<PAGE> 1
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. 20 / 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
------------------------------
ROBERT J. BERDAN, Vice President and General Counsel
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 28, 2000 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> 2
NML VARIABLE ANNUITY ACCOUNT C
CROSS-REFERENCE SHEET
<TABLE>
<CAPTION>
N-4, Part A Heading in
Item Prospectus
- ---- ----------
<S> <C>
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 Funds
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
</TABLE>
<PAGE> 3
APRIL 28, 2000
NML VARIABLE ANNUITY ACCOUNT C
Group Combination Annuity Contracts for
Retirement Plans of Self-Employed Persons
and Their Employees
(PHOTO)
NORTHWESTERN MUTUAL The Northwestern Mutual Life
SERIES FUND, INC. AND Insurance Company
RUSSELL INSURANCE FUNDS 720 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
(414) 271-1444
P R O S P E C T U S E S
NORTHWESTERN MUTUAL(TM)
The Quiet Company(R)
<PAGE> 4
P R O S P E C T U S
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") 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"). You
may accumulate funds on a variable or fixed or combination basis. We will pay
retirement benefits in a lump sum or under a variable or fixed annuity payment
plan. Annuity benefits are described in individual certificates issued to
Annuitants.
We fund variable accumulations and retirement benefits through NML Variable
Annuity Account C (the "Account"), our separate account. 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
sixteen Divisions. You may direct how net considerations are allocated among the
Divisions.
We use NML Variable Annuity Account C (the "Account") to keep the money you
invest separate from our general assets. The money in the Account is invested in
the eleven portfolios of Northwestern Mutual Series Fund, Inc. and the five
Russell Insurance Funds. You select the Portfolios or Funds in which you want to
invest. Northwestern Mutual Series Fund, Inc.: Small Cap Growth Stock,
Aggressive Growth Stock, International Equity, Index 400 Stock, Growth Stock,
Growth and Income Stock, Index 500 Stock, Balanced, High Yield Bond, Select
Bond, Money Market. Russell Insurance Funds: Multi-Style Equity, Aggressive
Equity, Non-U.S., Real Estate Securities, Core Bond.
The Account has 16 Divisions that correspond to the 11 Portfolios and 5 Funds in
which you may invest. The Contracts also permit you to invest on a fixed basis,
at rates that we determine. This prospectus describes only the Account and the
variable provisions of the Contracts except where there are specific references
to the fixed provisions.
We offer two versions of the Contracts: front-load Contracts and simplified-load
Contracts. (See "Expense Table", p. 3, and "Deductions", p. 15.)
This prospectus is a concise description of the information you should know
before you buy a Contract. We have filed additional information about the
Contracts with the Securities and Exchange Commission in a Statement of
Additional Information. We incorporate the Statement of Additional Information
into this prospectus by reference. We will send you the Statement of Additional
Information without charge if you write to The Northwestern Mutual Life
Insurance Company, 720 East Wisconsin Avenue, Milwaukee, Wisconsin, 53202, or
call us at Telephone Number 1-888-455-2232. You will find the table of contents
for the Statement of Additional Information following page 16 of this
prospectus.
This prospectus is valid only when accompanied by the current prospectuses for
Northwestern Mutual Series Fund, Inc. and Russell Insurance Funds which are
attached to this prospectus. You should retain this prospectus for future
reference.
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy of this prospectus. Any representation to
the contrary is a criminal offense.
The Date of this prospectus and the Statement of Additional Information is April
28, 2000.
1
<PAGE> 5
CONTENTS FOR THIS PROSPECTUS
<TABLE>
<CAPTION>
PAGE PAGE
---- ----
<S> <C> <C> <C>
PROSPECTUS......................................1 Amount of Annuity Payments..............13
Group Combination Annuity Contracts
NML Variable Annuity Account C................1 Assumed Investment Rate.................13
INDEX OF SPECIAL TERMS..........................3 Additional Information...................13
Penalty Tax on Premature Payments..............3 Transfers Between Divisions and
Payment Plans..........................13
EXPENSE TABLE...................................3
Owners of the Contracts.................13
ACCUMULATION UNIT VALUES........................6
Deferment of Benefit Payments...........13
THE COMPANY....................................10
Dividends...............................13
NML VARIABLE ANNUITY
ACCOUNT C.....................................10 Substitution and Change.................14
THE FUNDS......................................10 Amendments and Termination..............14
Financial Statements....................14
THE CONTRACTS..................................11
FEDERAL INCOME TAXES......................14
Unallocated Group Annuity Contracts...........11
Purchase Payments Under the Contracts.........11 Contribution Limits......................14
Amount and Frequency.........................11 Taxation of Contract Benefits............14
Application of Purchase Payments.............11 Minimum Distribution Requirement.........15
Taxation of Northwestern Mutual..........15
Net Investment Factor.........................12
DEDUCTIONS................................15
Benefits Provided Under the Contracts.........12
DISTRIBUTION OF THE
Surrender or Withdrawal Value...............12 CONTRACTS................................16
Retirement Benefits.........................12
CONTRACTS ISSUED PRIOR TO
Variable Payment Plans........................12 JANUARY 1, 1992..........................16
Description of Payment Plans...........12
</TABLE>
THE TABLE OF CONTENTS FOR THE STATEMENT OF ADDITIONAL INFORMATION
APPEARS ON THE PAGE FOLLOWING PAGE 16 OF THIS PROSPECTUS.
