by the major rating agencies. Such securities are sometimes known as "junk
bonds" and are considered speculative. Investors should carefully consider
the risks associated with such investments, as described in the Fund's
prospectus attached hereto, and should understand that high yield fixed
income securities are not appropriate for short-term investment purposes.
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 SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
</TABLE>
<PAGE> 5
CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Summary . . . . . . . . . . . . . . . . . . . . 3
Variable Life Insurance . . . . . . . . . . . . 3
The Account and its Divisions . . . . . . . . . 3
The Policy . . . . . . . . . . . . . . . . . . 3
Premiums . . . . . . . . . . . . . . . . . . 3
Death Benefit . . . . . . . . . . . . . . . . 3
Cash Value . . . . . . . . . . . . . . . . . 3
Deductions and Charges . . . . . . . . . . . 3
From Premiums . . . . . . . . . . . . . . . 3
From Policy Value . . . . . . . . . . . . . 4
From the Assets of the Account and the Fund 4
Transaction Charges . . . . . . . . . . . . 4
Surrender Charges . . . . . . . . . . . . . 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 Policy . . . . . . 6
The Policy Design . . . . . . . . . . . . . . 6
Requirements for Insurance . . . . . . . . . . 7
Premiums . . . . . . . . . . . . . . . . . . . 7
Death Benefit . . . . . . . . . . . . . . . . 9
Policy Value and Paid-Up Additional Insurance 9
Allocations to the Account . . . . . . . . . 10
Deductions and Charges . . . . . . . . . . . 10
Deductions from Premiums . . . . . . . . 10
Charges Against the Policy Value . . . . 11
Charges Against the Account Assets . . . 11
Transaction Charges . . . . . . . . . . . 11
Surrender Charges . . . . . . . . . . . . 11
Guarantee of Premiums, Deductions
and Charges . . . . . . . . . . . . . . . . 12
Cash Value . . . . . . . . . . . . . . . . . 12
Annual Dividends . . . . . . . . . . . . . . 13
Loans and Withdrawals . . . . . . . . . . . 13
Excess Amount . . . . . . . . . . . . . . . 14
Paid-Up Insurance . . . . . . . . . . . . . 14
Reinstatement . . . . . . . . . . . . . . . 15
Right to Return Policy . . . . . . . . . . . 15
Right to Exchange for a Fixed Benefit Policy 15
Other Policy Provisions . . . . . . . . . . 15
Owner . . . . . . . . . . . . . . . . . . 15
Beneficiary . . . . . . . . . . . . . . . 15
Incontestability . . . . . . . . . . . . 15
Suicide . . . . . . . . . . . . . . . . . 16
Misstatement of Age or Sex . . . . . . . 16
Collateral Assignment . . . . . . . . . . 16
Payment Plans . . . . . . . . . . . . . . 16
Deferral of Determination and Payment . . 16
Voting Rights . . . . . . . . . . . . . . . 16
Substitution of Fund Shares
and Other Changes . . . . . . . . . . . . . 16
Reports . . . . . . . . . . . . . . . . . . 16
Special Policy for Employers . . . . . . . . 17
Distribution of the Policies . . . . . . . . 17
Tax Treatment of Policy Benefits . . . . . . 17
Other Information . . . . . . . . . . . . . . . 18
Management . . . . . . . . . . . . . . . . . 18
Regulation . . . . . . . . . . . . . . . . . 20
Legal Proceedings . . . . . . . . . . . . . 20
Registration Statement . . . . . . . . . . . 20
Experts . . . . . . . . . . . . . . . . . . 20
Financial Statements . . . . . . . . . . . . . 21
Report of Independent Accountants
(for year ended December 31, 1995) . . . . 21
Financial Statements of the Account
(for year ended December 31, 1995) . . . . 22
Financial Statements of Northwestern Mutual Life
(for the three years ended
December 31, 1995) . . . . . . . . . . . . 28
Report of Independent Accountants
(for the three years ended
December 31, 1995) . . . . . . . . . . . . 44
Appendix . . . . . . . . . . . . . . . . . . . 45
</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
SUMMARY
The following summary provides a brief overview of the Account and the
Policy. It omits details which are included elsewhere in this prospectus and
the attached Fund prospectus and in the terms of the Policy.
Variable Life Insurance
Variable life insurance is cash value life insurance and is similar in many
ways to traditional fixed benefit life insurance. Variable life insurance
allows the policyowner to direct the premiums, after certain deductions, among
a range of investment options. The variable life insurance death benefit and
cash value vary daily to reflect the performance of the selected investments.
Since a substantial part of the premium pays for the insurance risk of death a
variable life insurance policy should not be considered unless the primary need
is life insurance protection.
The Account and its Divisions
Northwestern Mutual Variable Life Account is the investment vehicle for the
Policies. The Account has nine divisions. The owner of the Policy determines
how net premiums are to be apportioned. Up to six divisions may be selected at
any one point in time. 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.
THE POLICY
PREMIUMS
The Policy provides for a scheduled premium for the Minimum Guaranteed
Death Benefit and any Additional Protection purchased as part of the Policy.
The Minimum Guaranteed Death Benefit is the initial amount of whole life
insurance provided by the Policy. Additional Protection is insurance which
does not have a lifetime guarantee, but is guaranteed for a specified period.
The scheduled premium may include additional amounts to purchase variable
paid-up additional insurance or to increase Policy Value. The scheduled
premium also includes the amount required for any additional benefits that are
purchased with the Policy. The Policy permits payment of optional unscheduled
additional premiums, within limits, to purchase variable paid-up additional
insurance or to increase Policy Value. Payment of premiums may be suspended if
it is determined under a certain set of assumptions that the Policy Value is
already sufficient to cover future insurance costs. Resumption of premiums may
be required in the future if the Policy Value becomes insufficient. The Policy
Value reflects investment experience as well as premiums paid and the cost of
insurance and other charges. After a Policy is issued the amount of scheduled
premiums may be increased, or decreased, within limits, at the option of the
policyowner. Premiums are payable at least annually.
DEATH BENEFIT
Northwestern Mutual Life guarantees that the Minimum Guaranteed Death
Benefit provided by a Policy will be paid upon the death of the insured,
regardless of investment experience, if scheduled premiums are paid when due
and no Policy debt is outstanding. The death benefit will be increased by the
amount of any Additional Protection in force. The Additional Protection is
guaranteed for a period which depends on the sex and risk classification and
age of the insured when the Policy is issued and on the proportions of Minimum
Guaranteed Death Benefit and Additional Protection. The death benefit will
also be increased by the amount of any variable paid-up additional insurance,
any excess Policy Value and any amount needed to meet federal income tax
requirements for life insurance.
CASH VALUE
The cash value of a Policy is not guaranteed and varies daily to reflect
investment experience. A Policy may be surrendered for its cash value. A
surrender charge applies during the first 15 policy years. Partial surrenders
are permitted by administrative practice if the remaining Policy meets minimum
size requirements.
