<PAGE>
Registration No. 333-22455
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OF 1933 / /
Pre-Effective Amendment No. / /
---
Post-Effective Amendment No. 1 /X/
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and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940 / /
Amendment No. _____ / /
(Check appropriate box or boxes.)
NML VARIABLE ANNUITY ACCOUNT A
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(Exact Name of Registrant)
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
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(Name of Depositor)
720 East Wisconsin Avenue, Milwaukee, Wisconsin 53202
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(Address of Depositor's Principal Executive Offices) (Zip Code)
Depositor's Telephone Number, including Area Code 414-271-1444
------------
JOHN M. BREMER, Executive Vice President, General Counsel and Secretary
720 East Wisconsin Avenue, Milwaukee, Wisconsin 53202
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(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check appropriate space)
immediately upon filing pursuant to paragraph (b) of Rule 485
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X on April 30, 1998 pursuant to paragraph (b) of Rule 485
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60 days after filing pursuant to paragraph (a)(1) of Rule 485
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on (DATE) pursuant to paragraph (a)(1) of Rule 485
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this post-effective amendment designates a new effective date for a
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previously filed post-effective amendment
<PAGE>
NML VARIABLE ANNUITY ACCOUNT A
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CROSS-REFERENCE SHEET
N-4, Part A Heading in
Item Prospectus
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1 . . . . . . . . . . . . . . . . . Cover Page
2 . . . . . . . . . . . . . . . . . Index of Special Terms
3 . . . . . . . . . . . . . . . . . Expense Table
4 . . . . . . . . . . . . . . . . . Accumulation Unit Values, Financial
Statements
5 . . . . . . . . . . . . . . . . . The Company, NML Variable Annuity
Account A, The Fund
6 . . . . . . . . . . . . . . . . . Deductions, Distribution of the
Contracts
7 . . . . . . . . . . . . . . . . . The Contracts, Owners of the
Contracts, Application of Purchase
Payments, Transfers Between Divisions
and Payment Plans, Substitution and
Change
8 . . . . . . . . . . . . . . . . . Variable Payment Plans, Description
of Payment Plans, Amount of Annuity
Payments, Maturity Benefit, Assumed
Investment Rate, Transfers Between
Divisions and Payment Plans
9 . . . . . . . . . . . . . . . . . Death Benefit
10 . . . . . . . . . . . . . . . . Amount and Frequency, Application of
Purchase Payments, Net Investment
Factor, Distribution of the Contracts
11 . . . . . . . . . . . . . . . . Withdrawal Amount, Deferment of
Benefit Payments, Right to Examine
Contract
12 . . . . . . . . . . . . . . . . Federal Income Taxes
13 . . . . . . . . . . . . . . . . Not Applicable
14 . . . . . . . . . . . . . . . . Table of Contents for Statement of
Additional Information
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N-4, Part B Heading in Statement
Item of Additional Information
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15 . . . . . . . . . . . . . . . . Cover Page
16 . . . . . . . . . . . . . . . . Table of Contents
17 . . . . . . . . . . . . . . . . Not Applicable
18 . . . . . . . . . . . . . . . . Experts
19 . . . . . . . . . . . . . . . . Not Applicable
20 . . . . . . . . . . . . . . . . Distribution of the Contracts
21 . . . . . . . . . . . . . . . . Not Applicable
22 . . . . . . . . . . . . . . . . Determination of Annuity Payments
23 . . . . . . . . . . . . . . . . Financial Statements
<PAGE>
April 30, 1998
[LOGO]
The Quiet Company-Registered Trademark-
NML VARIABLE ANNUITY ACCOUNT A
Individual Variable Annuity Contracts for Retirement
Plans of Self-Employed Persons and Their Employees
(PHOTO)
PROSPECTUS
NORTHWESTERN MUTUAL
SERIES FUND, INC.
The Northwestern Mutual
Life Insurance Company
720 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
(414) 271-1444
<PAGE>
CONTENTS FOR THIS PROSPECTUS
Page
----
PROFILE
PROSPECTUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
NML Variable Annuity Account A. . . . . . . . . . . . . . . . . . . . . . 1
INDEX OF SPECIAL TERMS . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
EXPENSE TABLE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ACCUMULATION UNIT VALUES . . . . . . . . . . . . . . . . . . . . . . . . . . 4
THE COMPANY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
NM VARIABLE ANNUITY
ACCOUNT A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
THE FUND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
THE CONTRACTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Purchase Payments Under the Contracts. . . . . . . . . . . . . . . . . . . 8
Amount and Frequency . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Application of Purchase Payments . . . . . . . . . . . . . . . . . . . . 8
Net Investment Factor . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Benefits Provided Under the
Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Withdrawal Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Death Benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Maturity Benefit. . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Variable Payment Plans . . . . . . . . . . . . . . . . . . . . . . . . . 9
Description of Payment Plans. . . . . . . . . . . . . . . . . . . . . . 9
Amount of Annuity Payments. . . . . . . . . . . . . . . . . . . . . . . 10
Assumed Investment Rate . . . . . . . . . . . . . . . . . . . . . . . . 10
Additional Information . . . . . . . . . . . . . . . . . . . . . . . . . 10
Transfers Between Divisions and
Payment Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Gender-Based Annuity Payment
Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Owners of the Contracts. . . . . . . . . . . . . . . . . . . . . . . . . 11
Disability Provision . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Deferment of Benefit Payments. . . . . . . . . . . . . . . . . . . . . . 11
Dividends. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Substitution and Change. . . . . . . . . . . . . . . . . . . . . . . . . 11
Fixed Annuity Payment Plans. . . . . . . . . . . . . . . . . . . . . . . 12
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . 12
THE GUARANTEED INTEREST FUND . . . . . . . . . . . . . . . . . . . . . . . . 12
FEDERAL INCOME TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Taxation of Contract Benefits. . . . . . . . . . . . . . . . . . . . . . . 12
Taxation of Northwestern Mutual Life . . . . . . . . . . . . . . . . . . . 13
DEDUCTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Contracts Issued Prior to
March 31, 1995. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Contracts Issued Prior to
December 17, 1981 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Reduced Charges for Exchange
Transactions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
DISTRIBUTION OF THE
CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
THE TABLE OF CONTENTS FOR THE STATEMENT OF ADDITIONAL INFORMATION APPEARS ON THE
PAGE FOLLOWING PAGE 15 OF THIS PROSPECTUS.
<PAGE>
[LOGO] The Northwestern Mutual Life Insurance Company April 30, 1998
NML Variable Annuity Account A
PROFILE OF THE VARIABLE ANNUITY CONTRACT
THIS PROFILE IS A SUMMARY OF SOME OF THE MORE IMPORTANT POINTS THAT YOU SHOULD
CONSIDER AND KNOW BEFORE PURCHASING THE CONTRACT. THE CONTRACT IS MORE FULLY
DESCRIBED IN THE PROSPECTUS WHICH ACCOMPANIES THIS PROFILE. PLEASE READ THE
PROSPECTUS CAREFULLY.
1. THE ANNUITY CONTRACT The Contract provides retirement annuity benefits for
self-employed individuals (and their eligible employees). The Contract will
invest on a tax-deferred basis in your choice of nine investment portfolios.
The Contract also allows investment on a fixed basis in a guaranteed account.
The Contract is intended for retirement savings or other long-term investment
purposes. The Contract provides for a death benefit during the years when funds
are being accumulated and for a variety of income options following retirement.
The nine investment portfolios are listed in Section 4 below. These portfolios
bear varying amounts of investment risk. Those with more risk are designed to
produce a better long-term return than those with less risk. But this is not
guaranteed. You can also lose your money.
The amounts invested on a fixed basis earn interest at a rate set once each
year. Both interest and principal are guaranteed by Northwestern Mutual Life.
You may invest in any or all of the nine investment portfolios. You may move
money among these portfolios without charge up to 12 times per year. After
that, a charge of $25 may apply. Transfers of amounts invested on a fixed basis
are subject to restrictions.
During the years when funds are being paid into your Contract, known as the
accumulation phase, the earnings accumulate on a tax-deferred basis. The
earnings are taxed as income if you make a withdrawal. The income phase begins
when you start receiving annuity payments from your Contract, usually at
retirement. Monthly annuity payments begin on the date you select.
The amount you accumulate in your Contract, including the results of investment
performance, will determine the amount of your monthly annuity payments.
2. ANNUITY PAYMENTS If you decide to begin receiving monthly annuity payments
from your Contract, you may choose one of three payment plans: (1) monthly
payments for a specified period of five to thirty years, as you select; (2)
monthly payments for your life (assuming you are the annuitant), and you may
choose to have payments continue to your beneficiary for the balance of ten or
twenty years if you die sooner; or (3) monthly payments for your life and for
the life of another person (usually your spouse) selected by you. After you
begin receiving monthly annuity payments you cannot change your selection if the
payments depend on your life or the life of another.
These payment plans are available to you on a variable or fixed basis. Variable
means that the amount accumulated in your Contract will continue to be invested
in one or more of the nine investment portfolios as you choose. Your monthly
annuity payments will vary up or down to reflect continuing investment
performance. Or you may choose a fixed annuity payment plan which guarantees
the amount you will receive each month.
3. PURCHASE You may make purchase payments of $25 or more as you accumulate
funds in your Contract. The minimum initial purchase payment is $100, or $25
for Contracts used with some tax-qualified retirement plans. We offer Front
Load and Back Load Contracts, as briefly described in Section 5. For the Front
Load Contract the minimum initial purchase payment is $10,000. Your
Northwestern Mutual Life agent will help you complete a Contract application
form.
4. INVESTMENT CHOICES You may invest in any or all of the following
investment portfolios, which are described in the attached prospectus for
Northwestern Mutual Series Fund, Inc.:
1. Aggressive Growth Stock Portfolio
2. International Equity Portfolio
3. Growth Stock Portfolio
4. Growth and Income Stock Portfolio
5. Index 500 Stock Portfolio
6. Balanced Portfolio
7. High Yield Bond Portfolio
8. Select Bond Portfolio
9. Money Market Portfolio
You may also invest all or part of your funds on a fixed basis (the Guaranteed
Interest Fund).
PROFILE-I
<PAGE>
5. EXPENSES The Contract has insurance and investment features, and there are
costs related to them. For the Front Load Contract we deduct a sales load of 4%
from your purchase payments. The percentage is lower when cumulative purchase
payments exceed $100,000. For the Back Load Contract there is no sales load
deducted from purchase payments but a withdrawal charge of 0% to 8% applies,
depending on the length of time the money you withdraw has been in the Contract
and the size of your Contract.
Each year we deduct a $30 Contract fee. Currently this fee is waived if the
value of your Contract is $50,000 or more.
We also deduct mortality and expense risk charges for the guarantees associated
with your Contract. These charges are at the annual rate of .40% for the Front
Load Contract and 1.25% for the Back Load Contract.
The portfolios also bear investment charges that range from an annual rate of
.21% to .77% of the average daily value of the portfolio, depending on the
investment portfolio you select.
The following charts are designed to help you understand the charges for the
Front Load and Back Load Contracts. The first three columns show the annual
expenses as a percentage of assets including the risk charges, the portfolio
charges and the total charges. The last two columns show you examples of the
charges, in dollars, you would pay. The examples reflect the impact of the
asset based charges, any sales loads or withdrawals that would apply, and the
$30 Contract fee (expressed as a percentage of assets). The examples assume
that you invested $1,000 in a Contract which earns 5% annually and that you
withdraw your money at the end of year one, and at the end of year ten. Both of
these examples, for both Contracts, reflect aggregate charges on a cumulative
basis to the end of the 1 or 10-year period.
For more detailed information, see the Expense Table which begins on page 2 of
the attached prospectus for the Contracts.
<TABLE>
<CAPTION>
EXPENSES
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FRONT LOAD CONTRACT ANNUAL EXPENSES AS A PERCENTAGE OF ASSETS
EXAMPLES: *
Charges for Total Expenses At End of
Mortality &
Portfolio Expense Risks Portfolio Expenses Total Expenses 1 Year 10 Years
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Aggressive Growth Stock .40% .53% .93% $49 $150
International Equity .40 .77 1.17 $51 $176
Growth Stock .40 .49 .89 $49 $145
Growth and Income Stock .40 .60 1.00 $50 $158
Index 500 Stock .40 .21 .61 $46 $113
Balanced .40 .30 .70 $47 $124
High Yield Bond .40 .55 .95 $49 $152
Select Bond .40 .30 .70 $47 $124
Money Market .40 .30 .70 $47 $124
</TABLE>
NOTE: THE MINIMUM INITIAL PURCHASE PAYMENT FOR A FRONT LOAD CONTRACT IS
$10,000. THE NUMBERS ABOVE MUST BE MULTIPLIED BY 10 TO FIND THE EXPENSES FOR A
FRONT LOAD CONTRACT OF MINIMUM SIZE.
<TABLE>
<CAPTION>
BACK LOAD CONTRACT ANNUAL EXPENSES AS A PERCENTAGE OF ASSETS
EXAMPLES: **
Charges for Total Expenses At End of
Mortality &
Portfolio Expense Risks Portfolio Expenses Total Expenses 1 Year 10 Years
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Aggressive Growth Stock 1.25% .53% 1.78% $98 $228
International Equity 1.25 .77 2.02 $101 $253
Growth Stock 1.25 .49 1.74 $98 $224
Growth and Income Stock 1.25 .60 1.85 $99 $236
Index 500 Stock 1.25 .21 1.46 $95 $194
Balanced 1.25 .30 1.55 $96 $204
High Yield Bond 1.25 .55 1.80 $98 $231
Select Bond 1.25 .30 1.55 $96 $204
Money Market 1.25 .30 1.55 $96 $204
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
* THE $30 CONTRACT FEE IS ASSUMED NOT TO APPLY BASED ON AN AVERAGE CONTRACT
SIZE OF $55,000.
** THE $30 CONTRACT FEE IS REFLECTED AS 0.20% OF THE ASSETS BASED ON AN
AVERAGE CONTRACT SIZE OF $15,000.
PROFILE-II
<PAGE>
6. TAXES As a general rule, earnings on your Contract are not taxed until
they are withdrawn or taken as monthly annuity payments. A 10% federal tax
penalty may apply if you make withdrawals from the Contract before you reach age
59 1/2.
7. ACCESS TO YOUR MONEY You may take money out of your Contract at any
time before monthly annuity payments begin. For the Front Load Contract
there is no charge for withdrawals. For the Back Load Contract there is a
withdrawal charge of 8% or less, depending on how much money has been paid
into the Contract and how long it has been held there. Each purchase payment
has its own withdrawal charge period. When you make a withdrawal, we use the
oldest amounts first when the charge is calculated. After the first year,
part of any investment earnings may be withdrawn without a withdrawal charge.
For both Front Load and Back Load Contracts, you may also have to pay income
tax and a tax penalty on amounts you take out.
8. PERFORMANCE The value of your Contract will vary up or down reflecting the
performance of the investment portfolios you select. The chart below shows
total returns for each of the investment portfolios for the years shown. These
numbers, for the Front Load Contract and the Back Load Contract, reflect the
asset-based charges for mortality and expense risks and investment expenses for
each portfolio. The numbers do not reflect deductions from purchase payments
for the Front Load Contract or any withdrawal charge for the Back Load Contract.
The numbers also do not reflect the annuity Contract fee. Those charges, if
applied, would reduce the performance. Past performance does not guarantee
future results.
<TABLE>
<CAPTION>
PERFORMANCE
- --------------------------------------------------------------------------------------------------------------------------
FRONT LOAD CONTRACT
CALENDAR YEAR
PORTFOLIO 1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Aggressive Growth Stock 13.41 17.22 38.74 4.98 18.63 5.52 55.37 NA NA NA
International Equity 11.83 20.53 14.12 -.50 NA NA NA NA NA NA
Growth Stock 29.33 20.42 30.30 NA NA NA NA NA NA NA
Growth and Income Stock 29.51 19.49 30.60 NA NA NA NA NA NA NA
Index 500 Stock 32.67 22.25 36.70 .79 9.33 6.83 29.04 NA NA NA
Balanced 21.03 13.00 25.88 -.42 9.14 4.90 23.44 .64 15.14 8.56
High Yield Bond 15.39 19.29 16.31 NA NA NA NA NA NA NA
Select Bond 9.03 2.90 18.62 (3.22) 9.89 6.56 16.41 7.89 13.41 8.02
Money Market 5.05 4.86 5.40 3.64 2.44 2.93 5.27 7.60 8.54 6.75
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
BACK LOAD CONTRACT
CALENDAR YEAR
PORTFOLIO 1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Aggressive Growth Stock 12.45 16.23 37.57 4.10 17.63 4.63 54.06 NA NA NA
International Equity 10.89 19.50 13.16 -1.34 NA NA NA NA NA NA
Growth Stock 28.24 19.40 29.20 NA NA NA NA NA NA NA
Growth and Income Stock 28.42 18.47 29.50 NA NA NA NA NA NA NA
Index 500 Stock 31.55 21.22 35.56 -.06 8.41 5.92 27.95 NA NA NA
Balanced 20.01 12.04 24.83 -1.25 8.22 4.01 22.40 -.21 14.17 7.64
High Yield Bond 14.42 18.27 15.33 NA NA NA NA NA NA NA
Select Bond 8.11 2.02 17.62 -4.04 8.97 5.66 15.43 6.98 12.46 7.10
Money Market 4.16 3.97 4.51 2.77 1.58 2.05 4.38 6.69 7.63 5.85
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
PROFILE-III
<PAGE>
9. DEATH BENEFIT If you die before age 65, and before monthly annuity
payments begin, your beneficiary will receive a death benefit. The amount will
be the value of your Contract or, if greater, the amount you have paid in. The
death benefit will be adjusted, of course, for any withdrawals you have made.
The death benefit will be paid as a lump sum or your beneficiary may select a
monthly annuity payment plan.
10. OTHER INFORMATION
FREE LOOK. If you return the Contract within ten days after you receive it (or
whatever period is required in your state), we will send your money back. There
is no charge for our expenses but the amount you receive may be more or less
than what you paid, based on actual investment experience following the date we
received your purchase payment.
AVOID PROBATE. In most cases, when you die, your beneficiary will receive the
full death benefit of your Contract without going through probate.
AUTOMATIC DOLLAR-COST AVERAGING. With our Dollar-Cost Averaging Plan, you can
arrange to have a regular amount of money ($100 minimum) automatically
transferred from the Money Market Portfolio into the portfolio or portfolios you
have chosen on a monthly or quarterly basis.
ELECTRONIC FUNDS TRANSFER (EFT). Another convenient way to invest using the
dollar-cost averaging approach is through our EFT Plan. These automatic
checkbook withdrawals allow you to add to your portfolio(s) on a regular monthly
basis through payments drawn directly on your checking account.
SYSTEMATIC WITHDRAWAL PLAN. You can arrange to have regular amounts of money
sent to you while your Contract is still in the accumulation phase. Our
Systematic Withdrawal Plan allows you to automatically redeem accumulation units
to generate monthly payments. Of course you will have to pay taxes on certain
amounts of money you receive.
AUTOMATIC REQUIRED MINIMUM DISTRIBUTIONS. You can arrange for annual required
minimum distributions to be sent to you automatically once you turn age 70 1/2.
DISABILITY PROVISION. Your Contract offers an optional disability benefit under
which the Company will continue to pay your purchase payments during periods of
total disability. This benefit is provided for at a specified additional cost.
DIVIDENDS. We are paying dividends on approximately 16% of our inforce variable
annuity contracts in 1998, primarily older, larger contracts. The dividends
arise principally as a result of more favorable expense results than assumed in
determining deductions on these contracts.
NML EXPRESS. 1-800-519-4NML (1-800-519-4665). Get up-to-date information about
your contract at your convenience with your contract number and your Personal
Identification Number (PIN). Call toll-free to review contract values and unit
values, transfer among portfolios, change the allocation and obtain fund
performance information.
INTERNET. For information about Northwestern Mutual Life, visit us on our
Website.
WWW.NORTHWESTERNMUTUAL.COM
11. INQUIRIES If you need more information, please contact us at:
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY, 720 EAST WISCONSIN AVENUE,
MILWAUKEE, WISCONSIN 53202; (414) 271-1444.
PROFILE-IV
<PAGE>
P R O S P E C T U S
NML VARIABLE ANNUITY ACCOUNT A
This prospectus describes individual variable annuity contracts (the
"Contracts") offered by The Northwestern Mutual Life Insurance Company
("Northwestern Mutual Life") to provide retirement annuity benefits for
self-employed individuals (and their eligible employees) who adopt plans meeting
the requirements of Sections 401 or 403(a) of the Internal Revenue Code of 1986,
as amended (the "Code"). Such plans, which are popularly called "HR-10 Plans",
afford certain federal income tax benefits to employers and to employees and
their beneficiaries.
The Contracts contemplate periodic purchase payments until a selected maturity
date--usually retirement--after which the benefits under the Contracts become
payable. Purchase payments which are to be accumulated on a variable basis or
applied to provide variable benefits are credited by Northwestern Mutual Life to
NML Variable Annuity Account A (the "Account") and allocated among one or more
of the nine Divisions of the Account as directed by the individual Contract
owners. The Contracts also permit accumulation of funds on a fixed basis, at
rates of interest declared periodically by Northwestern Mutual Life. This
prospectus describes only the Account and the variable provisions of the
Contracts except where there are specific references to the fixed provisions.
The assets of the Account are maintained separately from Northwestern Mutual
Life's general assets. Assets of each Division of the Account are invested
entirely in shares of a corresponding Portfolio of Northwestern Mutual Series
Fund, Inc. (the "Fund"). The Fund is currently comprised of the Aggressive
Growth Stock, International Equity, Growth Stock, Growth and Income Stock, Index
500 Stock, Balanced, High Yield Bond, Select Bond and Money Market Portfolios.
The value of interests in each Division before annuity benefits become payable
will vary continuously to reflect the investment performance of the Portfolio
selected by the Contract owner. When annuity benefits become payable the
Contracts provide lifetime annuity payments or other annuity payment plans on
either a variable or fixed basis. If a variable payment plan is selected the
annuity payments will continue to increase or decrease to reflect the investment
experience of the Portfolios for the Divisions to which Contract values have
been allocated. If a fixed payment plan is selected the amount of annuity
payments will remain fixed, except as they may be increased by dividends.
Two versions of the Contracts are offered: Front Load Contracts and Back Load
Contracts. (See "Expense Table", p. 2, and "Deductions", p. 13.)
This prospectus sets forth concisely the information about the Contracts that a
prospective investor ought to know before investing. Additional information
about the Contracts and the Account has been filed with the Securities and
Exchange Commission in a Statement of Additional Information which is
incorporated herein by reference. The Statement of Additional Information is
available upon written or oral request and without charge from The Northwestern
Mutual Life Insurance Company, 720 East Wisconsin Avenue, Milwaukee, Wisconsin,
53202, Telephone Number (414) 271-1444. The table of contents for the Statement
of Additional Information is shown on the inside front cover of this prospectus.
THIS PROSPECTUS IS VALID ONLY WHEN ACCOMPANIED BY THE CURRENT PROSPECTUS FOR
NORTHWESTERN MUTUAL SERIES FUND, INC. WHICH IS ATTACHED HERETO, AND SHOULD BE
RETAINED FOR FUTURE REFERENCE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT LAWFULLY BE MADE. NO PERSON IS AUTHORIZED TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS.