2
<PAGE> 6
INDEX OF SPECIAL TERMS
The following special terms used in this prospectus are discussed at the pages
indicated.
<TABLE>
<CAPTION>
TERM PAGE TERM PAGE
- ---- ---- ---- ----
<S> <C> <C> <C>
ACCUMULATION UNIT................................11 ANNUITANT......................................11
ANNUITY (or ANNUITY PAYMENTS)....................11 OWNER..........................................13
NET INVESTMENT FACTOR............................12 PAYMENT PLANS..................................12
SURRENDER OR WITHDRAWAL VALUE....................12
</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. 14.)
EXPENSE TABLE
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 and Expense Risk Fees................0.65%
Other Expenses.................................None
Total Separate Account Annual Expenses.........0.65%
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 and Expense Risk Fees................1.25%
Other Expenses.................................None
Total Separate Account Annual Expenses.........1.25%
<TABLE>
<CAPTION>
ANNUAL EXPENSES OF THE PORTFOLIOS AND FUNDS
(AS A PERCENTAGE OF THE ASSETS) MANAGEMENT
- ------------------------------- ---------- TOTAL ANNUAL
FEES (AFTER EXPENSES
----------- OTHER (AFTER EXPENSE
FEE WAIVER) EXPENSES REIMBURSEMENT)
----------- --------- ---------------
Northwestern Mutual Series Fund, Inc.
- -------------------------------------
<S> <C> <C> <C> >
Small Cap Growth Stock* 0.79% 0.21% 1.00%
Aggressive Growth Stock 0.51% 0.00% 0.51%
International Equity 0.67% 0.07% 0.74%
Index 400 Stock* 0.25% 0.10% 0.35%
Growth Stock 0.43% 0.00% 0.43%
Growth and Income Stock 0.57% 0.00% 0.57%
Index 500 Stock 0.20% 0.00% 0.20%
Balanced 0.30% 0.00% 0.30%
High Yield Bond 0.49% 0.01% 0.50%
Select Bond 0.30% 0.00% 0.30%
Money Market 0.30% 0.00% 0.30%
Russell Insurance Funds*
- -------------------------
Multi-Style Equity 0.49% 0.43% 0.92%
Aggressive Equity 0.53% 0.72% 1.25%
Non-U.S. 0.00% 1.30% 1.30%
Real Estate Securities 0.85% 0.30% 1.15%
Core Bond 0.12% 0.68% 0.80%
</TABLE>
- -------------------
* For the Russell Insurance Funds (the "Fund"), the Small Cap Growth Stock
Portfolio and the Index 400 Stock Portfolio (the "Portfolios"), the adviser has
voluntarily agreed to waive a portion of the management fee, up to the full
amount of the fee, equal to the amount by which the Fund's and Portfolios' total
operating expenses exceed the amounts shown above under "Total Annual Expenses
(After Expense Reimbursement)". The adviser has also agreed to reimburse the
Fund and Portfolios for all remaining expenses after fee waivers which exceed
the amounts shown above under that heading. Absent the fee waiver and expense
reimbursement, the management fees and total annual expenses would be 0.78% and
0.93% for the Multi-Style Equity Fund; 0.95% and 1.34% for the Aggressive Equity
Fund; 0.95% and 1.50% for the Non-U.S. Fund; 0.85% and 1.15% for the Real Estate
Securities Fund; 0.60% and 0.86% for the Core Bond Fund; 0.79% and 1.03% for the
Small Cap Growth Stock Portfolio; and 0.25% and 0.46% for the Index 400 Stock
Portfolio.
3
<PAGE> 7
EXAMPLE
FRONT-LOAD CONTRACT - The plan would pay the following expenses on each $1,000
investment, assuming 5% annual return:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------ ------- --------
Northwestern Mutual Series Fund, Inc.