DEDUCTIONS AND CHARGES
FROM PREMIUMS
- - Deduction of 3.5% for state and federal taxes attributable to premiums
- - Sales load of 4.5%
3
<PAGE> 7
- - Annual charge of $84, currently expected to be reduced to $60 after ten
years
- - Annual charge of $0.12 per $1,000 of Minimum Guaranteed Death Benefit
- - Annual expense charge of $0.12 per $1,000 of Minimum Guaranteed Death
Benefit and Additional Protection (currently expected to be charged for ten
years only)
- - Any extra premium charged for insureds who do not qualify as select,
standard plus or standard risks
- - Any extra premium for additional benefits purchased with the Policy
FROM POLICY VALUE
- - An annual charge, based on the amount at risk and the attained age and risk
classification of the insured, with rates based on the 1980 CSO Mortality
Tables. This charge also applies for the values which support any paid-up
additional insurance.
- - Any surrender charges, administrative charges or decrease in Policy debt
that may result from a withdrawal, a decrease in the face amount of
insurance or a transfer of Policy Value to paid-up insurance
FROM THE ASSETS OF THE ACCOUNT AND THE FUND
- - A daily charge at the annual rate of .60% of the account assets for
mortality and expense risks
- - A daily charge for investment advisory and other services provided to the
Fund. The total Fund expenses vary by Portfolio and currently fall in an
approximate range of .21% to .85% of assets on an annual basis.
TRANSACTION CHARGES
- - Fee of up to $25 (currently waived) for transfers among the Account
Divisions
- - Fee of up to $25 (currently waived) for withdrawals of Excess Amount
- - Charge for administrative costs to process a partial surrender, currently
expected to be $250
SURRENDER CHARGES
- - Surrender charges for sales and issuance expenses deducted from Policy
proceeds upon surrender of the Policy during the first 15 years
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
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 variable life
insurance policies. However, the policies issued prior to the introduction of
Variable CompLife(R) (October 11, 1995 in most states) are different from the
Variable CompLife(R) Policies described herein. The older policies are
described in a separate prospectus and are offered only in states where the
Variable CompLife Policies are not yet available.
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 generally are 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
5
<PAGE> 9
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.
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 POLICY
THE POLICY DESIGN
The simplified description of the Variable CompLife(R) Policy design in
this section is intended to help the reader understand how the Policy is
constructed. It omits details and important qualifications which are discussed
in the following sections.
The Policy combines a Minimum Guaranteed Death Benefit with Additional
Protection in an integrated policy design. The Minimum Guaranteed Death
Benefit represents permanent life insurance guaranteed for the lifetime of the
insured if premiums are paid when due and no Policy debt is outstanding. The
Additional Protection is guaranteed for a period of years which depends on the
sex and risk classification and age of the insured when the Policy is issued
and the relative proportions of Minimum Guaranteed Death Benefit and
Additional Protection. For an insured aged less than 43 the guaranteed period
is not less than ten years. It is generally longer for younger insureds and
shorter for insureds who are older, but will not be less than six years.
Net premiums are invested in the Account divisions selected by the
Policyowner and increase the Policy Value. The Policy Value is the cumulative
amount invested, adjusted for investment results, reduced by the cost of
insurance. The cost of insurance is based on the net amount at risk. This is
the amount of insurance in force less the Policy Value. The cost of insurance
also reflects the attained age of the insured each year. If premiums are paid
when due and investment experience is favorable, the Policy Value will increase
year by year.
The Policy is designed so that the increase in Policy Value over time
should reduce the net amount at risk. The reduction in the net amount at risk
offsets the rising cost of the mortality risk as the age of the insured
increases, reducing the total cost of insurance which is subtracted from the
Policy Value each year. This scenario depends, however, on the investment
experience which is a principal factor in determining Policy Value. Investment
experience is not guaranteed. If investment experience does not produce a
sufficient rate of return, the amount of Additional Protection will be reduced
in later Policy years, or the Policyowner will need to pay additional premium
to keep the Additional Protection from falling. For a typical Policy the
average annual net investment rate of return required to maintain the initial
amount of Additional Protection, without additional premium, should be between
4% and 6%, based on the current charges and dividend scale. Any excess Policy
Value (called the "Excess Amount") is simply added to the death benefit and the
cash value, dollar for dollar, unless a greater increase in the death benefit
is required to meet tax requirements for life insurance. See "Excess Amount",
p.14.
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<PAGE> 10
The Policy also allows the payment of additional premiums to purchase
variable paid up additional insurance. The values for the additional insurance
are calculated separately from those which support the initial amount of
insurance and do not affect the Policy Value. Unscheduled additional premiums
to purchase variable paid-up additional insurance are allowed, subject to
insurability of the insured when the premiums are accepted.
REQUIREMENTS FOR INSURANCE
The minimum amount required for the Minimum Guaranteed Death Benefit is
$100,000, reduced to $50,000 if the insured is below age 15 or over age 59. If
the initial premium is at least $10,000 ($5,000 for ages below 15) the required
minimum for the Minimum Guaranteed Death Benefit is $1,000. A lower minimum
may apply in some circumstances and will apply if the Policy is purchased for
an employer-sponsored benefit plan. See "Special Policy for Employers", p. 17.
The Minimum Guaranteed Death Benefit must always be at least $1,000.
Before issuing a Policy, Northwestern Mutual Life will require satisfactory
evidence of insurability. Non-smokers who meet preferred underwriting
requirements are considered select risks. Nonsmokers in the second best
classification are considered standard plus risks. The best class of smokers
are considered standard risks. The premium is different for each risk
classification. A higher premium is charged for insureds who do not qualify as
select, standard plus or standard risks. The amount of extra premium depends on
the risk classification in which the insured is placed.
PREMIUMS
The Policy provides for a level scheduled premium to be paid annually at
the beginning of each Policy year. Premiums are payable at the Home Office or
to an authorized Agent of Northwestern Mutual Life.
By administrative practice, Northwestern Mutual Life accepts premiums on a
monthly, quarterly or semi-annual schedule. If premiums are paid more
frequently than annually, Northwestern Mutual Life places the scheduled net
annual premium in the Account on each Policy anniversary. Northwestern Mutual
Life advances this amount on this date and is reimbursed as premium payments
are received from the Policyowner. The Policyowner has no obligation to repay
the amount that has been advanced, but failure to pay the premiums when due
will cause (a) premium payments to be suspended (subject to the conditions
described later in this section), (b) the Policy to continue in force as a
reduced amount of paid-up insurance, or (c) the Policy to terminate. If
premiums are not paid when due, the Account assets supporting the Policy will
be reduced to reflect the premiums due later in the Policy year.
Premiums paid other than on an annual basis are increased to (1) reflect
the time value of money, based on an 8% interest rate, and (2) cover the
administrative costs to process the additional premium payments. A monthly
premium is currently equal to the annual premium times .0863 plus 50 cents.
Thus, the total of monthly premiums for a year is currently 3.56% plus $6.00
higher than a premium paid annually. Monthly premiums may be paid only through
an automatic payment plan arranged with the Policyowner's bank. A quarterly
premium is currently equal to the annual premium times .2573 plus $2.00. A
semiannual premium is equal to the annual premium times .5096 plus $1.35.
The scheduled premium includes the premium for the Minimum Guaranteed Death
Benefit and the premium for any Additional Protection. The amount of the
premium depends on the amount of the Minimum Guaranteed Death Benefit and the
amount of Additional Protection, as well as 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
Policyowner not less than two weeks before each premium is due.
The purchaser of the Policy may select the proportions of Minimum
Guaranteed Death Benefit and Additional Protection, subject to the required
minimum amount for the Minimum Guaranteed Death Benefit. See "Requirements for
Insurance", above.