The Date of the Statement of Additional Information is April 30, 1998
1
<PAGE>
INDEX OF SPECIAL TERMS
THE FOLLOWING SPECIAL TERMS USED IN THIS OFFERING CIRCULAR ARE DISCUSSED AT THE
PAGES INDICATED.
TERM PAGE TERM PAGE
- ---- ---- ---- ----
ACCUMULATION UNIT..............8 ANNUITANT............................9
ANNUITY (or ANNUITY PAYMENTS)..9 MATURITY DATE........................9
NET INVESTMENT FACTOR..........8 OWNER................................8
PAYMENT PLANS..................9 WITHDRAWAL AMOUNT....................9
- --------------------------------------------------------------------------------
EXPENSE TABLE
FRONT LOAD CONTRACT
TRANSACTION EXPENSES FOR CONTRACTOWNERS
Maximum Sales Load (as a percentage
of purchase payments). . . . . . . . . . . . . . . . . . . . . . . . . 4%
Withdrawal Charge. . . . . . . . . . . . . . . . . . . . . . . . . . . None
BACK LOAD CONTRACT
TRANSACTION EXPENSES FOR CONTRACTOWNERS
Sales Load (as a percentage of purchase
payments). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . None
Withdrawal Charge for Sales Expenses
(as a percentage of amounts paid). . . . . . . . . . . . . . . . . . . 0%-8%
ANNUAL EXPENSES OF THE ACCOUNT
(AS A PERCENTAGE OF ASSETS)
Mortality Rate and Expense Guarantee
Charge. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40%
ANNUAL CONTRACT FEE
$30; waived if the Contract Value equals or exceeds
$50,000
ANNUAL EXPENSES OF THE ACCOUNT
(AS A PERCENTAGE OF ASSETS)
Mortality Rate and Expense Guarantee
Charge. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.25%
ANNUAL CONTRACT FEE
$30; waived if the Contract Value equals or exceeds
$50,000
<TABLE>
<CAPTION>
ANNUAL EXPENSES OF THE PORTFOLIOS
(AS A PERCENTAGE OF THE ASSETS)
TOTAL ANNUAL
MANAGEMENT FEES CUSTODY FEES OTHER EXPENSES EXPENSES
--------------- ------------ -------------- --------
<S> <C> <C> <C> <C>
Aggressive Growth Stock .52% .00% .01% .53%
International Equity .67% .08% .02% .77%
Growth Stock .47% .00% .02% .49%
Growth and Income Stock .59% .00% .01% .60%
Index 500 Stock .20% .00% .01% .21%
Balanced .30% .00% .00% .30%
High Yield Bond .52% .00% .03% .55%
Select Bond .30% .00% .00% .30%
Money Market .30% .00% .00% .30%
- --------------------------------------------------------------------------------------------------------------
EXAMPLE
FRONT LOAD CONTRACT - You would pay the following expenses on each $1,000
investment, assuming 5% annual return:
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Aggressive Growth Stock $49 $68 $ 89 $150
International Equity $51 $76 $102 $176
Growth Stock $49 $67 $ 87 $145
Growth and Income Stock $50 $71 $ 93 $158
Index 500 Stock $46 $59 $ 73 $113
Balanced $47 $61 $ 77 $124
High Yield Bond $49 $69 $ 90 $152
Select Bond $47 $61 $ 77 $124
Money Market $47 $61 $ 77 $124
</TABLE>
NOTE: THE MINIMUM INITIAL PURCHASE PAYMENT FOR A FRONT-LOAD CONTRACT IS
$10,000. THE NUMBERS ABOVE MUST BE MULTIPLIED BY 10 TO FIND THE EXPENSES FOR A
FRONT-LOAD CONTRACT OF MINIMUM SIZE.
2
<PAGE>
EXAMPLE
BACK LOAD CONTRACT - You would pay the following expenses on a $1,000
investment, assuming (1) 5% annual return and (2) surrender at the end of each
time period:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Aggressive Growth Stock $ 98 $120 $145 $228
International Equity $101 $127 $157 $253
Growth Stock $ 98 $119 $143 $224
Growth and Income Stock $ 99 $122 $148 $236
Index 500 Stock $ 95 $110 $128 $194
Balanced $ 96 $113 $133 $204
High Yield Bond $ 98 $121 $146 $231
Select Bond $ 96 $113 $133 $204
Money Market $ 96 $113 $133 $204
You would pay the following expenses on the same $1,000 investment, assuming
no surrender or annuitization:
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Aggressive Growth Stock $18 $60 $105 $228
International Equity $21 $67 $117 $253
Growth Stock $18 $59 $103 $224
Growth and Income Stock $19 $62 $108 $236
Index 500 Stock $15 $50 $ 88 $194
Balanced $16 $53 $ 93 $204
High Yield Bond $18 $61 $106 $231
Select Bond $16 $53 $ 93 $204
Money Market $16 $53 $ 93 $204
</TABLE>
The purpose of the table above is to assist a Contract Owner in understanding
the expenses paid by the Account and the Portfolios and borne by investors in
the Contracts. The sales load for a Front Load Contract depends on the amount
of cumulative purchase payments. For the Back Load Contract the withdrawal
charge depends on the length of time funds have been held under the Contract and
the amounts held. The $30 annual Contract fee is reflected as .2% of the assets
in the Back Load Contract based on an average Contract size of $15,000. The $30
annual Contract fee is not reflected in the Front Load Contract based on an
average Contract size of $55,000. The Contracts provide for charges for
transfers between the Divisions of the Account and for premium taxes, but no
such charges are currently being made. See "Transfers Between Divisions and
Payment Plans", p. 10 and "Deductions", p. 13, for additional information about
expenses for the Contracts. The expenses shown in the table for the Portfolios
show the annual expenses for each of the Portfolios, as a percentage of the
average net assets of the Portfolio, based on 1997 operations for the Portfolios
and their predecessors. For additional information about expenses of the
Portfolios, see the prospectus for the Fund attached hereto.
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN, SUBJECT TO
THE GUARANTEES OF THE CONTRACTS.
The tables on the following pages present the accumulation unit values of the
nine Divisions of the Account for the Contracts, including Contracts issued
prior to the date of this prospectus. The Contracts issued prior to March 31,
1995 are different in certain material respects from Contracts offered
currently, but the values shown below for Contracts issued after December 16,
1981 and prior to March 31, 1995 are calculated on the same basis as those for
the Back Load Contracts described in this prospectus. The Front Load Contracts
described in this prospectus have a lower mortality rate and expense guarantee
charge than any of the Contracts issued prior to March 31, 1995.
3
<PAGE>
ACCUMULATION UNIT VALUES
CONTRACTS ISSUED ON OR AFTER MARCH 31, 1995
<TABLE>
<CAPTION>
FOR YEARS ENDED
DECEMBER 31 FOR THE NINE
---------------------- MONTHS ENDED
1997 1996 DECEMBER 31, 1995
----------- --------- -----------------
<S> <C> <C> <C>
Aggressive Growth Stock Division
Accumulation Unit Value:
Front Load Version
Beginning of Period $1.530 $1.305 $1.00
End of Period $1.735 $1.530 $1.305
Back Load Version
Beginning of Period $3.188 $2.743 $2.115
End of Period $3.585 $3.188 $2.743
Number of Accumulation Units
Outstanding, End of Period
Front Load 832,513 568,732 255,895
Back Load 2,962,218 1,734,023 407,729
International Equity Division
Accumulation Unit Value:
Front Load Version
Beginning of Period $1.374 $1.140 $1.00
End of Period $1.537 $1.374 $1.140
Back Load Version
Beginning of Period $1.649 $1.380 $1.218
End of Period $1.829 $1.649 $1.380
Number of Accumulation Units
Outstanding, End of Period
Front Load 575,775 286,469 32,573
Back Load 2,488,184 1,281,128 374,986
Growth Stock Division
Accumulation Unit Value:
Front Load Version
Beginning of Period $1.456 $1.209 $1.00
End of Period $1.883 $1.456 $1.209
Back Load Version
Beginning of Period $1.552 $1.300 $1.082
End of Period $1.991 $1.552 $1.300
Number of Accumulation Units
Outstanding, End of Period
Front Load 422,029 257,158 103,292
Back Load 1,870,296 922,390 227,218
Growth and Income Stock Division
Accumulation Unit Value:
Front Load Version
Beginning of Period $1.430 $1.197 $1.00
End of Period $1.852 $1.430 $1.197
Back Load Version
Beginning of Period $1.525 $1.287 $1.083
End of Period $1.959 $1.525 $1.287
Number of Accumulation Units
Outstanding, End of Period
Front Load 540,977 208,323 114,414
Back Load 1,940,827 1,215,721 310,321
Index 500 Stock Division
Accumulation Unit Value:
Front Load Version
Beginning of Period $1.527 $1.249 $1.00
End of Period $2.026 $1.527 $1.249
Back Load Version
Beginning of Period $2.414 $1.991 $1.604
End of Period $3.175 $2.414 $1.991
Number of Accumulation Units
Outstanding, End of Period
Front Load 690,248 454,096 278,235
Back Load 3,279,176 1,970,961 471,752
Balanced Division
Accumulation Unit Value:
Front Load Version
Beginning of Period $1.334 $1.181 $1.00
End of Period $1.615 $1.334 $1.181
Back Load Version
Beginning of Period $4.806 $4.290 $3.655
End of Period $5.768 $4.806 $4.290
Number of Accumulation Units
Outstanding, End of Period
Front Load 1,296,330 786,271 164,302
Back Load 2,109,606 1,347,427 372,457
High Yield Bond Division
Accumulation Unit Value:
Front Load Version
Beginning of Period $1.326 $1.112 $1.00
End of Period $1.530 $1.326 $1.112
Back Load Version
Beginning of Period $1.394 $1.178 $1.067
End of Period $1.595 $1.394 $1.178
Number of Accumulation Units
Outstanding, End of Period
Front Load 95,718 55,625 --
Back Load 967,118 572,121 138,470
Select Bond Division
Accumulation Unit Value:
Front Load Version
Beginning of Period $1.161 $1.129 $1.00
End of Period $1.266 $1.161 $1.129
Back Load Version
Beginning of Period $6.201 $6.078 $5.419
End of Period $6.703 $6.201 $6.078
Number of Accumulation Units
Outstanding, End of Period
Front Load 72,941 38,713 26,732
Back Load 271,027 182,907 50,828
Money Market Division
Accumulation Unit Value:
Front Load Version
Beginning of Period $1.091 $1.040 $1.00
End of Period $1.146 $1.091 $1.040
Back Load Version
Beginning of Period $2.241 $2.156 $2.086
End of Period $2.335 $2.241 $2.156
Number of Accumulation Units
Outstanding, End of Period
Front Load 1,439,686 1,843,605 327,441
Back Load 1,081,227 1,123,081 379,473
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
ACCUMULATION UNIT VALUES
CONTRACTS ISSUED AFTER DECEMBER 16, 1981 AND PRIOR TO MARCH 31, 1995
FOR THE YEARS ENDED DECEMBER 31
-------------------------------------------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Aggressive Growth Stock Division
Accumulation Unit Value:
Beginning of Period* $3.188 $2.743 $1.994 $1.915 $1.628
End of Period $3.585 $3.188 $2.743 $1.994 $1.915
Number of Accumulation Units
Outstanding, End of Period 20,861,309 21,479,837 19,083,707 17,290,856 11,319,698
International Equity Division
Accumulation Unit Value:
Beginning of Period** $1.649 $1.380 $1.220 $1.236 $1.000
End of Period $1.829 $1.649 $1.380 $1.220 $1.236
Number of Accumulation Units
Outstanding, End of Period 22,910,908 22,132,206 21,338,267 21,538,113 8,548,091
Growth Stock Division
Accumulation Unit Value:
Beginning of Period*** $1.552 $1.300 $1.006 $1.000 --
End of Period $1.991 $1.552 $1.300 $1.006 --
Number of Accumulation Units
Outstanding, End of Period 6,045,075 4,845,965 2,970,905 1,311,686 --
Growth and Income Stock Division
Accumulation Unit Value:
Beginning of Period*** $1.525 $1.287 $0.994 $1.000 --
End of Period $1.959 $1.525 $1.287 $0.994 --
Number of Accumulation Units
Outstanding, End of Period 8,963,724 7,054,484 5,605,215 3,129,287 --
Index 500 Stock Division
Accumulation Unit Value:
Beginning of Period* $2.414 $1.991 $1.469 $1.470 $1.356
End of Period $3.175 $2.414 $1.991 $1.469 $1.470
Number of Accumulation Units
Outstanding, End of Period 21,531,879 20,092,060 18,961,291 17,624,809 16,051,619
Balanced Division
Accumulation Unit Value:
Beginning of Period $4.806 $4.290 $3.436 $3.480 $3.216
End of Period $5.768 $4.806 $4.290 $3.436 $3.480
Number of Accumulation Units
Outstanding, End of Period 44,638,127 48,457,793 52,575,295 59,200,252 63,940,609
High Yield Bond Division
Accumulation Unit Value:
Beginning of Period*** $1.394 $1.178 $1.022 $1.000 --
End of Period $1.595 $1.394 $1.178 $1.022 --
Number of Accumulation Units
Outstanding, End of Period 3,770,055 2,456,295 1,609,770 1,215,989 --
Select Bond Division
Accumulation Unit Value:
Beginning of Period $6.201 $6.078 $5.167 $5.384 $4.941
End of Period $6.703 $6.201 $6.078 $5.167 $5.384
Number of Accumulation Units
Outstanding, End of Period 2,252,704 2,691,481 2,778,441 2,923,557 2,937,137
Money Market Division
Accumulation Unit Value:
Beginning of Period $2.241 $2.156 $2.063 $2.007 $1.976
End of Period $2.335 $2.241 $2.156 $2.063 $2.007
Number of Accumulation Units
Outstanding, End of Period 6,270,333 7,029,739 7,896,022 8,608,326 7,614,186
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31
-------------------------------------------------------------------------------------------------------------------------------
1992 1991 1990 1989 1988
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Aggressive Growth Stock Division
Accumulation Unit Value:
Beginning of Period* $1.556 $1.010 $1.000 -- --
End of Period $1.628 $1.556 $1.010 -- --
Number of Accumulation Units
Outstanding, End of Period 7,939,571 3,208,965 81,406 -- --
International Equity Division
Accumulation Unit Value:
Beginning of Period** -- -- -- -- --
End of Period -- -- -- -- --
Number of Accumulation Units
Outstanding, End of Period -- -- -- -- --
Growth Stock Division
Accumulation Unit Value:
Beginning of Period*** -- -- -- -- --
End of Period -- -- -- -- --
Number of Accumulation Units
Outstanding, End of Period -- -- -- -- --
Growth and Income Stock Division
Accumulation Unit Value:
Beginning of Period*** -- -- -- -- --
End of Period -- -- -- -- --
Number of Accumulation Units
Outstanding, End of Period -- -- -- -- --
Index 500 Stock Division
Accumulation Unit Value:
Beginning of Period* $1.280 $1.000 $1.000 -- --
End of Period $1.356 $1.280 $1.000 -- --
Number of Accumulation Units
Outstanding, End of Period 4,774,008 2,593,051 30,451 -- --
Balanced Division
Accumulation Unit Value:
Beginning of Period $3.092 $2.526 $2.531 $2.217 $2.060
End of Period $3.216 $3.092 $2.526 $2.531 $2.217
Number of Accumulation Units
Outstanding, End of Period 62,756,051 59,013,262 58,632,612 59,790,768 56,485,511
High Yield Bond Division
Accumulation Unit Value:
Beginning of Period*** -- -- -- -- --
End of Period -- -- -- -- --
Number of Accumulation Units
Outstanding, End of Period -- -- -- -- --
Select Bond Division
Accumulation Unit Value:
Beginning of Period $4.677 $4.052 $3.787 $3.368 $3.144
End of Period $4.941 $4.677 $4.052 $3.787 $3.368
Number of Accumulation Units
Outstanding, End of Period 2,667,880 2,087,901 1,970,476 2,102,874 1,106,292
Money Market Division
Accumulation Unit Value:
Beginning of Period $1.936 $1.855 $1.739 $1.615 $1.526
End of Period $1.976 $1.936 $1.855 $1.739 $1.615
Number of Accumulation Units
Outstanding, End of Period 8,478,941 9,098,558 10,506,714 8,094,998 7,909,585
</TABLE>
* The initial investments in the Aggressive Growth Stock Division and Index
500 Stock Division and were made on December 12, 1990.
** The initial investment in the International Equity Division was made on
April 30, 1993.
*** The initial investments in the Growth Stock Division, Growth and Income
Stock Division, and High Yield Bond Division were made on May 3, 1994.
5
<PAGE>
<TABLE>
<CAPTION>
ACCUMULATION UNIT VALUES
CONTRACTS ISSUED PRIOR TO DECEMBER 17, 1981
FOR THE YEARS ENDED DECEMBER 31
------------------------------------------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Aggressive Growth Stock Division
Accumulation Unit Value:
Beginning of Period* $3.286 $2.813 $2.035 $1.945 $1.645
End of Period $3.714 $3.286 $2.813 $2.035 $1.945
Number of Accumulation Units
Outstanding, End of Period 640,838 890,850 861,229 805,409 602,390
International Equity Division
Accumulation Unit Value:
Beginning of Period** $1.680 $1.398 $1.230 $1.240 $1.000
End of Period $1.872 $1.680 $1.398 $1.230 $1.240
Number of Accumulation Units
Outstanding, End of Period 1,297,660 1,332,812 1,166,796 1,529,309 912,421
Growth Stock Division
Accumulation Unit Value:
Beginning of Period*** $1.573 $1.311 $1.009 -- --
End of Period $2.027 $1.573 $1.311 -- --
Number of Accumulation Units
Outstanding, End of Period 327,731 118,168 1,782 -- --
Growth and Income Stock Division
Accumulation Unit Value:
Beginning of Period*** $1.546 $1.298 $0.997 -- --
End of Period $1.995 $1.546 $1.298 -- --
Number of Accumulation Units
Outstanding, End of Period 348,188 69,566 9,498 -- --
Index 500 Stock Division
Accumulation Unit Value:
Beginning of Period* $2.488 $2.042 $1.499 $1.492 $1.370
End of Period $3.289 $2.488 $2.042 $1.499 $1.492
Number of Accumulation Units
Outstanding, End of Period 8,175,537 9,600,286 10,111,615 10,735,943 12,320,684
Balanced Division
Accumulation Unit Value:
Beginning of Period $5.180 $4.601 $3.667 $3.695 $3.398
End of Period $6.248 $5.180 $4.601 $3.667 $3.695
Number of Accumulation Units
Outstanding, End of Period 3,845,538 4,743,812 5,651,599 6,525,821 7,060,303
High Yield Bond Division
Accumulation Unit Value:
Beginning of Period*** $1.412 $1.188 $1.025 -- --
End of Period $1.624 $1.412 $1.188 -- --
Number of Accumulation Units
Outstanding, End of Period 600,752 428,588 -- -- --
Select Bond Division
Accumulation Unit Value:
Beginning of Period $6.685 $6.520 $5.515 $5.719 $5.222
End of Period $7.263 $6.685 $6.520 $5.515 $5.719
Number of Accumulation Units
Outstanding, End of Period 1,012,083 1,215,131 1,172,420 1,266,751 1,389,667
Money Market Division
Accumulation Unit Value:
Beginning of Period $2.416 $2.312 $2.201 $2.131 $2.088
End of Period $2.529 $2.416 $2.312 $2.201 $2.131
Number of Accumulation Units
Outstanding, End of Period 893,452 1,103,625 1,264,988 1,020,911 788,050
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31
-------------------------------------------------------------------------------------------------------------------------------
1992 1991 1990 1989 1988
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Aggressive Growth Stock Division
Accumulation Unit Value:
Beginning of Period* $1.564 $1.010 $1.000 -- --
End of Period $1.645 $1.564 $1.010 -- --
Number of Accumulation Units
Outstanding, End of Period 459,581 262,149 9,478 -- --
International Equity Division
Accumulation Unit Value:
Beginning of Period** -- -- -- -- --
End of Period -- -- -- -- --
Number of Accumulation Units
Outstanding, End of Period -- -- -- -- --
Growth Stock Division
Accumulation Unit Value:
Beginning of Period*** -- -- -- -- --
End of Period -- -- -- -- --
Number of Accumulation Units
Outstanding, End of Period -- -- -- -- --
Growth and Income Stock Division
Accumulation Unit Value:
Beginning of Period*** -- -- -- -- --
End of Period -- -- -- -- --
Number of Accumulation Units
Outstanding, End of Period -- -- -- -- --
Index 500 Stock Division
Accumulation Unit Value:
Beginning of Period* $1.287 $1.000 $1.000 -- --
End of Period $1.370 $1.287 $1.000 -- --
Number of Accumulation Units
Outstanding, End of Period 242,871 33,349 13,511 -- --
Balanced Division
Accumulation Unit Value:
Beginning of Period $3.250 $2.642 $2.635 $2.296 $2.123
End of Period $3.398 $3.250 $2.642 $2.635 $2.296
Number of Accumulation Units
Outstanding, End of Period 8,324,438 8,795,056 9,637,964 11,002,773 11,609,029
High Yield Bond Division
Accumulation Unit Value:
Beginning of Period*** -- -- -- -- --
End of Period -- -- -- -- --
Number of Accumulation Units
Outstanding, End of Period -- -- -- -- --
Select Bond Division
Accumulation Unit Value:
Beginning of Period $4.918 $4.239 $3.943 $3.488 $3.241
End of Period $5.222 $4.918 $4.239 $3.943 $3.488
Number of Accumulation Units
Outstanding, End of Period 1,411,347 1,590,698 1,590,884 1,854,807 1,879,354
Money Market Division
Accumulation Unit Value:
Beginning of Period $2.035 $1.940 $1.810 $1.673 $1.573
End of Period $2.088 $2.035 $1.940 $1.810 $1.673
Number of Accumulation Units
Outstanding, End of Period 1,231,018 1,393,920 2,143,153 1,590,479 1,832,118
</TABLE>
* The initial investments in the Index 500 Stock Division and Aggressive
Growth Stock Division were made on December 12, 1990.
** The initial investment in the International Equity Division was made on
April 30, 1993.
*** The initial investments in the Growth Stock Division, Growth and Income
Stock Division, and High Yield Bond Division were made on May 3, 1994.
6
<PAGE>
THE COMPANY
The Northwestern Mutual Life Insurance Company was organized by a special act of
the Wisconsin Legislature in 1857. It is the nation's fifth largest life
insurance company, based on total assets in excess of $71 billion on
December 31, 1997, and is licensed to conduct a conventional life insurance
business in the District of Columbia and in all states of the United States.
Northwestern Mutual Life sells life and disability income insurance policies and
annuity contracts through its own field force of approximately 6,000 full time
producing agents. The Home Office of Northwestern Mutual Life is located at 720
East Wisconsin Avenue, Milwaukee, Wisconsin 53202.
NML VARIABLE ANNUITY ACCOUNT A
The Account was established on February 14, 1968 by the Board of Trustees of
Northwestern Mutual Life in accordance with the provisions of the Wisconsin
insurance law to facilitate the issuance of the Contracts.