- --------------------------------------
<S> <C> <C> <C> <C>
Small Cap Growth Stock $61 $ 95 $131 $232
Aggressive Growth Stock $56 $ 80 $106 $180
International Equity $59 $ 87 $118 $204
Index 400 Stock $55 $ 75 $ 98 $162
Growth Stock $56 $ 78 $102 $171
Growth and Income Stock $57 $ 82 $109 $186
Index 500 Stock $53 $ 71 $ 90 $145
Balanced $54 $ 74 $ 95 $156
High Yield Bond $56 $ 80 $105 $178
Select Bond $54 $ 74 $ 95 $156
Money Market $54 $ 74 $ 95 $156
Russell Insurance Funds
- ------------------------
Multi-Style Equity $60 $ 92 $127 $223
Aggressive Equity $63 $102 $143 $257
Non-U.S. $64 $103 $145 $262
Real Estate Securities $62 $ 99 $138 $247
Core Bond $59 $ 89 $121 $211
SIMPLIFIED LOAD CONTRACT - The plan would pay the following expenses on each
$1,000 investment, assuming 5% annual return:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
Northwestern Mutual Series Fund, Inc.
- --------------------------------------
Small Cap Growth Stock $24 $72 $122 $260
Aggressive Growth Stock $19 $57 $ 97 $209
International Equity $22 $64 $109 $233
Index 400 Stock $18 $52 $ 89 $191
Growth Stock $19 $54 $ 93 $200
Growth and Income Stock $20 $59 $100 $215
Index 500 Stock $16 $47 $ 81 $175
Balanced $17 $50 $ 86 $186
High Yield Bond $19 $57 $ 96 $207
Select Bond $17 $50 $ 86 $186
Money Market $17 $50 $ 86 $186
Russell Insurance Funds
- -------------------------
Multi-Style Equity $24 $69 $118 $252
Aggressive Equity $27 $79 $134 $285
Non-U.S. $27 $81 $137 $290
Real Estate Securities $26 $76 $129 $275
Core Bond $22 $66 $112 $239
</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 INSTALLATION FEE OF $750 IS DIVIDED BETWEEN THE FUNDS
FOR THE SIMPLIFIED-LOAD FEE TABLE. 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 you in understanding the expenses
paid by the Account and the Portfolios and Funds 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. The table does not include any expenses for premium taxes. We
currently make no charges for premium taxes. See "Deductions", p. 15 for
additional information about expenses for the Contracts. The expenses shown in
the table for the Portfolios and Funds show the annual expenses for each, as a
4
<PAGE> 8
percentage of their average net assets, based on 1999 operations for the
Portfolios and their predecessors and the Funds. Expenses for each of the
Russell Insurance Funds reflect fee waivers and expense reimbursements that the
Funds' adviser has voluntarily agreed to make for 2000. These may be changed at
any time without notice. Absent the fee waivers and expense reimbursements the
expenses would be higher. See the disclosure at the bottom of page 3. For
additional information about expenses of the Portfolios and Funds, see the
prospectuses for Northwestern Mutual Series Fund, Inc. and the Russell Insurance
Funds attached to this prospectus.
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.
5
<PAGE> 9
ACCUMULATION UNIT VALUES
CONTRACTS ISSUED AFTER DECEMBER 31, 1991
NORTHWESTERN MUTUAL SERIES, FUND, INC.
