NML VARIABLE ANNUITY ACCT C OF NORTHWESTERN MUT LIFE INS CO, 485BPOS, 1997-04-29

NML VARIABLE ANNUITY ACCT C OF NORTHWESTERN MUT LIFE INS CO
485BPOS, 1997-04-29

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<PAGE>

Registration No. 2-89905-01

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. 17 / X /
---

and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940 / /

Amendment No. / /
----

(Check appropriate box or boxes.)

NML VARIABLE ANNUITY ACCOUNT C
- --------------------------------------------------------------------------------
(Exact Name of Registrant)

THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
(Name of Depositor)

720 East Wisconsin Avenue, Milwaukee, Wisconsin 53202
- --------------------------------------------------------------------------------
(Address of Depositor's Principal Executive Offices) (Zip Code)

Depositor's Telephone Number, including Area Code 414-271-1444
------------------------------

JOHN M. BREMER, Senior Vice President, General Counsel and Secretary
720 East Wisconsin Avenue, Milwaukee, Wisconsin 53202
- --------------------------------------------------------------------------------
(Name and Address of Agent for Service)

It is proposed that this filing will become effective (check appropriate space)

immediately upon filing pursuant to paragraph (b) of Rule 485
---
X on April 30, 1997 pursuant to paragraph (b) of Rule 485
---
60 days after filing pursuant to paragraph (a)(1) of Rule 485
---
on (DATE) pursuant to paragraph (a)(1) of Rule 485
---
this post-effective amendment designates a new effective date for
--- a previously filed post-effective amendment.

<PAGE>

NML VARIABLE ANNUITY ACCOUNT C
- --------------------------------------------------------------------------------
CROSS-REFERENCE SHEET

N-4, Part A Heading in
Item Prospectus
- ----------- ----------

1 . . . . . . . . . . . . . . . . . . . . . . . . Cover Page
2 . . . . . . . . . . . . . . . . . . . . . . . . Index of Special Terms
3 . . . . . . . . . . . . . . . . . . . . . . . . Right to Examine Deferred
Contract, Penalty Tax on
Premature Payments,
Expense Table
4 . . . . . . . . . . . . . . . . . . . . . . . . Accumulation Unit Values,
Financial Statements
5 . . . . . . . . . . . . . . . . . . . . . . . . The Company, NML Variable
Annuity Account C, 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,
Fixed Annuity Payment
Plans, Description of
Payment Plans, Amount of
Annuity Payments, Annuity
Unit Value, Assumed
Investment Rate,
Transfers Between
Divisions and Payment
Plans
9 . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
10 . . . . . . . . . . . . . . . . . . . . . . . . Amount and Frequency,
Application of Purchase
Payments, Net Investment
Factor, Distribution of
the Contracts
11 . . . . . . . . . . . . . . . . . . . . . . . . Surrender or Withdrawal
Value, Retirement
Benefits, Deferment of
Benefit Payments, Right
to Examine Deferred
Contract
12 . . . . . . . . . . . . . . . . . . . . . . . . Federal Income Taxes
13 . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
14 . . . . . . . . . . . . . . . . . . . . . . . . Table of Contents for
Statement of Additional
Information

- --------------------------------------------------------------------------------

N-4, Part B Heading in Statement
Item of Additional Information
- ----------- -------------------------

15 . . . . . . . . . . . . . . . . . . . . . . . . Cover Page
16 . . . . . . . . . . . . . . . . . . . . . . . . Table of Contents
17 . . . . . . . . . . . . . . . . . . . . . . . . General Information
18 . . . . . . . . . . . . . . . . . . . . . . . . Experts
19 . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
20 . . . . . . . . . . . . . . . . . . . . . . . . Distribution of the
Contracts
21 . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
22 . . . . . . . . . . . . . . . . . . . . . . . . Determination of Annuity
Payments
23 . . . . . . . . . . . . . . . . . . . . . . . . Financial Statements
<PAGE>

April 30, 1997

NORTHWESTERN
MUTUAL LIFE
The Quiet Company

NML VARIABLE ANNUITY ACCOUNT C
Group Combination Annuity Contracts for
Retirement Plans of Self-Employed Persons
and their Employees

[Photo]

Northwestern Mutual Life
Series Fund, Inc.

The Northwestern Mutual
Life Insurance Company
720 East Wisconsin Avenue
Milwaukee, WI 53202
(414)271-1444

<PAGE>
CONTENTS OF THIS PROSPECTUS
<TABLE>
<CAPTION>
Page
------
<S> <C>
PROSPECTUS............................................ 1

Group Combination Annuity Contracts
NML Variable Annuity Account C..................... 1

INDEX OF SPECIAL TERMS................................ 2

EXPENSE TABLE......................................... 2

ACCUMULATION UNIT VALUES.............................. 4

THE COMPANY........................................... 7

NML VARIABLE ANNUITY ACCOUNT C........................ 7

THE FUND.............................................. 7

THE CONTRACTS......................................... 8

Unallocated Group Annuity 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

Surrender or Withdrawal Value..................... 9

Retirement Benefits............................... 9

Variable Payment Plans.............................. 9

Description of Payment Plans...................... 10

Amount of Annuity Payments........................ 10

Assumed Investment Rate........................... 10

Additional Information.............................. 10

Transfers Between Divisions and Payment Plans..... 10

Owners of the Contracts........................... 11

Deferment of Benefit Payments..................... 11

Dividends......................................... 11

Substitution and Change........................... 11

Amendments and Termination........................ 11

Financial Statements.............................. 11

FEDERAL INCOME TAXES.................................. 12

Taxation of Contract Benefits....................... 12

Taxation of Northwestern Mutual Life................ 12

DEDUCTIONS............................................ 13

DISTRIBUTIONS OF THE CONTRACTS........................ 13

CONTRACTS ISSUED PRIOR TO
JANUARY 1, 1992..................................... 14
</TABLE>

TABLE OF CONTENTS FOR STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
Page
------
<S> <C>
GENERAL INFORMATION................................... B-2

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

Page
------
<S> <C>

FINANCIAL STATEMENTS OF THE ACCOUNT
(for year ended December 31, 1996)................... B-5

REPORT OF INDEPENDENT ACCOUNTANTS
(for the year ended December 31, 1996)............... B-11

FINANCIAL STATEMENTS OF NORTHWESTERN MUTUAL LIFE (for
the three years ended December 31, 1996)............. B-12

REPORT OF INDEPENDENT ACCOUNTANTS
(for the three years ended December 31, 1996)........ B-25

</TABLE>
<PAGE>
PROSPECTUS

GROUP COMBINATION ANNUITY CONTRACTS
NML VARIABLE ANNUITY ACCOUNT C

This prospectus describes group combination annuity contracts (the "Contracts")
offered by The Northwestern Mutual Life Insurance Company ("Northwestern Mutual
Life") for use in connection with plans and trusts 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 self-employed individuals and to employees and
their beneficiaries.

The Contracts provide for the accumulation of funds and the payment of
retirement benefits to participants or their beneficiaries ("Annuitants"). Funds
may be accumulated on a variable or fixed or combination basis. Retirement
benefits may be paid in a lump sum or under a variable or fixed annuity payment
plan. Annuity benefits are described in individual certificates issued to
Annuitants.

Variable accumulations and retirement benefits are funded through NML Variable
Annuity Account C (the "Account"), a separate account of 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 Account has nine Divisions. Contract Owners may direct how net
considerations are allocated among the Divisions.

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 Index 500 Stock, Select Bond, Money
Market, Balanced, Growth and Income Stock, Growth Stock, Aggressive Growth
Stock, High Yield Bond and International Equity Portfolios. Variable
accumulations and variable annuity payments will vary continuously to reflect
the investment performance of the Division or Divisions selected.

Two versions of the Contracts are offered: front-load Contracts and
simplified-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, 1997

--
1
<PAGE>
INDEX OF SPECIAL TERMS

THE FOLLOWING SPECIAL TERMS USED IN THIS PROSPECTUS ARE DISCUSSED AT THE PAGES
INDICATED.
<TABLE>
<CAPTION>
TERM PAGE
- ------------------------------------------ ------
<S> <C>
Accumulation Unit......................... 8
Annuity (or Annuity Payments)............. 10
Net Investment Factor..................... 8
Surrender or Withdrawal Value............. 9

<CAPTION>
TERM PAGE
- ------------------------------------------ ------
<S> <C>
Annuitant................................. 11
Owner..................................... 11
Payment Plans............................. 9
</TABLE>

PENALTY TAX ON PREMATURE PAYMENTS Premature payment of benefits under an
annuity contract may cause a penalty tax to be incurred. (See "Taxation of
Contract Benefits", p. 12.)

- --------------------------------------------------------------------------------

EXPENSE TABLE
<TABLE>
<S> <C>
FRONT-LOAD CONTRACT
TRANSACTION EXPENSES FOR CONTRACTOWNERS
Maximum Sales Load (as a percentage of
purchase payments)........................ 4.5%
Installation Fee.......................... None
ANNUAL EXPENSES OF THE ACCOUNT
(AS A PERCENTAGE OF ASSETS)
Mortality Rate and Expense Guarantee
Charge.................................... .65%
</TABLE>

<TABLE>
<S> <C>
SIMPLIFIED-LOAD CONTRACT
TRANSACTION EXPENSES FOR CONTRACTOWNERS
Maximum Sales Load (as a percentage of
purchase payments)........................ None
Installation Fee.......................... $ 750
ANNUAL EXPENSES OF THE ACCOUNT
(AS A PERCENTAGE OF ASSETS)
Mortality Rate and Expense Guarantee
Charge.................................... 1.25%
</TABLE>

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>
Index 500 Stock....................... .20% .00% .01% .21%
Select Bond........................... .30% .00% .00% .30%
Money Market.......................... .30% .00% .00% .30%
Balanced.............................. .30% .00% .00% .30%
Growth and Income Stock............... .61% .00% .01% .62%
Growth Stock.......................... .52% .00% .05% .57%
Aggressive Growth Stock............... .53% .00% .01% .54%
High Yield Bond....................... .57% .00% .03% .60%
International Equity.................. .67% .11% .03% .81%

</TABLE>

See the Example on page 3.
--
2
<PAGE>
EXAMPLE

The plan would pay the following expenses on each $1,000 investment, with a
Front-Load Contract, assuming 5% annual return:

1 YEAR 3 YEARS 5 YEARS 10 YEARS
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Index 500 Stock....................................... $ 53 $ 71 $ 91 $ 146
Select Bond........................................... $ 54 $ 74 $ 95 $ 156
Money Market.......................................... $ 54 $ 74 $ 95 $ 156
Balanced.............................................. $ 54 $ 74 $ 95 $ 156
Growth and Income Stock............................... $ 57 $ 83 $ 112 $ 191
Growth Stock.......................................... $ 57 $ 82 $ 109 $ 186
Aggressive Growth Stock............................... $ 57 $ 81 $ 107 $ 183
High Yield Bond....................................... $ 57 $ 83 $ 111 $ 189
International Equity.................................. $ 59 $ 89 $ 121 $ 212

</TABLE>

The plan would pay the following expenses on each $1,000 investment, with a
Simplified-Load Contract, assuming 5% annual return:

1 YEAR 3 YEARS 5 YEARS 10 YEARS
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Index 500 Stock....................................... $ 44 $ 75 $ 107 $ 199
Select Bond........................................... $ 45 $ 77 $ 112 $ 209
Money Market.......................................... $ 45 $ 77 $ 112 $ 209
Balanced.............................................. $ 45 $ 77 $ 112 $ 209
Growth and Income Stock............................... $ 48 $ 87 $ 128 $ 242
Growth Stock.......................................... $ 48 $ 86 $ 126 $ 237
Aggressive Growth Stock............................... $ 48 $ 85 $ 124 $ 234
High Yield Bond....................................... $ 48 $ 86 $ 127 $ 240
International Equity.................................. $ 50 $ 93 $ 138 $ 262

</TABLE>

NOTE: THE PURCHASE PAYMENTS FOR EITHER A FRONT-LOAD CONTRACT OR A
SIMPLIFIED-LOAD CONTRACT MUST REACH A TOTAL MINIMUM AMOUNT OF $25,000 DURING THE
FIRST CONTRACT YEAR. THE NUMBERS ABOVE MUST BE MULTIPLIED BY 25 TO FIND THE
EXPENSES FOR A FRONT-LOAD CONTRACT OR A SIMPLIFIED-LOAD CONTRACT OF THIS MINIMUM
SIZE.

The purpose of the table above is to assist a Contract Owner in understanding
the expenses paid by the Account and the Portfolios borne by investors in the
Contracts. The sales load for a front-load Contract depends on the amount of
cumulative purchase payments. For both Contracts an annual administration fee of
$150 applies if the Contract value is less than $25,000 on the Contract
anniversary. See "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 1996 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.