Policies that include Additional Protection are subject to a minimum
premium that is equal to 70% of the premium for a Policy that consists solely
of Minimum Guaranteed Death Benefit. The premium for the Additional Protection
consists of two times the cost of term insurance (for the insured's age when
the Policy was issued) as long as this amount in combination with the premium
for the Minimum Guaranteed Death Benefit meets the 70% requirement. If this
combination does not meet the 70% requirement the premium for Additional
Protection is increased to bring the total up to the 70% level.
In addition to the premium required for the Minimum Guaranteed Death
Benefit and any Additional Protection, the scheduled premium may include
additional premium to purchase paid-up additional insurance or to increase the
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<PAGE> 11
Policy Value. The scheduled premium will also include the premium required for
any additional benefit included as part of the Policy.
After the Policy is issued the additional premium included in the scheduled
premium may be decreased at any time upon the request of the Policyowner. The
additional premium included in the scheduled premium may be increased, or
optional unscheduled additional premiums may be paid, at any time before the
Policy anniversary nearest to the insured's 85th birthday, subject to the
insurability requirements and issue limits of Northwestern Mutual Life.
If the Policy includes Additional Protection, an increased premium may be
required after the guaranteed period to prevent a reduction of the amount of
Additional Protection. The increased premium, if required, is determined each
year as of the date 25 days before the Policy anniversary. The Policyowner is
entitled to pay the increased premium required to keep the Additional
Protection from falling until the insured reaches age 80 but this right
terminates as of the first Policy anniversary on which the required increased
premium is not paid when due.
Payment of scheduled premiums may be suspended, at the option of the
Policyowner, if as of 25 days prior to the Policy anniversary on or before the
due date of the premium, (1) the Excess Amount exceeds one year's minimum
premium, and (2) the Policy Value exceeds the sum of the net single premium for
the amount of insurance then in force, plus the present value of future charges
for expenses, additional benefits, and any extra mortality. See "Excess
Amount", p. 14. The minimum premium is the sum of the premiums for the Minimum
Guaranteed Death Benefit, the Additional Protection and any additional benefit
included in the Policy. The net single premium and the present value of future
charges will be calculated using the mortality basis for the cost of insurance
charges with 6% interest. See "Charges Against the Policy Value", p. 11.
While payment of premiums is suspended, certain charges ordinarily deducted
from premiums will reduce the Policy Value instead. Payment of scheduled
premiums may be resumed as of any Policy anniversary. Payment of scheduled
premiums must be resumed as of the next Policy anniversary if the Excess
Amount, as of 25 days prior to the Policy anniversary, is determined to be less
than one year's minimum premium. Unscheduled additional premiums may be paid
while suspension of scheduled premiums is in effect, subject to the
insurability requirements and issue limits of Northwestern Mutual Life.
The Policy provides for a grace period of 31 days for any premium that is
not paid when due. The Policy remains in force during this period. If a premium
is paid during the grace period, the values for the Policy will be the same as
if the premium had been paid when due. If the premium is not paid within the
grace period, and the Policy does not qualify for premium suspension, 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 paid-up insurance. See "Paid-Up
Insurance", p. 14. If a Policy is surrendered, its cash value will be paid.
See "Cash Value", p. 12.
The following table shows representative annual premiums for a Policy with
an initial amount of $200,000, divided equally between Minimum Guaranteed Death
Benefit and Additional Protection, for male select, standard plus and standard
risks, at three ages.
<TABLE>
<CAPTION>
MINIMUM PREMIUM
GUARANTEED FOR MINIMUM PREMIUM FOR
AGE AT DEATH GUARANTEED ADDITIONAL ADDITIONAL TOTAL
ISSUE BENEFIT DEATH BENEFIT PROTECTION PROTECTION PREMIUM
-------------------------------------------------------------------------------------
SELECT
<S> <C> <C> <C> <C> <C>
15 $100,000 $ 688 $100,000 $ 294 $ 982
35 100,000 1,347 100,000 505 1,852
55 100,000 3,351 100,000 1,660 5,011
STANDARD PLUS
15 $100,000 $ 745 $100,000 $ 304 $ 1,049
35 100,000 1,479 100,000 558 2,037
55 100,000 3,640 100,000 2,420 6,060
STANDARD
15 $100,000 $ 848 $100,000 $ 370 $ 1,218
35 100,000 1,723 100,000 656 2,379
55 100,000 4,367 100,000 3,190 7,557
</TABLE>
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<PAGE> 12
DEATH BENEFIT
The death benefit for a Policy includes the Minimum Guaranteed Death
Benefit, any Additional Protection in effect, any Excess Amount and any paid-up
additional insurance. It is reduced by the amount of any Policy debt
outstanding and by an adjustment for any unpaid premiums which have been
applied to purchase paid-up additional insurance.
The Minimum Guaranteed Death Benefit selected by the Policyowner when the
Policy is issued will neither increase nor decrease, regardless of the
investment experience of the Account divisions where assets for the Policy are
held, so long as scheduled premiums are paid when due and no Policy debt is
outstanding. In setting the premium rates for the Minimum Guaranteed Death
Benefit it has been assumed that the Account assets will grow at a net annual
rate of 4%. Northwestern Mutual Life bears the risk that the rate of growth
will be less. A higher rate of growth results in an increase in the Policy
Value.
The Additional Protection included in a Policy when it is issued will not
increase by reason of investment experience more favorable than the assumed 4%
net annual rate of growth. It will not decrease, regardless of investment
experience, until expiration of the guaranteed period, so long as scheduled
premiums are paid when due and no Policy debt is outstanding. A condition for
this guarantee is that any dividends paid on the Policy must be used to
increase Policy Value until the end of the guaranteed period unless the Policy
has an Excess Amount. See "Excess Amount" p. 14. After the guaranteed period,
the Additional Protection may be reduced unless the Policy Value exceeds the
amount defined by the formula in the Policy. The amount of Policy Value, and
the amount of increased premium required to prevent a reduction in the
Additional Protection, are calculated 25 days before each Policy anniversary.
The Policyowner may pay any increased premium required to prevent a reduction
in the Additional Protection each year until the Policy anniversary nearest the
insured's 80th birthday, but this right terminates the first time any required
increased premium is not paid when it is due.
The Policy Value represents the total cumulative net premiums for the
Minimum Guaranteed Death Benefit and the Additional Protection, including any
additional net premiums or Policy dividends which have been used to increase
the Policy Value, adjusted for investment experience, less the cost of
insurance which is deducted from the Policy Value on each Policy anniversary.
The Policy Value may exceed the amount required to support the Minimum
Guaranteed Death Benefit and the Additional Protection. This may result from
favorable investment experience or from additional premium or Policy dividends
used to increase the Policy Value. The amount by which the Policy Value
exceeds the amount needed to support the Minimum Guaranteed Death Benefit and
the Additional Protection under a specified set of assumptions is called the
Excess Amount. See "Excess Amount", p. 14. Any Excess Amount will increase
the death benefit for the Policy, dollar-for-dollar, except as described in the
next paragraph. The Policy Value and any Excess Amount change daily.
The Policy is designed to meet the definitional requirements for life
insurance in Section 7702 of the Internal Revenue Code. See "Tax Treatment of
Policy Benefits," p. 17. These rules require that the death benefit will never
be less than the Policy Value divided by the net single premium per dollar of
death benefit. The required difference between the death benefit and the
Policy Value is higher at younger ages than at older ages. The Policy provides
for an increase in the death benefit to the extent required to meet this test.