FOR THE YEARS ENDED DECEMBER 31
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995 1994 1993 1992
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SMALL CAP GROWTH STOCK
DIVISION
Front Load Version
Beginning of Period* $1.000 -- -- -- -- -- -- --
End of Period $1.853 -- -- -- -- -- -- --
Simplified Load Version
Beginning of Period* $1.000 -- -- -- -- -- -- --
End of Period $1.846 -- -- -- -- -- -- --
Number of Units
Outstanding, End of
Period
Front Load 73,643 -- -- -- -- -- -- --
Simplified Load 360,069 -- -- -- -- -- -- --
AGGRESSIVE GROWTH STOCK
DIVISION
Front Load Version
Beginning of Period $2.512 $2.350 $2.078 $1.777 $1.284 $1.226 $1.036 $0.984
End of Period $3.588 $2.512 $2.350 $2.078 $1.777 $1.284 $1.226 $1.036
Simplified Load Version
Beginning of Period $3.822 $3.598 $3.200 $2.753 $2.001 $1.922 $1.634 $1.562
End of Period $5.428 $3.822 $3.598 $3.200 $2.753 $2.001 $1.922 $1.634
Number of Units
Outstanding, End of
Period
Front Load 2,776,961 2,921,309 3,169,006 3,197,341 2,242,402 1,206,187 1,370,746 821,911
Simplified Load 6,707,103 8,671,088 8,989,193 7,872,553 5,316,689 3,503,170 1,538,447 411,718
INTERNATIONAL EQUITY
DIVISION
Front Load Version
Beginning of Period** $1.958 $1.881 $1.686 $1.402 $1.232 $1.241 $1.000 --
End of Period $2.391 $1.958 $1.881 $1.686 $1.402 $1.232 $1.241 --
Simplified Load Version
Beginning of Period** $1.893 $1.829 $1.649 $1.380 $1.220 $1.236 $1.000 --
End of Period $2.298 $1.893 $1.829 $1.649 $1.380 $1.220 $1.236 --
Number of Units
Outstanding, End of
Period
Front Load 2,301,771 2,807,888 3,021,349 2,709,249 2,009,228 1,453,091 743,216 --
Simplified Load 5,480,221 6,652,248 7,247,144 5,703,032 3,972,573 2,764,466 591,810 --
INDEX 400 STOCK DIVISION
Front Load Version
Beginning of Period* $1.000 -- -- -- -- -- -- --
End of Period $1.123 -- -- -- -- -- -- --
Simplified Load Version
Beginning of Period* $1.000 -- -- -- -- -- -- --
End of Period $1.119 -- -- -- -- -- -- --
Number of Units
Outstanding, End of
Period
Front Load 13,563 -- -- -- -- -- -- --
Simplified Load 398,635 -- -- -- -- -- -- --
GROWTH STOCK DIVISION
Front Load Version
Beginning of Period+ $2.561 $2.035 $1.577 $1.313 $1.010 $1.000 -- --
End of Period $3.117 $2.561 $2.035 $1.577 $1.313 $1.010 -- --
Simplified Load Version
Beginning of Period+ $2.491 $1.991 $1.552 $1.300 $1.006 $1.000 -- --
End of Period $3.013 $2.491 $1.991 $1.552 $1.300 $1.006 -- --
Number of Units
Outstanding, End of
Period
Front Load 995,796 845,190 710,110 587,482 361,207 149,268 -- --
Simplified Load 3,646,722 3,373,983 2,159,985 1,742,522 586,644 177,918 -- --
GROWTH AND INCOME STOCK
DIVISION
Front Load Version
Beginning of Period+ $2.449 $2.002 $1.550 $1.300 $0.998 $1.000 -- --
End of Period $2.615 $2.449 $2.002 $1.550 $1.300 $0.998 -- --
Simplified Load Version
Beginning of Period+ $2.382 $1.959 $1.525 $1.287 $0.994 $1.000 -- --
End of Period $2.528 $2.382 $1.959 $1.525 $1.287 $0.994 -- --
Number of Units
Outstanding, End of
Period
Front Load 1,704,699 2,452,149 1,970,478 1,357,354 861,211 418,974 -- --
Simplified Load 5,912,799 5,876,089 4,547,004 2,769,823 1,733,022 745,425 -- --
</TABLE>
* The initial investments in Small Cap Growth Stock Division and the Index 400
Stock Division were made on April 30, 1999.
** The initial investment in the International Equity Division was made on
April 30, 1993.
+ The initial investments in the Growth Stock Division and Growth and Income
Stock Division were made on May 3, 1994.
6
<PAGE> 10
ACCUMULATION UNIT VALUES
CONTRACTS ISSUED AFTER DECEMBER 31, 1991 (CONTINUED)
NORTHWESTERN MUTUAL SERIES FUND, INC.