The Account has nine Divisions. Considerations paid to Northwestern Mutual Life
to provide variable benefits under the Contracts are allocated to one or more of
the Divisions as directed by the Owner of the Contract. Assets allocated to the
Aggressive Growth Stock, International Equity, Growth Stock, Growth and Income
Stock, Index 500 Stock, Balanced, High Yield Bond, Select Bond and Money Market
Divisions are simultaneously invested in shares of the corresponding Portfolios
of Northwestern Mutual Series Fund, Inc.
Under Wisconsin law, the income, gains or losses, realized or unrealized, of the
Account are credited to or charged against the Account in accordance with the
Contracts, without regard to other income, gains or losses of Northwestern
Mutual Life. The assets of the Account are owned by Northwestern Mutual Life and
it is not a trustee with respect thereto. However, such assets are not
chargeable with any liabilities arising out of any other separate account or
other business of Northwestern Mutual Life. All obligations arising under the
Contracts are general obligations of Northwestern Mutual Life. Shares of the
Fund held in the Account will be voted in the discretion of Northwestern Mutual
Life.
THE FUND
Northwestern Mutual Series Fund, Inc. is a mutual fund of the series type
registered under the Investment Company Act of 1940 as an open-end diversified
management investment company. The Fund is composed of nine separate portfolios
which operate as separate mutual funds. The portfolios are the Aggressive
Growth Stock Portfolio, International Equity Portfolio, Growth Stock Portfolio,
Growth and Income Stock Portfolio, Index 500 Stock Portfolio, Balanced
Portfolio, High Yield Bond Portfolio, Select Bond Portfolio and Money Market
Portfolio. Shares of each Portfolio of the Fund will be purchased by the
corresponding Division of the Account at net asset value, that is, without any
sales charge.
Northwestern Mutual Investment Services, Inc. ("NMIS"), a wholly-owned
subsidiary of Northwestern Mutual Life, is the investment adviser to the Fund.
Northwestern Mutual Life provides certain personnel and facilities utilized by
NMIS in performing its investment advisory functions, and Northwestern Mutual
Life is a party to the investment advisory agreement. J.P. Morgan Investment
Management, Inc. and Templeton Investment Counsel, Inc. have been retained under
investment sub-advisory agreements to provide investment advice to the Growth
and Income Stock Portfolio and the International Equity Portfolio, respectively.
FOR MORE INFORMATION REGARDING THE FUND AND ITS PORTFOLIOS, INCLUDING
INFORMATION ABOUT THEIR INVESTMENT OBJECTIVES AND EXPENSES, SEE THE PROSPECTUS
FOR THE FUND ATTACHED HERETO. AN INVESTOR SHOULD READ THE FUND'S PROSPECTUS
CAREFULLY BEFORE INVESTING IN THE CONTRACTS.
7
<PAGE>
THE CONTRACTS
PURCHASE PAYMENTS UNDER THE CONTRACTS
AMOUNT AND FREQUENCY Purchase payments may be paid monthly, quarterly,
semiannually, annually or on any other frequency acceptable to Northwestern
Mutual Life.
For Back Load Contracts the minimum amount for each purchase payment is $25.
Northwestern Mutual Life will accept larger purchase payments than due, or
payments at other times, but total purchase payments under any Contract may not
exceed $5,000,000 without the consent of Northwestern Mutual Life. For Front
Load Contracts the minimum initial purchase payment is $10,000. The minimum
amount for each subsequent purchase payment is $25 for all Contracts.
Purchase payments may not exceed the applicable limits of the Code. See "Federal
Income Taxes", p. 12.
APPLICATION OF PURCHASE PAYMENTS Net purchase payments, after deduction of any
sales load, are credited by Northwestern Mutual Life to the Account and
allocated to one or more Divisions in accordance with the direction of the
Owner. Assets allocated to each Division will thereupon be invested in shares of
the Portfolio which corresponds to that Division.
Purchase payments are applied to provide "Accumulation Units" in one or more
Divisions. Accumulation Units represent the interest of an Owner in the Account.
The number of Accumulation Units provided by each net purchase payment is
determined by dividing the amount of the purchase payment to be allocated to a
Division by the value of an Accumulation Unit in that Division, based upon the
valuation of the assets of the Division next following receipt of the purchase
payment at the Home Office of Northwestern Mutual Life. Receipt of purchase
payments at a lockbox facility designated by Northwestern Mutual Life will be
considered the same as receipt at the Home Office. Assets are valued as of the
close of trading on the New York Stock Exchange for each day the Exchange is
open, and at any other time required by the Investment Company Act of 1940.
The number of an Owner's Accumulation Units will be increased by additional
purchase payments or transfers into the Account and decreased by withdrawals or
transfers out of the Account. The investment experience of the Account does not
change the number (as distinguished from the value) of Accumulation Units.
The value of an Accumulation Unit in each Division varies with the investment
experience of the Division (which in turn is determined by the investment
experience of the corresponding Portfolio of the Fund), and is determined by
multiplying the value on the immediately preceding valuation date by the net
investment factor for the Division. (See "Net Investment Factor", below.) Since
the Owner bears the investment risk, there is no guarantee as to the aggregate
value of Accumulation Units; such value may be less than, equal to or more than
the cumulative net purchase payments.
All or part of a purchase payment may be directed to the Guaranteed Interest
Fund and invested on a fixed basis. See "The Guaranteed Interest Fund", p. 12.
NET INVESTMENT FACTOR
For each Division the net investment factor for any period ending on a valuation
date is 1.000000 plus the net investment rate for the Division for that period.
Under the Contract the net investment rate is related to the assets of the
Division. However, since all amounts are simultaneously invested in shares of
the corresponding Portfolio when allocated to the Division, calculation of the
net investment rate for each of the Divisions may also be based upon the change
in value of a single share of the corresponding Portfolio.
Thus, for example, in the case of the Balanced Division the net investment rate
is equal to (a) the change in the net asset value of a Balanced Portfolio share
for the period from the immediately preceding valuation date up to and including
the current valuation date, plus the per share amount of any dividends and other
distributions made by the Balanced Portfolio during the valuation period, less a
deduction for any applicable taxes or for any expenses resulting from a
substitution of securities, (b) divided by the net asset value of a Balanced
Portfolio share on the valuation date immediately preceding the current
valuation date, (c) less an adjustment to provide for the deduction for
mortality rate and expense risks assumed by Northwestern Mutual Life. (See
"Deductions", p. 13.) A penalty tax will apply to premature payments of
Contract benefits. A penalty tax of 10% of the amount of the payment which is
includible in income will be imposed on non-exempt withdrawals under individual
retirement annuities, tax deferred annuities and nonqualified deferred
annuities. Payments which are exempt from the penalty tax include payments upon
disability, after age 59-1/2 or as substantially equal periodic payments for
life.
Investment income and realized capital gains will be received in the form of
dividend and capital gain distributions upon Portfolio shares held by each
Division; such distributions will be reinvested in additional shares of the same
Portfolio. Unrealized
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capital gains and realized and unrealized capital losses will be reflected by
changes in the value of the shares held by the Account.
BENEFITS PROVIDED UNDER THE CONTRACTS
The benefits provided under the Contracts consist of a withdrawal amount, a
death benefit and a maturity benefit. Subject to the restrictions noted below,
all of these benefits may be paid in a lump sum or under the payment plans
described below.
WITHDRAWAL AMOUNT On or prior to the maturity date the Owner is entitled to
withdraw the Accumulation Units credited to his Contract and receive the value
thereof less the applicable withdrawal charge. (See "Withdrawal Charge", p. 14.)
The value, which may be either greater or less than the amount paid by the
Owner, is determined as of the valuation date coincident with or next following
receipt by Northwestern Mutual Life of a written request for withdrawal on a
form provided by Northwestern Mutual Life. The forms are available from the Home
Office and agents of Northwestern Mutual Life. A portion of the Accumulation
Units may be withdrawn on the same basis, except Northwestern Mutual Life will
not grant a partial withdrawal which would result in less than 100 Accumulation
Units remaining; a request for such a partial withdrawal will be treated as a
request to surrender the entire Contract. Amounts distributed to an Annuitant
upon withdrawal of all or a portion of Accumulation Units may be subject to
federal income tax. (See "Federal Income Taxes", p. 12.) A 10% penalty tax may
be imposed on the taxable portion of premature payments of benefits (prior to
age 59-1/2 or disability) unless payments are made after the employee separates
from service and payments are either paid in substantially equal installments
over the life or life expectancy of the employee or are paid on account of early
retirement after age 55.
If annuity payments are being made under Payment Plan 1 the payee may surrender
the Contract and receive the value of the Annuity Units credited to his
Contract, less the applicable withdrawal charge. (See "Withdrawal Charge", p.
14.) Upon death during the certain period of the payee under Plan 2 or both
payees under Plan 3, the beneficiary may surrender the Contract and receive the
withdrawal value of the unpaid payments for the certain period. The withdrawal
value is based on the Annuity Unit value on the withdrawal date, with the unpaid
payments discounted at the Assumed Investment Rate. (See "Description of
Payment Plans", below.)
DEATH BENEFIT Upon the death of the Annuitant prior to the maturity date,
Northwestern Mutual Life will pay to the direct beneficiary a death benefit
equal to the Contract value, as of the valuation date coincident with or next
following the date on which proof of death is received at the Home Office of
Northwestern Mutual Life or, if later, the date on which a method of payment is
elected. If death occurs prior to the Annuitant's 65th birthday the death
benefit, where permitted by state law, will be not less than the amount of
purchase payments received by Northwestern Mutual Life under the Contract, less
withdrawals. The death benefit may be paid either in a lump sum or under a
payment plan.
MATURITY BENEFIT Purchase payments under the Contract are payable until the
maturity date specified in the Contract. Any date up to age 90 may be selected
as the maturity date, subject to applicable requirements of the Code. On the
maturity date, if no other permissible payment plan has been elected, the
maturity date will be changed to the Contract anniversary nearest the
Annuitant's 90th birthday. On that date, if no other permissible payment plan
has been elected, the value of the Contract will be paid in monthly payments for
life under a variable payment plan with payments certain for ten years.
VARIABLE PAYMENT PLANS
Part or all of the benefits under a Contract may be paid under a variable
payment plan. Under a variable plan the payee bears the entire investment risk,
since no guarantees of investment return are made. Accordingly, there is no
guarantee of the amount of the variable payments, and the amount of such
payments can be expected to change from month to month. For a discussion of tax
considerations and limitations regarding the election of payment plans, see
"Federal Income Taxes", p. 12.
DESCRIPTION OF PAYMENT PLANS The following payment plans are available:
1. PAYMENTS FOR A CERTAIN PERIOD. An annuity payable monthly for a specified
period of five to 30 years.
2. LIFE ANNUITY WITH OR WITHOUT CERTAIN PERIOD. An annuity payable monthly until
the payee's death, or until the expiration of a selected certain period,
whichever is later. After the payee's death during the certain period, if any,
payments becoming due are paid to the designated contingent beneficiary. A
certain period of either 10 or 20 years may be selected, or a plan with no
certain period may be chosen.
3. JOINT AND SURVIVOR LIFE ANNUITY WITH CERTAIN PERIOD. An annuity payable
monthly for a certain period of 10 years and thereafter to two persons for their
joint lives. On the death of either payee, payments continue for the remainder
of the 10 years certain or the remaining lifetime of the survivor, whichever is
longer.
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Northwestern Mutual Life may limit the election of a payment plan to one that
results in payments of at least $20.
From time to time Northwestern Mutual Life may establish payment plan rates with
greater actuarial value than those stated in the Contract and make them
available at the time of settlement. Northwestern Mutual Life may also make
available other payment plans, with provisions and rates as published by
Northwestern Mutual Life for those plans.
AMOUNT OF ANNUITY PAYMENTS The amount of the first annuity payment will be
determined on the basis of the particular payment plan selected, the annuity
payment rate and, for plans involving life contingencies, the Annuitant's
adjusted age. Variable annuity payments after the first will vary from month to
month to reflect the fluctuating value of the Annuity Units credited to the
Contract. Annuity Units represent the interest of the Contract in each Division
of the Account after annuity payments begin.
ASSUMED INVESTMENT RATE The variable annuity rate tables for the Contracts are
based upon an Assumed Investment Rate of 3 1/2%. Variable annuity rate tables
based upon an Assumed Investment Rate of 5% are also available where permitted
by state law.
The Assumed Investment Rate affects both the amount of the first variable
payment and the amount by which subsequent payments increase or decrease. The
Assumed Investment Rate does not affect the actuarial value of the future
payments as of the date when payments begin, though it does affect the actual
amount which may be received by an individual Annuitant.
Over a period of time, if each Division achieved a net investment result exactly
equal to the Assumed Investment Rate applicable to a particular payment plan,
the amount of annuity payments would be level. However, if the Division achieved
a net investment result greater than the Assumed Investment Rate, the amount of
annuity payments would increase. Similarly, if the Division achieved a net
investment result smaller than the Assumed Investment Rate, the amount of
annuity payments would decrease.
A higher Assumed Investment Rate will result in a larger initial payment but
more slowly rising and more rapidly falling subsequent payments than a lower
Assumed Investment Rate.
ADDITIONAL INFORMATION
TRANSFERS BETWEEN DIVISIONS AND PAYMENT PLANS The Contracts provide
considerable flexibility for Owners to change the allocation of purchase
payments among the Divisions and to transfer values from one Division to another
both before and after annuity payments begin. In order to take full advantage of
these features Owners should carefully consider, on a continuing basis, which
Division or apportionment is best suited to their long-term investment needs.
A Contract Owner may at any time change the allocation of purchase payments
among the Divisions by written notice to Northwestern Mutual Life. Purchase
payments received at the Home Office of Northwestern Mutual Life on and after
the date on which the notice is received will be applied to provide Accumulation
Units in one or more Divisions on the basis of the new allocation.
Before the effective date of a payment plan the owner may, upon written request,
transfer Accumulation Units from one Division to another. After the effective
date of a payment plan the payee may transfer Annuity Units from one Division to
another. The number of Accumulation or Annuity Units to be credited will be
adjusted to reflect the respective value of the Accumulation and Annuity Units
in each of the Divisions. For Accumulation Units the minimum amount which may be
transferred is the lesser of $100 or the entire value of the Accumulation Units
in the Division from which the transfer is being made. For each transfer
beginning with the thirteenth in any Contract year a transfer fee of $25 may be
deducted from the amount transferred. No charge is currently being made for
transfers.
Owners who contemplate the transfer of funds from one Division to another should
consider the risk inherent in a switch from one investment medium to another. In
general, frequent transfers based on short-term expectations for the stock and
bond markets, especially transfers of large sums, will tend to accentuate the
danger that a transfer will be made at an inopportune time.
Amounts which have been invested on a fixed basis may be transferred to any
Division of the Account, and the value of Accumulation Units in any Division of
the Account may be transferred to the Guaranteed Interest Fund for investment on
a fixed basis, subject to the restrictions described in the Contract. See "The
Guaranteed Interest Fund", p. 12.
After the effective date of a payment plan which does not involve a life
contingency (i.e., Plan 1) a payee may transfer to either form of life annuity
at no charge. The value of the remaining payments will be applied to the new
plan selected, with the amount of the first annuity payment under the new plan
being determined on the basis of the particular plan selected, the annuity
payment rate and the Annuitant's adjusted age and sex. Subsequent payments will
vary to reflect changes in the value of the Annuity Units credited. Other
transfers between payment plans are permitted subject to such
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limitations as Northwestern Mutual Life may reasonably determine. Generally,
however, transfer is not permitted from a payment plan involving a life
contingency to a payment plan which does not involve the same life contingency.
Transfers from the Money Market Division may be made at any time while a payment
plan is in force. The Contracts provide that transfers between the other
Divisions and transfers between payment plans may be made after the payment plan
has been in force for at least 90 days and thereafter whenever at least 90 days
have elapsed since the date of the last transfer. At present Northwestern Mutual
Life permits transfers at any time. The transfer will be made as of the close of
business on the valuation date coincident with or next following the date on
which the request for transfer is received at the Home Office of Northwestern
Mutual Life, or at a later date if requested.
GENDER-BASED ANNUITY PAYMENT RATES Federal law, and the laws of certain states,
may require that annuity considerations and annuity payment rates be determined
without regard to the sex of the Annuitant. Because the Contracts are offered
for use with HR-10 Plans where these rules may have general application, the
annuity payment rates in the Contracts do not distinguish between male and
female Annuitants. However, Contracts with sex-distinct rates are available on
request. Prospective purchasers of the Contracts are urged to review any
questions in this area with qualified counsel.
OWNERS OF THE CONTRACTS The Owner of the Contract has the sole right to
exercise all rights and privileges under the Contract, except as the Contract
otherwise provides. The Owner is ordinarily the retirement plan, but may be the
employer or the Annuitant or other person. The Annuitant is the person upon
whose life the Contract is issued and Contract benefits depend. Following the
death of the Annuitant any remaining Contract benefits are payable to a
beneficiary or contingent beneficiary named in the Contract.
DISABILITY PROVISION A Contract may include, as an optional benefit, a
provision under which Northwestern Mutual Life will continue to pay purchase
payments during the total disability of the Annuitant. Each Contract containing
this provision specifies the additional cost of such benefit.
DEFERMENT OF BENEFIT PAYMENTS Northwestern Mutual Life reserves the right to
defer determination of the withdrawal value of the Contracts, or the payment of
benefits under a variable payment plan, until after the end of any period during
which the right to redeem Fund shares is suspended, or payment of the redemption
value is postponed, and for any period during which the New York Stock Exchange
is closed or trading thereon is restricted or an emergency exists, so that
valuation of the assets of the Fund or disposal of securities held by it is not
reasonably practical; or as such deferment is otherwise permitted by applicable
law.
DIVIDENDS The Contracts share in the divisible surplus of Northwestern Mutual
Life, except while payments are being made under a variable payment plan. The
divisible surplus of Northwestern Mutual Life is determined annually for the
following year. State law requires that the surplus be distributed equitably
among participating contracts. Distributions of divisible surplus are commonly
referred to as "dividends".
Northwestern Mutual Life is paying dividends on approximately 16% of its inforce
variable annuity contracts in 1998. Dividends are not guaranteed to be paid in
future years. The dividend amount is volatile since it is based on the average
variable Contract value which is defined as the value of the Accumulation units
on the last Contract anniversary adjusted to reflect any transactions since that
date which increased or decreased the Contract's interest in the Account.
Dividends on variable annuities arise principally as a result of more favorable
expense experience than that assumed in determining deductions. Such favorable
experience is generated primarily by older and/or larger Contracts, which have a
mortality rate and expense risk charge of at least 0.75%. In general, Contracts
with an average variable Contract value of less than $30,000 will not receive
dividends, and only about half of those with a value above $30,000 will receive
them. The expected dividend payout for 1998 represents about 0.36% of the
average variable Contract value for those Contracts that will receive dividends.
The maximum dividend payable on a specific contract is about 0.70%.
Any dividend for a Contract is paid on the anniversary date of that Contract.
The dividend is applied as a net purchase payment unless the Owner elects to
have the dividend paid in cash.
SUBSTITUTION AND CHANGE Pursuant to authority of the Board of Trustees of
Northwestern Mutual Life (a) the assets of a Division may be invested in
securities other than Fund shares as a substitute for such shares already
purchased or as the securities to be purchased in the future, or (b) the
provisions of the Contracts may be modified to assure qualification for the
benefits provided by the provisions of the Internal Revenue Code relating to
retirement annuity or variable annuity contracts, or to comply with any other
applicable federal or state laws. In the event of any such substitution or
change, Northwestern Mutual Life may make appropriate endorsement on Contracts
having an interest in the Account and take such other action as may be necessary
to effect the substitution or change.
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FIXED ANNUITY PAYMENT PLANS Contract benefits may also be paid under fixed
annuity payment plans which are not described in this Prospectus. If a fixed
annuity is selected the Accumulation Units credited to a Deferred Contract will
be cancelled, the withdrawal value of the Contract will be transferred to the
general account of Northwestern Mutual Life, and the payee will no longer have
any interest in the Account. A withdrawal charge may be applicable in
determining the withdrawal value. (See "Withdrawal Amount", p. 9, and
"Withdrawal Charge", p. 14.)
FINANCIAL STATEMENTS Financial statements of the Account and financial
statements of Northwestern Mutual Life appear in the Statement of Additional
Information.
THE GUARANTEED INTEREST FUND
Contract Owners may direct all or part of their purchase payments to the
Guaranteed Interest Fund for investment on a fixed basis. Amounts previously
invested in the Account Divisions may be transferred to the Guaranteed Interest
Fund, prior to the maturity date, and amounts in the Guaranteed Interest Fund
may be transferred to the Account Divisions subject, in each case, to the
restrictions described in the Contract.
Amounts invested in the Guaranteed Interest Fund become part of the general
assets of Northwestern Mutual Life. In reliance on certain exemptive and
exclusionary provisions, interests in the Guaranteed Interest Fund have not been
registered under the Securities Act of 1933 and the Guaranteed Interest Fund has
not been registered as an investment company under the Investment Company Act of
1940. Accordingly, neither the Guaranteed Interest Fund nor any interests
therein are generally subject to these Acts. Northwestern Mutual Life has been
advised that the staff of the Securities and Exchange Commission has not
reviewed the disclosure in this prospectus relating to the Guaranteed Interest
Fund. This disclosure, however, may be subject to certain generally applicable
provisions of the federal securities laws relating to the accuracy and
completeness of statements made in prospectuses.
Amounts invested in the Guaranteed Interest Fund earn interest at rates declared
by Northwestern Mutual Life from time to time. The interest rate will be
guaranteed for each amount for at least one year and will be at an annual
effective rate of not less than 3%. At the expiration of the period for which
the interest rate is guaranteed a new interest rate may apply. Interest is
credited and compounded daily. The effective date for a transaction involving
the Guaranteed Interest Fund is determined in the same manner as the effective
date for a transaction involving a Division of the Account.
Investments in the Guaranteed Interest Fund are subject to a maximum limit of
$1,000,000 ($250,000 in New York) without prior consent of Northwestern Mutual
Life. To the extent that a purchase payment or transfer from a Division of the
Account causes the Contract's interest in the Guaranteed Interest Fund to exceed
this maximum limit, the amount of the excess will be placed in the Money Market
Division and will remain there until the Contract Owner instructs otherwise.
Transfers from the Guaranteed Interest Fund to the Account Divisions are subject
to limits. After a transfer from the Guaranteed Interest Fund no further
transfers from the Guaranteed Interest Fund will be allowed for a period of 365
days; in addition, no further transfers will be allowed back to the Guaranteed
Interest Fund for a period of 90 days. The maximum amount that may be
transferred from the Guaranteed Interest Fund in one transfer is the greater of
(1) 25% of the amount that was invested in the Guaranteed Interest Fund as of
the last Contract anniversary preceding the transfer and (2) the amount of the
most recent transfer from the Guaranteed Interest Fund. But in no event will
this maximum transfer amount be less than $1,000 or more than $50,000. (The
$50,000 does not apply in New York.)