--
3
<PAGE>
ACCUMULATION UNIT VALUES

CONTRACTS ISSUED AFTER DECEMBER 31, 1991

FOR THE YEARS ENDED DECEMBER 31
-----------------------------------------------------
1996 1995 1994 1993 1992
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Index 500 Stock Division
Accumulation Unit Value:
Front Load Version
Beginning of Period......... $1.588 $1.165 $1.159 $1.062 $.997
End of Period............... $1.937 $1.588 $1.165 $1.159 $1.062
Simplified Load Version
Beginning of Period......... $2.032 $1.499 $1.500 $1.384 $1.306
End of Period............... $2.463 $2.032 $1.499 $1.500 $1.384

Number of Accumulation Units
Outstanding, End of Period
Front Load.................. 3,880,961 2,399,586 1,918,074 1,919,768 921,624
Simplified Load............. 8,015,553 5,080,179 3,939,802 2,767,397 599,961

Select Bond Division
Accumulation Unit Value:
Front Load Version
Beginning of Period......... $1.335 $1.128 $1.169 $1.066 $1.003
End of Period............... $1.370 $1.335 $1.128 $1.169 $1.066
Simplified Load Version
Beginning of Period......... $6.137 $5.217 $5.437 $4.990 $4.722
End of Period............... $6.261 $6.137 $5.217 $5.437 $4.990

Number of Accumulation Units
Outstanding, End of Period
Front Load.................. 2,676,832 1,800,898 1,668,091 2,389,345 736,697
Simplified Load............. 966,414 677,396 503,763 328,979 133,930

Money Market Division
Accumulation Unit Value:
Front Load Version
Beginning of Period......... $1.140 $1.084 $1.048 $1.026 $.999
End of Period............... $1.192 $1.140 $1.084 $1.048 $1.026
Simplified Load Version
Beginning of Period......... $2.161 $2.067 $2.012 $1.980 $1.940
End of Period............... $2.246 $2.161 $2.067 $2.012 $1.980

Number of Accumulation Units
Outstanding, End of Period
Front Load.................. 2,829,669 2,956,017 3,313,061 218,747 127,838
Simplified Load............. 3,818,067 1,890,645 1,453,033 810,405 485,704

Balanced Division
Accumulation Unit Value:
Front Load Version
Beginning of Period......... $1.419 $1.130 $1.138 $1.045 $.999
End of Period............... $1.600 $1.419 $1.130 $1.138 $1.045
Simplified Load Version
Beginning of Period......... $4.311 $3.453 $3.497 $3.232 $3.107
End of Period............... $4.830 $4.311 $3.453 $3.497 $3.232

Number of Accumulation Units
Outstanding, End of Period
Front Load.................. 5,934,240 5,275,308 3,879,218 4,987,943 3,980,687
Simplified Load............. 5,971,232 4,902,410 4,108,593 3,002,098 1,445,698

Growth and Income Stock
Division
Accumulation Unit Value:
Front Load Version
Beginning of Period*........ $1.300 $0.998 $1.000 -- --
End of Period............... $1.550 $1.300 $0.998 -- --
Simplified Load Version
Beginning of Period*........ $1.287 $0.994 $1.000 -- --
End of Period............... $1.525 $1.287 $0.994 -- --

</TABLE>

* The initial investment in the Growth and Income Stock Division was made on
May 3, 1994.

--
4
<PAGE>
<TABLE>
<CAPTION>

FOR THE YEARS ENDED DECEMBER 31
-----------------------------------------------------
1996 1995 1994 1993 1992
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Number of Accumulation Units
Outstanding, End of Period
Front Load....................... 1,357,354 861,211 418,974 -- --
Simplified Load.................. 2,769,823 1,733,022 745,425 -- --

Growth Stock Division
Accumulation Unit Value:
Front Load Version
Beginning of Period**............ $1.313 $1.010 $1.000 -- --
End of Period.................... $1.577 $1.313 $1.010 -- --
Simplified Load Version
Beginning of Period**............ $1.300 $1.006 $1.000 -- --
End of Period.................... $1.552 $1.300 $1.006 -- --

Number of Accumulation Units
Outstanding, End of Period
Front Load....................... 587,482 361,207 149,268 -- --
Simplified Load.................. 1,742,522 586,644 177,918 -- --

Aggressive Growth Stock Division
Accumulation Unit Value:
Front Load Version
Beginning of Period.............. $1.777 $1.284 $1.226 $1.036 $.984
End of Period.................... $2.078 $1.777 $1.284 $1.226 $1.036
Simplified Load Version
Beginning of Period.............. $2.753 $2.001 $1.922 $1.634 $1.562
End of Period.................... $3.200 $2.753 $2.001 $1.922 $1.634

Number of Accumulation Units
Outstanding, End of Period
Front Load....................... 3,197,341 2,242,402 1,206,187 1,370,746 821,911
Simplified Load.................. 7,872,553 5,316,689 3,503,170 1,538,447 411,718

High Yield Bond Division
Accumulation Unit Value:
Front Load Version
Beginning of Period**............ $1.190 $1.026 $1.000 -- --
End of Period.................... $1.416 $1.190 $1.026 -- --
Simplified Load Version
Beginning of Period**............ $1.178 $1.022 $1.000 -- --
End of Period.................... $1.394 $1.178 $1.022 -- --

Number of Accumulation Units
Outstanding, End of Period
Front Load....................... 275,323 90,184 47,321 -- --
Simplified Load.................. 626,090 313,810 149,862 -- --

International Equity Division
Accumulation Unit Value:
Front Load Version
Beginning of Period***........... $1.402 $1.232 $1.241 $1.000 --
End of Period.................... $1.686 $1.402 $1.232 $1.241 --
Simplified Load Version
Beginning of Period***........... $1.380 $1.220 $1.236 $1.000 --
End of Period.................... $1.649 $1.380 $1.220 $1.236 --

Number of Accumulation Units
Outstanding, End of Period
Front Load....................... 2,709,249 2,009,228 1,453,091 743,216 --
Simplified Load.................. 5,703,032 3,972,573 2,764,466 591,810 --

</TABLE>

** The initial investments in the Growth Stock Division and High Yield Bond
Division were made on May 3, 1994.

*** The initial investment in the International Equity Division was made on
April 30, 1993.
--
5
<PAGE>
ACCUMULATION UNIT VALUES

CONTRACTS ISSUED BETWEEN APRIL 30, 1984 AND DECEMBER 31, 1991
<TABLE>
<CAPTION>

FOR THE YEARS ENDED DECEMBER 31
-------------------------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990 1989 1988
--------- --------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Index 500 Stock Division
Accumulation Unit Value:
Beginning of Period*......... $22.105 $16.105 $15.916 $14.500 $13.519 $10.000 -- -- --
End of Period................ $27.134 $22.105 $16.105 $15.916 $14.500 $13.519 -- -- --

Number of Accumulation Units
Outstanding, End of Period.... 2,386,284 2,232,983 2,284,637 2,454,444 246,820 36,842 -- -- --

Select Bond Division
Accumulation Unit Value:
Beginning of Period.......... $74.223 $62.322 $64.139 $58.132 $54.335 $46.489 $42.915 $37.688 $34.753
End of Period................ $76.682 $74.223 $62.322 $64.139 $58.132 $54.335 $46.489 $42.915 $37.688

Number of Accumulation Units
Outstanding, End of Period.... 97,868 124,163 150,232 157,630 170,104 162,656 139,272 131,612 136,739

Money Market Division
Accumulation Unit Value:
Beginning of Period.......... $24.706 $23.346 $22.436 $21.814 $21.110 $19.973 $18.488 $16.965 $15.829
End of Period................ $26.011 $24.706 $23.346 $22.436 $21.814 $21.110 $19.973 $18.488 $16.965

Number of Accumulation Units
Outstanding, End of Period.... 57,013 62,209 200,510 341,361 355,217 476,920 427,960 289,871 362,742

Balanced Division
Accumulation Unit Value:
Beginning of Period.......... $51.856 $41.029 $41.036 $37.449 $35.557 $28.690 $28.392 $24.560 $22.534
End of Period................ $58.832 $51.856 $41.029 $41.036 $37.449 $35.557 $28.690 $28.392 $24.560

Number of Accumulation Units
Outstanding, End of Period.... 1,489,658 1,889,324 2,327,834 2,660,165 2,787,942 2,872,612 2,853,458 2,721,226 2,690,086

Growth and Income Stock
Division
Accumulation Unit Value:
Beginning of Period***....... $13.143 $10.024 -- -- -- -- -- -- --
End of Period $15.767 $13.143 -- -- -- -- -- -- --

Number of Accumulation Units
Outstanding, End of Period.... 424,144 117,004 -- -- -- -- -- -- --

Growth Stock Division
Accumulation Unit Value:
Beginning of Period***....... $13.272 $10.145 -- -- -- -- -- -- --
End of Period................ $16.047 $13.272 -- -- -- -- -- -- --

Number of Accumulation Units
Outstanding, End of Period.... 378,236 63,881 -- -- -- -- -- -- --

Aggressive Growth Stock
Division
Accumulation Unit Value:
Beginning of Period**........ $27.649 $19.849 $18.832 $15.810 $14.923 $10.000 -- -- --
End of Period................ $32.543 $27.649 $19.849 $18.832 $15.810 $14.923 -- -- --

Number of Accumulation Units
Outstanding, End of Period.... 1,944,411 1,397,885 1,239,328 910,764 594,531 40,650 -- -- --

High Yield Bond Division
Accumulation Unit Value:
Beginning of Period***....... $12.030 $10.302 -- -- -- -- -- -- --
End of Period................ $14.409 $12.030 -- -- -- -- -- -- --

Number of Accumulation Units
Outstanding, End of Period.... 119,423 21,583 -- -- -- -- -- -- --

International Equity Division
Accumulation Unit Value:
Beginning of Period****...... $1.427 $1.245 $1.246 $1.000 -- -- -- -- --
End of Period................ $1.726 $1.427 $1.245 $1.246 -- -- -- -- --

Number of Accumulation Units
Outstanding, End of Period.... 20,439,570 14,747,734 15,153,296 1,128,950 -- -- -- -- --

1987
---------
<S> <C>
Index 500 Stock 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.......... $35.076
End of Period................ $34.753
Number of Accumulation Units
Outstanding, End of Period.... 122,517
Money Market Division
Accumulation Unit Value:
Beginning of Period.......... $14.891
End of Period................ $15.829
Number of Accumulation Units
Outstanding, End of Period.... 238,771
Balanced Division
Accumulation Unit Value:
Beginning of Period.......... $21.375
End of Period................ $22.534
Number of Accumulation Units
Outstanding, End of Period.... 2,491,382
Growth and Income Stock
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.... --
Aggressive Growth Stock
Division
Accumulation Unit Value:
Beginning of Period**........
End of Period................ --
Number of Accumulation Units
Outstanding, End of Period.... --
High Yield Bond Division
Accumulation Unit Value:
Beginning of Period***....... --
End of Period................ --
Number of Accumulation Units
Outstanding, End of Period.... --
International Equity Division
Accumulation Unit Value:
Beginning of Period****...... --
End of Period................ --
Number of Accumulation Units
Outstanding, End of Period.... --

</TABLE>

* The initial investment in the Index 500 Stock Division was made on January
16, 1991.

** The initial investment in the Aggressive Growth Stock Division was made on
January 25, 1991.

*** The initial investments in the Growth and Income Stock Division, Growth
Stock Division and High Yield Bond Division were made on May 3, 1994.

**** The initial investment in the International Equity Division was made on
April 30, 1993.

--
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 sixth largest life
insurance company, based on total assets in excess of $62 billion on December
31, 1996, and is licensed to conduct a conventional life insurance business in
the District of Columbia and in all states of the United States. Northwestern
Mutual Life sells life and disability insurance policies and annuity contracts
through its own field force of approximately 6,000 full time producing agents.
The Home Office of Northwestern Mutual Life is located at 720 East Wisconsin
Avenue, Milwaukee, Wisconsin 53202.

- --------------------------------------------------------------------------------

NML VARIABLE ANNUITY ACCOUNT C

The Account was established on July 22, 1970 by the Board of Trustees of
Northwestern Mutual Life in accordance with the provisions of the Wisconsin
insurance law. The Account is used for the Contracts and for outstanding
Contracts to Provide Annuity Benefits. Northwestern Mutual Life discontinued
sales of Contracts to Provide Annuity Benefits on May 1, 1984.

The Account has nine Divisions. Net considerations paid to Northwestern Mutual
Life are allocated to one or more of the Divisions as directed by the Owner of
the Contract. Assets allocated to the Index 500 Stock, Select Bond, Money
Market, Balanced, Growth and Income Stock, Growth Stock, Aggressive Growth
Stock, High Yield Bond and International Equity 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 Index 500 Stock
Portfolio, the Select Bond Portfolio, the Money Market Portfolio, the Balanced
Portfolio, the Growth and Income Stock Portfolio, the Growth Stock Portfolio,
the Aggressive Growth Stock Portfolio, the High Yield Bond Portfolio and the
International Equity Portfolio. 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

UNALLOCATED GROUP ANNUITY CONTRACTS

The Contracts are unallocated group annuity contracts. The Contracts do not
provide for the establishment of individual accounts for Plan or Trust
participants until participants become entitled to receive benefits from the
Plan or Trust. When a participant retires or otherwise becomes entitled to
receive benefits, the Contract Owner may direct Northwestern Mutual Life to pay
annuity benefits to the participant. (See "Retirement Benefits", p. 9.)
Northwestern Mutual Life will then issue the Annuitant a Certificate describing
the benefits which have been selected. (See "Variable Payment Plans", p. 9.)
Benefits available to Participants are determined entirely by the provisions of
the Plan or Trust.

PURCHASE PAYMENTS UNDER THE CONTRACTS

AMOUNT AND FREQUENCY The amount and frequency of purchase payments are largely
determined by the Plan or Trust and the Owner of the Contract. Larger or
additional purchase payments may be paid. However, Northwestern Mutual Life will
not accept (a) any purchase payment unless it is a contribution for funding or
for the payment of fees or loads under a pension or profit-sharing plan or trust
which meets the requirements of Section 401 of the Code or the requirements for
deduction of the employer's contribution under Section 404(a)(2) of the Code; or
(b) any purchase payment of less than $100.

Purchase payments may be paid monthly, quarterly, semiannually, annually or on
any other frequency acceptable to Northwestern Mutual Life. If a purchase
payment is not paid when due, or if Northwestern Mutual Life declines to accept
a purchase payment as provided above, the Contract will continue in force unless
all Accumulation Units are redeemed for their value. Payment of purchase
payments may be resumed at any time the Contract is in force.

APPLICATION OF PURCHASE PAYMENTS Net purchase payments, after deduction of any
sales load or installation fee, are credited by Northwestern Mutual Life to the
Contract and allocated as directed by the Owner. To the extent that a net
purchase payment is to be accumulated on a variable basis it is placed in the
Account and allocated to one or more Divisions. Assets allocated to each
Division will thereupon be invested in shares of the Portfolio which corresponds
to that Division. If no allocation instructions are received the net purchase
payment will be placed in the Money Market Division.

Payments placed in the Account 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 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.

The number of an Owner's Accumulation Units will be increased by additional
purchase payments and decreased by withdrawals. 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. This in turn is determined by the investment
experience of the corresponding Portfolio of the Fund. The value of an
Accumulation Unit on any date is determined by multiplying the value on the
immediately preceding valuation date by the net investment factor for the
Division for the current period. (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.

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.