After the death benefit has been increased to meet this requirement an increase
in the Policy Value will cause a greater than dollar-for-dollar increase in the
death benefit, and a decrease in the Policy Value will cause a greater than
dollar-for-dollar decrease in the death benefit.
The death benefit is increased by the amount of any paid-up additional
insurance purchased with additional premium or Policy dividends. The amount
and value of the paid-up additional insurance vary daily to reflect investment
experience and are not guaranteed. The amount of any paid-up additional
insurance is its value used as a net single premium at the attained age of the
insured.
POLICY VALUE AND PAID-UP ADDITIONAL INSURANCE
The Policy Value and the value of any paid-up additional insurance are each
determined daily by separate calculations. An increase or decrease in the
Policy Value has no effect on the value of any paid-up additional insurance,
and an increase or decrease in the value of any paid-up additional insurance
has no effect on the Policy Value. The Policyowner may increase or decrease
the amount of scheduled additional premium which is being paid to increase the
Policy Value or to increase the amount of paid-up additional insurance, and may
change the allocation for applying this additional premium. Changes in the
scheduled additional premium and its allocation must be made by written
request. Evidence of insurability may be required. Increases in the scheduled
additional premium are not permitted after the Policy anniversary nearest the
insured's 85th birthday.
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<PAGE> 13
The value of paid-up additional insurance may be transferred to increase
the Policy Value by written request. This will generally result in a decrease
in the total death benefit. Policy Value may not be transferred to the value
of paid-up additional insurance.
Allocations to the Account
The first net annual premium for the Policy, including any net scheduled
additional premium, is placed in the Account on the Policy date. The net
scheduled annual premium is placed in the Account on each Policy anniversary
thereafter even if premiums are being paid on an other-than-annual frequency.
Net unscheduled premiums will be placed in the Account on the date received at
the Home Office of Northwestern Mutual Life. Net premiums are premiums less
the deductions from premiums. See "Deductions from Premiums", below.
Premiums placed in the Account prior to the initial allocation date are
invested in the Money Market Division of the Account. The initial allocation
date is identified in the Policy and is the latest of the Policy date, 45 days
after the date of the completed application or 32 days after the application is
approved by Northwestern Mutual Life. On the initial allocation date the
amount in the Money Market Division is invested in the Account divisions as
directed in the application for the Policy. The Policyowner may change the
allocation for future net premiums at any time by written request and the
change will be effective for premiums placed in the Account thereafter. If
any portion of a premium is allocated to a division, the division must receive
at least 10% of that premium.
The Account assets supporting a Policy may be apportioned among as many
as six divisions of the Account at any one time.
The Policyowner may transfer accumulated amounts from one division of
the Account to another as often as twelve 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 of up to $25 to cover administrative costs of transfers. No fee
is presently charged.
DEDUCTIONS AND CHARGES
DEDUCTIONS FROM PREMIUMS
A charge for taxes attributable to premiums is deducted from each premium.
The total amount of this deduction is 3.5% of the premium. Of this amount
2.25% is for state premium taxes. Premium taxes vary from state to state and
currently range from .75% to 3.5% of life insurance premiums. The 2.25% rate
is an average. The tax rate for a particular state may be lower, higher, or
equal to the 2.25% deduction. Northwestern Mutual Life does not expect to
profit from this charge. The remainder of the deduction, 1.25% of each
premium, is for federal income taxes measured by premiums. Northwestern Mutual
Life believes that this charge does not exceed a reasonable estimate of an
increase in its federal income taxes resulting from a recent change in the
Internal Revenue Code.
A charge of 4.5% for sales costs is deducted from each premium.
Northwestern Mutual Life expects to recover its sales expenses from this
amount, over the period while the Policies are in force, and from the surrender
charges described below. The amounts deducted for sales costs in a Policy year
are not specifically related to sales costs incurred that year. 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. 11. To the extent that the amounts
deducted for sales costs exceed the amounts needed, Northwestern Mutual Life
will realize a gain.
An annual charge of $60 is deducted from premiums each year for
administrative costs to maintain the Policy. These expenses include costs of
premium billing and collection, processing claims, keeping records and
communicating with Policyowners. Northwestern Mutual Life retains the right to
increase this charge after 10 years, but it is guaranteed not to exceed $84
plus 12 cents per $1,000 of both the Minimum Guaranteed Death Benefit and the
Additional Protection. Northwestern Mutual Life does not expect to profit from
this charge.
An annual charge is deducted from premiums each of the first 10 years to
compensate Northwestern Mutual Life for expenses, other than sales expenses,
incurred in conjunction with issuance of the Policy. These expenses include
the costs of processing applications, medical examinations, determining
insurability and establishing records. The annual amount of this charge is $24
plus 12 cents per $1,000 of Minimum Guaranteed Death Benefit and Additional
Protection. If the Policy is surrendered before these charges have been
deducted for 10 years, the remaining charges will be reflected in the
administrative surrender charge. See "Surrender Charges", p. 11.
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<PAGE> 14
An annual charge of 12 cents per $1,000 of Minimum Guaranteed Death Benefit
is deducted from premiums each year to compensate Northwestern Mutual Life for
the risk assumed by guaranteeing the Minimum Guaranteed Death Benefit, as long
as all premiums are paid when due, no matter how unfavorable investment
performance may be.
Any extra amounts charged for insureds who do not qualify as select,
standard plus or standard risks, plus the cost of any additional benefits
purchased with the Policy, are also deducted to determine the net annual
premium.
CHARGES AGAINST THE POLICY VALUE
A cost of insurance charge is deducted from the Policy Value on each Policy
Anniversary. The amount is determined by multiplying the net amount at risk by
the cost of insurance rate. The net amount at risk is the projected insurance
amount, discounted at 4%, less the Policy Value. The projected insurance
amount is the amount of insurance at the end of the Policy year, assuming that
the Policy Value increases by the 4% annual growth rate assumed in
constructing the Policy. The cost of insurance rate reflects the attained age
of the insured. For select and standard risks, the cost of insurance rate is
based on the Commissioners 1980 Standard Ordinary Smoker and Non-Smoker
Mortality Tables. For other risks, the cost of insurance rate is based on the
Commissioners 1980 Standard Ordinary Mortality Tables. The cost of insurance
rates are included in the Policy. A cost of insurance charge is also deducted
from the cash value of any paid-up additional insurance on each Policy
anniversary. If an unscheduled premium is received on a day other than a
Policy anniversary and the net amount at risk increases as a result, a cost of
insurance charge will be deducted on that day, reflecting the increase in the
net amount at risk and the portion of the Policy year remaining.
While payment of premiums is suspended, a portion of the annual charges
which would ordinarily be deducted from premiums will be deducted from the
Policy Value instead. This deduction will also be made on the Policy
anniversary each year.
The Policy Value will also be reduced by any surrender charges,
administrative charges or decrease in Policy debt that may result from a
withdrawal, a decrease in the face amount of insurance or a change to variable
benefit paid-up insurance.
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 .60%
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. 13.
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 not being made. 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.
TRANSACTION CHARGES
The Policy provides for a fee of up to $25 for a transfer of assets among
the Account divisions and for a fee of up to $25 for a withdrawal of Excess
Amount. These charges are currently being waived.