The deduction for mortality rate and expense risks, as described below, is not
assessed against amounts in the Guaranteed Interest Fund, and amounts in the
Guaranteed Interest Fund do not bear any expenses of Northwestern Mutual Series
Fund, Inc. Other charges under the Contracts apply for amounts in the
Guaranteed Interest Fund as they are described in this prospectus for amounts
invested on a variable basis. See "Deductions", p. 13. For purposes of
allocating and deducting the annual Contract fee, any investment in the
Guaranteed Interest Fund is considered as though it were an investment of the
same amount in one of the Account Divisions.
FEDERAL INCOME TAXES
TAXATION OF CONTRACT BENEFITS
The Contracts are offered only for use under tax-qualified plans meeting the
requirements of Sections 401 and 403(a) of the Code. However, in the event
Contracts should be issued pursuant to HR-10 Plans, trusts or custodial accounts
which at the time of
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issuance are not qualified under the Code, some or all of the tax benefits
described herein may be lost.
No tax is payable as a result of any increase in the value of a Contract until
benefits from the Contract are received. Benefits received as annuity payments
will be taxable as ordinary income when received in accordance with Section 72
of the Code. As a general rule, where an employee makes nondeductible
contributions to the Plan, the payee may exclude from income that portion of
each benefit payment which represents a return of the employee's "investment in
the contract" as defined in Section 72 until the entire "investment in the
contract" is recovered. A 50% penalty tax may be imposed on payments to the
extent they are less than certain required minimum amounts. In addition, a 10%
penalty tax may be imposed on benefits paid in excess of the benefits provided
under the Plan formula if the payee is or was a "5% owner" of the employer while
a participant in the Plan.
Benefits paid in a form other than an annuity will be taxed as ordinary income
when received except for that portion of the payment, if any, which represents a
return of the employee's "investment in the contract." Benefits received as a
"lump sum distribution" may be eligible for a separate tax averaging calculation
and, with certain limited exceptions, all benefits are subject to the tax-free
rollover provisions of the Code. A 10% penalty tax may be imposed on the taxable
portion of premature payments of benefits (prior to age 59-1/2 or disability)
unless payments are made after the employee separates from service and payments
are either paid in substantially equal installments over the life or life
expectancy of the employee or are paid on account of early retirement after age
55 or unless payments are made for medical expenses in excess of 7.5% of the
employee's Adjusted Gross Income.
A loan from the Plan to an employee, other than an owner-employee, may be
taxable as ordinary income depending on the amount and terms of the loan. A loan
to an owner-employee is a prohibited transaction under the Code and could
disqualify the Plan.
Benefit payments will be subject to mandatory 20% withholding unless (1) they
are rolled over directly to another tax-qualified plan or an individual
retirement arrangement, (2) they are paid in substantially equal installments
over the life or life expectancy of the employee (or of the employee and the
employee's beneficiary) or over a period of 10 years or more, or (3) they are
"required minimum distributions."
The rules governing Plan provisions, payments and deductions and taxation of
distributions from such Plans and Trusts, as set forth in the Code and the
regulations relating thereto, are complex and cannot be readily summarized.
Furthermore, special rules are applicable in many situations, and prospective
purchasers desiring to adopt an HR-10 pension or profit-sharing plan or trust
are advised to consult qualified tax counsel.
TAXATION OF NORTHWESTERN MUTUAL LIFE
Northwestern Mutual Life may charge the appropriate Contracts with their shares
of any tax liability which may result from the maintenance or operation of the
Divisions of the Account. No charge is currently being made. (See "Net
Investment Factor", p. 8 and "Deductions", below.)
DEDUCTIONS
The following deductions will be made:
1. SALES LOAD. For the Front Load Contract a sales load is deducted from all
purchase payments received. The deduction is based on cumulative purchase
payments received and the rates in the table below:
CUMULATIVE PURCHASE PAYMENTS
PAID UNDER THE CONTRACT RATE
- ----------------------- ----
First $100,000 4.0%
Next $400,000 2.0%
Next $500,000 1.0%
Balance over $1,000,000 0.5%
2. DEDUCTIONS FOR MORTALITY RATE AND EXPENSE RISKS. The net investment factor
(see "Net Investment Factor", p. 8) used in determining the value of
Accumulation and Annuity Units reflects a deduction on each valuation date for
mortality rate and expense risks assumed by Northwestern Mutual Life. For the
Front Load Contract, the deduction from Accumulation Units is at a current
annual rate of 0.4% of the assets of the Account, while the deduction from
Annuity Units is zero. For the Back Load Contract the deduction is at a current
annual rate of 1.25% of the assets of the Account. The deduction may be
increased or decreased by the Board of Trustees of Northwestern Mutual Life, but
in no event may the deduction exceed an annual rate of .75% for the Front Load
Contract and 1.50% for the Back Load Contract. This deduction is the only
expense item paid by the Account to date. The Fund pays expenses which are
described in the attached prospectus for the Fund.
The risks assumed by Northwestern Mutual Life are (a) the risk that annuity
payments will continue for longer periods than anticipated because the
Annuitants as a group live longer than expected, and (b) the risk that
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the charges made by Northwestern Mutual Life may be insufficient to cover the
actual costs incurred in connection with the Contracts. Northwestern Mutual Life
assumes these risks for the duration of the Contract.
The net investment factor also reflects the deduction of any reasonable expenses
which may result if there were a substitution of other securities for shares of
a Portfolio of the Fund as described under "Substitution and Change", p. 11, and
any applicable taxes, i.e., any tax liability paid or reserved for by
Northwestern Mutual Life resulting from the maintenance or operation of a
Division of the Account, other than applicable premium taxes which may be
deducted directly from considerations. It is not anticipated that any deduction
will be made for federal income taxes (see "Federal Income Taxes", p. 12), nor
is it anticipated that maintenance or operation of the Account will give rise to
any deduction for state or local taxes. However, Northwestern Mutual Life
reserves the right to charge the appropriate Contracts with their shares of any
tax liability which may result under present or future tax laws from the
maintenance or operation of the Account or to deduct any such tax liability in
the computation of the net investment factor for such Contracts.
3. CONTRACT FEE. On each Contract anniversary prior to the maturity date a
deduction of $30 is made for administrative expenses relating to a Deferred
Contract during the prior year. The charge is made by reducing the number of
Accumulation Units credited to the Contract. For purposes of allocating and
deducting the annual Contract fee, any investment in the Guaranteed Interest
Fund is considered as though it were an investment of the same amount in one of
the Account Divisions. This charge may not be increased, and is intended only
to reimburse Northwestern Mutual Life for its actual administrative expenses.
The charge is currently being waived if the Contract value on the Contract
anniversary is $50,000 or more.
4. WITHDRAWAL CHARGE. For the Back Load Contract if Accumulation Units are
withdrawn for cash a withdrawal charge for sales expenses will be deducted. The
withdrawal charge will be based on the Amount Categories and the Rates in the
table below. The amount in each Category is based on cumulative purchase
payments made and on the number of Contract anniversaries that have occurred
since each purchase payment was made.
AMOUNT CATEGORY RATE
- --------------- ----
Eight. . . . . . . . . . . . . . . . . . .8%
Seven. . . . . . . . . . . . . . . . . . .7
Six . . . . . . . . . . . . . . . . . . .6
Five . . . . . . . . . . . . . . . . . . .5
Four . . . . . . . . . . . . . . . . . . .4
Three. . . . . . . . . . . . . . . . . . .3
Two . . . . . . . . . . . . . . . . . . .2
One . . . . . . . . . . . . . . . . . . .1
Zero . . . . . . . . . . . . . . . . . . .0
The first $100,000 of total purchase payments paid over the life of the Contract
start out in Category Eight, the next $400,000 start out in Category Four, the
next $500,000 start out in Category Two, and all additional purchase payments
paid start out in Category One. As of each Contract anniversary, any amount in a
Category moves to the next lower Category until the Contract anniversary on
which that amount reaches Category Zero. The total withdrawal charge will be the
sum of all the results calculated by multiplying the amount in each Category by
the Rate for that Category. The amounts used to calculate the withdrawal charge
will be limited to the value of the Contract benefits that are subject to the
withdrawal charge. The amounts used will be taken from those Categories that
produce the lowest withdrawal charge. However, any amounts used to determine the
charge for a partial withdrawal will not be used to determine subsequent
withdrawal charges. There is no withdrawal charge on the value of Accumulation
Units withdrawn in excess of the total purchase payments paid under the
Contract; but in the case of a partial withdrawal, the purchase payments paid
under the Contract are deemed to be withdrawn first, except for amounts eligible
for the withdrawal charge free amount described in the next paragraph.
The withdrawal charge free amount is available on a Contract if the Contract
value is at least $10,000 on the Contract anniversary preceding a withdrawal.
For each Contract year, the withdrawal charge free amount is equal to the lesser
of 10% of the Contract value on the last Contract anniversary, and the amount by
which the Contract value exceeds cumulative purchase payments as of the date of
the withdrawal. Eligible amounts withdrawn meeting these requirements will be
taken first from the portion of the Contract value that exceeds cumulative
purchase payments. The withdrawal charge for any amounts not included in the
withdrawal charge free amount will be based first on the purchase payments that
have been paid.
No withdrawal charge will be made upon the selection of a variable payment plan.
However, the withdrawal charge will be made if a withdrawal, or partial
withdrawal, is made within five years after the beginning of a variable payment
plan which is not contingent on the payee's life (Plan 1). For fixed payment
plans the Contract provides for deduction of the withdrawal charge when the
payment plan is selected. By current administrative practice Northwestern
Mutual Life will waive the withdrawal
14
<PAGE>
charge upon selection of a fixed payment plan for a certain period of 12 years
or more (Plan 1) or any fixed payment plan which involves a life contingency
(Plans 2 or 3) if the payment plan is selected after the Contract has been in
force for at least one full year.
5. PREMIUM TAXES. The Contracts provide for the deduction of applicable premium
taxes, if any, from purchase payments or from Contract benefits. Premium taxes
are levied by various jurisdictions, and presently range from 0% to 2.25% of
total considerations. Many jurisdictions presently exempt from premium taxes
annuities such as the Contracts. As a matter of current practice, Northwestern
Mutual Life does not deduct premium taxes from purchase payments received under
the Contracts or from Contract benefits. However, Northwestern Mutual Life
reserves the right to deduct premium taxes in the future.
CONTRACTS ISSUED PRIOR TO MARCH 31, 1995
For Contracts issued prior to March 31, 1995 and after December 16, 1981 there
is no front-end sales load but there is a surrender charge of 8% on the first
$25,000 of considerations, 4% on the next $75,000 and 2% on considerations in
excess of $100,000, based on total cumulative considerations paid under the
Contract. The surrender charge applicable for each consideration reduces by 1%
on each Contract anniversary. A surrender charge free corridor is available on
the same basis described above for the current Contracts. The charge for
mortality and expense risks for those Contracts is 1.25% of the assets of the
Account. The annual Contract fee is the lesser of $30 or 1% of the Contract
value.
CONTRACTS ISSUED PRIOR TO DECEMBER 17, 1981
For Contracts issued prior to December 17, 1981 there is no surrender charge,
but considerations are subject to a deduction of 8% for sales expenses. The
deduction is reduced to 4% on considerations in excess of $5,000 received during
a single Contract year as defined in the Contract, 2% on the next $75,000 and 1%
on the excess over $100,000. The charge for mortality rate and expense risks for
those Contracts is .75% of the assets of the Account, which may be raised to a
maximum annual rate of 1%. There is no annual Contract fee.
REDUCED CHARGES FOR EXCHANGE TRANSACTIONS
As a matter of current practice, owners of fixed dollar annuities previously
issued by Northwestern Mutual Life are permitted to exchange those contracts for
Front Load or Back Load Contracts without paying a second charge for sales
expenses. This rule is subject to a number of exceptions and qualifications and
may be changed or withdrawn at any time.
In general, a $25 administrative charge is made on these exchange transactions
and only one such transaction may be effected in any 12-month period.
Transactions on this basis are subject to a limit of 20% of the amount held
under the fixed annuity contract in any 12-month period, but this limit is
presently being waived.
Amounts exchanged from a fixed contract which provides for a surrender charge
are not charged for sales expenses when the exchange is effected and are placed
in the same withdrawal charge category under the new Back Load Contract as they
were before.
Exchange proceeds from fixed contracts which have no surrender charge provisions
are placed in the 0% withdrawal charge category. As an alternative, exchange
proceeds from such a fixed contract may be added to a Front Load Contract or to
a Deferred Contract issued prior to December 17, 1981 without any deduction for
sales expenses.
Fixed annuity contracts (which are not described in this prospectus) are
available in exchange for the Contracts on a comparable basis.
DISTRIBUTION OF THE CONTRACTS
The Contracts will be sold through individuals who, in addition to being
licensed insurance agents of Northwestern Mutual Life, are registered
representatives of Northwestern Mutual Investment Services, Inc., a wholly-owned
subsidiary of Northwestern Mutual Life, and a registered broker-dealer under the
Securities Exchange Act of 1934, and a member of the National Association of
Securities Dealers. Where state law requires, such agents will also be licensed
securities salesmen. Commissions paid to the agents on sales of the Contracts
will not exceed 4% of purchase payments.
15
<PAGE>
TABLE OF CONTENTS FOR STATEMENT OF ADDITIONAL INFORMATION
PAGE
----
DISTRIBUTION OF THE
CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .B-2
DETERMINATION OF ANNUITY
PAYMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .B-2
Amount of Annuity Payments . . . . . . . . . . . . . . . . . . . . .B-2
Annuity Unit Value . . . . . . . . . . . . . . . . . . . . . . . . .B-3
Illustrations of Variable Annuity
Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . .B-3
VALUATION OF ASSETS OF THE
ACCOUNT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .B-4
TRANSFERABILITY RESTRICTIONS . . . . . . . . . . . . . . . . . . . . .B-4
EXPERTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .B-4
FINANCIAL STATEMENTS OF THE
ACCOUNT (for the two years ended December
31, 1997) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .B-5
REPORT OF INDEPENDENT
ACCOUNTANTS (for the two years ended December
31, 1997) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .B-11
FINANCIAL STATEMENTS OF
NORTHWESTERN MUTUAL LIFE
(for the three years ended December
31, 1997) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .B-12
REPORT OF INDEPENDENT
ACCOUNTANTS (for the three years
ended December 31, 1997). . . . . . . . . . . . . . . . . . . . . . .B-25
This Prospectus sets forth concisely the information about NML Variable
Annuity Account A that a prospective investor ought to know before investing.
Additional information about Account A has been filed with the Securities and
Exchange Commission in a Statement of Additional Information which is
incorporated herein by reference. The Statement of Additional Information is
available upon request and without charge from The Northwestern Mutual Life
Insurance Company. To receive a copy, return the request form to the address
listed below, or telephone (414) 271-1444.
TO: The Northwestern Mutual Life Insurance Company
Annuity and Accumulation Products Marketing Department
Room E12J
720 East Wisconsin Avenue
Milwaukee, WI 53202
Please send a Statement of Additional Information for NML Variable Annuity
Account A to:
Name_______________________________________________________________________
Address____________________________________________________________________
___________________________________________________________________________
City________________________________________State___________Zip____________
<PAGE>
N O R T H W E S T E R N M U T U A L L I F E
INDIVIDUAL VARIABLE ANNUITY CONTRACTS
for Retirement Plans of Self-Employed Persons and Their Employees
NML VARIABLE ANNUITY ACCOUNT A
NORTHWESTERN MUTUAL SERIES FUND, INC.
P R O S P E C T U S
NORTHWESTERN
MUTUAL LIFE-Registered Trademark-
PO Box 3095
Milwaukee WI 53201-3095
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
VARIABLE ANNUITY CONTRACTS
(for Retirement Plans of Self-Employed Persons and their Employees)
NML VARIABLE ANNUITY ACCOUNT A
(the "Account"),
a separate investment account of
The Northwestern Mutual Life Insurance Company
("Northwestern Mutual Life")
- --------------------------------------------------------------------------------
This Statement of Additional Information is not a prospectus but
supplements and should be read in conjunction with the prospectus for
the Contracts. A copy of the prospectus may be obtained from The
Northwestern Mutual Life Insurance Company, 720 East Wisconsin Avenue,
Milwaukee, Wisconsin 53202, telephone number (414) 271-1444.
- --------------------------------------------------------------------------------
The Date of the Prospectus to which this Statement of
Additional Information Relates is April 30, 1998.
The Date of this Statement of Additional Information is
April 30, 1998.
B-1
<PAGE>
DISTRIBUTION OF THE CONTRACTS
The Contracts are offered on a continuous basis exclusively through
individuals who, in addition to being life insurance agents of Northwestern
Mutual Life, are registered representatives of Northwestern Mutual Investment
Services, Inc. ("NMIS").
NMIS may be considered the underwriter of the Contracts for purposes of the
federal securities laws. The following amounts of commissions were paid on
sales of the Contracts, including commissions on sales of variable annuity
contracts to corporate pension plans, during each of the last three years:
Year Amount
---- ------
1997 $2,203,105
1996 $1,344,104
1995 $1,114,411
DETERMINATION OF ANNUITY PAYMENTS
The following discussion of the method for determining the amount of
monthly annuity payments under a variable payment plan is intended to be read in
conjunction with these sections of the prospectus for the Contracts: "Variable
Payment Plans", p. 9, including "Description of Payment Plans", p. 9, "Amount of
Annuity Payments", p. 10, and "Assumed Investment Rate", p. 10; "Dividends", p.
11; "Net Investment Factor", p. 8; and "Deductions", p. 13.
AMOUNT OF ANNUITY PAYMENTS The amount of the first annuity payment under
a variable Payment Plan will be determined on the basis of the particular
Payment Plan selected, the annuity payment rate and, for plans involving life
contingencies, the Annuitant's adjusted age. The amount of the first payment is
the sum of the payments from each Division of the Account determined by applying
the appropriate annuity payment rate to the product of the number of
Accumulation Units in the Division on the effective date of the Payment Plan and
the Accumulation Unit value for the Division on that date. Annuity rates
currently in use are based on the 1983 a Table with age adjustment.
Variable annuity payments after the first will vary from month to month and
will depend upon the number and value of Annuity Units credited to the
Annuitant. After the effective date of a Payment Plan a Contract will not share
in the divisible surplus of Northwestern Mutual Life.
The number of Annuity Units in each Division is determined by dividing the
amount of the first annuity payment from the Division by the value of an Annuity
Unit on the effective date of the Payment Plan. The number of Annuity Units
thus credited to the Annuitant in each Division remains constant throughout the
annuity period. However, the value of Annuity Units in each Division will
fluctuate with the investment experience of the Division.
The amount of each variable annuity payment after the first is the sum of
payments from each Division determined by multiplying this fixed number of
Annuity Units each month by the value of an Annuity Unit for the Division on (a)
the fifth valuation date prior to the payment due date if the payment due date
is a valuation date, or (b) the sixth valuation date prior to the payment due
date if the payment due date is not a valuation date. To illustrate, if a
payment due date falls on a Friday, Saturday or Sunday, the amount of the
payment will normally be based upon the Annuity Unit value calculated on the
preceding Friday. The preceding Friday would be the fifth valuation date prior
to the Friday due date, and the sixth valuation date prior to the Saturday or
Sunday due dates.
B-2
<PAGE>
ANNUITY UNIT VALUE The value of an Annuity Unit for each Division was
established at $1.00 as of the date operations began for that Division. The
value of an Annuity Unit on any later date varies to reflect the investment
experience of the Division, the Assumed Investment Rate on which the annuity
rate tables are based, and the deduction for mortality rate and expense risks
assumed by Northwestern Mutual Life.
The Annuity Unit value for each Division on any valuation date is
determined by multiplying the Annuity Unit value on the immediately preceding
valuation date by two factors: (a) the net investment factor for the current
period for the Division; and (b) an adjustment factor to neutralize the Assumed
Investment Rate used in calculating the annuity rate tables.
ILLUSTRATIONS OF VARIABLE ANNUITY PAYMENTS To illustrate the manner in
which variable annuity payments are determined consider this example. Item (4)
in the example shows the applicable monthly payment rate for an annuitant,
adjusted age 65, who has elected a life annuity Payment Plan with a certain
period of 10 years with an Assumed Investment Rate of 3-1/2% (Plan 2, as
described in the prospectus).
(1) Assumed number of Accumulation Units in
Balanced Division on
maturity date. . . . . . . . . . . . . . . . . . . . . 25,000
(2) Assumed Value of an Accumulation Unit in
Balanced Division at
maturity . . . . . . . . . . . . . . . . . . . . . . . $2.000000
(3) Cash Value of Contract at maturity, (1) X (2). . . . . $50,000
(4) Assumed applicable monthly payment rate per
$1,000 from annuity rate table . . . . . . . . . . . . $5.00
(5) Amount of first payment from
Balanced Division,
(3) X (4) divided by $1,000. . . . . . . . . . . . . . $250.00
(6) Assumed Value of Annuity Unit in
Balanced Division at maturity. . . . . . . . . . . . . $1.500000
(7) Number of Annuity Units credited in
Balanced Division, (5) divided
by (6) . . . . . . . . . . . . . . . . . . . . . . . . 166.67
The $50,000 value at maturity provides a first payment from the Balanced
Division of $250.00, and payments thereafter of the varying dollar value of
166.67 Annuity Units. The amount of subsequent payments from the Balanced
Division is determined by multiplying 166.67 units by the value of an Annuity
Unit in the Balanced Division on the applicable valuation date. For example, if
that unit value is $1.501000, the monthly payment from the Division will be
166.67 multiplied by $1.501000, or $250.17.
However, the value of the Annuity Unit depends entirely on the investment
performance of the Division. Thus in the example above, if the net investment
rate for the following month was less than the Assumed Investment Rate of
3-1/2%, the Annuity Unit would decline in value. If the Annuity Unit
B-3
<PAGE>
value declined to $1.499000 the succeeding monthly payment would then be 166.67
X $1.499000, or $249.84.
For the sake of simplicity the foregoing example assumes that all of the
Annuity Units are in the Balanced Division. If there are Annuity Units in two
or more Divisions, the annuity payment from each Division is calculated
separately, in the manner illustrated, and the total monthly payment is the sum
of the payments from the Divisions.
VALUATION OF ASSETS OF THE ACCOUNT
The value of Portfolio shares of the Fund held in each Division of the
Account at the time of each valuation is the redemption value of such shares at
such time. If the right to redeem shares of the Fund has been suspended, or
payment of redemption value has been postponed, for the sole purpose of
computing annuity payments the shares held in the Account (and Annuity Units)
may be valued at fair value as determined in good faith by the Board of Trustees
of Northwestern Mutual Life.
TRANSFERABILITY RESTRICTIONS
Ownership of a Contract cannot be changed or the Contract sold, assigned or
pledged as collateral for a loan, or for any other purpose, to any person other
than Northwestern Mutual Life; except, that if the Owner of the Contract is a
trustee of an employee trust qualified under the Code, or the custodian of a
custodial account treated as such, it may transfer the Contract to a successor
trustee or custodian. In addition, the trustee or custodian, as well as the
employer under a qualified non-trusted pension plan, may assign the Contract to
an employee upon termination of employment.