--
8
<PAGE>
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 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 at the beginning of the valuation period, (c) less an adjustment
to provide for the charge for mortality rate and expense guarantees. (See
"Deductions", p. 13.)

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 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 surrender value and a retirement 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. The amounts required to pay benefits
will be taken from the Divisions of the Account, or from the value accumulated
on a fixed basis, as directed by the Owner of the Contract.

SURRENDER OR WITHDRAWAL VALUE To the extent permitted by the Plan or Trust, the
Owner may terminate the Contract and redeem the value of Accumulation Units
credited to the Contract. 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 termination. Request forms are available from Northwestern Mutual Life's
Home Office and its agents. A portion of the Accumulation Units may be
surrendered on the same basis.

A payee under Payment Plan 1 may elect to withdraw the present value of any
unpaid income payments at any time. Upon death during the certain period of the
payee under Plan 2 or both payees under Plan 3, the beneficiary may elect to
withdraw the present value of any unpaid payments for the certain period. The
withdrawal value is based on the Annuity Unit value on the withdrawal date, with
the unpaid payments discounted at the Assumed Investment Rate. (See "Description
of Payment Plans", p.10.)

RETIREMENT BENEFITS The Contract Owner may at any time direct Northwestern
Mutual Life to pay retirement benefits to an Annuitant. Upon the Owner's
request, benefits may be paid in a lump sum or under the Payment Plans described
below. The Owner's request will state the Payment Plan elected and the amount
and date of the first payment. Amounts distributed to an Annuitant may be
subject to federal income tax. 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.

Northwestern Mutual Life will determine the amount required to pay the annuity
or cash benefits and will redeem Accumulation Units in that amount. There is no
assurance that amounts accumulated under the Contract will be sufficient to
provide the retirement benefits under the Plan or Trust.

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.

Under a variable Payment Plan an Annuitant must select the initial allocation of
variable benefits among the Divisions. The Annuitant may name and change the
beneficiaries of unpaid payments for the specified period under Plan 1 or the
certain period under Plans 2 or 3. Northwestern Mutual Life will issue the
Annuitant a Certificate describing the variable annuity benefits and including
beneficiary provisions of annuity contracts issued by Northwestern Mutual Life
on the date of issue of the Certificate. For a discussion of tax considerations
and limitations regarding the election of payment plans, see "Federal Income
Taxes", p. 12.

--
9
<PAGE>
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 the Annuitant and the
Joint Annuitant 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.

A Payment Plan must result in payments that meet the minimums required by
Northwestern Mutual Life for annuity payment plans on the date the plan is
elected. 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 and will depend upon the number and value of Annuity Units credited to the
Annuitant. Annuity Units represent the interest of the Annuitant in each
Division of the Account.

ASSUMED INVESTMENT RATE The payment rate tables for the Contracts are based
upon an Assumed Investment Rate of 3 1/2%. Payment 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 actual value of the future payments
as of the date when payments begin.

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 Annuity Unit for each Division would not change in value, and 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 A Contract Owner may at any time
change the allocation of net purchase payments among the Divisions or transfer
Accumulation Units from one Division to another. After the effective date of a
variable Payment Plan the Annuitant may transfer Annuity Units from one Division
to another. Changes in allocation and transfers are effective on the date a
written request is received at the Home Office of Northwestern Mutual Life or on
a future specified date.

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. Accumulation Units may be transferred among the Divisions up to
twelve times in a Contract year without charge. The charge for each additional
transfer is $25. For transfers of Annuity Units, charges and waiting periods may
be set by Northwestern Mutual Life.

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 securities
markets, especially transfers of large sums, will tend to accentuate the danger
that a transfer will be made at an inopportune time.

--
10
<PAGE>
After the effective date of a variable Payment Plan which includes the right of
withdrawal a payee may transfer the withdrawal value to any other Payment Plan.
An administrative charge may apply.

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 employer, a custodian or
trustee. The Annuitant is a Participant in the Plan or Trust who has been named
to receive annuity payments in accordance with the provisions of the Plan or
Trust.

DEFERMENT OF BENEFIT PAYMENTS Northwestern Mutual Life reserves the right to
defer determination and payment of the surrender value of the Accumulation
Units, the withdrawal value under a variable Payment Plan, or the payment of
benefits under a variable Payment Plan. Deferral will arise only if the right to
redeem Fund shares is suspended, payment of the redemption value is postponed,
or the New York Stock Exchange is closed, or trading thereon is restricted; or
an emergency exists, as a result of which it is not reasonably practical for
Northwestern Mutual Life to dispose of securities owned by it, or to determine
the value of Accumulation or Annuity Units.

DIVIDENDS The Contracts share in the divisible surplus of Northwestern Mutual
Life, except while payments are being made under a payment plan. The divisible
surplus of Northwestern Mutual Life is determined annually. Each Contract's
share, if any, will be credited as a dividend on the Contract anniversary. Under
the terms of the Contract, any dividend will be applied as a net purchase
payment allocated to the Money Market Division.

On Group Combination Annuity Contracts, dividends arise principally as a result
of more favorable expense experience than that assumed in determining mortality
rate and expense guarantee charges. The dividend 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.

For 1997, all front-load and simplified-load Contracts with an average variable
Contract value of $250,000 or more will receive a dividend of 0.25% of the
average variable Contract value. For the simplified-load Contracts, this factor
increases to 0.75% on the portion of the average variable Contract value in
excess of $500,000. In future years, dividends will continue to be based on
actual experience, and as a result, the factors may be different from those
stated above.

SUBSTITUTION AND CHANGE Northwestern Mutual Life reserves the right to (a)
substitute other securities for shares of each Portfolio of the Fund held by any
Division, or (b) change the provisions of the Contracts to assure qualification
for tax benefits under the Internal Revenue Code or to comply with any other
applicable federal or state laws. 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. Contract Owners
will be given prompt notice after any substitution or change.

AMENDMENTS AND TERMINATION After the fifth Contract year, Northwestern Mutual
Life may amend the Contract with respect to (1) the sales load; (2) the maximum
annual annuity rate and expense guarantee charge; (3) the administration fee;
(4) the transfer fee; (5) the minimum amounts for purchase payment(s) and for
the Contract value; or (6) the payment rate tables which are included in the
Contract.

An amendment will become effective after not less than 30 days' written notice
to the Owner. An Amendment to the payment rate tables will not apply to a
Payment Plan that starts before the amendment becomes effective.

Northwestern Mutual Life reserves the right to terminate a Contract if
representations of the Owner are or become incorrect. The Contract Owner may
terminate a Contract in whole or in part at any time and be paid the value of
the Accumulation Units.

FINANCIAL STATEMENTS Financial statements of the Account and financial
statements of Northwestern Mutual Life appear in the Statement of Additional
Information.

--
11
<PAGE>
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 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 15% penalty tax may be imposed after 1999 on aggregate
payments in excess of certain annual limits and 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 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 or for reimbursement of health insurance
premiums paid while the employee was unemployed.

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", p.13.)

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12
<PAGE>
DEDUCTIONS

The following deductions will be made:

1. DEDUCTIONS FROM PURCHASE PAYMENTS.

Front-Load Contract

A sales load is deducted from all purchase payments received. The deduction is
based on the cumulative amounts received and the rates in the table below:

<TABLE>
<CAPTION>
CUMULATIVE PURCHASE PAYMENTS
PAID UNDER THE CONTRACT RATE
- ----------------------------------------------------- -----------
<S> <C>
First $150,000....................................... 4.5%
Next $350,000........................................ 3.0%
Next $500,000........................................ 1.0%
Balance over $1,000,000.............................. .5%
</TABLE>

Simplified-Load Contract

An installation fee in the amount of $750 is deducted from the first purchase
payment received. Alternatively, the fee may be paid separately when the
application for the Contract is submitted. The installation fee covers the
non-recurring expenses of processing the application and issuing the Contract.

2. ANNUAL MORTALITY RATE AND EXPENSE GUARANTEE CHARGE. The net investment
factor (see "Net Investment Factor", p. 8) used in determining the value of
Accumulation and Annuity Units reflects a charge on each valuation date for
mortality and expense risks assumed by Northwestern Mutual Life. For the front-
load Contract the charge on an annual basis is .65% of the current value of the
net assets of the Account. For the simplified-load Contract the charge on an
annual basis is 1.25% of the net assets. This charge may be increased by
Northwestern Mutual Life to a maximum of 1.00% for the front-load Contract and
1.50% for the simplified-load Contract. After the fifth Contract year the
maximum may be amended. (See "Amendments and Termination", p. 11.)

The mortality risk is that annuity payments will continue for longer periods
than anticipated because the Annuitants as a group live longer than expected.
The expense risk is that 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
the deduction of any applicable taxes. Applicable taxes could include any tax
liability paid or reserved for by Northwestern Mutual Life resulting from the
maintenance or operation of a Division of the Account. It is not presently
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. ADMINISTRATION FEE. Northwestern Mutual Life may terminate a Contract on 60
days' written notice after it has been in force for one year if the total
Contract value (including any amounts held on a fixed basis) is less than the
minimum Contract value of $25,000. In lieu of terminating the Contract an
administration fee of $150 may be charged annually on the Contract anniversary.

- --------------------------------------------------------------------------------

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
are calculated partly as a percentage of purchase payments and partly as a
percentage of

--
13
<PAGE>
Contract values for each Contract year. Total commissions, on average, are not
expected to exceed the equivalent of 7.0% of purchase payments.

- --------------------------------------------------------------------------------

CONTRACTS ISSUED PRIOR TO JANUARY 1, 1992

For Contracts issued prior to January 1, 1992 the purchase payments are subject
to a charge for sales expenses. This deduction is at the rate of 4.0% on the
first $25,000; 2.0% on the next $75,000; 1.0% on the next $100,000; .4% on the
next $100,000; .2% on the next $200,000; and .1% on the balance over $500,000 of
cumulative considerations. For these Contracts there is also an annual service
fee charged on each anniversary, based on the value of Accumulation Units on the
last valuation date of the Contract year, at the rate of .5% on the first
$100,000; .4% on the next $100,000; .3% on the next $100,000; .2% on the next
$200,000; and .1% on the balance over $500,000. The charge for annuity rate and
expense risks may not exceed .25% of the Account assets held for these Contracts
(unless the Contracts are amended after the fifth Contract year), and no charge
for these risks is currently being made. These Contracts contain no provisions
for accumulation of funds on a fixed basis.

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14
<PAGE>
This Prospectus sets forth concisely the information about NML Variable Annuity
Account C that a prospective investor ought to know before investing. Additional
information about Account C 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 C to:

Name __________________________________________________________________

Address _______________________________________________________________

______________________________________________________________________

City ______________________________ State ____________ Zip ____________
<PAGE>
NORTHWESTERN MUTUAL LIFE

GROUP COMBINATION ANNUITY CONTRACTS

For Retirement Plans of Self-Employed Persons and their Employees

NML VARIABLE ANNUITY ACCOUNT C

NORTHWESTERN MUTUAL SERIES FUND, INC.

90-1896 (4/97)

PROSPECTUS
- -------------------------------------------------------------------------------
Northwestern BULK RATE
Mutual Life-Registered Trademark- U.S. POSTAGE
PO Box 3095 PAID
Milwaukee WI 53201-3095 MILWAUKEE,WI
Address Correction Requested PERMIT NO.426
- -------------------------------------------------------------------------------

<PAGE>

STATEMENT OF ADDITIONAL INFORMATION

GROUP COMBINATION ANNUITY CONTRACTS
(for Retirement Plans of Self-Employed Persons and their Employees)

NML VARIABLE ANNUITY ACCOUNT C
(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, 1997.

The date of this Statement of Additional Information is April 30,
1997.

B-1

<PAGE>

GENERAL INFORMATION

The Account was originally named NML Separate Account C but was renamed NML
Variable Annuity Account C on November 23, 1983. The Account is used for the
Contracts and for outstanding Contracts to Provide Annuity Benefits.
Northwestern Mutual Life discontinued sales of Contracts to Provide Annuity
Benefits on May 1, 1984.

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 Contracts to corporate
pension plans, during each of the last three years:

Year Amount
---- ------
1996 $756,038
1995 $583,954
1994 $577,227

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. 10, "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 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. The payments from each Division are determined by multiplying
the applicable monthly variable annuity payment rate by the benefits allocated
to the Division under the variable Payment Plan. (See "Illustrations of
Variable Annuity Payments".) Payment rate tables are set forth in the
Contracts. Annuity payment rates currently in use by Northwestern Mutual Life
are based on the 1983 Table a with Projection Scale G.

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. The amount held under a Payment Plan 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. The payments from each Division are determined by
multiplying the number of Annuity Units

B-2

<PAGE>

credited to the Annuitant in the Division by the value of an Annuity Unit for
the Division on (a) the fifth valuation date prior to the payment due date if
the payment due date is a valuation date, or (b) the sixth valuation date prior
to the payment due date if the payment due date is not a valuation date. To
illustrate, if a payment due date falls on a Friday, Saturday or Sunday, the
amount of the payment will normally be based upon the Annuity Unit value
calculated on the preceding Friday. The preceding Friday would be the fifth
valuation date prior to the Friday due date, and the sixth valuation date prior
to the Saturday or Sunday due dates.

ANNUITY UNIT VALUE The value of an Annuity Unit for each Division was
arbitrarily established as of the date on which the operations of the Division
began. 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 annuity rate and expense guarantee
charge.

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 mortality rate tables.

ILLUSTRATIONS OF VARIABLE ANNUITY PAYMENTS To illustrate the manner in
which variable annuity payments are determined consider this example. Item (2)
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) Value of Annuitant's retirement benefit
allocated to Balanced. . . . . . . . . . . . . . . . $ 50,000

(2) Assumed applicable monthly payment rate
per $1,000 from annuity rate table . . . . . . . . . $ 5.00

(3) Amount of first payment from Balanced
Division (1) x (2) divided by $1,000 . . . . . . . . $ 250.00

(4) Assumed Value of Annuity Unit in Balanced
Division on effective date of payment plan.. . . . . $ 1.500000

(5) Number of Annuity Units credited in
Balanced Division, (3) divided by (4). . . . . . . . 166.67

The $50,000 value on the effective date of the payment plan 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 (see "Net Investment Factor") was less than the
Assumed Investment Rate of 3-1/2%, the Annuity Unit would decline in value. If
the Annuity Unit value declined to $1.499000 the succeeding monthly payment
would then be 166.67 X $1.499000, or $249.84.