SURRENDER CHARGES
If the Policy is surrendered before the premium due at the beginning of the
fifteenth year has been paid, surrender charges will be deducted from the
Policy Value. A table of surrender charges is in the Policy.
The surrender charges consist of an administrative surrender charge and a
premium surrender charge. The administrative surrender charge is equal to the
sum of the issue expense charges which have not been deducted. The
administrative surrender charge in the first Policy year is $216, plus $1.08
per $1,000 of Minimum Guaranteed Death Benefit and Additional Protection. This
charge grades down linearly each year as the premium is paid (or payment of
premiums is suspended) and is zero after the premium due at the beginning of
the tenth Policy year has been paid (or suspended).
The premium surrender charge is a percentage (shown in the table below) of
the surrender charge base. If payment of the premium for a Policy year has
been suspended, the premium surrender charge percentage will be as if the
annual premium had been paid. During the first five policy years, if premiums
are paid more frequently than
11
<PAGE> 15
annually the premium surrender charge percentages will be adjusted to reflect
the actual period for which premiums have been paid.
If none of the premium payments during the first five Policy years have
been suspended, the surrender charge base equals the sum of an annual premium
for the Minimum Guaranteed Death Benefit (exclusive of the Policy fee and
exclusive of any charge for extra mortality) plus a term insurance premium for
the initial amount of Additional Protection.
If any of the premium payments during the first five Policy years have been
suspended, the surrender charge base equals the lesser of (1) the sum of an
annual premium for the Minimum Guaranteed Death Benefit (exclusive of the
Policy fee and exclusive of any charge for extra mortality) plus a term
insurance premium for the initial amount of Additional Protection, and (2) the
sum of the total premiums paid (exclusive of any premiums for additional
benefits purchased with the Policy, and premiums for extra mortality, and any
extra amount for premiums paid more often than annually) divided by the number
of years (including fractions), but not more than five, for which premiums have
been paid or suspended.
<TABLE>
<CAPTION>
For Policies surrendered after payment of Premium Surrender Charge Percentage
-----------------------------------
the premium due at the beginning of year: Issue age 65 and under Issue age 75
---------------------------------------- ---------------------- ------------
<S> <C> <C>
1 24% 24%
2 28% 25.5%
3 32% 27%
4 36% 28.5%
5 through 10 40% 30%
11 32% 24%
12 24% 18%
13 16% 12%
14 8% 6%
15 and later 0% 0%
</TABLE>
For issue ages 66 through 74, the percentages are determined by linear
interpolation between the percentages shown.
GUARANTEE OF PREMIUMS, DEDUCTIONS AND CHARGES
Northwestern Mutual Life guarantees and may not increase the premiums for
the Minimum Guaranteed Death Benefit and the charge for mortality and expense
risks. These amounts will not increase regardless of future changes in
longevity or increases in expenses.
CASH VALUE
The cash value for the Policy will change daily in response to investment
results. No minimum cash value is guaranteed. The cash value is equal to the
Policy Value plus the value of any paid-up additional insurance, reduced by any
Policy debt outstanding and the surrender charges. If premiums are not being
paid on an annual basis the cash value is reduced for any premiums due later in
the Policy year.
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 may be
applied to provide a reduced amount of fixed or variable paid-up insurance. See
"Paid-Up Insurance", p.14.
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<PAGE> 16
Northwestern Mutual Life will permit partial surrenders of the Policies so
long as the Policy that remains meets the regular minimum size requirements. A
partial surrender will cause the Policy to be split into two Policies. One
Policy will be surrendered; the other will continue in force on the same terms
as the original Policy except that the premiums will be based on the reduced
amount of insurance. The owner will receive a new Policy document. The cash
value and the death benefit will be proportionately reduced. A deduction from
the Policy proceeds for a proportionate part of the surrender charges will be
made if a partial surrender takes place before the premium due at the beginning
of the fifteenth Policy year has been paid. A transaction charge will be made
when a partial surrender is effected. The amount of the transaction charge
will not exceed the actual administrative costs for the transaction.
Northwestern Mutual Life currently expects this charge to be $250.
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. 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 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 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.
Dividends for variable life insurance are generally lower than those for
participating fixed benefit life insurance, primarily because a variable life
insurance policy provides a contractual mechanism for translation of investment
experience into a variable death benefit and variable cash value. For
participating fixed benefit life insurance the dividend includes amounts
produced by favorable investment results. Dividends based on the Minimum
Guaranteed Death Benefit for the Policies described in this prospectus are
expected be relatively low during the first 15 Policy years.
The prospectus illustrations show dividends being used to increase the
Policy Value. If the Policy has Additional Protection in force, the dividends
will be used to increase the Policy Value unless the Policy has Excess Amount.
See "Excess Amount", p. 14. If the Policy has Excess Amount, or if no
Additional Protection is in force, dividends may be used to purchase variable
benefit paid-up additional insurance, used to pay premiums or paid in cash. If
the Policy is in force as fixed benefit paid-up insurance, dividends may be
paid in cash or used to purchase fixed benefit paid-up additional insurance. If
the Policy is in force as variable benefit paid-up insurance, dividends may be
paid in cash or used to purchase variable benefit paid-up additional
insurance.
LOANS AND WITHDRAWALS
The owner of a Policy may borrow up to 90% of the Policy's cash value using
the Policy as security. If a Policy loan is already outstanding, the maximum
amount for any new loan is 90% of the amount of cash value the Policy would
have if there were no loan, less the amount already borrowed. Loan proceeds may
be taken in cash or 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
13
<PAGE> 17
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 5% is one choice. The other choice is a variable rate based
on a corporate bond yield index. The variable rate will be adjusted annually,
but 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 .90% for the 5%
specified Policy loan interest rate and .90% for the variable Policy loan
interest rate. For example, the earnings rate corresponding to the specified 5%
Policy loan interest rate is currently 4.10%. A Policy loan, even if it is
repaid, will have a permanent effect on the Policy Value 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.
Except when the Policy is in force as fixed benefit paid-up insurance, a
Policy loan will be allocated between Policy Value and variable paid-up
additional insurance in proportion to the amount of cash value attributable to
each.
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.
The Policyowner may make a withdrawal if the Excess Amount is sufficient.
See "Excess Amount", below. A withdrawal may neither decrease the Excess
Amount to less than the surrender charge which would apply if the Policy were
surrendered nor reduce the loan value to less than any Policy debt outstanding.
The minimum amount for withdrawals is $250. An administrative charge of up to
$25 may apply, but is currently being waived.
A withdrawal of Policy Value decreases the death benefit by the same
amount. If the death benefit for a Policy has been increased to meet the
federal tax requirements for life insurance, the decrease in the death benefit
caused by a subsequent withdrawal may be larger than the amount of the
withdrawal.
If cumulative withdrawals exceed the cumulative additional premiums which
have been used to increase the Policy Value, with both withdrawals and premiums
increased by 4% annual interest, subsequent unfavorable investment experience
may cause the Policy to lapse unless an additional unscheduled premium is paid
to increase the Policy Value. The due date for this premium is the Policy
anniversary following written notice to the Policyowner.