EXPERTS
The financial statements of the Account as of December 31, 1997 and for
each of the two years in the period ended December 31, 1997 and of Northwestern
Mutual Life as of December 31, 1997 and 1996 and for each of the three years in
the period ended December 31, 1997 included in this Statement of Additional
Information have been so included in reliance on the reports of Price Waterhouse
LLP, independent accountants, given on the authority of said firm as experts in
auditing and accounting. Price Waterhouse LLP provides audit services for the
Account. The address of Price Waterhouse LLP is 100 East Wisconsin Avenue,
Suite 1500, Milwaukee, Wisconsin 53202.
B-4
<PAGE>
ACCOUNT A FINANCIAL STATEMENTS
NML VARIABLE ANNUITY ACCOUNT A
Financial Statements
DECEMBER 31, 1997
STATEMENT OF ASSETS AND LIABILITIES
(IN THOUSANDS)
<TABLE>
<S> <C> <C>
ASSETS
Investments at Market Value:
Northwestern Mutual Series Fund, Inc.
Aggressive Growth Stock
26,799 shares (cost $63,803).................................................................. $ 89,429
International Equity
29,691 shares (cost $40,305).................................................................. 50,148
Growth Stock
9,536 shares (cost $13,891)................................................................... 17,261
Growth and Income Stock
17,713 shares (cost $23,486).................................................................. 23,576
Index 500 Stock
42,035 shares (cost $62,643).................................................................. 111,141
Balanced
152,059 shares (cost $210,404)................................................................ 302,750
High Yield Bond
8,225 shares (cost $9,217).................................................................... 8,743
Select Bond
20,090 shares (cost $23,555).................................................................. 25,253
Money Market
21,586 shares (cost $21,586).................................................................. 21,586 $ 649,887
-----------
Due from Sale of Fund Shares...................................................................................... 1,555
Due from Northwestern Mutual Life Insurance Company............................................................... 323
-----------
Total Assets...................................................................................................... $ 651,765
-----------
-----------
LIABILITIES
Due to Participants............................................................................................. $ 1,492
Due to Northwestern Mutual Life Insurance Company............................................................... 1,555
Due on Purchase of Fund Shares.................................................................................. 323
-----------
Total Liabilities........................................................................................... 3,370
-----------
EQUITY (NOTE 8)
Contracts Issued Prior to December 17, 1981..................................................................... $ 71,175
Contracts Issued After December 16, 1981 and Prior to March 31, 1995............................................ 516,025
Contracts Issued On or After March 31, 1995:
Front Load Version............................................................................................ 9,868
Back Load Version............................................................................................. 51,327
-----------
Total Equity................................................................................................ 648,395
-----------
Total Liabilities and Equity................................................................................ $ 651,765
-----------
-----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements
---
B-5
<PAGE>
NML VARIABLE ANNUITY ACCOUNT A
Statement of Operations and Changes in Equity
(IN THOUSANDS)
<TABLE>
<CAPTION>
AGGRESSIVE GROWTH
COMBINED STOCK DIVISION
---------------------------------- ----------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1996 1997 1996
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Dividend Income............... $ 33,253 $ 24,501 $ 5,047 $ 2,457
Annuity Rate and Expense
Guarantees.................. 7,047 5,783 979 820
--------------- --------------- --------------- ---------------
Net Investment Income......... 26,206 18,718 4,068 1,637
--------------- --------------- --------------- ---------------
REALIZED AND UNREALIZED GAIN
ON INVESTMENTS
Realized Gain on
Investments............... 23,135 13,967 4,372 2,228
Unrealized Appreciation of
Investments During the
Period.................... 56,364 33,051 1,563 5,805
--------------- --------------- --------------- ---------------
Net Gain on Investments..... 79,499 47,018 5,935 8,033
--------------- --------------- --------------- ---------------
Increase in Equity Derived
from Investment
Activity.................. 105,705 65,736 10,003 9,670
--------------- --------------- --------------- ---------------
EQUITY TRANSACTIONS
Contract Owners' Net
Payments.................. 61,965 65,170 11,297 12,574
Annuity Payments............ (1,047) (831) (40) (36)
Surrenders and Other
(net)..................... (64,552) (51,557) (7,160) (5,090)
Transfers from Other
Divisions or Sponsor...... 63,046 47,709 8,697 10,996
Transfers to Other Divisions
or Sponsor................ (64,242) (48,527) (11,469) (6,505)
--------------- --------------- --------------- ---------------
Increase in Equity Derived
from Equity
Transactions.............. (4,830) 11,964 1,325 11,939
--------------- --------------- --------------- ---------------
Net Increase in Equity...... 100,875 77,700 11,328 21,609
EQUITY
Beginning of Period......... 547,520 469,820 78,075 56,466
--------------- --------------- --------------- ---------------
End of Period............... $ 648,395 $ 547,520 $ 89,403 $ 78,075
--------------- --------------- --------------- ---------------
--------------- --------------- --------------- ---------------
<CAPTION>
INTERNATIONAL EQUITY DIVISION
----------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1997 1996
--------------- ---------------
<S> <C> <C>
INVESTMENT INCOME
Dividend Income............... $ 1,628 $ 1,821
Annuity Rate and Expense
Guarantees.................. 580 431
--------------- ---------------
Net Investment Income......... 1,048 1,390
--------------- ---------------
REALIZED AND UNREALIZED GAIN
ON INVESTMENTS
Realized Gain on
Investments............... 1,235 752
Unrealized Appreciation of
Investments During the
Period.................... 2,446 4,511
--------------- ---------------
Net Gain on Investments..... 3,681 5,263
--------------- ---------------
Increase in Equity Derived
from Investment
Activity.................. 4,729 6,653
--------------- ---------------
EQUITY TRANSACTIONS
Contract Owners' Net
Payments.................. 6,419 5,801
Annuity Payments............ (25) (9)
Surrenders and Other
(net)..................... (4,015) (2,852)
Transfers from Other
Divisions or Sponsor...... 6,734 4,904
Transfers to Other Divisions
or Sponsor................ (5,225) (4,794)
--------------- ---------------
Increase in Equity Derived
from Equity
Transactions.............. 3,888 3,050
--------------- ---------------
Net Increase in Equity...... 8,617 9,703
EQUITY
Beginning of Period......... 41,494 31,791
--------------- ---------------
End of Period............... $ 50,111 $ 41,494
--------------- ---------------
--------------- ---------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements
---
B-6
<PAGE>
NML VARIABLE ANNUITY ACCOUNT A
Statement of Operations and Changes in Equity
(IN THOUSANDS)
<TABLE>
<CAPTION>
GROWTH & INCOME
GROWTH STOCK DIVISION STOCK DIVISION
------------------------------- --------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1996 1997 1996
-------------- ------------- -------------- --------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Dividend Income............... $ 770 $ 379 $ 5,155 $ 1,207
Annuity Rate and Expense
Guarantees.................. 151 73 214 121
-------------- ------------- -------------- --------------
Net Investment Income......... 619 306 4,941 1,086
-------------- ------------- -------------- --------------
REALIZED AND UNREALIZED GAIN
ON INVESTMENTS
Realized Gain on
Investments............... 595 137 683 295
Unrealized Appreciation
(Depreciation) of
Investments During the
Period.................... 2,039 779 (1,305) 534
-------------- ------------- -------------- --------------
Net Gain (Loss) on
Investments............... 2,634 916 (622) 829
-------------- ------------- -------------- --------------
Increase in Equity Derived
from Investment
Activity.................. 3,253 1,222 4,319 1,915
-------------- ------------- -------------- --------------
EQUITY TRANSACTIONS
Contract Owners' Net
Payments.................. 2,808 2,502 3,571 2,886
Annuity Payments............ (2) -- (35) (19)
Surrenders and Other
(net)..................... (834) (457) (1,978) (646)
Transfers from Other
Divisions or Sponsor...... 4,394 2,554 6,598 2,461
Transfers to Other Divisions
or Sponsor................ (1,889) (582) (2,128) (1,352)
-------------- ------------- -------------- --------------
Increase (Decrease) in
Equity Derived from Equity
Transactions.............. 4,477 4,017 6,028 3,330
-------------- ------------- -------------- --------------
Net Increase (Decrease) in
Equity.................... 7,730 5,239 10,347 5,245
EQUITY
Beginning of Period......... 9,525 4,286 13,201 7,956
-------------- ------------- -------------- --------------
End of Period............... $ 17,255 $ 9,525 $ 23,548 $ 13,201
-------------- ------------- -------------- --------------
-------------- ------------- -------------- --------------
<CAPTION>
INDEX 500
STOCK DIVISION
-------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1997 1996
-------------- -------------
<S> <C> <C>
INVESTMENT INCOME
Dividend Income............... $ 3,230 $ 1,906
Annuity Rate and Expense
Guarantees.................. 1,062 742
-------------- -------------
Net Investment Income......... 2,168 1,164
-------------- -------------
REALIZED AND UNREALIZED GAIN
ON INVESTMENTS
Realized Gain on
Investments............... 4,795 2,662
Unrealized Appreciation
(Depreciation) of
Investments During the
Period.................... 19,474 10,313
-------------- -------------
Net Gain (Loss) on
Investments............... 24,269 12,975
-------------- -------------
Increase in Equity Derived
from Investment
Activity.................. 26,437 14,139
-------------- -------------
EQUITY TRANSACTIONS
Contract Owners' Net
Payments.................. 9,100 8,293
Annuity Payments............ (334) (258)
Surrenders and Other
(net)..................... (9,181) (6,271)
Transfers from Other
Divisions or Sponsor...... 10,885 6,790
Transfers to Other Divisions
or Sponsor................ (6,821) (4,194)
-------------- -------------
Increase (Decrease) in
Equity Derived from Equity
Transactions.............. 3,649 4,360
-------------- -------------
Net Increase (Decrease) in
Equity.................... 30,086 18,499
EQUITY
Beginning of Period......... 80,809 62,310
-------------- -------------
End of Period............... $ 110,895 $ 80,809
-------------- -------------
-------------- -------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements
---
B-7
<PAGE>
NML VARIABLE ANNUITY ACCOUNT A
Statement of Operations and Changes in Equity
(IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCED DIVISION HIGH YIELD BOND DIVISION
---------------------------------- -------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1996 1997 1996
--------------- --------------- -------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Dividend Income............... $ 13,245 $ 14,325 $ 1,418 $ 474
Annuity Rate and Expense
Guarantees.................. 3,458 3,072 84 34
--------------- --------------- -------------- -------------
Net Investment Income......... 9,787 11,253 1,334 440
--------------- --------------- -------------- -------------
REALIZED AND UNREALIZED GAIN
ON INVESTMENTS
Realized Gain on
Investments............... 10,959 7,621 198 48
Unrealized Appreciation
(Depreciation) of
Investments During the
Period.................... 32,245 11,291 (533) 71
--------------- --------------- -------------- -------------
Net Gain (Loss) on
Investments............... 43,204 18,912 (335) 119
--------------- --------------- -------------- -------------
Increase in Equity Derived
from Investment
Activity.................. 52,991 30,165 999 559
--------------- --------------- -------------- -------------
EQUITY TRANSACTIONS
Contract Owners' Net
Payments.................. 19,753 20,606 1,351 862
Annuity Payments............ (515) (407) (3) --
Surrenders and Other
(net)..................... (31,209) (27,741) (413) (258)
Transfers from Other
Divisions or Sponsor...... 6,095 6,154 3,537 2,251
Transfers to Other Divisions
or Sponsor................ (14,968) (16,978) (1,635) (567)
--------------- --------------- -------------- -------------
Increase (Decrease) in
Equity Derived from Equity
Transactions.............. (20,844) (18,366) 2,837 2,288
--------------- --------------- -------------- -------------
Net Increase (Decrease) in
Equity.................... 32,148 11,799 3,836 2,847
EQUITY
Beginning of Period......... 269,480 257,681 4,908 2,061
--------------- --------------- -------------- -------------
End of Period............... $ 301,628 $ 269,480 $ 8,744 $ 4,908
--------------- --------------- -------------- -------------
--------------- --------------- -------------- -------------
<CAPTION>
SELECT BOND DIVISION MONEY MARKET DIVISION
---------------------------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1996 1997 1996
--------------- --------------- -------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Dividend Income............... $ 1,557 $ 907 $ 1,203 $ 1,025
Annuity Rate and Expense
Guarantees.................. 274 276 245 214
--------------- --------------- -------------- -------------
Net Investment Income......... 1,283 631 958 811
--------------- --------------- -------------- -------------
REALIZED AND UNREALIZED GAIN
ON INVESTMENTS
Realized Gain on
Investments............... 298 224 -- --
Unrealized Appreciation
(Depreciation) of
Investments During the
Period.................... 435 (253) -- --
--------------- --------------- -------------- -------------
Net Gain (Loss) on
Investments............... 733 (29) 0 0
--------------- --------------- -------------- -------------
Increase in Equity Derived
from Investment
Activity.................. 2,015 602 958 811
--------------- --------------- -------------- -------------
EQUITY TRANSACTIONS
Contract Owners' Net
Payments.................. 2,086 3,319 5,580 8,327
Annuity Payments............ (50) (59) (43) (43)
Surrenders and Other
(net)..................... (4,326) (3,120) (5,436) (5,122)
Transfers from Other
Divisions or Sponsor...... 2,638 3,101 13,468 8,498
Transfers to Other Divisions
or Sponsor................ (3,785) (2,908) (16,322) (10,647)
--------------- --------------- -------------- -------------
Increase (Decrease) in
Equity Derived from Equity
Transactions.............. (3,437) 333 (2,753) 1,013
--------------- --------------- -------------- -------------
Net Increase (Decrease) in
Equity.................... (1,422) 935 (1,795) 1,824
EQUITY
Beginning of Period......... 26,647 25,712 23,381 21,557
--------------- --------------- -------------- -------------
End of Period............... $ 25,225 $ 26,647 $ 21,586 $ 23,381
--------------- --------------- -------------- -------------
--------------- --------------- -------------- -------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements
---
B-8
<PAGE>
NOTES TO FINANCIAL STATEMENTS
NML VARIABLE ANNUITY ACCOUNT A
Notes to Financial Statements
DECEMBER 31, 1997
Note 1 -- NML Variable Annuity Account A (the "Account") is a segregated asset
account of The Northwestern Mutual Life Insurance Company ("Northwestern Mutual
Life" or "Sponsor") used to fund variable annuity contracts ("contracts") for
HR-10 and corporate pension and profit-sharing plans which qualify for special
tax treatment under the Internal Revenue Code. Beginning March 31, 1995, two
versions of the contract are offered: Front Load contracts with a sales charge
up to 4% of purchase payments and Back Load contracts with a withdrawal charge
of 0-8%.
Note 2 -- The preparation of the financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. Principal
accounting policies are summarized below.
Note 3 -- All assets of each Division of the Account are invested in shares of
the corresponding Portfolio of Northwestern Mutual Series Fund, Inc. (the
"Fund"). The shares are valued at the Fund's offering and redemption price per
share.
The Fund is an open-end investment company registered under the Investment
Company Act of 1940.
Note 4 -- Annuity reserves are based on published annuity tables with age
adjustment and benefit payments which reflect actual investment experience. For
variable payment plans issued prior to January 1, 1974, annuity reserves are
based on the 1955 American Annuity Table with assumed interest rates of 3% or
5%. For variable payment plans issued on or after January 1, 1974 and before
January 1, 1985, annuity reserves are based on the 1971 Individual Annuity Table
with assumed interest rates of 3 1/2% or 5%. For variable payment plans issued
on or after January 1, 1985, annuity reserves are based on the 1983 Table a with
assumed interest rates of 3 1/2% or 5%.
Note 5 -- Dividend income from the Fund is recorded on the record date of the
dividends. Transactions in Fund shares are accounted for on the trade date. The
basis for determining cost on sale of Fund shares is identified cost. Purchases
and sales of Fund shares for the year ended December 31, 1997 by each Division
are shown below:
<TABLE>
<CAPTION>
PURCHASES SALES
--------------- --------------
<S> <C> <C>
Aggressive Growth Division...... $ 13,774,024 $ 8,367,827
International Equity Division... 9,401,229 4,431,627
Growth Stock Division........... 6,679,256 1,576,559
Growth & Income Stock Division.. 13,074,930 2,076,927
Index 500 Stock Division........ 14,059,126 8,104,812
Balanced Division............... 21,076,301 32,274,893
High Yield Bond Division........ 5,687,823 1,516,721
Select Bond Division............ 4,506,469 6,636,325
Money Market Division........... 13,132,202 14,926,292
</TABLE>
Note 6 -- A deduction for annuity rate and expense guarantees is determined
daily and paid to Northwestern Mutual Life as compensation for assuming the risk
that annuity payments will continue for longer periods than anticipated because
the annuitants as a group live longer than expected, and the risk that the
charges made by Northwestern Mutual Life may be insufficient to cover the actual
costs incurred in connection with the contracts.
For contracts issued on or after March 31, 1995, for the Front Load version and
the Back Load version, the deduction for annuity rate and expense guarantees is
determined daily at annual rates of 4/10 of 1% and 1 1/4%, respectively, of the
net assets of each Division attributable to these contracts and is paid to
Northwestern Mutual Life. For these contracts, the rates may be increased or
decreased by the Board of Trustees of Northwestern Mutual Life not to exceed
3/4 of 1% and 1 1/2%, respectively.
For contracts issued after December 16, 1981 and prior to March 31, 1995, the
deduction is at an annual rate of 1 1/4% of the net assets of each Division
attributable to these contracts. For these contracts, the rate may be increased
or decreased by the Board of Trustees of Northwestern Mutual Life not to exceed
a 1 1/2% annual rate.
For contracts issued prior to December 17, 1981, the deduction is at an annual
rate of 3/4 of 1% of the net assets of each Division attributable to these
contracts. For these contracts, the rate may be increased or decreased by the
Board of Trustees of Northwestern Mutual Life not to exceed a 1% annual rate.
Since 1995, Northwestern Mutual Life has paid a dividend to certain contracts.
The dividend is re-invested in the Account and has been reflected as a Contract
Owners' Net Payment in the accompanying financial statements.
Note 7 -- Northwestern Mutual Life is taxed as a "life insurance company" under
the Internal Revenue Code and the operations of the Account form a part of and
are taxed with those of Northwestern Mutual Life. Under current law, no federal
income taxes are payable with respect to the Account. Accordingly, no provision
for any such liability has been made.
---
B-9
<PAGE>
NML VARIABLE ANNUITY ACCOUNT A
Notes to Financial Statements
DECEMBER 31, 1997
Note 8 -- Equity Values by Division are shown below:
<TABLE>
<CAPTION>
CONTRACTS ISSUED:
-----------------------------------------------------------------------------------
AFTER DECEMBER 16, 1981 AND
PRIOR TO DECEMBER 17, 1981 PRIOR TO MARCH 31, 1995
---------------------------------------- -----------------------------------------
ACCUMULATION UNITS ACCUMULATION UNITS
DIVISION UNIT VALUE OUTSTANDING EQUITY UNIT VALUE OUTSTANDING EQUITY
- ---------------------------------------- -------------- ------------- --------- -------------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Aggressive Growth Stock................. $ 3.714008 641 $ 2,380 $ 3.585281 20,861 $ 74,794
International Equity.................... 1.871861 1,298 2,429 1.828649 22,911 41,896
Growth Stock............................ 2.027359 328 664 1.990509 6,045 12,033
Growth and Income....................... 1.994748 348 695 1.958555 8,964 17,556
Index 500 Stock......................... 3.289255 8,176 26,891 3.175298 21,532 68,370
Balanced................................ 6.248153 3,846 24,028 5.767570 44,638 257,454
High Yield Bond......................... 1.624115 601 976 1.594619 3,770 6,012
Select Bond............................. 7.263164 1,012 7,351 6.703164 2,253 15,100
Money Market............................ 2.529098 893 2,260 2.334748 6,270 14,640
--------- ----------
Equity.................................. 67,674 507,855
Annuity Reserves........................ 3,501 8,170
--------- ----------
Total Equity............................ $ 71,175 $ 516,025
--------- ----------
--------- ----------
</TABLE>
<TABLE>
<CAPTION>
CONTRACTS ISSUED:
----------------------------------------------------------------------------------
ON OR AFTER MARCH 31, 1995 ON OR AFTER MARCH 31, 1995
FRONT LOAD VERSION BACK LOAD VERSION
---------------------------------------- ----------------------------------------
ACCUMULATION UNITS ACCUMULATION UNITS
DIVISION UNIT VALUE OUTSTANDING EQUITY UNIT VALUE OUTSTANDING EQUITY
- ------------------------------------------- -------------- ------------- --------- -------------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Aggressive Growth Stock.................... $ 1.735135 833 $ 1,445 $ 3.585281 2,962 $ 10,491
International Equity....................... 1.537080 576 885 1.828649 2,488 4,550
Growth Stock............................... 1.882500 422 794 1.990509 1,870 3,723
Growth and Income Stock.................... 1.851666 541 1,002 1.958555 1,941 3,801
Index 500 Stock............................ 2.025922 690 1,398 3.175298 3,279 10,412
Balanced................................... 1.615054 1,296 2,094 5.767570 2,110 12,167
High Yield Bond............................ 1.530051 96 146 1.594619 967 1,542
Select Bond................................ 1.266282 73 92 6.703164 271 1,817
Money Market............................... 1.145720 1,440 1,649 2.334748 1,081 2,524
--------- ---------
Equity..................................... 9,505 51,027
Annuity Reserves........................... 363 300
--------- ---------
Total Equity............................... $ 9,868 $ 51,327
--------- ---------
--------- ---------
</TABLE>
---
B-10
<PAGE>
Accountants' Letter
[LOGO]
[LOGO]
Report of Independent Accountants
To The Northwestern Mutual Life Insurance Company and
Contract Owners NML Variable Annuity Account A
In our opinion, the accompanying combined statement of assets and liabilities
and the related combined and separate statements of operations and changes in
equity present fairly, in all material respects, the financial position of NML
Variable Annuity Account A and the Aggressive Growth Stock Division,
International Equity Division, Growth Stock Division, Growth and Income Stock
Division, Index 500 Stock Division, Balanced Division, High Yield Bond Division,
Select Bond Division and the Money Market Division thereof at December 31, 1997,
the results of their operations and the changes in their equity for the year
then ended and for each of the other periods presented, in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of The Northwestern Mutual Life Insurance Company's management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these financial statements in
accordance with generally accepted auditing standards which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included direct confirmation of the number of
shares owned at December 31, 1997 with Northwestern Mutual Series Fund, Inc.,
provide a reasonable basis for the opinion expressed above.
/s/ Price Waterhouse LLP
Milwaukee, Wisconsin
January 27, 1998
---
B-11
<PAGE>
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(IN MILLIONS)
The following financial statements of Northwestern Mutual should be considered
only as bearing upon the ability of Northwestern Mutual Life to meet its
obligations under the Policies.