B-3

<PAGE>

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 may be transferred subject to the terms of the Plan
or Trust. The transferee, or its fiduciary representative, must acknowledge in
writing that the new Owner is a tax-qualified pension or profit-sharing plan.
Written proof of transfer satisfactory to Northwestern Mutual Life must be
received at the Home Office of Northwestern Mutual Life. The transfer will take
effect on the date the proof of the transfer is signed. Ownership of a Contract
may not be assigned without the consent of Northwestern Mutual Life.
Northwestern Mutual Life will not be responsible for the validity or effect of
the assignment or for any payment or other action taken by Northwestern Mutual
Life before Northwestern Mutual Life consents to the assignment.

EXPERTS

The financial statements of the Account as of December 31, 1996 and for
each of the two years in the period ended December 31, 1996 and of Northwestern
Mutual Life as of December 31, 1996 and 1995 and for each of the three years in
the period ended December 31, 1996 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 C Financial Statements

NML VARIABLE ANNUITY ACCOUNT C
Statement of Assets and Liabilities
DECEMBER 31, 1996
(IN THOUSANDS)

<TABLE>
<S> <C> <C>
ASSETS
Investments at Market Value:
Northwestern Mutual Series Fund, Inc.
Growth Stock
6,649 shares (cost $9,029).................................................................... $ 9,734
Aggressive Growth Stock
30,295 shares (cost $70,856).................................................................. 95,277
International Equity
31,747 shares (cost $41,643).................................................................. 49,462
Growth and Income Stock
9,890 shares (cost $12,380)................................................................... 13,035
Index 500 Stock
45,377 shares (cost $63,646).................................................................. 93,249
Money Market
13,784 shares (cost $13,784).................................................................. 13,784
Balanced
76,441 shares (cost $108,531)................................................................. 131,325
Select Bond
14,545 shares (cost $16,953).................................................................. 17,803
High Yield Bond
2,715 shares (cost $2,979).................................................................... 2,983 $ 426,652
----------
Due from Sale of Fund Shares...................................................................................... 53
Due from Northwestern Mutual Life Insurance Company............................................................... 1,662
----------
Total Assets................................................................................................ $ 428,367
----------
----------

LIABILITIES
Due to Northwestern Mutual Life Insurance Company............................................................... $ 53
Due on Purchase of Fund Shares.................................................................................. 1,662
----------
Total Liabilities........................................................................................... $ 1,715
----------
EQUITY (NOTE 8)
Group Variable Annuity Contracts Issued:
Before December 17, 1981 or between April 30, 1984 and December 31, 1991...................................... $ 274,418
After December 16, 1981 and Prior to May 1, 1984.............................................................. 7,945
After December 31, 1991 - Front Load Version.................................................................. 38,682
After December 31, 1991 - Simplified Load Version............................................................. 105,607
----------
Total Equity................................................................................................ 426,652
----------
Total Liabilities and Equity................................................................................ $ 428,367
----------
----------
</TABLE>

The Accompanying Notes are an Integral Part of the Financial Statements

B-5

<PAGE>
Account C Financial Statements

NML VARIABLE ANNUITY ACCOUNT C
Statement of Operations and Changes in Equity
(IN THOUSANDS)

<TABLE>
<CAPTION>
AGGRESSIVE
GROWTH STOCK GROWTH
COMBINED DIVISION STOCK DIVISION
--------------------- ----------------- ---------------
YEAR YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
DECEMBER DECEMBER DECEMBER DECEMBER DECEMBER DECEMBER
31, 31, 31, 31, 31, 31,
1996 1995 1996 1995 1996 1995
--------- --------- ------- ------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividend Income............. $ 16,994 $ 6,471 $ 367 $ 59 $2,575 $ 243
Annuity Rate and Expense
Guarantees................ 1,738 857 22 8 384 167
--------- --------- ------- ------- ------ ------
Net Investment Income....... 15,256 5,614 345 51 2,191 76
--------- --------- ------- ------- ------ ------
REALIZED AND UNREALIZED GAIN
ON INVESTMENTS
Realized Gain on
Investments............... 8,855 9,884 77 33 574 2,648
Unrealized Appreciation of
Investments During the
Year...................... 29,833 53,407 568 140 7,637 12,416
--------- --------- ------- ------- ------ ------
Net Gain on Investments..... 38,688 63,291 645 173 8,211 15,064
--------- --------- ------- ------- ------ ------
Increase in Equity Derived
from Investment
Activity.................. 53,944 68,905 990 224 10,402 15,140
--------- --------- ------- ------- ------ ------
EQUITY TRANSACTIONS
Contract Owners' Net
Payments.................. 89,651 59,390 2,183 543 23,018 12,411
Annuity Payments............ (37) 0 (1) -- (1) --
Surrenders and Other
(net)..................... (35,414) (58,627) (116) (90) (4,477) (7,855)
Transfers from Other
Divisions or Sponsors..... 47,413 19,929 4,847 1,254 10,470 5,511
Transfers to Other Divisions
or Sponsors............... (46,710) (22,174) (254) (177) (1,555) (1,053)
--------- --------- ------- ------- ------ ------
Increase (Decrease) in Equity
Derived from Equity
Transactions................ 54,903 (1,482) 6,659 1,530 27,455 9,014
--------- --------- ------- ------- ------ ------
Net Increase in Equity........ 108,847 67,423 7,649 1,754 37,857 24,154
EQUITY
Beginning of Period......... 317,805 250,382 2,084 330 57,422 33,268
--------- --------- ------- ------- ------ ------
End of Period............... $426,652 $317,805 $9,733 $2,084 $95,279 $57,422
--------- --------- ------- ------- ------ ------
--------- --------- ------- ------- ------ ------
</TABLE>

The Accompanying Notes are an Integral Part of the Financial Statements

B-6

<PAGE>
Account C Financial Statements

NML VARIABLE ANNUITY ACCOUNT C
Statement of Operations and Changes in Equity
(IN THOUSANDS)
<TABLE>
<CAPTION>
GROWTH & INCOME INDEX 500
STOCK DIVISION STOCK DIVISION
INTERNATIONAL EQUITY ------------------ -------------------
DIVISION
-------------------------------- YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
YEAR ENDED YEAR ENDED DECEMBER DECEMBER DECEMBER DECEMBER
DECEMBER 31, DECEMBER 31, 31, 31, 31, 31,
1996 1995 1996 1995 1996 1995
-------------- -------------- -------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividend Income............. $ 1,805 $ 190 $ 1,146 $ 277 $ 2,082 $ 546
Annuity Rate and Expense
Guarantees................ 162 83 51 21 303 140
-------------- -------------- -------- ------- -------- --------
Net Investment Income....... 1,643 107 1,095 256 1,779 406
-------------- -------------- -------- ------- -------- --------
REALIZED AND UNREALIZED GAIN
ON INVESTMENTS
Realized Gain on
Investments............... 243 286 189 48 2,433 2,386
Unrealized Appreciation of
Investments During the
Year...................... 5,631 3,281 387 282 11,685 14,264
-------------- -------------- -------- ------- -------- --------
Net Gain on Investments..... 5,874 3,567 576 330 14,118 16,650
-------------- -------------- -------- ------- -------- --------
Increase in Equity Derived
from Investment
Activity.................. 7,517 3,674 1,671 586 15,897 17,056
-------------- -------------- -------- ------- -------- --------
EQUITY TRANSACTIONS
Contract Owners' Net
Payments.................. 7,618 6,644 3,722 1,670 15,515 9,482
Annuity Payments............ (1) -- -- -- (1) --
Surrenders and Other
(net)..................... (2,272) (4,567) (582) (225) (4,705) (7,614)
Transfers from Other
Divisions or Sponsors..... 7,684 1,708 3,922 1,885 6,527 2,498
Transfers to Other Divisions
or Sponsors............... (1,124) (2,068) (586) (186) (4,546) (2,411)
-------------- -------------- -------- ------- -------- --------
Increase (Decrease) in Equity
Derived from Equity
Transactions................ 11,905 1,717 6,476 3,144 12,790 1,955
-------------- -------------- -------- ------- -------- --------
Net Increase in Equity........ 19,422 5,391 8,147 3,730 28,687 19,011
EQUITY
Beginning of Period......... 30,038 24,647 4,889 1,159 64,563 45,552
-------------- -------------- -------- ------- -------- --------
End of Period............... $ 49,460 $ 30,038 $13,036 $4,889 $93,250 $64,563
-------------- -------------- -------- ------- -------- --------
-------------- -------------- -------- ------- -------- --------

MONEY MARKET DIVISION
---------------------
YEAR YEAR
ENDED ENDED
DECEMBER DECEMBER
31, 31,
1996 1995
-------- --------
<S> <C> <C>
INVESTMENT INCOME
Dividend Income............. $ 610 $ 494
Annuity Rate and Expense
Guarantees................ 109 65
-------- --------
Net Investment Income....... 501 429
-------- --------
REALIZED AND UNREALIZED GAIN
ON INVESTMENTS
Realized Gain on
Investments............... -- --
Unrealized Appreciation of
Investments During the
Year...................... -- --
-------- --------
Net Gain on Investments..... 0 0
-------- --------
Increase in Equity Derived
from Investment
Activity.................. 501 429
-------- --------
EQUITY TRANSACTIONS
Contract Owners' Net
Payments.................. 15,624 7,895
Annuity Payments............ -- --
Surrenders and Other
(net)..................... (6,072) (7,513)
Transfers from Other
Divisions or Sponsors..... 7,239 3,825
Transfers to Other Divisions
or Sponsors............... (12,832) (6,822)
-------- --------
Increase (Decrease) in Equity
Derived from Equity
Transactions................ 3,959 (2,615)
-------- --------
Net Increase in Equity........ 4,460 (2,186)
EQUITY
Beginning of Period......... 9,324 11,510
-------- --------
End of Period............... $13,784 $ 9,324
-------- --------
-------- --------
</TABLE>

The Accompanying Notes are an Integral Part of the Financial Statements

B-7

<PAGE>
Account C Financial Statements

NML VARIABLE ANNUITY ACCOUNT C
Statement of Operations and Changes in Equity
(IN THOUSANDS)

<TABLE>
<CAPTION>
HIGH YIELD BOND
DIVISION
BALANCED DIVISION SELECT BOND DIVISION -----------------------
----------------------------- --------------------------- YEAR
YEAR ENDED ENDED
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED DECEMBER DECEMBER
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, 31, 31,
1996 1995 1996 1995 1996 1995
------------- ------------- ------------ ------------ ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividend Income............. $ 7,534 $ 4,212 $ 566 $ 395 $ 309 $ 55
Annuity Rate and Expense
Guarantees................ 601 310 97 60 9 3
------------- ------------- ------------ ------------ ----------- ---------
Net Investment Income....... 6,933 3,902 469 335 300 52
------------- ------------- ------------ ------------ ----------- ---------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS
Realized Gain (Loss) on
Investments............... 5,336 4,550 (11) (71) 14 4
Unrealized Appreciation
(Depreciation) of
Investments During the
Year...................... 3,891 20,775 6 2,263 28 (14)
------------- ------------- ------------ ------------ ----------- ---------
Net Gain (Loss) on
Investments............... 9,227 25,325 (5) 2,192 42 (10)
------------- ------------- ------------ ------------ ----------- ---------
Increase in Equity Derived
from Investment
Activity.................. 16,160 29,227 464 2,527 342 42
------------- ------------- ------------ ------------ ----------- ---------
EQUITY TRANSACTIONS
Contract Owners' Net
Payments.................. 17,719 17,344 3,797 3,236 455 165
Annuity Payments............ (32) -- (1) -- -- --
Surrenders and Other
(net)..................... (15,880) (27,145) (1,149) (3,582) (161) (36)
Transfers from Other
Divisions or Sponsors..... 2,692 1,323 2,356 1,503 1,676 422
Transfers to Other Divisions
or Sponsors............... (21,803) (7,732) (3,945) (1,666) (65) (59)
------------- ------------- ------------ ------------ ----------- ---------
Increase (Decrease) in Equity
Derived from Equity
Transactions................ (17,304) (16,210) 1,058 (509) 1,905 492
------------- ------------- ------------ ------------ ----------- ---------
Net Increase (Decrease) in
Equity...................... (1,144) 13,017 1,522 2,018 2,247 534
EQUITY
Beginning of Period......... 132,469 119,452 16,280 14,262 736 202
------------- ------------- ------------ ------------ ----------- ---------
End of Period............... $131,325 $132,469 $17,802 $16,280 $2,983 $736
------------- ------------- ------------ ------------ ----------- ---------
------------- ------------- ------------ ------------ ----------- ---------
</TABLE>

The Accompanying Notes are an Integral Part of the Financial Statements

B-8

<PAGE>
Notes to Financial Statements

NML VARIABLE ANNUITY ACCOUNT C
Notes to Financial Statements
DECEMBER 31, 1996

Note 1 -- NML Variable Annuity Account C (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 December 31, 1991, two
versions of the contract are offered: Front Load contracts with a sales charge
up to 4.5% of purchase payments and Simplified Load contracts with an
installment fee of $750.

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.
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, 1996 by each Division
are shown below:

<TABLE>
<CAPTION>
Purchases Sales
--------------- ---------------
<S> <C> <C>
Growth Stock Division........... $ 7,308,964 $ 303,927
Aggressive Growth Division...... 30,690,195 1,045,256
International Equity Division... 15,119,614 1,571,810
Growth & Income Stock
Division........................ 8,410,421 839,196
Index 500 Stock Division........ 19,824,136 5,253,981
Money Market Division........... 20,346,897 15,887,232
Balanced Division............... 19,426,753 29,797,911
Select Bond Division............ 5,445,050 3,918,139
High Yield Bond Division........ 2,362,508 158,086
</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.

Generally, for contracts issued after December 31, 1991, for the Front Load
version and the Simplified Load version, the deduction for annuity rate and
expense guarantees is determined daily at annual rates of 6 1/2 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 1% and 1 1/2% annual rates, respectively.