EXCESS AMOUNT
The Excess Amount is the amount by which the Policy Value exceeds the
Tabular Cash Value for the sum of the Minimum Guaranteed Death Benefit and any
Additional Protection in effect. The Tabular Cash Value is an amount equal to
a Policy Value calculated assuming (1) a whole life Policy with a face amount
equal to the sum of the Minimum Guaranteed Death Benefit and the Additional
Protection, (2) all premiums are paid when due, (3) no additional premiums or
dividends used to increase Policy Value, (4) a 4% level annual rate of return,
and (5) maximum Policy charges apply. If premiums are not being paid on an
annual basis, the Excess Amount is reduced for any premiums due later in the
Policy year.
PAID-UP INSURANCE
If a premium is not paid within the 31-day grace period, and the Policy
does not qualify for suspension of premium payments, the Policy will continue
in force as a reduced amount of fixed benefit paid-up insurance. Alternatively
the Policyowner may select a reduced amount of variable benefit paid-up
insurance. This selection must be made during the grace period or sooner.
If the Policy is in force as a reduced amount of fixed benefit paid-up
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. The minimum cash value for
fixed benefit paid-up insurance is $1,000. If the cash value is less than
$1,000
14
<PAGE> 18
as of the last day of the grace period the Policy will be treated as
surrendered. Variable benefit paid-up insurance may be selected only if the
cash value of the Policy is at least $5,000.
The amount of paid-up insurance is determined by the applying amount of
cash value plus any Policy debt as a net single premium at the attained age.
Paid-up insurance has cash and loan values. For fixed benefit paid-up insurance
the amounts of these are guaranteed. For variable paid-up insurance neither the
death benefit or the cash value is guaranteed. Paid-up insurance remains in
force for the lifetime of the insured unless the Policy is surrendered or
terminated. While the Policy is in force as either fixed or variable benefit
paid-up insurance the Minimum Guaranteed Death Benefit and any Additional
Protection will not be in effect. Any Policy debt will continue.
REINSTATEMENT
If a premium is due and remains unpaid after the grace period expires, the
Policy may be reinstated while the insured is alive within three years after
the premium due date. The insured must provide satisfactory evidence of
insurability unless reinstatement takes place within 31 days after the end of
the grace period. A substantial payment may be required. Following
reinstatement the Policy will have the same Minimum Guaranteed Death Benefit,
Additional Protection, Policy Value and paid-up additional insurance as if
minimum premiums had been paid when due. A 4% rate of investment earnings will
be credited for the period from the due date of the overdue premium to the date
of reinstatement. An adjustment will be made for any Policy debt or the debt
may be reinstated. 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.
RIGHT TO EXCHANGE FOR A FIXED BENEFIT POLICY
The owner may exchange a Policy for a 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 initial guaranteed death benefit, policy date and issue age. The premiums
and cash values will be the same as those for fixed benefit 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, less
the amount of any Policy debt and withdrawals and less the cash value of any
variable paid-up insurance surrendered.
15
<PAGE> 19
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 Policy is in force as fixed benefit 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 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 Policy is in force as 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
16
<PAGE> 20
anniversary date. This report will show the apportionment of invested assets
among the Account divisions. Owners will also receive annual and semiannual
reports for the Account and the Fund, including financial statements.
SPECIAL POLICY FOR EMPLOYERS
A reduced minimum amount applies for Policies where the insurance involves
an employer sponsored benefit plan or arrangement. The sum of the Minimum
Guaranteed Death Benefit and the Additional Protection must be at least
$10,000, of which the Minimum Guaranteed Death Benefit must be at least $1,000.
The premium for the Additional Protection is two times the cost of term
insurance for the insured's age when the Policy is issued.
These Policies for employers may include a provision to permit the amount
of Additional Protection to increase after issue. Any such increase amount
must be based on the terms of the benefit plan or arrangement and may not be
subject to the discretion of the insured or the insured's beneficiary. A
description of the method of determining the amount of any increase is included
in the Policy. Changes to the amount of Additional Protection will be
effective on Policy anniversaries. The surrender charge and all charges for
issue and administrative expenses will be based on the initial amount of
Additional Protection.
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 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 will not exceed 40% of the premium for the
first year, 6% of the premium for the second through tenth years, and 2-3/4% of
the premium thereafter.
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.
Under certain limited circumstances, all or part of a partial surrender or
a withdrawal during the first 15 years may be taxable on a "gain first basis"
to the extent that the cash value of the Policy exceeds the basis of the
Policy. This means the amount surrendered or withdrawn may be taxable even if
that amount is less than the basis of the Policy.
Northwestern Mutual Life believes that loans received under the Policies
(except modified endowment contracts as described below) 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.
Policies will be classified as modified endowment contracts under Section
7702A of the Internal Revenue Code if the aggregate premium paid during the
first 7 years exceeds a defined "7-pay limit". Generally, this can occur if
significant additional premiums are paid or the death benefit is reduced within
the first 7 years or if additional benefits are added to the Policy.
For Policies that are modified endowment contracts, withdrawals, partial
surrenders, Policy loans and dividends paid in cash are taxable as income on a
gain first basis. 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 Policies that
are modified endowment contracts (including any fixed dollar policies that are
modified
17
<PAGE> 21
endowment contracts) issued by Northwestern Mutual Life to the Policyowner
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 Policyowner 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
George A. Dickerman (IP)......................... President, Spalding Sports Worldwide, Chicopee, MA
(manufacturer of sporting equipment)
Thomas I. Dolan (HR)............................. Retired since 1992; prior thereto, Chairman, A. O.
Smith Corporation, Milwaukee, WI
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)
Richard H. Holton (IP)........................... Professor Emeritus, Haas School of Business
Administration, University of California, Berkeley, CA
</TABLE>
18
<PAGE> 22
<TABLE>
<S> <C>
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>
A-Member, Audit Committee HR-Member, Human Resources and
Public Policy Committee
E-Member, Executive Committee IF-Member, Investment and Financial
Policy Committee
F-Member, Finance Committee IP-Member, Insurance Product and
Marketing Committee
19
<PAGE> 23
SENIOR OFFICERS (OTHER THAN TRUSTEES)
<TABLE>
<CAPTION>
NAME POSITION WITH
NORTHWESTERN MUTUAL LIFE
----------------------------------------------------------
<S> <C>
Peter W. Bruce Executive 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
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.
20
<PAGE> 24
[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
21
<PAGE> 25
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
22
<PAGE> 26
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
23
<PAGE> 27
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
24
<PAGE> 28
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
25
<PAGE> 29
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.
26
<PAGE> 30
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
27
<PAGE> 31
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
28
<PAGE> 32
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
29
<PAGE> 33
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
30
<PAGE> 34
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
31
<PAGE> 35
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
32
<PAGE> 36
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:
<TABLE>
<S> <C>
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
</TABLE>
33
<PAGE> 37
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
<TABLE>
<S> <C>
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
</TABLE>
SEPARATE ACCOUNT BUSINESS
This business consists of annuities funded by specific assets held in separate
accounts. The assets in these accounts are carried at market value. The
policy values reflect the investment performance of the respective accounts.
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
34
<PAGE> 38
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
35
<PAGE> 39
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.
36
<PAGE> 40
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.
37
<PAGE> 41
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>
38
<PAGE> 42
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.
39
<PAGE> 43
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.
40
<PAGE> 44
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.
41
<PAGE> 45
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.
42
<PAGE> 46
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.