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1997 1996
--------- ---------
<S> <C> <C>
ASSETS
Bonds......................................... $ 32,359 $ 29,076
Common and preferred stocks................... 6,524 4,728
Mortgage loans................................ 10,835 9,564
Real estate................................... 1,372 1,385
Policy loans.................................. 7,163 6,802
Other investments............................. 2,026 1,714
Cash and temporary investments................ 572 1,131
Due and accrued investment income............. 795 764
Other assets.................................. 1,275 1,177
Separate account assets....................... 8,160 6,339
--------- ---------
Total assets.............................. $ 71,081 $ 62,680
--------- ---------
--------- ---------
LIABILITIES AND GENERAL CONTINGENCY RESERVE
Reserves for policy benefits.................. $ 47,343 $ 43,209
Policy benefit and premium deposits........... 1,624 1,567
Policyowner dividends payable................. 2,640 2,350
Interest maintenance reserve.................. 461 299
Asset valuation reserve....................... 1,974 1,538
Income taxes payable.......................... 1,043 942
Other liabilities............................. 3,735 2,921
Separate account liabilities.................. 8,160 6,339
--------- ---------
Total liabilities......................... 66,980 59,165
General contingency reserve................... 4,101 3,515
--------- ---------
Total liabilities and general contingency
reserve.................................. $ 71,081 $ 62,680
--------- ---------
--------- ---------
</TABLE>
The accompanying notes are an integral part of the financial statements
B-12
<PAGE>
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENT OF OPERATIONS
(IN MILLIONS)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31,
------------------------------
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
REVENUE
Premiums...................................... $ 7,294 $ 6,667 $ 6,196
Net investment income......................... 4,171 3,836 3,673
Policy benefits left with Company and other
income....................................... 861 759 733
-------- -------- --------
Total revenue............................. 12,326 11,262 10,602
-------- -------- --------
BENEFITS AND EXPENSES
Benefit payments to policyowners and
beneficiaries:
Death benefits.............................. 775 673 655
Surrender benefits.......................... 1,422 1,182 1,375
Disability benefits......................... 227 202 174
Annuity benefits............................ 140 128 92
Matured endowments.......................... 58 52 48
Payments from policy benefits left with
Company.................................... 707 684 590
-------- -------- --------
Benefits paid............................. 3,329 2,921 2,934
Net transfers to separate accounts............ 566 579 236
Net additions to policy reserves.............. 4,026 3,701 3,506
-------- -------- --------
Total benefits............................ 7,921 7,201 6,676
Operating expenses............................ 1,138 1,043 1,026
-------- -------- --------
Total benefits and expenses............... 9,059 8,244 7,702
-------- -------- --------
Gain from operations before income taxes and
dividends........................................ 3,267 3,018 2,900
Policyowner dividends............................. 2,636 2,341 2,111
-------- -------- --------
Gain from operations before taxes................. 631 677 789
Income tax expense................................ 356 452 467
-------- -------- --------
Net gain from operations.......................... 275 225 322
Net realized capital gains........................ 414 395 137
-------- -------- --------
Net income................................ $ 689 $ 620 $ 459
-------- -------- --------
-------- -------- --------
</TABLE>
The accompanying notes are an integral part of the financial statements
B-13
<PAGE>
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENT OF CHANGES IN GENERAL CONTINGENCY RESERVE
(IN MILLIONS)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
-------------------------------
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
BEGINNING OF YEAR BALANCE......................... $3,515 $2,786 $2,225
Net income...................................... 689 620 459
Increase in net unrealized capital gains........ 576 295 373
Increase in investment reserves................. (526) (176) (237)
Other, net...................................... (153) (10) (34)
------- ------- -------
Net increase in general contingency reserve..... 586 729 561
------- ------- -------
END OF YEAR BALANCE............................... $4,101 $3,515 $2,786
------- ------- -------
------- ------- -------
</TABLE>
The accompanying notes are an integral part of the financial statements
B-14
<PAGE>
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN MILLIONS)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
----------------------------------
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Insurance and annuity premiums................ $ 8,093 $ 7,361 $ 6,864
Investment income received.................... 3,928 3,634 3,480
Net disbursement of policy loans.............. (360) (326) (331)
Benefits paid to policyowners and
beneficiaries................................ (3,316) (2,912) (2,939)
Net transfers to separate accounts............ (565) (579) (236)
Policyowner dividends paid.................... (2,347) (2,105) (1,945)
Operating expenses and taxes.................. (1,722) (1,663) (1,364)
Other, net.................................... 564 1,558 381
------- ------- -------
NET CASH PROVIDED BY OPERATING ACTIVITIES..... 4,275 4,968 3,910
------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
PROCEEDS FROM INVESTMENTS SOLD OR MATURED
Bonds......................................... 38,284 31,942 25,317
Common and preferred stocks................... 9,057 4,570 2,465
Mortgage loans................................ 1,012 1,253 431
Real estate................................... 302 178 48
Other invested assets......................... 398 316 149
------- ------- -------
49,053 38,259 28,410
------- ------- -------
COST OF INVESTMENTS ACQUIRED
Bonds......................................... 41,169 35,342 27,596
Common and preferred stocks................... 9,848 4,463 2,562
Mortgage loans................................ 2,309 2,455 1,883
Real estate................................... 202 125 202
Other invested assets......................... 359 255 336
------- ------- -------
53,887 42,640 32,579
------- ------- -------
NET CASH USED IN INVESTING ACTIVITIES......... (4,834) (4,381) (4,169)
------- ------- -------
NET (DECREASE) INCREASE IN CASH AND TEMPORARY
INVESTMENTS...................................... (559) 587 (259)
CASH AND TEMPORARY INVESTMENTS, BEGINNING OF
YEAR............................................. 1,131 544 803
------- ------- -------
CASH AND TEMPORARY INVESTMENTS, END OF YEAR....... $ 572 $ 1,131 $ 544
------- ------- -------
------- ------- -------
</TABLE>
The accompanying notes are an integral part of the financial statements
B-15
<PAGE>
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED STATUTORY FINANCIAL STATEMENTS
DECEMBER 31, 1997, 1996 AND 1995
NOTE 1 -- PRINCIPAL ACCOUNTING POLICIES
The accompanying consolidated statutory financial statements include the
accounts of The Northwestern Mutual Life Insurance Company ("Company") and its
wholly-owned life insurance subsidiary, Northwestern Long Term Care Insurance
Company ("Subsidiary"). The Company 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 Office of the Commissioner of Insurance
of the State of Wisconsin ("statutory basis of accounting"). Prior to December
15, 1995, these policies were considered generally accepted accounting
principles ("GAAP") for mutual life insurance enterprises. However, in April
1993, the Financial Accounting Standards Board issued Interpretation No. 40,
"Applicability of Generally Accepted Accounting Principles to Mutual Life
Insurance Companies and Other Enterprises," which established a different
definition of GAAP for mutual life insurance enterprises. Under the
Interpretation, financial statements of mutual life insurance enterprises for
periods beginning after December 15, 1995 which are prepared on the statutory
basis of accounting are no longer characterized as being in conformity with
GAAP.
Financial statements prepared on the statutory basis of accounting vary from
financial statements prepared on a GAAP basis primarily because on a GAAP basis
(1) policy acquisition costs are deferred and amortized, (2) investment
valuations and insurance reserves are based on different assumptions, (3) funds
received under deposit-type contracts are not reported as premium revenue, and
(4) deferred taxes are provided for temporary differences between book and tax
basis of certain assets and liabilities. The effects on the financial statements
of the differences between the statutory basis of accounting and GAAP are
material to the Company.
The preparation of financial statements in conformity with the statutory basis
of accounting requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual future results could differ from these estimates.
INVESTMENTS
The Company's investments are valued on the following bases:
<TABLE>
<S> <C> <C>
Bonds -- Amortized cost using the interest method; loan-backed and
structured securities are amortized using estimated
prepayment rates and, generally, the prospective adjustment
method
Common and preferred stocks -- Common stocks are carried at market value, preferred stocks
are generally carried at cost, and unconsolidated
subsidiaries are recorded as equity in subsidiaries' net
assets
Mortgage loans -- Amortized cost
Real estate -- Lower of cost, less depreciation and encumbrances, or
estimated net realizable value
Policy loans -- Unpaid principal balance, which approximates fair value
Other investments -- Consists primarily of joint ventures which are valued at
equity in ventures' net assets
Cash and temporary investments -- Amortized cost, which approximates fair value
</TABLE>
B-16
<PAGE>
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED STATUTORY FINANCIAL STATEMENTS
DECEMBER 31, 1997, 1996 AND 1995
CASH AND TEMPORARY INVESTMENTS
Temporary investments consist of debt securities that have maturities of one
year or less at acquisition.
NET INVESTMENT INCOME
Net investment income includes interest and dividends received or due and
accrued on debt securities and stocks, equity in unconsolidated subsidiaries'
earnings and the Company's prorated portion of joint venture income. Net
investment income is reduced by investment management expenses, real estate
depreciation and depletion related to energy assets.
INTEREST MAINTENANCE RESERVE
The Company is required to maintain an interest maintenance reserve ("IMR"). The
IMR is used to defer realized gains and losses, net of tax, on fixed income
investments resulting from changes in interest rates. Net realized gains and
losses deferred to the IMR are amortized into investment income over the
approximate remaining term to maturity of the investment sold.
ASSET VALUATION RESERVE
The Company is required to maintain an asset valuation reserve ("AVR"). The AVR
establishes a general reserve for invested assets held by the Company using a
formula prescribed by state regulations. The AVR is designed to stabilize the
general contingency reserves against potential declines in the value of
investments.
SEPARATE ACCOUNT BUSINESS
Separate account assets and related policy liabilities represent the segregation
of funds deposited by "variable" life insurance and annuity policyowners.
Policyowners bear the investment performance risk associated with variable
products. Separate account assets are invested at the direction of the
policyowner in a variety of Company-managed mutual funds and/or a fixed interest
rate option. Separate account assets are reported at fair market value.
RESERVES FOR POLICY BENEFITS
Reserves for policy benefits are determined by actuarial estimates based on
mortality and morbidity experience tables and valuation interest rates
prescribed by the Office of the Commissioner of Insurance of the State of
Wisconsin. See Note 3.
PREMIUM REVENUE AND OPERATING EXPENSES
Life insurance premiums are recognized as revenue at the beginning of each
policy year. Annuity and disability income premiums are recognized when received
by the Company. Operating expenses, including costs of acquiring new policies,
are charged to operations as incurred.
B-17
<PAGE>
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED STATUTORY FINANCIAL STATEMENTS
DECEMBER 31, 1997, 1996 AND 1995
POLICYOWNER DIVIDENDS
All life insurance policies, and certain annuity and disability income policies,
issued by the Company are participating. Annually, the Company's Board of
Trustees approves dividends payable on participating policies in the following
fiscal year, which are accrued and charged to operations when approved.
RECLASSIFICATION
Certain 1996 and 1995 financial statement balances have been reclassified to
conform to the current year presentation.
NOTE 2 -- INVESTMENTS
DEBT SECURITIES
Debt securities consist of all bonds and fixed-maturity preferred stocks. The
estimated market values of debt securities are based upon quoted market prices,
if available. For securities not actively traded, fair values are estimated
using independent pricing services or internally developed pricing models.
Statement value, which principally represents amortized cost, and estimated
market value of the Company's debt securities at December 31, 1997 and 1996 are
as follows:
<TABLE>
<CAPTION>
RECONCILIATION TO ESTIMATED MARKET
VALUE
---------------------------------------
GROSS GROSS ESTIMATED
STATEMENT UNREALIZED UNREALIZED MARKET
DECEMBER 31, 1997 VALUE APPRECIATION DEPRECIATION VALUE
- -------------------------------------------------- --------- ------------ ------------ ---------
(IN MILLIONS)
<S> <C> <C> <C> <C>
US Government and political obligations........... $ 3,695 $ 336 $ (3) $ 4,028
Mortgage-backed securities........................ 7,015 264 (4) 7,275
Corporate and other debt securities............... 21,649 1,098 (208) 22,539
------- ------ ----- -------
32,359 1,698 (215) 33,842
Preferred stocks.................................. 167 4 (2) 169
------- ------ ----- -------
Total............................................. $32,526 $1,702 $(217) $34,011
------- ------ ----- -------
------- ------ ----- -------
<CAPTION>
RECONCILIATION TO ESTIMATED MARKET
VALUE
---------------------------------------
GROSS GROSS ESTIMATED
STATEMENT UNREALIZED UNREALIZED MARKET
DECEMBER 31, 1996 VALUE APPRECIATION DEPRECIATION VALUE
- -------------------------------------------------- --------- ------------ ------------ ---------
(IN MILLIONS)
<S> <C> <C> <C> <C>
US Government and political obligations........... $ 4,789 $ 171 $ (2) $ 4,958
Mortgage-backed securities........................ 6,747 179 (38) 6,888
Corporate and other debt securities............... 17,540 776 (99) 18,217
------- ------ ----- -------
29,076 1,126 (139) 30,063
Preferred stocks.................................. 84 6 (1) 89
------- ------ ----- -------
Total............................................. $29,160 $1,132 $(140) $30,152
------- ------ ----- -------
------- ------ ----- -------
</TABLE>
B-18
<PAGE>
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED STATUTORY FINANCIAL STATEMENTS
DECEMBER 31, 1997, 1996 AND 1995
The statement value of debt securities by contractual maturity at December 31,
1997 and 1996 is shown below. Expected maturities may differ from contractual
maturities because borrowers may have the right to call or prepay obligations
with or without call or prepayment penalties.
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1997 1996
------------ ------------
(IN MILLIONS)
<S> <C> <C>
Due in one year or less........................... $ 605 $ 457
Due after one year through five years............. 4,878 4,077
Due after five years through ten years............ 9,760 7,802
Due after ten years............................... 10,268 10,077
------- -------
25,511 22,413
Mortgage-backed securities........................ 7,015 6,747
------- -------
$32,526 $29,160
------- -------
------- -------
</TABLE>
STOCKS
The estimated market values of common and perpetual preferred stocks are based
upon quoted market prices, if available. For securities not actively traded,
fair values are estimated using independent pricing services or internally
developed pricing models.
The cost of common and preferred stock held by the Company at December 31, 1997
and 1996 is $5.0 billion and $3.7 billion, respectively.
MORTGAGE LOANS AND REAL ESTATE
Mortgage loans are collateralized by properties located throughout the United
States and Canada. The Company attempts to minimize mortgage loan investment
risk by diversification of geographic locations and types of properties.
The fair value of mortgage loans as of December 31, 1997 and 1996 was
approximately $11.5 billion and $9.8 billion, respectively. The fair value of
the mortgage loan portfolio is estimated by discounting the future estimated
cash flows using current interest rates of debt securities with similar
credit risk and maturities, or utilizing net realizable values.
At December 31, 1997, real estate includes $61 million acquired through
foreclosure and $124 million of home office real estate. In 1997 and 1996, the
Company recorded unrealized losses of $2 million and $43 million, respectively,
for the excess of carrying value over fair value of certain real estate
investments and mortgage loans.
B-19
<PAGE>
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED STATUTORY FINANCIAL STATEMENTS
DECEMBER 31, 1997, 1996 AND 1995
REALIZED GAINS AND LOSSES
Realized investment gains and losses for the years ended December 31, 1997, 1996
and 1995 are as follows:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED FOR THE YEAR ENDED
DECEMBER 31, 1997 DECEMBER 31, 1996
--------------------------------------- ---------------------------------------
NET NET
REALIZED REALIZED
REALIZED REALIZED GAINS REALIZED REALIZED GAINS
GAINS LOSSES (LOSSES) GAINS LOSSES (LOSSES)
----------- ----------- ----------- ----------- ----------- -----------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Bonds............................ $ 518 $(269) $249 $ 396 $(383) $ 13
Common and preferred Stocks...... 533 (150) 383 580 (115) 465
Mortgage loans................... 14 (14) - 2 (15) (13)
Real estate...................... 100 (2) 98 36 0 36
Other invested assets............ 338 (105) 233 204 (51) 153
------ ----- ---- ------ ----- ----
$1,503 $(540) $963 $1,218 $(564) $654
------ ----- ---- ------ ----- ----
------ ----- ---- ------ ----- ----
Less: Capital gains taxes........ 340 224
Less: IMR deferrals.............. 209 35
---- ----
Net realized capital gains....... $414 $395
---- ----
---- ----
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31, 1995
---------------------------------------
NET
REALIZED
REALIZED REALIZED GAINS
GAINS LOSSES (LOSSES)
----------- ----------- -----------
<S> <C> <C> <C>
Bonds............................ $ 576 $(130) $446
Common and preferred Stocks...... 574 (429) 145
Mortgage loans................... 2 (32) (30)
Real estate...................... 14 (3) 11
Other invested assets............ 188 (95) 93
------ ----- ----
$1,354 $(689) $665
------ ----- ----
------ ----- ----
Less: Capital gains taxes........ 239
Less: IMR deferrals.............. 289
----
Net realized capital gains....... $137
----
----
</TABLE>
SECURITIES LENDING
The Company has entered into a securities lending agreement whereby certain
securities are loaned to third parties, primarily major brokerage firms. The
Company's policy requires a minimum of 102 percent of the fair value of the
loaned securities as collateral, calculated on a daily basis in the form of
either cash or securities. Collateral assets received and related liability due
to counterparties of $1.5 billion and $1.0 billion are included in the
consolidated statements of financial position at December 31, 1997 and 1996,
respectively, and approximate the statement value of securities loaned at those
dates.
INVESTMENT IN MGIC
The Company owns 18.4% (20.9 million shares) of the outstanding common stock of
MGIC Investment Corporation ("MGIC"). This investment is accounted for using the
equity method. At December 31, 1997, the market value of the Company's
investment in MGIC exceeded the statement value of $273 million by $768 million.
In July 1995, the Company entered into a forward contract with a brokerage firm
to deliver 8.8 million to 10.7 million shares of MGIC (or cash in an amount
equal to the market value of the MGIC shares at contract maturity) in August,
1998, in exchange for a fixed cash payment of $247 million ($24 per share). The
Company's objective in entering into the forward contract was to hedge against
depreciation in the value of its MGIC holdings during the contract period below
the initial spot price of $24, while partially participating in appreciation, if
any, during the forward contract's duration.
B-20
<PAGE>
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED STATUTORY FINANCIAL STATEMENTS
DECEMBER 31, 1997, 1996 AND 1995
DERIVATIVE FINANCIAL INSTRUMENTS
In the normal course of business, the Company enters into transactions to reduce
its exposure to fluctuations in interest rates, foreign currency exchange rates
and market volatility. These hedging strategies include the use of forwards,
futures, options and swaps. In addition to the use of derivatives for hedging
purposes, equity swaps were held for investment purposes during 1997.
The Company held the following positions for hedging purposes at December 31,
1997:
<TABLE>
<CAPTION>
NOTIONAL
DERIVATIVE FINANCIAL INSTRUMENT AMOUNTS RISKS REDUCED
- --------------------------------------------- ------------------ ---------------------------------------------
(IN MILLIONS)
<S> <C> <C>
Foreign Currency Forward Contracts........... $564 Currency exposure on foreign denominated
investments.
Common Stock Futures......................... 327 Stock market price fluctuation.
Bond Futures................................. 95 Bond market price fluctuation.
Options to acquire Interest Rate Swaps....... 530 Interest rates payable on certain annuity and
insurance contracts.
Foreign Currency and Interest Rate Swaps..... 209 Interest rates on variable rate notes and
currency exposure on foreign denominated
bonds.
</TABLE>
The notional or contractual amounts of derivative financial instruments are used
to denominate these types of transactions and do not represent the amounts
exchanged between the parties.
The notional amount of equity swaps outstanding at December 31, 1997 was $143
million.
The hedges are recorded by the Company in the same manner as the underlying
investments. Foreign currency forwards, foreign currency swaps, stock futures,
and options to acquire interest rate swaps are reported at market value. There
is no statement value reported for interest rate swaps and bond futures prior to
the settlement of the contract. Changes in the values of these contracts are
expected to offset gains and losses on the hedged items. For hedges reported at
market value, gains and losses are unrealized until expiration of the contract.
The effect of derivative transactions is not material to the Company's results
of operations or financial position.
NOTE 3 -- RESERVES FOR POLICY BENEFITS
Life insurance reserves on substantially all policies issued since 1978 are
based on the Commissioner's Reserve Valuation Method ("CRVM") with interest
rates ranging from 3 1/2% to 5 1/2%. Other life 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 contracts issued since 1985 are valued using CRVM
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 based
on present values of expected benefit payments at interest rates ranging from
3 1/2% to 7 1/2%.
B-21
<PAGE>
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED STATUTORY FINANCIAL STATEMENTS
DECEMBER 31, 1997, 1996 AND 1995
Active life reserves for disability income ("DI") policies issued since 1987 are
primarily based on the two-year preliminary term method using a 4% interest rate
and the 1985 Commissioner's Individual Disability Table A ("CIDA") for
morbidity. Active life reserves for prior DI policies are estimated using the
net level premium method, a 3% to 4% interest rate and the 1964 Commissioner's
Disability Table for morbidity. Disabled life reserves for DI policies are based
on the present values of expected benefit payments using primarily the 1985 CIDA
(modified for Company experience in the first two years of disability) with
interest rates ranging from 3% to 5 1/2%.
Use of these actuarial tables and methods involves estimation of future
mortality and morbidity based on past experience. Actual future experience could
differ from these estimates.
NOTE 4 -- EMPLOYEE AND AGENT BENEFIT PLANS
The Company sponsors noncontributory defined benefit retirement plans for all
eligible employees and agents. The expense associated with these plans is
generally recorded by the Company in the period contributions to the plans
are funded. As of January 1, 1997, the most recent actuarial valuation date
available, the defined benefit plans were fully funded. In addition, the
Company has a contributory 401(k) plan for eligible employees and a
noncontributory defined contribution plan for all full-time agents. The
Company's contributions are expensed in the period contributions are required
under the plan. The defined benefit and defined contribution plans' assets of
$1.4 billion at December 31, 1997 are primarily invested in the separate
accounts of the Company.
In addition to pension benefits, the Company provides certain health care and
life insurance benefits ("postretirement benefits") for retired employees.
Substantially all employees may become eligible for these benefits if they reach
retirement age while working for the Company. Postretirement benefit cost for
the year ended December 31, 1997 was a net benefit of $1.3 million; it includes
the expected cost of postretirement benefits for newly eligible and vested
employees, interest cost and return on plan assets totaling $3.6 million, offset
by gains from favorable differences between actuarial assumptions and actual
experience of $4.9 million.
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1997 1996
-------------------- --------------------
<S> <C> <C>
Unfunded postretirement
benefit obligation for
retirees and other fully
eligible employees (Accrued
in statement of financial
position).................... $34 million $35 million
Estimated postretirement
benefit obligation for active
non-vested employees (Not
accrued until employee
vests)....................... $50 million $43 million
Discount rate................. 7% 7%
Health care cost trend rate... 10% to an ultimate 10% to an ultimate
5%, declining 1% 5%, declining 1%
for 5 years for 5 years
</TABLE>
If the health care cost trend rate assumptions were increased by 1%, the accrued
postretirement benefit obligation as of December 31, 1997 would be increased by
$4 million.
At December 31, 1997, the recorded postretirement benefit obligation was reduced
by $20 million for assets funded for postretirement health care benefits.
B-22
<PAGE>
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED STATUTORY FINANCIAL STATEMENTS
DECEMBER 31, 1997, 1996 AND 1995
NOTE 5 -- REINSURANCE
In the normal course of business, the Company seeks to limit its exposure to
loss on any single insured and to recover a portion of benefits paid by
ceding to reinsurers under excess coverage and co-insurance contracts. The
Company retains a maximum of $15 million of coverage per individual life and
$20 million maximum of coverage per joint life. The Company has an excess
reinsurance contract for disability income policies with retention limits
varying based upon coverage type.