Generally, the deduction for contracts issued before December 17, 1981 or
between April 30, 1984 and December 31, 1991 as provided for in the contracts
has been waived by the Board of Trustees of Northwestern Mutual Life. For these
contracts, the rate may be determined by the Board of Trustees of Northwestern
Mutual Life not to exceed a 3/4 of 1% annual rate.

For contracts issued after December 16, 1981, and prior to May 1, 1984, the
deduction is determined daily at an annual rate of 1/2 of 1% of the net assets
of each Division attributable to these contracts and is paid to Northwestern
Mutual Life. For these contracts, the rate may be increased or decreased by the
Board of Trustees of Northwestern Mutual Life not to exceed a 3/4 of 1% annual
rate.

Beginning in 1996, Northwestern Mutual Life paid a dividend to certain
contracts. The dividend was 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>
Notes to Financial Statements

NML VARIABLE ANNUITY ACCOUNT C
Notes to Financial Statements (Continued) (in thousands)
DECEMBER 31, 1996

Note 8 - Equity Values by Division are shown below:

<TABLE>
<CAPTION>
GROUP VARIABLE ANNUITY CONTRACT ISSUED:
-------------------------------------------------------------------------------------
BEFORE DECEMBER 17, 1981 OR BETWEEN AFTER DECEMBER 16, 1981 AND
APRIL 30, 1984 AND DECEMBER 31, 1991 PRIOR TO MAY 1, 1984
----------------------------------------- ------------------------------------------
ACCUMULATION UNITS ACCUMULATION UNITS
UNIT VALUE OUTSTANDING EQUITY UNIT VALUE OUTSTANDING EQUITY
-------------- ------------- ---------- -------------- --------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Growth Stock.............................. $ 16.046821 378 $ 6,069 $ 15.834243 -- --
Aggressive Growth Stock................... 32.542621 1,944 63,276 31.591115 4 $ 134
International Equity...................... 1.726413 20,440 35,287 1.695019 110 186
Growth and Income Stock................... 15.767435 424 6,688 15.558532 1 19
Index 500 Stock........................... 27.133645 2,386 64,749 26.337300 46 1,206
Money Market.............................. 26.011476 57 1,483 24.167111 14 344
Balanced.................................. 58.832423 1,490 87,640 54.595947 90 4,923
Select Bond............................... 76.681608 98 7,505 71.125132 8 540
High Yield Bond........................... 14.408967 119 1,721 14.218083 -- --
---------- ---------
Equity.................................. 274,418 7,352
Annuity Reserves........................ -- 593
---------- ---------
Total Equity............................ $ 274,418 $ 7,945
---------- ---------
---------- ---------
</TABLE>

<TABLE>
<CAPTION>
GROUP COMBINED ANNUITY CONTRACT ISSUED:
-----------------------------------------------------------------------------------
AFTER DECEMBER 31, 1991 AFTER DECEMBER 31, 1991
FRONT LOAD VERSION SIMPLIFIED LOAD VERSION
---------------------------------------- -----------------------------------------
ACCUMULATION UNITS ACCUMULATION UNITS
UNIT VALUE OUTSTANDING EQUITY UNIT VALUE OUTSTANDING EQUITY
-------------- ------------- --------- -------------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Growth Stock............................ $ 1.577134 587 $ 927 $ 1.552125 1,743 $ 2,705
Aggressive Growth Stock................. 2.077739 3,197 6,643 3.199964 7,873 25,192
International Equity.................... 1.685759 2,709 4,567 1.649102 5,703 9,405
Growth and Income Stock................. 1.549666 1,357 2,103 1.525144 2,770 4,224
Index 500 Stock......................... 1.937139 3,881 7,518 2.463008 8,016 19,742
Money Market............................ 1.192105 2,830 3,373 2.246287 3,818 8,576
Balanced................................ 1.599774 5,934 9,493 4.829655 5,971 28,839
Select Bond............................. 1.370157 2,677 3,668 6.260939 966 6,051
High Yield Bond......................... 1.416152 275 390 1.393713 626 873
--------- ----------
Equity................................ 38,682 105,607
Annuity Reserves...................... -- --
--------- ----------
Total Equity.......................... $ 38,682 $ 105,607
--------- ----------
--------- ----------
</TABLE>

B-10

<PAGE>
Accountants' Letter

[LOGO]

REPORT OF INDEPENDENT ACCOUNTANTS

To The Northwestern Mutual Life Insurance Company and
Contract Owners NML Variable Annuity Account C

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 C and the Index 500 Stock Division, Growth Stock
Division, Growth and Income Stock Division, Aggressive Growth Stock Division,
International Equity Division, Select Bond Division, High Yield Bond Division,
Money Market Division and the Balanced Division thereof at December 31, 1996,
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, 1996 with Northwestern Mutual Series Fund, Inc.,
provide a reasonable basis for the opinion expressed above.

/s/ Price Waterhouse LLP

Milwaukee, Wisconsin
January 22, 1997

B-11

<PAGE>
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY

NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY AND SUBSIDIARY

CONSOLIDATED FINANCIAL STATEMENTS

The following financial statements of Northwestern Mutual should be considered
only as bearing upon the ability of Northwestern Mutual Life to meet its
obligations under the Policies.

CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(IN MILLIONS)

<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1996 1995
---------- ----------
<S> <C> <C>
ASSETS
BONDS
United States Government.................................................................. $ 5,417 $ 3,282
Industrial and other...................................................................... 23,659 22,236
---------- ----------
29,076 25,518
---------- ----------
STOCKS
Common.................................................................................... 3,356 2,894
Unconsolidated subsidiaries............................................................... 612 531
Preferred................................................................................. 760 546
---------- ----------
4,728 3,971
---------- ----------
MORTGAGE LOANS.............................................................................. 9,564 8,429
REAL ESTATE
Investment................................................................................ 1,257 1,294
Home office............................................................................... 128 135
---------- ----------
1,385 1,429
---------- ----------
LOANS ON POLICIES........................................................................... 6,802 6,476
OTHER INVESTMENTS........................................................................... 1,714 1,589
CASH AND TEMPORARY INVESTMENTS.............................................................. 1,131 544
DUE AND ACCRUED INVESTMENT INCOME........................................................... 764 721
---------- ----------
Total invested assets................................................................... 55,164 48,677
---------- ----------
SEPARATE ACCOUNT BUSINESS................................................................... 6,339 5,000
OTHER ASSETS................................................................................ 1,177 1,199
---------- ----------
Total Assets............................................................................ $ 62,680 $ 54,876
---------- ----------
---------- ----------
</TABLE>

The accompanying notes are an integral part of the financial statements

B-12

<PAGE>
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY

NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY AND SUBSIDIARY

CONSOLIDATED FINANCIAL STATEMENTS

CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(IN MILLIONS)

<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1996 1995
---------- ----------
<S> <C> <C>
LIABILITIES AND RESERVES
LIABILITY FOR POLICY BENEFITS
Insurance and annuity reserves............................................................ $ 43,209 $ 39,545
Policy benefits in process or left for future payments.................................... 1,140 1,109
Premium deposits.......................................................................... 427 427
Policyowner dividends payable............................................................. 2,350 2,115
---------- ----------
47,126 43,196
---------- ----------
OTHER LIABILITIES
Interest maintenance reserve.............................................................. 299 281
Income taxes.............................................................................. 942 895
Miscellaneous............................................................................. 2,921 1,336
---------- ----------
4,162 2,512
---------- ----------
SEPARATE ACCOUNT BUSINESS................................................................... 6,339 5,000
---------- ----------
ASSET VALUATION RESERVE..................................................................... 1,538 1,382
---------- ----------
Total liabilities......................................................................... 59,165 52,090
---------- ----------
GENERAL CONTINGENCY RESERVE................................................................. 3,515 2,786
---------- ----------
Total Liabilities and Contingency Reserve................................................... $ 62,680 $ 54,876
---------- ----------
---------- ----------
</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 AND SUBSIDIARY

CONSOLIDATED FINANCIAL STATEMENTS

CONSOLIDATED SUMMARY OF OPERATIONS
(IN MILLIONS)

<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
----------------------------------
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
INCOME
PREMIUMS..................................................................... $ 6,760 $ 6,196 $ 5,743
NET INVESTMENT INCOME........................................................ 3,836 3,673 3,106
POLICY BENEFITS LEFT WITH COMPANY AND OTHER INCOME........................... 666 733 636
---------- ---------- ----------
Total income............................................................... 11,262 10,602 9,485
---------- ---------- ----------
DISPOSITION OF INCOME
COSTS
Agents' compensation....................................................... 529 508 492
Other insurance costs...................................................... 418 398 334
Premium and other taxes or assessments..................................... 96 120 120
---------- ---------- ----------
1,043 1,026 946
---------- ---------- ----------
BENEFITS TO POLICYOWNERS AND BENEFICIARIES
Death benefits............................................................. 673 655 609
Surrender benefits......................................................... 1,182 1,375 904
Disability benefits........................................................ 202 174 151
Annuity benefits........................................................... 128 92 94
Matured endowments......................................................... 52 48 54
Payments from policy benefits left with Company............................ 684 590 568
Net transfers to separate accounts......................................... 579 236 344
Net additions to policy reserves........................................... 3,701 3,506 3,313
---------- ---------- ----------
7,201 6,676 6,037
---------- ---------- ----------
Total disposition of income.............................................. 8,244 7,702 6,983
---------- ---------- ----------
SAVINGS FROM OPERATIONS BEFORE INCOME TAXES AND DIVIDENDS...................... 3,018 2,900 2,502
INCOME TAX EXPENSE............................................................. 452 467 281
---------- ---------- ----------
SAVINGS FROM OPERATIONS BEFORE DIVIDENDS....................................... 2,566 2,433 2,221
POLICYOWNER DIVIDENDS.......................................................... 2,341 2,111 1,942
---------- ---------- ----------
NET SAVINGS FROM OPERATIONS.................................................... 225 322 279
NET REALIZED CAPITAL GAINS, LESS TAX EXPENSE OF $208, $98 AND 85,
RESPECTIVELY.................................................................. 395 137 119
---------- ---------- ----------
CONTRIBUTION TO GENERAL CONTINGENCY RESERVE FROM OPERATIONS.................... $ 620 $ 459 $ 398
---------- ---------- ----------
---------- ---------- ----------
</TABLE>

The accompanying notes are an integral part of the financial statements

B-14

<PAGE>
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY

NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY AND SUBSIDIARY

CONSOLIDATED FINANCIAL STATEMENTS

CONSOLIDATED STATEMENT OF GENERAL CONTINGENCY RESERVE
(IN MILLIONS)

<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
----------------------------------
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
BEGINNING OF YEAR BALANCE........................................................... $ 2,786 $ 2,225 $ 2,030
Contribution to general contingency reserve from operations....................... 620 459 398
Change in net unrealized capital gains............................................ 295 373 (242)
Change in asset valuation reserve................................................. (156) (192) 37
Other -- net...................................................................... (30) (79) 2
---------- ---------- ----------
END OF YEAR BALANCE................................................................. $ 3,515 $ 2,786 $ 2,225
---------- ---------- ----------
---------- ---------- ----------
</TABLE>

The accompanying notes are an integral part of the financial statements

B-15

<PAGE>
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY

NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY AND SUBSIDIARY

CONSOLIDATED FINANCIAL STATEMENTS

CONSOLIDATED STATEMENT OF CASH FLOWS
(IN MILLIONS)

<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
----------------------------------
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Insurance premiums, annuities and other considerations................... $ 7,361 $ 6,864 $ 6,299
Net investment income received........................................... 3,634 3,480 3,013
Net loans on policies.................................................... (326) (331) (297)
Benefits paid to policyholders and beneficiaries......................... (2,912) (2,939) (2,357)
Net transfers to separate accounts....................................... (579) (236) (344)
Policyowner dividends paid............................................... (2,105) (1,945) (1,777)
Expenses and taxes....................................................... (1,424) (1,279) (1,033)
Other -- net............................................................. 1,558 381 89
---------- ---------- ----------
NET CASH PROVIDED BY OPERATING ACTIVITIES................................ 5,207 3,995 3,593
CASH FLOWS FROM INVESTING ACTIVITIES
PROCEEDS FROM INVESTMENTS SOLD OR MATURED
Bonds.................................................................... 31,942 25,317 27,096
Stocks................................................................... 4,570 2,465 1,469
Mortgage loans........................................................... 1,253 431 512
Real estate.............................................................. 178 48 164
Other invested assets.................................................... 316 149 213
Capital gain (tax) benefit............................................... (239) (85) 28
---------- ---------- ----------
38,020 28,325 29,482
COST OF INVESTMENTS ACQUIRED
Bonds.................................................................... 35,342 27,596 29,674
Stocks................................................................... 4,463 2,562 1,606
Mortgage loans........................................................... 2,455 1,883 1,356
Real estate.............................................................. 125 202 6
Other invested assets.................................................... 255 336 413
---------- ---------- ----------
42,640 32,579 33,055
NET CASH USED IN INVESTING ACTIVITIES.................................... (4,620) (4,254) (3,573)
---------- ---------- ----------
NET (DECREASE) INCREASE IN CASH AND TEMPORARY INVESTMENTS.................... 587 (259) 20
CASH AND TEMPORARY INVESTMENTS, BEGINNING OF YEAR............................ 544 803 783
---------- ---------- ----------
CASH AND TEMPORARY INVESTMENTS, END OF YEAR.................................. $ 1,131 $ 544 $ 803
---------- ---------- ----------
---------- ---------- ----------
</TABLE>

The accompanying notes are an integral part of the financial statements

B-16

<PAGE>
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY

THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED STATUTORY FINANCIAL STATEMENTS

DECEMBER 31, 1996, 1995 AND 1994

NOTE 1 -- PRINCIPAL ACCOUNTING POLICIES

The accompanying consolidated statutory financial statements include the
accounts of The Northwestern Mutual Life Insurance Company (the "Company") and
its wholly-owned life insurance subsidiary. The Company offers life, annuity and
disability income products to the personal, business, estate and tax-qualified
markets.