43
<PAGE> 47
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
44
<PAGE> 48
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 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 Account. The Policies illustrated are for male insureds, select
risks, age 35. The first two illustrations, on pages 46-47, are for a policy
with a Minimum Guaranteed Death Benefit of $100,000 and no Additional
Protection, based (1) on current charges and the current dividend scale and (2)
on maximum charges and zero dividends. The other two illustrations are for a
Policy with a Minimum Guaranteed Death Benefit of $100,000 and Additional
Protection of $100,000.
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, deductions from Policy Value and the charge at the
annual rate of .60% of the Account's assets for mortality and expense risks.
The amounts shown as the cash values reflect the deduction of the surrender
charge during the first fifteen Policy years. The amounts shown also reflect
the average of the investment advisory fees and 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 "The Fund", p. 5. Thus the 0%, 6% and 12%
gross hypothetical return rates on the Fund's assets are equivalent to the net
rates of -1.10%, 4.90% and 10.90% 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 premium were invested to earn interest, after
taxes, at a 5% interest rate compounded annually.
The death benefits and corresponding cash values shown on pages 46 and 48
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. 13. 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 increase the Policy
Value, other dividend options are available. The use of dividends for other
purposes during the guaranteed period for Additional Protection may cause the
guaranteed period to terminate. See "Death Benefit", page 9.
A comparable illustration based on a proposed insured's age, sex and risk
classification and proposed face amount or premium is available upon request.
45
<PAGE> 49
VARIABLE WHOLE LIFE WITH ADDITIONAL PROTECTION INSURANCE POLICY
MALE ISSUE AGE 35 -- SELECT UNDERWRITING RISK
$100,000 VARIABLE WHOLE LIFE, $0 ADDITIONAL PROTECTION
$1,347 ANNUAL PREMIUM (1)
CURRENT CHARGES AND DIVIDEND SCALE (2)
DIVIDENDS USED TO INCREASE POLICY VALUE
<TABLE>
<CAPTION>
DEATH BENEFIT (3) CASH SURRENDER VALUE (3)
------------------------------------- -------------------------------------
ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS
PREMIUMS ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF
ACCUMULATED
END OF AT 5% INTEREST 0% 6% 12% 0% 6% 12%
POLICY YEAR PER YEAR --------- -------- ---------- ------- ---------- --------
----------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 1,414 $100,000 $100,009 $100,067 $ 341 $ 399 $ 458
2 2,899 100,000 100,028 100,213 1,278 1,456 1,641
3 4,459 100,000 100,058 100,447 2,196 2,556 2,946
4 6,096 100,000 100,098 100,779 3,095 3,702 4,384
5 7,815 100,000 100,151 101,227 3,973 4,893 5,970
6 9,620 100,000 100,215 101,806 4,880 6,183 7,774
7 11,516 100,000 100,298 102,536 5,763 7,524 9,762
8 13,506 100,000 100,400 103,437 6,623 8,919 11,956
9 15,595 100,000 100,521 104,529 7,459 10,368 14,376
10 17,790 100,000 100,659 105,833 8,270 11,871 17,046
15 30,520 100,000 102,389 117,409 12,823 21,299 36,319
20 46,767 100,000 106,125 157,332 16,849 33,123 68,724
25 67,503 100,000 111,821 241,742 19,733 47,610 121,990
30 (age 65) 93,968 100,000 120,578 362,760 21,295 65,632 208,990
35 127,745 100,000 135,934 540,103 20,774 88,062 349,895
40 170,853 100,000 159,819 798,553 15,153 114,491 572,068
45 225,872 100,000 185,317 1,173,611 0 143,921 911,449
</TABLE>
(1) If premiums are paid more frequently than annually the payments would be
$687.78 semiannually, $348.58 quarterly, or $116.75 monthly.
(2) Dividends illustrated are based on current scale and experience and are not
guaranteed.
(3) Assumes no policy loan has been made.
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.
46
<PAGE> 50
VARIABLE WHOLE LIFE WITH ADDITIONAL PROTECTION INSURANCE POLICY
MALE ISSUE AGE 35 -- SELECT UNDERWRITING RISK
$100,000 VARIABLE WHOLE LIFE, $0 ADDITIONAL PROTECTION
$1,347 ANNUAL PREMIUM (1)
MAXIMUM CHARGES AND ZERO DIVIDENDS
<TABLE>
<CAPTION>
DEATH BENEFIT (2) CASH SURRENDER VALUE (2)
----------------------------------- -------------------------------------
PREMIUMS ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS
ACCUMULATED ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF
END OF AT 5% INTEREST
POLICY YEAR PER YEAR 0% 6% 12% 0% 6% 12%
----------- ---------- -------- -------- -------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 1,414 $100,000 $100,009 $100,067 $ 341 $ 399 $ 458
2 2,899 100,000 100,028 100,213 1,278 1,456 1,641
3 4,459 100,000 100,058 100,447 2,196 2,556 2,946
4 6,096 100,000 100,098 100,779 3,095 3,702 4,384
5 7,815 100,000 100,151 101,226 3,973 4,893 5,968
6 9,620 100,000 100,215 101,798 4,880 6,183 7,766
7 11,516 100,000 100,294 102,515 5,763 7,520 9,741
8 13,506 100,000 100,388 103,394 6,623 8,907 11,912
9 15,595 100,000 100,498 104,454 7,459 10,345 14,301
10 17,790 100,000 100,624 105,717 8,269 11,837 16,930
15 30,520 100,000 101,552 116,052 12,208 20,462 34,962
20 46,767 100,000 103,098 145,451 14,706 30,096 63,534
25 67,503 100,000 105,468 215,596 15,696 41,257 108,796
30 (age 65) 93,968 100,000 108,913 310,337 14,229 53,967 178,788
35 127,745 100,000 113,733 439,410 8,213 68,085 284,663
40 170,853 100,000 120,291 616,147 0 83,528 441,395
45 225,872 100,000 129,015 858,903 0 100,060 667,041
</TABLE>
(1) If premiums are paid more frequently than annually the payments would be
$687.78 semiannually, $348.58 quarterly, or $116.75 monthly.
(2) Assumes no policy loan has been made.
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 WITH ADDITIONAL PROTECTION INSURANCE POLICY
MALE ISSUE AGE 35 -- SELECT UNDERWRITING RISK
$100,000 VARIABLE WHOLE LIFE PLUS $100,000 ADDITIONAL PROTECTION(1)
$1,852 ANNUAL PREMIUM (2)
CURRENT CHARGES AND DIVIDEND SCALE (3)
DIVIDENDS USED TO INCREASE POLICY VALUE
<TABLE>
<CAPTION>
DEATH BENEFIT (4) CASH SURRENDER VALUE (4)
------------------------------------- ------------------------------------
ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS
PREMIUMS ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF
ACCUMULATED
END OF AT 5% INTEREST 0% 6% 12% 0% 6% 12%
POLICY YEAR PER YEAR ------- ------- ---------- ------- -------- -------------
----------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 1,945 $200,000 $200,000 $200,000 $ 535 $ 611 $ 687
2 3,986 200,000 200,000 200,000 1,821 2,056 2,300
3 6,130 200,000 200,000 200,000 3,089 3,568 4,085
4 8,381 200,000 200,000 200,000 4,334 5,146 6,059
5 10,745 200,000 200,000 200,000 5,557 6,794 8,242
6 13,227 200,000 200,000 200,000 6,810 8,569 10,712
7 15,833 200,000 200,000 200,000 8,034 10,415 13,434
8 18,569 200,000 200,000 200,000 9,228 12,333 16,438
9 21,442 200,000 200,000 200,000 10,385 14,323 19,750
10 24,459 200,000 200,000 200,546 11,502 16,384 23,401
15 41,962 200,000 200,000 211,550 17,394 28,893 49,370
20 64,300 200,000 200,000 238,602 22,003 43,996 92,598
25 92,810 200,000 200,000 325,828 24,165 61,631 164,422
30 (age 65) 129,197 181,739 200,000 489,609 23,919 82,710 282,068
35 175,637 171,608 200,000 729,534 20,093 108,175 472,614
40 234,907 151,863 211,452 1,079,129 8,376 137,926 773,066
45 310,553 105,636 228,863 1,586,411 0 170,953 1,232,039
</TABLE>
(1) Additional Protection is guaranteed to be $100,000 for at least 15 years,
so long as all premiums are paid when due and all dividends are used to
increase Policy Value.