The amounts shown in the accompanying consolidated financial statements are net
of reinsurance activity. Benefit reserves at December 31, 1997 and 1996 are
reported net of reinsurance of $435 million and $355 million, respectively. The
effect of reinsurance on premiums and benefits for the years ended December 31,
1997, 1996 and 1995 is as follows:
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
(IN MILLIONS)
<S> <C> <C> <C>
Direct premiums................................... $7,647 $7,064 $6,452
Reinsurance ceded................................. (353) (397) (256)
------- ------- -------
Net premium revenue............................... $7,294 $6,667 $6,196
------- ------- -------
------- ------- -------
Benefits to policyowners and beneficiaries........ $8,057 $7,348 $6,818
Reinsurance recoveries............................ (136) (147) (142)
------- ------- -------
Net benefits to policyowners and beneficiaries.... $7,921 $7,201 $6,676
------- ------- -------
------- ------- -------
</TABLE>
In addition, the Company received $115 million, $93 million and $67 million in
1997, 1996 and 1995 respectively, from reinsurers representing reimbursement of
commissions and other expenses. These amounts are included in other income in
the consolidated statement of operations.
Reinsurance contracts do not relieve the Company from its obligations to
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 6 -- INCOME TAXES
Provisions for income taxes are based on current income tax payable without
recognition of deferred taxes. The Company files a consolidated life-nonlife
federal income tax return. Federal income tax returns for years through 1988 are
closed as to further assessment of tax. Adequate provision has been made in the
financial statements for any additional taxes which may become due with respect
to the open years.
The Company's effective tax rate on gains from operations before income tax
expense (after dividends) in 1997, 1996 and 1995 were 56%, 67% and 60%,
respectively. The Company's effective tax rate exceeds the federal corporate
rate of 35% because, (1) the Company pays a tax that is assessed only on mutual
life insurance companies which treats a portion of policyholder dividends like
nondeductible dividends paid to shareholders of stock companies ("equity tax"),
and (2) the Company must capitalize and amortize (as opposed to immediately
deducting) an amount deemed to represent the cost of acquiring new business
("DAC tax").
B-23
<PAGE>
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED STATUTORY FINANCIAL STATEMENTS
DECEMBER 31, 1997, 1996 AND 1995
NOTE 7 -- CONTINGENCIES
The Company has guaranteed certain obligations of its affiliates. These
guarantees totaled approximately $112 million at December 31, 1997 and are
generally supported by the underlying net asset values of the affiliates.
The Company is engaged in various legal actions in the normal course of its
investment and insurance operations. In the opinion of management, any losses
resulting from such actions would not have a material effect on the Company's
financial condition.
B-24
<PAGE>
[LOGO]
[LOGO]
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Trustees and Policyowners of
The Northwestern Mutual Life Insurance Company
We have audited the accompanying consolidated statement of financial position of
The Northwestern Mutual Life Insurance Company and its subsidiary as of December
31, 1997 and 1996, and the related consolidated statements of operations, of
changes in general contingency reserve and of cash flows for each of the three
years in the period ended December 31, 1997. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our report dated January 24, 1996, we expressed an opinion that the 1995
consolidated financial statements, prepared using accounting practices
prescribed or permitted by the Insurance Departments of the states in which the
Company and its subsidiary were domiciled (statutory basis of accounting), were
presented fairly, in all material respects, in conformity with generally
accepted accounting principles. As described in Note 1 to these financial
statements, pursuant to the pronouncement of the Financial Accounting Standards
Board, financial statements of mutual life insurance enterprises prepared using
accounting practices prescribed or permitted by insurance regulators (statutory
basis of accounting) are no longer considered presentations in conformity with
generally accepted accounting principles. Accordingly, our present opinion on
the presentation of the 1995 financial statements, as presented herein, is
different from that expressed in our previous report.
As described in Note 1, these consolidated financial statements were prepared in
conformity with accounting practices prescribed or permitted by the Office of
the Commissioner of Insurance of the State of Wisconsin (statutory basis of
accounting), which practices differ from generally accepted accounting
principles. Accordingly, the consolidated financial statements are not intended
to represent a presentation in accordance with generally accepted accounting
principles. The effects on the consolidated financial statements of the
variances between the statutory basis of accounting and generally accepted
accounting principles, although not reasonably determinable, are presumed to be
material.
In our opinion, the consolidated financial statements audited by us (1) do not
present fairly in conformity with generally accepted accounting principles, the
financial position of The Northwestern Mutual Life Insurance Company and its
subsidiary at December 31, 1997 and 1996, or the results of their operations or
their cash flows for each of the three years in the period ended December 31,
1997 because of the effects of the variances between the statutory basis of
accounting and generally accepted accounting principles referred to in the
preceding paragraph and (2) do present fairly, in all material respects, the
financial position of The Northwestern Mutual Life Insurance Company and its
subsidiary at December 31, 1997 and 1996 and the results of their operations and
their cash flows for each of the three years in the period ended December 31,
1997, on the basis of accounting described in Note 1.
/s/ PRICE WATERHOUSE LLP
January 26, 1998
B-25
<PAGE>
TABLE OF CONTENTS
PAGE
----
DISTRIBUTION OF THE CONTRACTS. . . . . . . . . . . . . . . . . . . . . . . .B-2
DETERMINATION OF ANNUITY PAYMENTS. . . . . . . . . . . . . . . . . . . . . .B-2
Amount of Annuity Payments. . . . . . . . . . . . . . . . . . . . . . .B-2
Annuity Unit Value. . . . . . . . . . . . . . . . . . . . . . . . . . .B-3
Illustrations of Variable Annuity Payments. . . . . . . . . . . . . . .B-3
VALUATION OF ASSETS OF THE ACCOUNT . . . . . . . . . . . . . . . . . . . . .B-4
TRANSFERABILITY RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . .B-4
EXPERTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .B-4
FINANCIAL STATEMENTS OF THE ACCOUNT. . . . . . . . . . . . . . . . . . . . .B-5
(for the two years ended December 31, 1997)
REPORT OF INDEPENDENT ACCOUNTANTS. . . . . . . . . . . . . . . . . . . . . B-11
(for the two years ended December 31, 1997)
FINANCIAL STATEMENTS OF NORTHWESTERN MUTUAL LIFE . . . . . . . . . . . . . B-12
(for the three years ended December 31, 1997)
REPORT OF INDEPENDENT ACCOUNTANTS. . . . . . . . . . . . . . . . . . . . . B-25
(for the three years ended December 31, 1997)
B-26
<PAGE>
PART C
OTHER INFORMATION
Item 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements
The financial statements of NML Variable Annuity Account A and
The Northwestern Mutual Life Insurance Company are included in
the Statement of Additional Information.
NML VARIABLE ANNUITY ACCOUNT A
(for the two years ended December 31, 1997)
Statement of Assets and Liabilities
Statement of Operations and Changes in Equity
Notes to Financial Statements
Report of Independent Accountants
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
(for the three years ended December 31, 1997)
Consolidated Statement of Financial Position
Consolidated Summary of Operations
Consolidated Statement of Changes in General Contingency Reserve
Consolidated Statement of Cash Flows
Notes to Consolidated Statutory Financial Statements
Report of Independent Accountants
(b) Exhibits
Exhibit B(11) Consent of Price Waterhouse LLP.
The following exhibit was filed in electronic format with the Registration
Statement on Form S-6 for Northwestern Mutual Variable Life Account, File
No. 333-36865, CIK 0000742277, dated October 1, 1997, and is incorporated
herein by reference.
Exhibit A(6)(c) Amendments to By-laws of The Northwestern
Mutual Life Insurance Company dated July 23,
1997.
The following exhibit was filed in electronic format with the Registration
Statement on Form S-6 for Northwestern Mutual Variable Life Account, File
No. 333-36865, CIK 0000742277, dated February 27, 1998, and is incorporated
herein by reference.
Exhibit A(6)(c)(1) Amendment to By-laws of The Northwestern Mutual
Life Insurance Company dated January 28, 1998.
Item 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
The following lists include all of the Trustees, executive officers and
other officers of The Northwestern Mutual Life Insurance Company as of February
1, 1998, without regard to their activities relating to variable annuity
contracts or their authority to act or their status as "officers" as that term
is used for certain purposes of the federal securities laws and rules
thereunder.
C-1
<PAGE>
<TABLE>
TRUSTEES
Name Business Address
- ---- ----------------
<S> <C>
R. Quintus Anderson Aarque Capital Corporation
111 West Second Street
Jamestown, NY 14701
Edward E. Barr Sun Chemical Corporation
222 Bridge Plaza South
Fort Lee, NJ 07024
Gordon T. Beaham III Faultless Starch/Bon Ami Co.
1025 West Eighth Street
Kansas City, MO 64101
Robert C. Buchanan Fox Valley Corporation
P.O. Box 727
Appleton, WI 54912
Robert E. Carlson The Northwestern Mutual Life
Insurance Company
720 East Wisconsin Avenue
Milwaukee, WI 53202
George A. Dickerman Spalding Sports Worldwide
425 Meadow Street
P.O. Box 901
Chicopee, MA 01021-0901
Pierre S. du Pont Richards, Layton and Finger
1 Rodney Square
Wilmington, DE 19801
James D. Ericson The Northwestern Mutual Life
Insurance Company
720 East Wisconsin Avenue
Milwaukee, WI 53202
J. E. Gallegos Gallegos Law Firm
460 St. Michaels Drive
Building 300
Santa Fe, NM 87501
Stephen N. Graff 805 Lone Tree Road
Elm Grove, WI 53122-2014
Patricia Albjerg Graham 420 Gutman
Graduate School of Education
Harvard University
Cambridge, MA 02138
C-2
<PAGE>
Stephen F. Keller 101 South Las Palmas Avenue
Los Angeles, CA 90004
Barbara A. King Landscape Structures, Inc.
Route 3
601-7th Street South
Delano, MN 55328
J. Thomas Lewis 228 St. Charles Avenue
Suite 1024
New Orleans, LA 70130
Daniel F. McKeithan, Jr. Tamarack PetroleumCompany,Inc.
Suite 1920
777 East Wisconsin Avenue
Milwaukee, WI 53202
Guy A. Osborn Universal Foods Corp.
433 East Michigan Street
Milwaukee, WI 53202
Timothy D. Proctor Glaxo Wellcome Inc.
P.O. Box 13398
5 Moore Drive
Research Triangle Park, NC
27709
Donald J. Schuenke The Northwestern Mutual
Life Insurance Company
720 East Wisconsin Avenue
Milwaukee, WI 53202
H. Mason Sizemore, Jr. The Seattle Times
P.O. Box 70
Seattle, WA 98111
Harold B. Smith, Jr. Illinois Tool Works, Inc.
3600 West Lake Avenue
Glenview, IL 60625-5811
Sherwood H. Smith, Jr. Carolina Power & Light Company
P.O. Box 1551
Raleigh, NC 27602
John E. Steuri 52 River Ridge Road
Little Rock, AR 72227-1518
C-3
<PAGE>
John J. Stollenwerk Allen-Edmonds Shoe Corporation
201 East Seven Hills Road
P.O. Box 998
Port Washington, WI 53074-0998
Barry L. Williams Williams Pacific Ventures,Inc.