The consolidated financial statements have been prepared using accounting
policies prescribed or permitted by the Insurance Departments of the states in
which the Company and its subsidiary are domiciled (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.

The consolidated financial statements are prepared on the statutory basis of
accounting and are not intended to represent a presentation in accordance with
GAAP. Financial statements prepared on a statutory basis of accounting vary from
financial statements prepared on a GAAP basis primarily because on a GAAP basis
policy acquisition costs are deferred and amortized, investment valuations and
insurance reserves are based on different assumptions, deferred taxes are
provided for book and tax differences and premiums on annuity contracts are
accounted for as deposits to policyholders' accounts.

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 results could differ from those 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 Stocks -- Market value
Unconsolidated Subsidiaries -- Equity in subsidiaries' net assets
Preferred Stocks -- Cost
Mortgage Loans -- Amortized cost
Investment Real Estate -- Lower of cost, less depreciation and encumbrances, or estimated net realizable
value
Home Office Real Estate -- Cost, less depreciation
Loans on Policies -- Cost
Other Investments -- Joint Ventures -- Lower of equity in or market value of ventures' net assets
</TABLE>

- --------------------------------------------------------------------------------

SEPARATE ACCOUNT BUSINESS

This business consists of annuities funded by specific assets held in separate
accounts. The assets in these accounts are carried at market value. The policy
values reflect the investment performance of the respective accounts.

B-17

<PAGE>
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY

INSURANCE, ANNUITY AND DISABILITY INCOME RESERVES

Life insurance reserves on substantially all policies issued since 1978 are
based on the Commissioner's Reserve Valuation Method with interest rates ranging
from 3 1/2% to 5 1/2%. Other policy reserves are based primarily on the net
level premium method employing various mortality tables at interest rates
ranging from 2% to 4 1/2%.

Deferred annuity reserves on policies issued since 1985 are valued using the
Commissioner's Annuity Reserve Valuation Method with interest rates ranging from
3 1/2% to 6 1/4%. Other deferred annuity reserves are based on the contract
value. Immediate annuity reserves are present values of expected benefit
payments at interest rates ranging from 3 1/2% to 7 1/2%.

Active life reserves for disability income ("DI") policies issued since 1987 are
primarily based on the two-year preliminary term method using a 4% interest rate
and the 1985 Commissioner's Individual Disability Table A ("CIDA") for
morbidity. Previous DI business uses the net level premium method, using a 3% or
4% interest rate and the 1964 Commissioner's Disability Table for morbidity.
Disabled life reserves for DI policies are based on the present values of
expected benefit payments using primarily the 1985 CIDA (modified for Company
experience in 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.

INTEREST MAINTENANCE RESERVE

The Company is required to maintain an interest maintenance reserve ("IMR"). The
IMR establishes a reserve for realized gains and losses, net of tax, resulting
from changes in interest rates on short and long-term fixed income investments.
Net realized gains and losses charged to the IMR are amortized into investment
income over the approximate remaining life of the investment sold.

ASSET VALUE RESERVE

The Company is also required to maintain an asset valuation reserve ("AVR"). The
AVR establishes a reserve for certain invested assets held by the Company. In
the aggregate, AVR was 83.8% of the allowable maximum at December 31, 1996.

PREMIUM INCOME

Life insurance premiums are recognized as income at the beginning of each policy
year.

REINSURANCE

In the normal course of business, the Company seeks to limit its exposure to
loss on any single insured and to recover a portion of benefits paid by ceding
reinsurance to other insurance enterprises or reinsurers under excess coverage
and co-insurance contracts. In 1996, the Company increased its use of
coinsurance on term insurance. As of December 31, 1996, total life insurance
inforce approximated $430 billion, of which approximately $146 billion,
comprised principally of term insurance, had been ceded to various reinsurers.
The Company retains a maximum of $15 million of coverage per individual life and
$20 million maximum of coverage per joint life.

OPERATING COSTS

Operating costs, including costs of acquiring new policies, are charged to
operations as incurred.

INCOME TAXES

Provisions for income taxes are based on current income tax returns without
recognition of deferred taxes due to timing differences. The portion of the
federal income tax based on mutual life insurance company equity is reflected as
a component of income tax expense, including related adjustments for prior
years.

The Company files a consolidated life-nonlife federal income tax return. Federal
income tax returns for years through 1988 are closed as to further assessment of
tax. Adequate provision has been made in the financial statements for any
additional taxes which may become due with respect to the open years.

B-18

<PAGE>
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY

The Company's effective tax rate on savings from operations before income tax
expense (after dividends) in 1996 was approximately 67%. Two significant factors
cause the Company's effective tax rate to exceed the federal corporate rate of
35%. First, the Company pays a tax that is assessed only on mutual life
insurance companies, which is an amount that purports to equate a portion of
policyholder dividends with nondeductible dividends paid to shareholders of
stock companies. Second, the Company must capitalize and amortize (as opposed to
immediately deducting) an amount deemed to represent the cost of acquiring new
business ("DAC tax").

POLICYOWNER DIVIDENDS

Dividends payable in the following year on participating policies are charged to
current operations. All life insurance policies issued by the Company are
participating.

RECLASSIFICATION

Certain amounts in previously issued financial statements have been reclassified
to conform to current year presentation.

NOTE 2 -- DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS

The following summarizes the bases used by the Company in estimating its fair
value disclosures for financial instruments:

Bonds and common and preferred stocks -- Fair values are based upon quoted
market prices, if available. For securities not actively traded, fair values
are estimated using independent pricing services or internally developed
pricing models.

Mortgage loans -- Fair values are derived by discounting the future
estimated cash flows using current interest rates of debt securities with
similar credit risk and maturities, or utilizing net realizable values.

Loans on policies -- The carrying amount reported in the statement of
financial position approximates fair value since loans on policies reduce
the amount payable at death or at surrender of the contract.

Cash and temporary investments and due and accrued investment income -- The
carrying amounts reported in the statement of financial position approximate
fair value.

Annuity reserves (without mortality/morbidity features) -- Fair values are
derived by discounting the future estimated cash flows using current
interest rates with similar maturities.

Other deposit liabilities -- The carrying amounts reported in the statement
of financial position approximate fair value.

NOTE 3 -- INVESTMENTS

NET INVESTMENT INCOME

The Company's net investment income for the years ended December 31, 1996, 1995
and 1994 of the following:

<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ----------
(IN MILLIONS)
<S> <C> <C> <C>
Interest, dividends, rents,
equity in unconsolidated
subsidiaries' earnings and
joint venture income........... $ 4,125 $ 3,952 $ 3,395
Less: Investment expenses and
depreciation................... (289) (279) (289)
---------- ---------- ----------
Net investment income.......... $ 3,836 $ 3,673 $ 3,106
---------- ---------- ----------
---------- ---------- ----------
</TABLE>

B-19

<PAGE>
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY

REALIZED GAINS AND LOSSES

During 1996, 1995 and 1994, the Company, in its normal course of business, sold
certain invested assets realizing gains and losses before transfer to the IMR
and capital gains tax from such sales as follows:
<TABLE>
<CAPTION>
FOR THE YEAR
ENDED
FOR THE YEAR ENDED FOR THE YEAR ENDED DECEMBER 31,
DECEMBER 31, 1996 DECEMBER 31, 1995 1994
--------------------------------------- --------------------------------------- ------------
NET REALIZED NET REALIZED
REALIZED REALIZED GAINS REALIZED REALIZED GAINS REALIZED
GAINS LOSSES (LOSSES) GAINS LOSSES (LOSSES) GAINS
----------- ------------ ------------ ----------- ------------ ------------ ------------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
Bonds............................ $ 396 $ (383) $ 13 $ 576 $ (130) $ 446 $ 171
Stocks........................... 580 (115) 465 574 (429) 145 499
Mortgage loans................... 2 (15) (13) 2 (32) (30) --
Real estate...................... 36 0 36 14 (3) 11 16
Other invested assets............ 204 (51) 153 188 (95) 93 110
----------- ------ ----- ----------- ------ ----- -----
$ 1,218 $ (564) $ 654 $ 1,354 $ (689) $ 665 $ 796
----------- ------ ----- ----------- ------ ----- -----
----------- ------ ----- ----------- ------ ----- -----

NET REALIZED
REALIZED GAINS
LOSSES (LOSSES)
------------ ------------

<S> <C> <C>
Bonds............................ $ (535) $ (364)
Stocks........................... (291) 208
Mortgage loans................... (37) (37)
Real estate...................... (7) 9
Other invested assets............ (98) 12
------ ------
$ (968) $ (172)
------ ------
------ ------
</TABLE>

- --------------------------------------------------------------------------------

DEBT SECURITIES

Debt securities consist of all bonds, fixed maturity preferred stocks and short
term fixed income investments.

The statement values, which principally represent amortized cost, and estimated
market values of the Company's debt securities at December 31, 1996 and 1995 are
as follows:

B-20

<PAGE>
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
<TABLE>
<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................................ $ 4,809 $ 171 $ (2) $ 4,978
Mortgage-backed securities............................................. 6,747 179 (38) 6,888
Corporate and other debt securities.................................... 18,722 776 (99) 19,399
----------- ------- ------ -----------
30,278 1,126 (139) 31,265
Preferred stocks....................................................... 84 6 (1) 89
----------- ------- ------ -----------
Total.................................................................. $ 30,362 $ 1,132 $ (140) $ 31,354
----------- ------- ------ -----------
----------- ------- ------ -----------

RECONCILIATION TO ESTIMATED MARKET VALUE
---------------------------------------------------------
GROSS GROSS ESTIMATED
STATEMENT UNREALIZED UNREALIZED MARKET
DECEMBER 31, 1995 VALUE APPRECIATION DEPRECIATION VALUE
- ----------------------------------------------------------------------- ----------- -------------- --------------- -----------
(IN MILLIONS)
<S> <C> <C> <C> <C>
US Government and political obligations................................ $ 3,267 $ 296 $ (1) $ 3,562
Mortgage-backed securities............................................. 6,734 336 (12) 7,058
Corporate and other debt securities.................................... 15,999 1,250 (47) 17,202
----------- ------- ------ -----------
26,000 1,882 (60) 27,822
Preferred stocks....................................................... 108 3 (2) 109
----------- ------- ------ -----------
Total.................................................................. $ 26,108 $ 1,885 $ (62) $ 27,931
----------- ------- ------ -----------
----------- ------- ------ -----------
</TABLE>

- --------------------------------------------------------------------------------

The amortized cost and estimated value of debt securities at December 31, 1996
and 1995, by contractual maturity, are shown below. Expected maturities may
differ from contractual maturities because borrowers may have the right to call
or prepay obligations with or without call or prepayment penalties.

<TABLE>
<CAPTION>
DECEMBER 31, 1996 DECEMBER 31, 1995
------------------------ ------------------------
ESTIMATED ESTIMATED
STATEMENT MARKET STATEMENT MARKET
VALUE VALUE VALUE VALUE
----------- ----------- ----------- -----------
(IN MILLIONS)
<S> <C> <C> <C> <C>
Due in one year or less..................................................... $ 1,659 $ 1,713 $ 977 $ 979
Due after one year through five years....................................... 4,077 4,205 3,658 3,879
Due after five years through ten years...................................... 7,802 8,092 6,879 7,347
Due after ten years......................................................... 10,077 10,456 7,860 8,668
----------- ----------- ----------- -----------
23,615 24,466 19,374 20,873
Mortgage-backed securities.................................................. 6,747 6,888 6,734 7,058
----------- ----------- ----------- -----------
$ 30,362 $ 31,354 $ 26,108 $ 27,931
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>

- --------------------------------------------------------------------------------

The fair value of perpetual preferred stocks as of December 31, 1996 and 1995
approximates $892 million and $578 million, respectively, compared to the
statement values of $676 million and $439 million, respectively.

The Company has entered into a securities lending agreement whereby blocks of
securities are loaned to third parties, primarily major brokerage firms. As of
December 31, 1996 the estimated fair value of loaned securities was $2.2
billion. 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. Cash collateral received and related amounts
due to counterparties are reflected in the consolidated statement of financial
position. To further minimize the credit risks related to this program, the
financial

B-21

<PAGE>
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY

condition of counterparties is monitored on a regular basis.

MORTGAGE LOANS

As of December 31, 1996 and 1995, the mortgage loan portfolio was distributed as
follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1996 DECEMBER 31, 1995
-------------------------------- ------------------
GEOGRAPHIC LOCATION % OF TOTAL
- ----------------------------------------------------------------- STATEMENT VALUE ------------ STATEMENT VALUE
------------------ ------------------
(IN MILLIONS) (IN MILLIONS)
<S> <C> <C> <C>
Middle Atlantic................................................ $ 1,170 12.3% $ 945
South Atlantic................................................. 2,845 29.7 2,346
North Central.................................................. 1,675 17.5 1,560
South Central.................................................. 1,035 10.8 1,018
Pacific Northwest.............................................. 578 6.1 454
Pacific........................................................ 1,998 20.9 1,803
Canada......................................................... 263 2.7 303
------- ------------ -------
$ 9,564 100.0% $ 8,429
------- ------------ -------
------- ------------ -------

PROPERTY TYPE
- -----------------------------------------------------------------
Retail......................................................... $ 3,099 32.4% $ 2,897
Office Building................................................ 2,963 31.0 2,677
Residential.................................................... 2,340 24.5 1,804
Commercial..................................................... 818 8.5 792
Other.......................................................... 344 3.6 259
------- ------------ -------
$ 9,564 100.0% $ 8,429
------- ------------ -------
------- ------------ -------

GEOGRAPHIC LOCATION % OF TOTAL
- ----------------------------------------------------------------- ------------

<S> <C>
Middle Atlantic................................................ 11.2%
South Atlantic................................................. 27.8
North Central.................................................. 18.5
South Central.................................................. 12.1
Pacific Northwest.............................................. 5.4
Pacific........................................................ 21.4
Canada......................................................... 3.6
------------
100.0%
------------
------------
PROPERTY TYPE
- -----------------------------------------------------------------
Retail......................................................... 34.4%
Office Building................................................ 31.8
Residential.................................................... 21.4
Commercial..................................................... 9.4
Other.......................................................... 3.0
------------
100.0%
------------
------------
</TABLE>

- --------------------------------------------------------------------------------

The fair value of mortgage loans as of December 31, 1996 and 1995 approximates
$9,823 million and $8,983 million, respectively.