(2) If premiums are paid more frequently than annually the payments would be
$945.13 semiannually, $478.52 quarterly, or $160.33 monthly.
(3) Dividends illustrated are based on current scale and experience and are not
guaranteed.
(4) Assumes no policy loan has been made.
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 WITH ADDITIONAL PROTECTION INSURANCE POLICY
MALE ISSUE AGE 35 -- SELECT UNDERWRITING RISK
$100,000 VARIABLE WHOLE LIFE PLUS $100,000 ADDITIONAL PROTECTION(1)
$1,852 ANNUAL PREMIUM (2)
MAXIMUM CHARGES AND ZERO DIVIDENDS
<TABLE>
<CAPTION>
DEATH BENEFIT (3) CASH SURRENDER VALUE (3)
------------------------------------- -------------------------------------
PREMIUMS ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS
ACCUMULATED ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF
END OF AT 5% INTEREST
POLICY YEAR PER YEAR 0% 6% 12% 0% 6% 12%
----------- -------------- -------- -------- ---------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 1,945 $200,000 $200,000 $ 200,000 $ 476 $ 552 $ 628
2 3,986 200,000 200,000 200,000 1,695 1,926 2,166
3 6,130 200,000 200,000 200,000 2,883 3,350 3,854
4 8,381 200,000 200,000 200,000 4,038 4,822 5,705
5 10,745 200,000 200,000 200,000 5,156 6,343 7,734
6 13,227 200,000 200,000 200,000 6,295 7,972 10,018
7 15,833 200,000 200,000 200,000 7,391 9,647 12,515
8 18,569 200,000 200,000 200,000 8,446 11,372 15,250
9 21,442 200,000 200,000 200,000 9,455 13,145 18,246
10 24,459 200,000 200,000 200,000 10,418 14,968 21,531
15 41,962 200,000 200,000 205,955 14,735 25,112 43,775
20 64,300 166,976 200,000 224,534 17,162 35,601 78,530
25 92,810 141,701 200,000 266,108 18,108 46,097 134,286
30 (age 65) 129,197 125,250 200,000 385,186 16,661 54,982 221,909
35 175,637 115,340 200,000 547,194 10,792 58,573 354,489
40 234,907 109,110 112,380 768,856 0 68,106 550,793
45 310,553 105,628 113,532 1,073,188 0 80,992 833,459
</TABLE>
(1) Additional Protection is guaranteed to be $100,000 for at least 15 years,
so long as all premiums are paid when due and all dividends are used to
increase Policy Value.
(2) If premiums are paid more frequently than annually the payments would be
$945.13 semiannually, $478.52 quarterly, or $160.33 monthly.
(3) Assumes no policy loan has been made.
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
NORTHWESTERN MUTUAL VARIABLE COMPLIFE(R)
NORTHWESTERN MUTUAL VARIABLE LIFE ACCOUNT
NORTHWESTERN MUTUAL SERIES FUND, INC.
P R O S P E C T U S
<PAGE> 54
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 49 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 and consent 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> 55
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant, Northwestern Mutual Variable Life Account, certifies that it meets
all of 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.
<TABLE>
<S> <C>
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, Mark G. Doll, President
Secretary
</TABLE>
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.
<TABLE>
<S><C>
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, Mark G. Doll, President
Secretary
</TABLE>
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:
<TABLE>
<CAPTION>
Signature Title
- --------- -----
<S> <C> <C>
JAMES D. ERICSON Trustee, President and Dated
- ------------------------------ Principal Executive and April 26,
James D. Ericson Financial Officer 1995
</TABLE>
II-2
<PAGE> 56
<TABLE>
<S> <C> <C>
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
Frank H. Bertsch 26, 1996
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
</TABLE>
II-3
<PAGE> 57
<TABLE>
<S> <C> <C>
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,
Daniel F. McKeithan, Jr. 1996
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.
</TABLE>
II-4
<PAGE> 58
<TABLE>
<S> <C> <C>
H. MASON SIZEMORE, JR.* Trustee
- ------------------------------
H. Mason Sizemore, Jr.
JOHN J. STOLLENWERK* Trustee
- ------------------------------
John J. Stollenwerk
GEORGE A. DICKERMAN* Trustee Dated
- ------------------------------ April
George A. Dickerman 26, 1996
GUY A. OSBORN* Trustee
- ------------------------------
Guy A. Osborn
JOHN E. STEURI* Trustee
- ------------------------------
John E. Steuri
</TABLE>
*By: JAMES D. ERICSON
------------------------------------
James D. Ericson, Attorney in fact,
pursuant to the Power of Attorney
filed on September 29, 1995
II-5
<PAGE> 59
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> 60
EXHIBIT INDEX
EXHIBITS FILED WITH FORM S-6
POST-EFFECTIVE AMENDEMENT NO. 1 TO
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
FOR
NORTHWESTERN MUTUAL VARIABLE COMPLIFE
Exhibit Number Exhibit Name
- -------------- ------------
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.
EX-99.A3C Standard Full-Time Special and
Soliciting Agents' Commission and
Fee Schedule Section II - CompLife.
<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. 1 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
EXHIBIT-.99C.6
April 26, 1996
The Northwestern Mutual Life Insurance Company
720 East Wisconsin
Milwaukee, WI 53202
Gentlemen:
This opinion is furnished in connection with Post-Effective Amendment
No. 1 to the Registration Statement on Form S-6 of Northwestern Mutual Variable
Life Account. The prospectus included in the Registration Statement
("Prospectus") describes the Variable CompLife insurance policies to be issued
in connection with the Account ("Policies"). The Policy form was prepared under
my direction, and I am familiar with the Registration Statement and Exhibits
thereto. In my opinion:
1. The illustrations of cash values and death benefits included on pages
46 through 49 of the Prospectus, in the Appendix thereto, based on the
assumptions stated in the illustrations, are consistent with the
provisions 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
illustrations, appear more favorable to a prospective purchaser of a
Policy for male age 35, than to prospective purchasers of Policies for
a male at other ages or for a female.
2. With respect to the charge of 1.25% of premiums for federal income
taxes measured by premiums, described on page 10 of the Prospectus,
(a) the charge is reasonable in relation to the issuer's increased
federal tax burden under Section 848 of the Internal Revenue
Code of 1986;
(b) the targeted rate of return (11%) used in calculating the
charge is reasonable; and
(c) the factors taken into account in determining such targeted
rate of return are appropriate.
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
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
</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
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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
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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
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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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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
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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
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<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
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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
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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,
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(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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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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