100 First Street
Suite 2350
San Francisco, CA 94105
Kathryn D. Wriston c/o Shearman & Sterling
599 Lexington Avenue
Room 1126
New York, NY 10022
EXECUTIVE OFFICERS
<CAPTION>
Name Title
- ---- -----
Deborah A. Beck Senior Vice President
William H. Beckley Senior Vice President
Robert J. Berdan Vice President
John M. Bremer Executive Vice President, General Counsel and Secretary
Peter W. Bruce Executive Vice President
Robert E. Carlson Executive Vice President and Trustee
Steven T. Catlett Vice President
Mark G. Doll Senior Vice President
Thomas E. Dyer Vice President
James D. Ericson President and Chief Executive Officer, Trustee
Richard L. Hall Senior Vice President
William C. Koenig, FSA Senior Vice President and Chief Actuary
Gary E. Long Vice President and Controller
Susan A. Lueger Vice President
Meridee J. Maynard Vice President
Donald L. Mellish Senior Vice President
Bruce L. Miller Senior Vice President
Gregory C. Oberland Vice President
Barbara F. Piehler Vice President
James F. Reiskytl Vice President
Mason G. Ross Senior Vice President
John E. Schlifske Vice President
Leonard F. Stecklein Senior Vice President - Policyowner Services
Frederic H. Sweet Senior Vice President
Dennis Tamcsin Senior Vice President
Martha M. Valerio Vice President
W. Ward White Vice President
Walt J. Wojcik Senior Vice President
Edward J. Zore Executive Vice President
C-4
<PAGE>
OTHER OFFICERS
Name Title
- ---- -----
John M. Abbott Associate Director - Benefits Research
Maria J. Avila Assistant Controller
Michael J. Backus Associate Director of Information Systems
John E. Bailey Senior Actuary
Nicholas H. Bandow Assistant Director-Information Systems
Lynn F. Bardele Assistant Director - Field Training &
Development
Margaret A. Barkley Assistant Director
Walter L. Barlow Assistant Director of Education
Sandra L. Barton Assistant Director - Marketing
Bradford P. Bauer Assistant Director - Advanced Marketing
Beth M. Berger Assistant General Counsel & Assistant
Secretary
Frederick W. Bessette Assistant General Counsel & Asst. Secretary
Carrie L. Bleck Assistant Director
D. Rodney Bluhm Assistant General Counsel
Timothy J. Bohannon Vice President
Willette Bowie Employee Relations Director
Mark C. Boyle Assistant General Counsel & Asst. Secretary
Martin R. Braasch Director - Underwriting Standards & Services
Patricia R. Braeger Associate Director - Information Systems
James A. Brewer Investment Research Officer
William J. Buholzer Employee Relations Director
Michael S. Bula Assistant General Counsel
Jerry C. Burg Associate Director - Field Benefits
Gregory B. Bynan Director - Corporate Services
Kim M. Cafaro Assistant General Counsel & Asst. Secretary
Shanklin B. Cannon, M.D. Medical Director - Life Products/Research
Terese J. Capizzi Actuarial Products Officer
Kurt P. Carbon Assistant Regional Director
Michael G. Carter Assistant General Counsel & Asst. Secretary
William W. Carter Associate Actuary
John E. Caspari Assistant Director - Advertising & Corporate
Information
Walter J. Chossek Associate Controller
Thomas R. Christenson Director - Employer Product Services
Eric P. Christophersen Associate Director
Alan E. Close Associate Controller
Carolyn M. Colbert Assistant Director - New Business
Margaret Winter Combe Director - Corporate Development
Virginia A. Corwin Assistant Director - New Business
Barbara E. Courtney Associate Director - Mutual Funds
Larry A. Curran Actuarial Administrative Officer
Dennis J. Darland Assistant Director - Disability Income
Thomas H. Davis Associate Director - Information Systems
Nicholas De Fino Assistant Director
David J. Derfus Assistant Controller
C-5
<PAGE>
Carol A. Detlaf Director - Annuity Administration
Colleen Devlin Assistant Director - Communications
Joseph Dobering, III Director - Underwriting Standards & Services
Jennifer L. Docea Assistant Actuary
Lisa C. Dodd Associate Actuary
Richard P. Dodd Assistant Director - Agency
Daniel C. Dougherty Director - Personal Markets
Margaret T. Dougherty Assistant Director - Information Systems
John R. Dowell Director - Workforce Diversity
William O. Drehfal Assistant Director - Media Services
Jeffrey S. Dunn Vice President
John E. Dunn Assistant General Counsel & Secretary
Somayajulu Durvasula Associate Director - Field Financial
James R. Eben Assistant General Counsel and Assistant
Secretary
Thomas F. Fadden Assistant Director - Information Systems
Christina H. Fiasca Director - Policyowner Services
Zenia J. Fieldbinder Assistant Director - Annuity Accumulation
Richard F. Fisher Senior Actuary
Dennis J. Fitzpatrick Director - Advanced Marketing
Jon T. Flaschner Director - Policyowner Services
Carol J. Flemma Assistant Director - Marketing
Donald Forecki Investment Officer
Phillip B. Franczyk Vice President
Stephen H. Frankel Vice President
Anne A. Frigo Assistant Director - New Business
Richard R. Garthwait Vice President - Field Financial
David L. Georgenson Director - Agent Development
Paulette A. Getschman Assistant Director - Policyowner Services
James W. Gillespie Vice President
Walter M. Givler Director - Corporate Services
Robert P. Glazier Director - New Business
Robert K. Gleeson, M.D. Vice President - Medical Director
Mark J. Gmach Assistant Regional Director - Agency
David Lee Gosse Assistant Director - Disability Benefits
William F. Grady Director of Field Finances
John M. Grogan Director - Disability Income
Thomas C. Guay Associate Director - Field Financial
Thomas P. Hamilton Associate Director - Information Systems
Lori A. Hanes Director - Human Resources
William M. Harris Assistant Regional Director - South
Dennis R. Hart Assistant Director - Agent Development
James C. Hartwig Vice President - Advanced Marketing
Paul F. Heaton Assistant General Counsel and Assistant
Secretary
William L. Hegge Associate Director of Telecommunications
Wayne F. Heidenreich Associate Medical Director
Jacquelyn F. Heise Associate Director - Information Systems
Robert L. Hellrood Director - New Business
Herbert F. Hellwig Assistant Director - Personal Markets
Jane A. Herman Director - Term Upgrade
C-6
<PAGE>
Gary M. Hewitt Vice President & Treasurer
Donna R. Higgins Associate Director - Information Systems
David L. Hilbert Investment Officer
Susan G. Hill Assistant Director
John D. Hillmer Assistant Director - Information Systems
Hugh L. Hoffman Assistant Director - Information Systems
Richard S. Hoffmann Director - Audit
Bruce Holmes Associate Actuary
Scott C. Iodice Assistant Director - Agency
Joseph P. Jansky Assistant Director - Corporate Planning
Meg E. Jansky Assistant Director
Michael D. Jaquint Assistant Actuary
Dolores A. Juergens Associate Director of Restaurant Operations
Marilyn J. Katz Assistant Director - Medical Consultants
John C. Kelly Associate Controller
Michael P. Kelly Assistant Director - Agency
Kevin C. Kennedy Assistant Director - Architecture
James B. Kern Regional Director - Central Region
Carson D. Keyes Vice President
Donald C. Kiefer Vice President
Brian J. Klink Director - Research
Allen B. Kluz Director - Field Financial
Beatrice C. Kmiec Assistant Regional Director - East
William S. Koch Assistant Regional Director - Agency
John L. Kordsmeier Director - Human Resources
Robert J. Kowalsky Assistant Director - Information Systems
Carol L. Kracht Assistant General Counsel & Asst. Secretary
Jeffrey J. Krygiel Assistant Actuary
Todd L. Laszewski Associate Actuary
Patrick J. Lavin Director - Disability Benefits
James L. Lavold Associate Director - Meetings
Russell M. Lemken Associate Director - Consumer Research
Elizabeth J. Lentini Assistant General Counsel & Secretary
Sally Jo Lewis Assistant General Counsel & Asst. Secretary
Mark P. Lichtenberger Associate Director - LINK Technical Planning
Steven M. Lindstedt Assistant Director - Information Systems
Melissa C. Lloyd Assistant Director - Advanced Marketing
James Lodermeier Assistant Director - Tax Planning
George R. Loxton Assistant General Counsel & Assistant
Secretary
Mary M. Lucci Director - New Business
Christine M. Lucia Human Resources Officer
Mark J. Lucius Corporate Information Officer
Merrill C. Lundberg Assistant General Counsel & Asst. Secretary
Jon K. Magalska Associate Actuary
Jean M. Maier Director - Life Benefits
Joseph Maniscalco Associate Director - Information Systems
Jeffrey S. Marks Multi Life, Research & Reinsurance
Officer
Steve Martinie Assistant General Counsel & Asst. Secretary
Ted A. Matchulat Actuarial Products Officer
C-7
<PAGE>
Margaret McCabe Associate Director - Policy Benefits Systems
Richard A. McComb Director - Human Resources
William L. McCown Vice President & Investment Counsel
Paul E. McElwee Assistant General Counsel & Asst. Secretary
James L. McFarland Assistant General Counsel & Secretary
Mary C. McIntosh Associate Director - Field Financial
Daniel E. McGinley Assistant Director - Management Development
Mark J. McLennon Assistant Director - Advanced Marketing
Robert J. Meiers Ad Valorem Tax Manager
Larry S. Meihsner Assistant General Counsel & Assistant
Secretary
Robert G. Meilander Vice President
Charles L. Messler Director - Natural Gas Sales
Richard E. Meyers Assistant General Counsel
Jay W. Miller Vice President & Tax Counsel
Sara K. Miller Vice President
Jill Mocarski Assistant Medical Director
Tom M. Mohr Director of Policyowner Services - South
Richard C. Moore Associate Actuary
Scott J. Morris Assistant General Counsel and Assistant
Secretary
Sharon A. Morton Investment Officer
Adrian J. Mullin Assistant Director - Personal Markets
Randolph J. Musil Assistant Director - Advanced Marketing
David K. Nelson Assistant General Counsel
Ronald C. Nelson Director
Timothy Nelson Assistant Director - Marketing
James J. Nemec Vice President
Karen M. Niessing Director - Policyowner Services
Daniel J. O'Meara Director - Field Financial
John K. O'Meara Assistant Director - Advanced Marketing
Mary Joy O'Meara Assistant Director - Advanced Marketing
Kathleen A. Oman Associate Director - Information Systems
Thomas A. Pajewski Investment Research Officer
Arthur V. Panighetti Director - Tax Planning
Christen L. Partleton Associate Director - Policyowner Services
David W. Perez Assistant General Counsel
Judith L. Perkins Assistant General Counsel & Asst. Secretary
Wilson D. Perry Assistant General Counsel & Asst. Secretary
Gary N. Peterson Actuary
John C. Peterson Director of Policyowner Services - West
Harvey W. Pogoriler Assistant General Counsel
Randolph R. Powell, M.D. Medical Director
Mark A. Prange Associate Director - Information Systems
Brian R. Pray Assistant Regional Director - New Business
David R. Remstad Senior Actuary
David R. Retherford Assistant Director of New Business - Central
Stephen M. Rhode Assistant Director - Qualified Benefits
Richard R. Richter Vice President
Daniel A. Riedl Assistant General Counsel
Marcia Rimai Vice President - Litigation Counsel
C-8
<PAGE>
Michael J. Riordan Assistant General Counsel
Kathleen M. Rivera Vice President - Insurance Counsel
Faith B. Rodenkirk Assistant Director - Group Marketing
James S. Rolfsmeyer Assistant Director - Information Systems
Larry R. Roscoe Assistant Director - Compliance
Lora A. Rosenbaum Director - New Business
Robert K. Roska Associate Director - Information Systems
Sue M. Roska Director - Systems and Services
Harry L. Ruppenthal Director of Policyowner Services - East
Stephen G. Ruys Assistant Director - Information Systems
Santo Saliture Associate Director of Advertising & Corporate
Information
Rose Kordich Sasich Assistant Director of Systems
Mary Ann Schachtner Assistant Director - Field Training &
Development
Linda Ann Schaefer Assistant Director - Marketing
Thomas F. Scheer Assistant General Counsel & Asst. Secretary
Carlen A. Schenk Assistant Director
Jane A. Schiltz Vice President - Disability Income
Kathleen H. Schluter Assistant General Counsel & Secretary
Calvin R. Schmidt Associate Director - Information Systems
John O. Schnorr Assistant Director
Margaret R. Schoewe Vice President - Information Systems
Todd M. Schoon Assistant Regional Director - Agency
John F. Schroeder Associate Director of Field Office Real Estate
Melva T. Seabron Director - Corporate Services
Norman W. Seguin, II Investment Officer - Ad Valorem Taxes
Catherine L. Shaw Assistant General Counsel & Asst. Secretary
John E. Sheaffer, Jr. Assistant Director - Agent Development
Janet Z. Silverman Human Resources Officer
Stephen M. Silverman Assistant General Counsel
David W. Simbro Senior Actuary
Paul W. Skalecki Associate Actuary
Cynthia S. Slavik Assistant Director - Environmental Engineer
Ignatius L. Smetek Director - Common Stocks
Landon T. Smith Assistant Director - Replacements
Mark W. Smith Assistant General Counsel & Asst. Secretary
Warren L. Smith, Jr. Investment Officer - Architecture
Steven W. Speer Director - Public Markets
Robert J. Spellman, M.D. Vice President & Chief Medical Director
Steve P. Sperka Assistant Actuary
Mark A. Stalsberg Assistant Director - Agency
Barbara J. Stansberry Director - New Business
Bonnie L. Steindorf Director - Department Operations
Karen J. Stevens Assistant General Counsel & Asst. Secretary
Steven J. Stribling Associate Actuary
Stephen J. Strommen Associate Actuary
Theodore H. Strupp Assistant Director
Daniel J. Suprenant Director - Group Disability Marketing
Rachel L. Taknint Assistant General Counsel & Asst. Secretary
C-9
<PAGE>
Thomas Talajkowski Assistant Director - Tax
Compliance
William H. Taylor Assistant Director - Advanced Marketing
Paul B. Tews Associate Director - Investment Planning
J. Edward Tippetts Vice President
Susan M. Tompkins Director - Agency
Chris J. Torkelson Assistant Director
Jeannine M. Torkelson Assistant Director - Marketing
Thomas W. Towers Associate Director - Public Relations
Linda K. Tredupp Assistant Director - Information Systems
Chris G. Trost Associate Actuary
Mark J. Van Cleave Assistant Director of Marketing Research
Michael T. Van Grinsven Assistant Director - Management Development
Mary Beth Van Groll Vice President - Information Systems
Gloria J. Venski Assistant Director - Disability Benefits
Scott E. Wallace Assistant Director - Projects
Hal W. Walter Vice President
Robert J. Waltos Regional Director - Agency
P. Andrew Ware Vice President
Mary L. Wehrle-Schnell Associate Director - Information Systems
Daniel T. Weidner Assistant Director - Information Systems
Ronald J. Weir Associate Director - Information Systems
Karen J. Weiss Senior Actuary
Kenneth R. Wentland Assistant Director of Policyowner Services -
East
Sandra D. Wesley Assistant Director of Special Projects
Anna C. Westfall Financial Officer
Charles D. Whittier Assistant Director - Disability Income
Marketing
Catherine A. Wilbert Assistant General Counsel & Secretary
David L. Wild Director - Corporate Services
Jeffrey B. Williams Risk Manager
John K. Wilson Assistant Director - Personal Markets
Penelope A. Woodcock Associate Director - Benefit Systems
Richard W. Woody Assistant Director - Agency
Stanford A. Wynn Assistant Director - Advanced Marketing
Catherine M. Young Assistant General Counsel & Secretary
Michael L. Youngman Vice President - Legislative Representative
James A. Youngquist Associate Actuary
Richard S. Zakrzewski Associate Research Officer
John Zao Assistant Director - Information Systems
Diana M. Zawada Assistant Director
Rick T. Zehner Director - Corporate Planning
Patricia A. Zimmermann Investment Officer - Real Estate Systems
Ray Zimmermann Director - LINK Information Network
Philip R. Zwieg Director - Technical Support
Robert E. Zysk Director - Tax Compliance
</TABLE>
The business addresses for all of the executive officers and other officers is
720 East Wisconsin Avenue, Milwaukee, Wisconsin 53202.
C-10
<PAGE>
Item 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR OR
REGISTRANT
The subsidiaries of The Northwestern Mutual Life Insurance Company
("Northwestern Mutual Life"), as of December 31, 1997, are set forth on pages
C-12 and C-13. In addition to the subsidiaries set forth pages on C-12 and
C-13, the following separate investment accounts (which include the Registrant)
may be deemed to be either controlled by, or under common control with,
Northwestern Mutual Life:
1. NML Variable Annuity Account A
2. NML Variable Annuity Account B
3. NML Variable Annuity Account C
4. Northwestern Mutual Variable Life Account
Northwestern Mutual Series Fund, Inc. (the "Fund"), shown on page C-12 as a
subsidiary of Northwestern Mutual Life, is an investment company registered
under the Investment Company Act of 1940, offering its shares to the separate
accounts identified above; and the shares of the Fund held in connection with
certain of the accounts are voted by Northwestern Mutual Life in accordance with
voting instructions obtained from the persons who own, or are receiving payments
under, variable annuity contracts or variable life insurance policies issued in
connection with the accounts, or in the same proportions as the shares which are
so voted.
C-11
<PAGE>
NML CORPORATE STRUCTURE*
The Northwestern Mutual Life Insurance Company
General Account
NML Variable Annuity Account A
NML Variable Annuity Account B
NML Variable Annuity Account C
NML Group Annuity Separate Account
NML Variable Life Account
Eiger Corporation - 100%
Northwestern Mutual Life Foundation, Inc. - 100%
NML Corporation - 100%
Northwestern Long Term Care Insurance Company - 100%
Saskatoon Centre, Limited (inactive) - 100%
Northwestern Mutual Series Fund, Inc. (and its 9 portfolios) - 100%
Mason Street Funds, Inc. (and its 9 funds) - 92.56%
MGIC Investment Corporation - 18.3%. MGIC holds 100% of the voting stock of the
following: Mortgage Guaranty Reinsurance Corporation, MGIC, MGIC Reinsurance
Corporation, MGIC Mortgage Insurance Corporation, and various subsidiaries.
Baird Financial Corporation - 92%. Baird Financial Corporation holds 100% of
the voting stock of Robert W. Baird & Co., Incorporated and various
subsidiaries.
Northwestern Mutual Investment Services, Inc. - 100%
The Grand Avenue Corporation - 98.54%
Marina Pacific, Ltd. - 100%
NW Pipeline, Inc. - 100%
NML - Bellevue Corporation - 100%
Solar Resources, Inc. - 100%
NH Corporation (inactive) - 100%
Rocket Sports, Inc. (inactive) - 100%
Summit Sports, Inc. - 100%
Greenway Sports, Inc. - 100%
Painted Rock Development Corporation - 100%
NML Development Corporation - 100%
Stadium and Arena Management, Inc. - 100%
RE Corporation - 100%
Carlisle Ventures, Inc. - 100%
INV Corp. - 100%
Buffalo Promotions, Inc. - 100%
Park Forest Northeast, Inc. - 100%
NW Greenway #1 (inactive) - 100%
NW Greenway #9 - 100%
Travers International Sales, Inc. - 100%
Highbrook International Sales, Inc. - 100%
Elderwood International Sales, Inc. - 100%
Mallon International Sales, Inc. - 100%
Higgins, Inc. - 100%
Hobby, Inc. - 100%
Logan, Inc. - 100%
*Except for MGIC Investment Corporation and its subsidiaries, includes all
NML mutual funds and other corporations of which 50% or more voting power
controlled by NML
12-31-97
C-12
<PAGE>
NML CORPORATE STRUCTURE, CONTINUED*
Baraboo, Inc. - 100%
Mitchell, Inc. - 100%
Elizabeth International Sales, Inc. - 100%
Sean International Sales, Inc. - 100%
Alexandra International Sales, Inc. - 100%
Brian International Sales, Inc. - 100%
Jack International Sales, Inc. - 100%
Brendan International Sales, Inc. - 100%
Justin International FSC, Inc. - 100%
Cass Corporation - 100%
Mason & Marshall, Inc. - 100%
North Van Buren, Inc. - 100%
Northwestern Mutual Life International, Inc. - 100%
White Oaks, Inc. - 100%
Burgundy, Inc. - 100%
Hazel, Inc. - 100%
Maroon, Inc. - 100%
Coral, Inc. - 100%
Russet, Inc. - 100%
Amber, Inc. - 100%
Northwestern Mutual Las Vegas, Inc. - 100%
Larkin, Inc. - 100%
Olive, Inc. - 100%
Lydell, Inc. - 100%
Bayridge, Inc. - 100%
Bradford, Inc. - 100%
Klode, Inc. - 100%
Chateau, Inc. - 100%
Diversey, Inc. - 100%
Lake Bluff, Inc. - 100%
Nicolet, Inc. - 100%
Tupelo, Inc. - 100%
Real Estate Holdings, Inc. - 100%
Northwestern Investment Management Company - 100%
* Except for MGIC Investment Corporation and its subsidiaries, includes all
NML mutual funds and other corporations of which 50% or more voting power
controlled by NML.
12-31-97
C-13
<PAGE>
Item 27. NUMBER OF CONTRACT OWNERS
As of March 31, 1998, 18,602 variable annuity contracts issued in
connection with NML Variable Annuity Account A were outstanding. All such
contracts were issued as contracts for plans qualifying for special treatment
under various provisions of the Internal Revenue Code.
Item 28. INDEMNIFICATION
That portion of the By-laws of Northwestern Mutual Life relating to
indemnification of Trustees and officers is set forth in full in Article VII of
the By-laws of Northwestern Mutual Life, amended by resolution and previously
filed as an exhibit to the Registration Statement.
Item 29. PRINCIPAL UNDERWRITERS
(a) Northwestern Mutual Investment Services, Inc. ("NMIS"), the
broker-dealer subsidiary of Northwestern Mutual Life, may be considered the
principal underwriter currently distributing securities of the Registrant. NMIS
is also co-depositor, and may be considered the principal underwriter, for NML
Variable Annuity Account B and Northwestern Mutual Variable Life Account,
separate investment accounts of Northwestern Mutual Life registered under the
Investment Company Act of 1940 as unit investment trusts. In addition NMIS is
the investment adviser for Northwestern Mutual Series Fund, Inc.
(b) The directors and officers of NMIS are as follows:
Name Position
- ---- --------
Maria J. Avila Assistant Treasurer
Deborah A. Beck Vice President, Variable Life Administration
William H. Beckley Executive Vice President, Sales
Peter W. Bruce Director
Robert E. Carlson Director
Thomas A. Carroll Vice President - Common Stocks
Walter J. Chossek Treasurer
Barbara E. Courtney Assistant Treasurer
Jefferson V. De Angelis Vice President - Fixed Income Securities
Mark G. Doll Executive Vice President, Investment Advisory
Services
James R. Eben Assistant Secretary
James W. Gillespie Vice President, Variable Life Marketing
Richard L. Hall President and CEO
Beatrice C. Kmiec Assistant Vice President, Variable Life
Administration
Merrill C. Lundberg Secretary
Meridee J. Maynard Vice President, Variable Annuity Administration
and Marketing
Donald Parker Assistant Director, Equity Compliance, NMIS Office
of Supervisory Jurisdiction
Larry R. Roscoe Vice President and Chief Compliance Officer
Ignatius L. Smetek Vice President - Common Stocks
Leonard F. Stecklein Vice President, Sales Support
Steven P. Swanson Vice President
C-14
<PAGE>
Carla A. Thoke Director, Equity Compliance, NMIS Offfice of
Supervisory Jurisdiction
Julie Van Cleave Vice President - Common Stocks
Patricia L. Van Kampen Vice President - Common Stocks
William R. Walker Vice President
Robert J. Ziegler Assistant Treasurer
Edward J. Zore Director
The address for each director and officer of NMIS is 720 East Wisconsin Avenue,
Milwaukee, Wisconsin 53202.
(c) During 1997 life insurance agents of Northwestern Mutual Life who are
also registered representatives of NMIS received commissions, including general
agent overrides, in the aggregate amount of $2,676,916 for sales of variable
annuity contracts, and interests therein, issued in connection with the
Registrant. NMIS received compensation for its investment advisory services
from Northwestern Mutual Series Fund, Inc., the investment company in which
assets of the Registrant are invested.
Item 30. LOCATION OF ACCOUNTS AND RECORDS
All accounts, books or other documents required to be maintained in
connection with the Registrant's operations are maintained in the physical
possession of Northwestern Mutual Life at 720 East Wisconsin Avenue, Milwaukee,
Wisconsin 53202.
Item 31. MANAGEMENT SERVICES
There are no contracts, other than those referred to in Part A or Part B of
this Registration Statement, under which management-related services are
provided to the Registrant and pursuant to which total payments of $5,000 or
more were made during any of the last three fiscal years.
Item 32. UNDERTAKINGS
(a) The Registrant undertakes to file a post-effective amendment to this
Registration Statement as frequently as is necessary to ensure that the audited
financial statements in the Registration Statement are never more than 16 months
old for so long as payments under the variable annuity contracts may be
accepted.
(b) The Registrant undertakes to include either (1) as part of any
application to purchase a contract offered by the prospectus, a space that an
applicant can check to request a Statement of Additional Information, or (2) a
post card or similar written communication affixed to or included in the
prospectus that the applicant can remove to send for a Statement of Additional
Information.
(c) The Registrant undertakes to deliver any Statement of Additional
Information and any financial statements required to be made available under
this Form promptly upon written or oral request.
(d) Reference is made to the indemnification provisions disclosed in
response to Item 28. Insofar as indemnification for liabilities arising under
the Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore,
C-15
<PAGE>
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the registered
securities, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
C-16
<PAGE>
SIGNATURES
As required by the Securities Act of 1933, the Registrant, NML Variable
Annuity Account A, 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, in the City of Milwaukee, and State of
Wisconsin, on the 28th day of April, 1998.
NML VARIABLE ANNUITY ACCOUNT A
(Registrant)
By THE NORTHWESTERN MUTUAL LIFE
INSURANCE COMPANY
(Depositor)
Attest: JOHN M. BREMER By: JAMES D. ERICSON
---------------------------- -----------------------------------
John M. Bremer, Executive Vice James D. Ericson, President
President, General Counsel and Chief Executive Officer
and Secretary
As required by the Securities Act of 1933, this Amended Registration
Statement has been signed by the depositor on the 28th day of April, 1998.
THE NORTHWESTERN MUTUAL LIFE
INSURANCE COMPANY
(Depositor)
Attest: JOHN M. BREMER By: JAMES D. ERICSON
---------------------------- -----------------------------------
John M. Bremer, Executive Vice James D. Ericson, President
President, General Counsel and Chief Executive Officer
and Secretary
As required by the Securities Act of 1933, this Amended Registration
Statement has been signed by the following persons in the capacities with the
depositor and on the dates indicated:
Signature Title
- --------- -----
Trustee, President and
JAMES D. ERICSON Principal Executive and
- ------------------------------ Financial Officer
James D. Ericson
GARY E. LONG Vice President, Controller
- ------------------------------ and Principal Accounting
Gary E. Long Officer
HAROLD B. SMITH* Trustee Dated
- ------------------------------ April 28, 1998
Harold B. Smith
C-17
<PAGE>
J. THOMAS LEWIS* Trustee
- ------------------------------
J. Thomas Lewis
PATRICIA ALBJERG GRAHAM* Trustee
- ------------------------------
Patricia Albjerg Graham*
DONALD J. SCHUENKE* Trustee
- ------------------------------
Donald J. Schuenke
R. QUINTUS ANDERSON* Trustee
- ------------------------------
R. Quintus Anderson
STEPHEN F. KELLER* Trustee
- ------------------------------
Stephen F. Keller
PIERRE S. DU PONT* Trustee
- ------------------------------
Pierre S. du Pont
J. E. GALLEGOS* Trustee Dated
- ------------------------------ April 28, 1998
J. E. Gallegos
KATHRYN D. WRISTON* Trustee
- ------------------------------
Kathryn D. Wriston
BARRY L. WILLIAMS* Trustee
- ------------------------------
Barry L. Williams
GORDON T. BEAHAM III* Trustee
- ------------------------------
Gordon T. Beaham III
DANIEL F. MCKEITHAN, JR.* Trustee
- ------------------------------
Daniel F. McKeithan, Jr.
ROBERT E. CARLSON* Trustee
- ------------------------------
Robert E. Carlson
EDWARD E. BARR* Trustee
- ------------------------------
Edward E. Barr
C-18
<PAGE>
ROBERT C. BUCHANAN* Trustee
- ------------------------------
VRobert C. Buchanan
SHERWOOD H. SMITH, JR.* Trustee
- ------------------------------
Sherwood H. Smith, Jr.
H. MASON SIZEMORE, JR.* Trustee
- ------------------------------
H. Mason Sizemore, Jr.
JOHN J. STOLLENWERK* Trustee
- ------------------------------
John J. Stollenwerk
GEORGE A. DICKERMAN* Trustee
- ------------------------------
George A. Dickerman
GUY A. OSBORN* Trustee Dated
- ------------------------------ April 28, 1998
Guy A. Osborn
JOHN E. STEURI* Trustee
- ------------------------------
John E. Steuri
STEPHEN N. GRAFF* Trustee
- ------------------------------
Stephen N. Graff
BARBARA A. KING* Trustee
- ------------------------------
Barbara A. King
TIMOTHY D. PROCTOR* Trustee
- ------------------------------
Timothy D. Proctor
*By: JAMES D. ERICSON
------------------------------
James D. Ericson, Attorney in Fact,
pursuant to the Power of Attorney
attached hereto
C-19
<PAGE>
POWER OF ATTORNEY
The undersigned Trustees of THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
hereby constitute and appoint James D. Ericson and Robert E. Carlson, or either
of them, their true and lawful attorneys and agents to sign the names of the
undersigned Trustees to (1) the registration statement or statements to be filed
under the Securities Act of 1933 and to any instrument or document filed as part
thereof or in connection therewith or in any way related thereto, and any and
all amendments thereto in connection with variable contracts issued or sold by
The Northwestern Mutual Life Insurance Company or any separate account credited
therein and (2) the Form 10-K Annual Report or Reports of The Northwestern
Mutual Life Insurance Company and/or its separate accounts for its or their
fiscal year ended December 31, 1997 to be filed under the Securities Exchange
Act of 1934 and to any instrument or document filed as part thereof or in
connection therewith or in any way related thereto, and any and all amendments
thereto. "Variable contracts" as used herein means any contracts providing for
benefits or values which may vary according to the investment experience of any
separate account maintained by The Northwestern Mutual Life Insurance Company,
including variable annuity contracts and variable life insurance policies. Each
of the undersigned hereby ratifies and confirms all that said attorneys and
agents shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, each of the undersigned has subscribed these presents
this 23rd day of July, 1997.
R. QUINTUS ANDERSON Trustee
-------------------------------------------
R. Quintus Anderson
EDWARD E. BARR Trustee
-------------------------------------------
Edward E. Barr
GORDON T. BEAHAM III Trustee
-------------------------------------------
Gordon T. Beaham III
ROBERT C. BUCHANAN Trustee
-------------------------------------------
Robert C. Buchanan
ROBERT E. CARLSON Trustee
-------------------------------------------
Robert E. Carlson
GEORGE A. DICKERMAN Trustee
-------------------------------------------
George A. Dickerman
C-20
<PAGE>
PIERRE S. DU PONT Trustee
-------------------------------------------
Pierre S. du Pont
JAMES D. ERICSON Trustee
-------------------------------------------
James D. Ericson
J. E. GALLEGOS Trustee
-------------------------------------------
J. E. Gallegos
STEPHEN N. GRAFF Trustee
-------------------------------------------
Stephen N. Graff
PATRICIA ALBJERG GRAHAM Trustee
-------------------------------------------
Patricia Albjerg Graham
STEPHEN F. KELLER Trustee
-------------------------------------------
Stephen F. Keller
BARBARA A. KING Trustee
-------------------------------------------
Barbara A. King
J. THOMAS LEWIS Trustee
-------------------------------------------
J. Thomas Lewis
DANIEL F. MCKEITHAN, JR. Trustee
-------------------------------------------
Daniel F. McKeithan, Jr.
GUY A. OSBORN Trustee
-------------------------------------------
Guy A. Osborn
C-21
<PAGE>
TIMOTHY D. PROCTOR Trustee
-------------------------------------------
Timothy D. Proctor
DONALD J. SCHUENKE Trustee
-------------------------------------------
Donald J. Schuenke
H. MASON SIZEMORE, JR. Trustee
-------------------------------------------
H. Mason Sizemore, Jr.
HAROLD B. SMITH Trustee
-------------------------------------------
Harold B, Smith
SHERWOOD H. SMITH, JR. Trustee
-------------------------------------------
Sherwood H. Smith, Jr.
JOHN E. STEURI Trustee
-------------------------------------------
John E. Steuri
JOHN J. STOLLENWERK Trustee
-------------------------------------------
John J. Stollenwerk
BARRY L. WILLIAMS Trustee
-------------------------------------------
Barry L. Williams
KATHRYN D. WRISTON Trustee
-------------------------------------------
Kathryn D. Wriston
C-22
<PAGE>
EXHIBIT INDEX
EXHIBITS FILED WITH FORM N-4
POST-EFFECTIVE AMENDMENT NO. 1 TO
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
FOR
NML VARIABLE ANNUITY ACCOUNT A
Exhibit Number Exhibit Name
- -------------- ------------
Exhibit B(11) Consent of Price Waterhouse LLP.
The following exhibit was filed in electronic format with the Registration
Statement on Form S-6 for Northwestern Mutual Variable Life Account, File No.
333-36865, CIK 0000742277, dated October 1, 1997, and is incorporated herein by
reference:
Exhibit A(6)(c) Amendments to By-Laws of The Northwestern
Mutual Life Insurance Company dated July 23,
1997.
The following exhibit was filed in electronic format with the Registration
Statement on Form S-6 for Northwestern Mutual Variable Life Account, File No.
333-36865, CIK 0000742277, dated February 27, 1998, and is incorporated herein
by reference.
Exhibit A(6)(c)(1) Amendment to By-laws of The Northwestern
Mutual Life Insurance Company dated January
28, 1998.
<PAGE>
Exhibit B(11)
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Statement of Additional Information
constituting part of this Post-Effective Amendment No. 1 to the registration
statement on Form N-4 (the "Registration Statement") of our report dated January
26, 1998, relating to the financial statements of The Northwestern Mutual Life
Insurance Company, and of our report dated January 27, 1998, relating to the
financial statements of NML Variable Annuity Account A, which appear in such
Statement of Additional Information, and to the incorporation by reference of
such reports into the Prospectus which constitutes part of this Registration
Statement. We also consent to the reference to us under the heading "Experts"
in such Statement of Additional Information.
PRICE WATERHOUSE LLP
Milwaukee, Wisconsin
April 28, 1998