AFFILIATES

The Company has a 17.7% investment in MGIC Investment Corporation ("MGIC"), an
affiliate. At December 31, 1996, the market value of the Company's investment in
MGIC (10.4 million shares) exceeded the statement value by $466 million. During
1996, NML sold 1.2 million shares of MGIC resulting in a realized gain of $50.0
million.

In July 1995, the Company entered into a forward contract with a brokerage firm
to deliver 4.4 million to 5.4 million shares of MGIC (or cash) in August 1998
for a price determined by the market value of the MGIC shares at that time in
exchange for a fixed cash payment of $247 million ($48 per share). The Company's
objective in entering into the forward contract is to hedge against depreciation
in the value of its MGIC holdings during the contract period below the initial
spot price of $48, while partially participating in appreciation, if any, during
the forward contract's duration.

REAL ESTATE

For real estate and joint venture properties acquired subsequent to December
1990, the Company calculates depreciation using the straight-line method in
accordance with guidelines established by the National Association of Insurance
Commissioners. For properties acquired prior to December 1990, the Company
calculates depreciation using either the straight-line method or the
constant-yield method. Home office real estate is depreciated using the
straight-line method.

At December 31, 1996, investment real estate includes $119 million of real
estate acquired through foreclosure. In 1996, the Company recorded writedowns of
$31 million and $12 million for the excess of carrying value over fair value of
certain real estate investments and mortgage loans, respectively. Valuation
allowances for real estate and mortgage loans with fair values that are less
than statement values are adequately covered by normal AVR reserves and by a
$110 million special

B-22

<PAGE>
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY

investment reserve established by the Company for real estate, mortgage loans
and other invested assets.

DERIVATIVE FINANCIAL INSTRUMENTS

The Company's current utilization of derivative financial instruments is
limited. The Company's derivative transactions are used to reduce or modify
risks of volatility related to foreign currency, interest rate movements and
stock price fluctuation. These hedging strategies use forwards, futures, options
and swaps.

At December 31, 1996 the Company held the following positions:

<TABLE>
<CAPTION>
DERIVATIVE FINANCIAL INSTRUMENT: RISKS REDUCED
- ------------------------------------------------------- NOTIONAL -------------------------------------------------------
CONTRACT
AMOUNTS
--------------
($ MILLIONS)
<S> <C> <C>
Foreign Currency Forward Contracts..................... $ 854 Currency exposure on foreign denominated investments.
Stock Futures.......................................... 279 Stock market price fluctuation.
Option to acquire an Interest Rate Swap................ 320 Interest rates payable on Fixed Annuities.
Foreign Currency and Interest Rate Swaps............... 251 Interest rates on variable rate notes and currency on
foreign denominated bonds.
</TABLE>

The hedges are recorded by the Company in the same manner as the underlying
investments. Changes in the values of these contracts are expected to offset the
gains and losses on the hedged investments. On hedges marked to market, gains
and losses are unrealized before contract settlement and realized on settlement.

The effect of derivative transactions is not significant to the Company's
results of operations or financial position.

NOTE 4 -- ANNUITIES AND OTHER DEPOSIT LIABILITIES

The value of annuities (without mortality/morbidity features) and other deposit
liabilities as of December 31, 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
DECEMBER 31, 1996 1995
-------------------------- ------------
STATEMENT STATEMENT
VALUE FAIR VALUE VALUE
------------ ------------ ------------
(IN MILLIONS)
<S> <C> <C> <C>
Annuities.................................................................... $ 2,554 $ 2,477 $ 2,631
Other deposit liabilities.................................................... 797 797 783

FAIR VALUE
------------

<S> <C>
Annuities.................................................................... $ 2,437
Other deposit liabilities.................................................... 783
</TABLE>

- --------------------------------------------------------------------------------

NOTE 5 -- BENEFIT PLANS

The Company maintains non-contributory defined benefit retirement plans for all
eligible employees and agents as well as a 401(k) plan for eligible employees
and a non-contributory defined contribution plan for all full-time agents. These
plans are funded currently and plan assets of $1.3 billion at December 31, 1996
are primarily included in the separate accounts of the Company. As of January 1,
1996, the most recent actuarial valuation date available, the defined benefit
plans were fully funded.

In addition to pension benefits, the Company provides certain health care and
life insurance benefits ("postretirement benefits") for retired employees.
Substantially all employees may become eligible for these benefits if they reach
retirement age while working for the Company.

Postretirement benefit cost for the year ended December 31, 1996 was a benefit
of $12 million; it includes the expected cost of postretirement benefits for
newly eligible and vested employees and interest cost totaling $6 million offset
by gains from differences between actuarial assumptions and actual experience of

B-23

<PAGE>
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY

$18 million. At December 31, 1996 and 1995, the unfunded postretirement benefit
obligation for retirees and other fully eligible or vested employees was $35
million and $49 million, respectively. The estimated postretirement benefit
obligation for active non-vested employees was $43 million. The discount rate
used to determine the postretirement benefit obligation was 7% and the health
care cost trend rate was 10% in 1996, declining by 1% per year to an ultimate
rate of 5% over 5 years. If the health care cost trend rate assumptions were
increased by 1%, the postretirement benefit obligation as of December 31, 1996
would be increased by $5 million.

At December 31, 1996, the plan assets attributable to postretirement health care
benefits totaled $34 million.

NOTE 6 -- REINSURANCE

The amounts shown in the accompanying consolidated financial statements are net
of reinsurance activity. Reserves at December 31, 1996 are stated net of
reinsurance of $355 million. The effect of reinsurance on premiums and benefits
for the years ended December 31, 1996, 1995 and 1994 are as follows (in
millions):

<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Direct premiums................ $ 7,064 $ 6,452 $ 5,977
Reinsurance ceded.............. (304) (256) (234)
---------- ---------- ----------
Net premiums................... $ 6,760 $ 6,196 $ 5,743
---------- ---------- ----------
---------- ---------- ----------
Benefits to policyholders and
beneficiaries................. $ 7,348 $ 6,818 $ 6,178
Reinsurance recoveries......... (147) (142) (141)
---------- ---------- ----------
Net benefits to policyholders
and beneficiaries............. $ 7,201 $ 6,676 $ 6,037
---------- ---------- ----------
---------- ---------- ----------
</TABLE>

In addition, the Company received credits of $93 million from reinsurers
representing reimbursements of commissions and other expenses. The credits are
included in other income in the consolidated summary of operations.

Reinsurance contracts do not relieve the Company from its obligations to
policyholders. Failure of reinsurers to honor their obligations could result in
losses to the Company; consequently, allowances are established for amounts
deemed uncollectible. The Company evaluates the financial condition of its
reinsurers and monitors concentrations of credit risk arising from similar
geographic regions, activities, or economic characteristics of the reinsurers to
minimize its exposure to significant losses from reinsurer insolvencies.

NOTE 7 -- CONTINGENCIES

In the normal course of business, the Company enters into transactions to reduce
its exposure to fluctuations in interest rates and market volatility. These
instruments may involve credit risk and may also be subject to risk of loss due
to interest rate fluctuations.

The Company has guaranteed certain obligations of its affiliates. These
guarantees totaled approximately $120 million at December 31, 1996 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>
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY

[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, 1996 and 1995, and the related consolidated summary of operations and
consolidated statements of general contingency reserve and of cash flows for
each of the three years in the period ended December 31, 1996. 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 are 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 Insurance
Departments of the states in which the Company and its subsidiary are domiciled
(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, 1996 and 1995, or the results of their operations or
their cash flows for each of the three years in the period ended December 31,
1996 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, 1996 and 1995 and the results of their operations and
their cash flows for each of the three years in the period ended December 31,
1996, on the basis of accounting described in Note 1.

/s/ Price Waterhouse LLP

January 22, 1997

B-25
<PAGE>

TABLE OF CONTENTS

PAGE
----

GENERAL INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-2

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 year ended December 31, 1996)

REPORT OF INDEPENDENT ACCOUNTANTS. . . . . . . . . . . . . . . . . . . . . .B-11
(for year ended December 31, 1996)

FINANCIAL STATEMENTS OF NORTHWESTERN MUTUAL LIFE . . . . . . . . . . . . . .B-12
(for the three years ended December 31, 1996)

REPORT OF INDEPENDENT ACCOUNTANTS. . . . . . . . . . . . . . . . . . . . . .B-25
(for the three years ended December 31, 1996)

B-26
<PAGE>

PART C

OTHER INFORMATION

Item 24. FINANCIAL STATEMENTS AND EXHIBITS

(a) Financial Statements
The financial statements of NML Variable Annuity Account C
and The Northwestern Mutual Life Insurance Company are
included in the Statement of Additional Information.

NML VARIABLE ANNUITY ACCOUNT C (for year ended December 31, 1996)
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, 1996)
Consolidated Statement of Financial Position
Consolidated Summary of Operations
Consolidated Statement of General Contingency Reserve
Consolidated Statement of Cash Flows
Notes to Consolidated Financial Statements
Report of Independent Accountants

(b) Exhibits

EX-99.B11 Consent of Price Waterhouse LLP.

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 March 1,
1997, without regard to their activities relating to variable annuity contracts
or their authority to act or their status as "officers" as that term is used for
certain purposes of the federal securities laws and rules thereunder.

TRUSTEES

Name Business Address
- ---- ----------------

R. Quintus Anderson Aarque Capital Corporation
111 West Second Street
Jamestown, NY 14701

Edward E. Barr Sun Chemical Corporation
222 Bridge Plaza South
Fort Lee, NJ 07024

C-1

<PAGE>

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

Thomas I. Dolan A.O. Smith Corporation
P.O. Box 23971
Milwaukee, WI 53223-0971

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

Stephen F. Keller The Santa Anita Companies
P.O. Box 60014
Arcadia, CA 91066-6014

Barbara A. King Landscape Structures, Inc.
601 - 7th Street South
Delano, MN 55328

C-2

<PAGE>

J. Thomas Lewis Monroe & Lemann
Suite 3300
210 St. Charles Avenue
New Orleans, LA 70170

Daniel F. McKeithan Jr. Tamarack Petroleum Company, Inc.
Suite 1920
777 East Wisconsin Avenue
Milwaukee, WI 53202

Guy A. Osborn Universal Foods Corp.
433 East Michigan Street
Milwaukee, WI 53202

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 Byron 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

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.
1200 Bayhill Drive, Suite 300
San Bruno, CA 94066

Kathryn D. Wriston 870 United Nations Plaza
Apartment 23-A
New York, NY 10017

C-3

<PAGE>

EXECUTIVE OFFICERS

Name Title
- ---- -----

Deborah A. Beck Senior Vice President
William H. Beckley Vice President
Robert J. Berdan Vice President
John M. Bremer Senior 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 W. Ehrenstrom Senior 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 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 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

OTHER OFFICERS

Name Title
- ---- -----

John M. Abbott Associate Director - Benefits Research
Ronald C. Alberts Associate Director-Public Markets
Maria J. Avila Assistant Controller
Michael J. Backus Associate Director of Information Systems
Jerome R. Baier Vice President
John E. Bailey Senior Actuary
Nicholas H. Bandow Assistant Director-Information Systems
Lynn F. Bardele Director - Corporate Services
Walter L. Barlow Assistant Director of Education
David A. Barras Associate Director
Bradford P. Bauer Assistant Director - Advanced Marketing
James M. Baumgartner Officer - Underwriting Standards & Services

C-4

<PAGE>

Beth M. Berger Assistant General Counsel & Assistant
Secretary
James L. Bergschneider Director - Underwriting Services
Frederick W. Bessette Assistant General Counsel & Asst. Secretary
Carrie L. Bleck Assistant Director
D. Rodney Bluhm Assistant General Counsel
Donald T. Bobbs Associate Director
Timothy J. Bohannon Vice President
Margaret Bowe Bonvicini Associate Director - Employment & Affirmative
Action
Willette Bowie Employee Relations Director
Mark C. Boyle Assistant General Counsel & Asst. Secretary
Martin R. Braasch Director - Underwriting Standards & Services
Patricia R. Braeger Assistant Director - Information Systems
Michael R. Buchholz Director - Real Estate Investments
Mary P. Buczynski Assistant Director
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
Thomas A. Carroll Director - Common Stock Division
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 - Advanced Marketing
J. Thomas Christofferson Vice President
Eric P. Christophersen Associate Director
David D. Clark Director - Real Estate Investments
Alan E. Close Associate Controller
Carolyn M. Colbert Assistant Director - New Business
Timothy S. Collins Director
Margaret Winter Combe Director - Corporate Development
Virginia A. Corwin Assistant Director - New Business
Barbara E. Courtney Associate Director
J. Scott Craig Associate Director
Larry A. Curran Actuarial Administrative Officer
Daniel G. Cuske Associate Director - Fixed Income
Brian H. Davidson Associate Director
Thomas H. Davis Associate Director - Information Systems
Jefferson V. De Angelis Vice President - Fixed Income
Nicholas De Fino Assistant Director
David J. Derfus Assistant Controller
Carol A. Detlaf Director - Annuity Services
John Diliberti Assistant Director - New Business
Joseph Dobering, III Director - Underwriting Standards & Services

C-5

<PAGE>

Lisa C. Dodd Associate Actuary
Richard P. Dodd Assistant Director
Daniel C. Dougherty Director - Individual Product Marketing
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 Assistant Director - Field Financial
James R. Eben Assistant General Counsel and Assistant
Secretary
Christina H. Fiasca Director - Policyowner Services
Zenia J. Fieldbinder Assistant Director - Employer Product Services
Richard F. Fisher Senior Actuary
Dennis J. Fitzpatrick Director - Advanced Marketing
Jon T. Flaschner Director - Policyowner Services
Donald Forecki Investment Officer
Phillip B. Franczyk Vice President
Stephen H. Frankel Vice President
Anne A. Frigo Assistant Director
H. Daniel Gardner Vice President & Insurance Counsel
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 K. Gleeson, M.D. Vice President - Medical Director
Mark J. Gmach Assistant Regional Director - Agency
Linda J. Gorens-Levey Associate Director
David Lee Gosse Assistant Director - Disability Benefits
William F. Grady Associate Director of Field Finances
John M. Grogan Assistant General Counsel and Assistant
Secretary
Jill M. Grueninger Associate Director
Thomas C. Guay Associate Director
Colleen M. Gunther Investment Officer
Gerald A. Haas Assistant Director - Information Systems
Stanley K. Hall Assistant Director - Policyowner Services
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 - Individual Annuity
Marketing

C-6

<PAGE>

Jane A. Herman Assistant Director - Term Upgrade
Gary M. Hewitt Vice President & Treasurer
Donna R. Higgins Assistant Director - Information Systems
David L. Hilbert Investment Officer
Susan G. Hill Assistant Director
Hugh L. Hoffman Assistant Director - Information Systems
Richard S. Hoffmann Director - Audit
Susan M. Hoffmann Life Product Officer
Bruce Holmes Associate Actuary
Cindy L. Jackson Associate Director
James C. Jackson Investment Officer
Meg E. Jansky Assistant Director
Michael D. Jaquint Assistant Actuary
Michael P. Johnson Investment Officer
Dolores A. Juergens Associate Director of Restaurant Operations
Marilyn J. Katz Assistant Director - Medical Consultants
Peter Keehn Investment Officer
Michael Kelly Assistant Director
Kevin C. Kennedy Assistant Director - Architecture
James B. Kern Regional Director - Central Region
David R. Keuler Associate Director
Carson D. Keyes Vice President
Donald C. Kiefer Vice President
Mark E. Kishler Investment Officer
Allen B. Kluz Director - Field Financial
Beatrice C. Kmiec Assistant Regional Director - East
Daniel C. Knuth Investment Officer
William S. Koch Assistant Regional Director - Agency
A. Kipp Koester Vice President
John L. Kordsmeier Director - Human Resources
Dennis Korjenek, Jr. Director - Fixed Income
Robert J. Kowalsky Assistant Director - Information Systems
Carol L. Kracht Assistant General Counsel & Asst. Secretary
Todd L. Laszewski Assistant Actuary
Patrick J. Lavin Director - Life & Disability Benefits
Patrick W. Lavin Assistant Treasurer & Assistant Secretary
James L. Lavold Associate Director - Meetings
Russell M. Lemken Assistant Director - Consumer Research
Sally Jo Lewis Assistant General Counsel & Asst. Secretary
Mark P. Lichtenberger Assistant Director - LINK Technical Planning
Steven M. Lindstedt Assistant Director - Information Systems
Melissa C. Lloyd Assistant Director
James Lodermeier Assistant Director - Tax Planning
James G. Loduha Director - Asset Management
George R. Loxton Assistant General Counsel & Assistant
Secretary
Mary M. Lucci Director - New Business
Mark J. Lucius Corporate Information Officer
Jeffrey J. Lueken Associate Director
Merrill C. Lundberg Assistant General Counsel & Asst. Secretary
Jon K. Magalska Associate Actuary

C-7

<PAGE>

Jean M. Maier Director - New Business
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
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 Assistant 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
Kelly H. Mess Investment Officer
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 - Individual Product
Marketing
Randolph J. Musil Assistant Director - Advanced Marketing
David K. Nelson Assistant General Counsel
Ronald C. Nelson Director
James J. Nemec Vice President
Karen M. Niessing Human Resources Officer
Donald L. O'Dell Vice President
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 Assistant Director - Policyowner Services
Dennis L. Paul Assistant General Counsel
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

C-8

<PAGE>

Harvey W. Pogoriler Assistant General Counsel
Gary A. Poliner Vice President
Randolph R. Powell, M.D. Medical Director
Mark A. Prange Associate Director - Information Systems
David R. Remstad Senior Actuary
David R. Retherford Assistant Director of New Business - Central
Stephen M. Rhode Assistant Director - Qualified Benefits
Robert C. Richardson Investment Officer
Richard R. Richter Vice President
Marcia Rimai Vice President - Litigation Counsel
Michael J. Riordan Assistant General Counsel & Secretary
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 Associate Director
Robert K. Roska Associate Director - Information Systems
Sue M. Roska Director - Systems and Services
Robert M. Ruess Vice President
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 - Life Insurance Marketing
Thomas F. Scheer Assistant General Counsel & Asst. Secretary
Carlen A. Schenk Assistant Director
Jane A. Schiltz Director - Individual Product
Emily K. Schleinz Investment Officer
Kathleen H. Schluter Assistant General Counsel & Secretary
Calvin R. Schmidt Assistant Director - Information Systems
Richard A. Schnell Assistant Director - Asset Management
John O. Schnorr Assistant Director
Margaret R. Schoewe Vice President - Information Systems
Todd M. Schoon Assistant Regional Director - Agency
Jeffrey G. Schragin Associate Medical Director
John F. Schroeder Associate Director of Field Office Real Estate
Melva T. Seabron Director
Norman W. Seguin, II Investment Officer - Ad Valorem Taxes
John W. Seifert Director - Real Estate Investments
Catherine L. Shaw Assistant General Counsel & Asst. Secretary
John E. Sheaffer, Jr. Assistant Director - Agent Development
Ronald A. Shuster Assistant Director - Real Estate Investments
Catherine A. Siebert Investment Officer
Janet Z. Silverman Assistant Director - New Business
Stephen M. Silverman Assistant General Counsel
David W. Simbro Senior Actuary
Eugene R. Skaggs Vice President
Paul W. Skalecki Assistant Actuary
Cynthia S. Slavik Assistant Director - Environmental Engineer
Ignatius L. Smetek Director - Common Stocks

C-9

<PAGE>

Lois A. Smith Director - Asset Management
Mark W. Smith Assistant General Counsel & Asst. Secretary
Warren L. Smith, Jr. Investment Officer - Architecture
Steven W. Speer Director - Individual Product Marketing
Robert J. Spellman, M.D. Vice President & Chief Medical Director
Barbara J. Stansberry Director - Administrative Services/Medical
Studies
Jason Steigman Investment Product Officer
Bonnie L. Steindorf Director - Department Operations
Karen J. Stevens Assistant General Counsel & Asst. Secretary
Richard A. Strait Vice President
Linda L. Streifender Associate Director - Training &
Communications
Steven J. Stribling Associate Actuary
Stephen J. Strommen Associate Director - Financial Planning
Theodore H. Strupp Assistant Director
Daniel J. Suprenant Director - Group Disability Marketing
Christopher P. Swain Investment Officer
Steven P. Swanson Vice President
Rachel L. Taknint Assistant General Counsel & Asst. Secretary
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 - Recruitment & Management
Chris J. Torkelson Assistant Director
Thomas W. Towers Associate Director - Public Relations
Linda K. Tredupp Assistant Director - Information Systems
Chris G. Trost Associate Actuary
Julie Van Cleave Director - Common Stock
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
Patricia L. Van Kampen Vice President - Common Stocks
Gloria J. Venski Assistant Director - Disability Benefits
Richard F. Von Haden Director - Real Estate Production
Margaret A. Wainer Assistant Director - Corporate Planning &
Information
William R. Walker Director - Common Stock
Scott E. Wallace Assistant Director - Operations
Hal W. Walter Vice President
Robert J. Waltos Regional Director - Agency
P. Andrew Ware Vice President
Kathleen S. Warner Assistant Director - Asset Management
Mary L. Wehrle-Schnell Associate Director - Information Systems
Daniel T. Weidner Assistant Director - Information Systems
Ronald J. Weir Associate Director - Information Systems
Kenneth D. Weiser Assistant Director - Sales Services
Karen J. Weiss Senior Actuary

C-10

<PAGE>

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 - Individual Product
Marketing
Debra C. Wing Investment Officer
Penelope A. Woodcock Associate Director - Benefit Systems
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. Zweig Director - Technical Support
Robert E. Zysk Director - Tax Compliance

The business addresses for all of the executive officers and other officers is
720 East Wisconsin Avenue, Milwaukee, Wisconsin 53202.

Item 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR OR
REGISTRANT

The subsidiaries of The Northwestern Mutual Life Insurance Company
("Northwestern Mutual Life"), as of December 31, 1996, are set forth on
pages C-12 and C-13. In addition to the subsidiaries set forth on pages C-12
and C-13, the following separate investment accounts (which include the
Registrant) may be deemed to be either controlled by, or under common control
with, Northwestern Mutual Life:

1. NML Variable Annuity Account A
2. NML Variable Annuity Account B
3. NML Variable Annuity Account C
4. Northwestern Mutual Variable Life Account

Northwestern Mutual Series Fund, Inc. (the "Fund") shown on page C-13 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 CHART*

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%
Standard of America Life Insurance Company - 100%
Saskatoon Centre, Limited (inactive) - 100%
Northwestern Mutual Series Fund, Inc. (and its 9 portfolios) - 100%
MGIC Investment Corporation - 18%. 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 - 92.22%. 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. - 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 - 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% * Includes all NML mutual funds
Logan, Inc. - 100% and other corporations of
Baraboo, Inc. - 100% which 50% or more of voting
Mitchell, Inc. - 100% power controlled by NML.
Elizabeth International Sales, Inc. - 100%
Sean International Sales, Inc. - 100% 12-31-96

C-12

<PAGE>

NML CORPORATE STRUCTURE, CONTINUED*

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%
Bradington-Young, Inc. - 50%

* Includes all NML mutual
funds and other corpor-
ations of which 50% or
more of voting power
controlled by NML

12-31-96

C-13

<PAGE>

Item 27. NUMBER OF CONTRACT OWNERS

As of March 31, 1997, the number of contract owners of NML Variable
Annuity Account C was 989. All 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 herein 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
- ---- --------
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
Richard L. Hall President and CEO
Beatrice C. Kmiec Assistant Vice President, Variable Life
Administration
Patrick W. Lavin Assistant Treasurer
Merrill C. Lundberg Secretary
Meridee J. Maynard Vice President, Variable Annuity
Administration and Marketing
Donald Parker Assistant Manager, 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
Carla A. Thoke Manager, Offfice of Supervisory Jurisdiction

C-14

<PAGE>

Julie Van Cleave Vice President - Common Stocks
Patricia L. Van Kampen Vice President - Common Stocks
William R. Walker Vice President
Edward J. Zore Director

The address for each director and officer of NMIS is 720 East Wisconsin Avenue,
Milwaukee, Wisconsin 53202.

(c) During 1996 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 $954,428 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, 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

C-15

<PAGE>

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 C, certifies that it meets all the requirements for
effectiveness of this Amended Registration Statement pursuant to Rule 485(b)
under the Securities Act of 1933 and has duly caused this Amended Registration
Statement to be signed on its behalf, in the City of Milwaukee, and State of
Wisconsin, on the 29th day of April, 1997.

NML VARIABLE ANNUITY ACCOUNT C
(Registrant)

By THE NORTHWESTERN MUTUAL LIFE
INSURANCE COMPANY
(Depositor)

Attest: JOHN M. BREMER By: JAMES D. ERICSON
-------------------- ------------------------------------
John M. Bremer, Senior James D. Ericson, President
Vice President, General and Chief Executive Officer
Counsel and Secretary

As required by the Securities Act of 1933, this Amended Registration
Statement has been signed by the Depositor on the 29th day of April, 1997.

THE NORTHWESTERN MUTUAL LIFE
INSURANCE COMPANY
(Depositor)

Attest: JOHN M. BREMER By: JAMES D. ERICSON
-------------------- ------------------------------------
John M. Bremer, Senior James D. Ericson, Chairman
Vice President, General and Chief Executive Officer
Counsel 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 Dated
April 29, 1997

GARY E. LONG Vice President, Controller
- --------------------------- and Principal Accounting
Gary E. Long Officer

HAROLD B. SMITH* Trustee
- ---------------------------
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 29, 1997
J. E. Gallegos

THOMAS I. DOLAN* Trustee
- ---------------------------
Thomas I. Dolan

KATHRYN D. WRISTON* Trustee
- ---------------------------
Kathryn D. Wriston

BARRY L. WILLIAMS* Trustee
- ---------------------------
Barry L. Williams

GORDON T. BEAHAM III* Trustee
- ---------------------------
Gordon T. Beaham III

DANIEL F. McKEITHAN, JR.* Trustee
- ---------------------------
Daniel F. McKeithan, Jr.

ROBERT E. CARLSON* Trustee
- ---------------------------
Robert E. Carlson

C-18

<PAGE>

EDWARD E. BARR* Trustee
- ---------------------------
Edward E. Barr

ROBERT C. BUCHANAN* Trustee
- ---------------------------
Robert C. Buchanan

SHERWOOD H. SMITH, JR.* Trustee
- ---------------------------
Sherwood H. Smith, Jr.

H. MASON SIZEMORE, JR.* Trustee
- ---------------------------
H. Mason Sizemore, Jr.

JOHN J. STOLLENWERK* Trustee
- ---------------------------
John J. Stollenwerk

GEORGE A. DICKERMAN* Trustee Dated
- --------------------------- April 29, 1997
George A. Dickerman

GUY A. OSBORN* Trustee
- ---------------------------
Guy A. Osborn

JOHN E. STEURI* Trustee
- ---------------------------
John E. Steuri

STEPHEN N. GRAFF* Trustee
- ---------------------------
Stephen N. Graff

BARBARA A. KING* Trustee
- ---------------------------
Barbara A. King

*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, 1996 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 24th day of July, 1996.

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>

THOMAS I. DOLAN Trustee
---------------------------------------
Thomas I. Dolan

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.

C-21

<PAGE>

GUY A. OSBORN Trustee

---------------------------------------
Guy A. Osborn

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. 17 TO
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
FOR
NML VARIABLE ANNUITY ACCOUNT C

Exhibit Number Exhibit Name
- -------------- ------------

EX-99.B11 Consent of Price Waterhouse LLP.

<PAGE>

EX-99.B11

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the use in the Statement of Additional Information
constituting part of this Post-Effective Amendment No. 17 to the registration
statement on Form N-4 (the "Registration Statement") of our report dated January
22, 1997, relating to the financial statements of The Northwestern Mutual Life
Insurance Company, and of our report dated January 22, 1997, relating to the
financial statements of NML Variable Annuity Account C, 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 29, 1997