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31
1999 1998 1997 1996 1995 1994 1993 1992
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INDEX 500 STOCK DIVISION
Front Load Version
Beginning of Period $3.279 $2.564 $1.937 $1.588 $1.165 $1.159 $1.062 $0.997
End of Period $3.938 $3.279 $2.564 $1.937 $1.588 $1.165 $1.159 $1.062
Simplified Load Version
Beginning of Period $4.119 $3.240 $2.463 $2.032 $1.499 $1.500 $1.384 $1.306
End of Period $4.919 $4.119 $3.240 $2.463 $2.032 $1.499 $1.500 $1.384
Number of Units
Outstanding, End of
Period
Front Load 4,131,824 4,231,423 3,966,706 3,880,961 2,399,586 1,918,074 1,919,768 921,624
Simplified Load 9,809,484 10,493,642 9,442,314 8,015,553 5,080,179 3,939,802 2,767,397 599,961
BALANCED DIVISION
Front Load Version
Beginning of Period $2.281 $1.931 $1.600 $1.419 $1.130 $1.138 $1.045 $0.999
End of Period $2.520 $2.281 $1.931 $1.600 $1.419 $1.130 $1.138 $1.045
Simplified Load Version
Beginning of Period $6.805 $5.796 $4.830 $4.311 $3.453 $3.497 $3.232 $3.107
End of Period $7.473 $6.805 $5.796 $4.830 $4.311 $3.453 $3.497 $3.232
Number of Units
Outstanding, End of
Period
Front Load 6,183,051 6,324,558 6,187,478 5,934,240 5,275,308 3,879,218 4,987,943 3,980,687
Simplified Load 6,319,468 7,165,398 6,839,439 5,971,232 4,902,410 4,108,593 3,002,098 1,445,698
HIGH YIELD BOND DIVISION
Front Load Version
Beginning of Period* $1.590 $1.630 $1.416 $1.190 $1.026 $1.000 -- --
End of Period $1.572 $1.590 $1.630 $1.416 $1.190 $1.026 -- --
Simplified Load Version
Beginning of Period* $1.546 $1.595 $1.394 $1.178 $1.022 $1.000 -- --
End of Period $1.520 $1.546 $1.595 $1.394 $1.178 $1.022 -- --
Number of Units
Outstanding, End of
Period
Front Load 409,857 441,272 423,726 275,323 90,184 47,321 -- --
Simplified Load 1,556,400 1,917,813 1,219,819 626,090 313,810 149,862 -- --
SELECT BOND DIVISION
Front Load Version
Beginning of Period $1.585 $1.490 $1.370 $1.335 $1.128 $1.169 $1.066 $1.003
End of Period $1.559 $1.585 $1.490 $1.370 $1.335 $1.128 $1.169 $1.066
Simplified Load Version
Beginning of Period $7.157 $6.768 $6.261 $6.137 $5.217 $5.437 $4.990 $4.722
End of Period $6.996 $7.157 $6.768 $6.261 $6.137 $5.217 $5.437 $4.990
Number of Units
Outstanding, End of
Period
Front Load 2,264,883 2,718,375 2,574,248 2,676,832 1,800,898 1,668,091 2,389,345 736,697
Simplified Load 1,068,272 1,231,485 1,034,899 966,414 677,396 503,763 328,979 133,930
MONEY MARKET DIVISION
Beginning of Period $1.308 $1.249 $1.192 $1.140 $1.084 $1.048 $1.026 $0.999
End of Period $1.366 $1.308 $1.249 $1.192 $1.140 $1.084 $1.048 $1.026
Simplified Load Version
Beginning of Period $2.436 $2.340 $2.246 $2.161 $2.067 $2.012 $1.980 $1.940
End of Period $2.529 $2.436 $2.340 $2.246 $2.161 $2.067 $2.012 $1.980
Number of Units
Outstanding, End of
Period
Front Load 1,879,181 1,905,815 1,710,473 2,829,669 2,956,017 3,313,061 218,747 127,838
Simplified Load 6,539,184 6,483,460 5,844,682 3,818,067 1,890,645 1,453,033 810,405 485,704
</TABLE>
* The initial investment in the High Yield Bond Division was made on May 3,
1994.
7
<PAGE> 11
ACCUMULATION UNIT VALUES
CONTRACTS ISSUED AFTER DECEMBER 31, 1991 (CONTINUED)
RUSSELL INSURANCE FUNDS
- -----------------------
<TABLE>
<CAPTION>
FOR THE EIGHT MONTHS ENDED FOR THE EIGHT MONTHS ENDED
-------------------------- --------------------------
DECEMBER 31 DECEMBER 31
----------- -----------
1999 1999
---- ----
<S> <C> <C> <C>
MULTI-STYLE EQUITY DIVISION REAL ESTATE SECURITIES DIVISION
Front Load Version Front Load Version
Beginning of Period* $1.000 Beginning of Period* $1.000
End of Period $1.071 End of Period $0.923
Simplified Load Version Simplified Load Version
Beginning of Period* $1.000 Beginning of Period* $1.000
End of Period $1.067 End of Period $0.920
Number of Units Number of Units
Outstanding, End of Period Outstanding, End of Period
Front Load 297,016 Front Load 36,624
Simplified Load 1,126,401 Simplified Load 36,814
AGGRESSIVE EQUITY DIVISION CORE BOND DIVISION
Front Load Version Front Load Version
Beginning of Period* $1.000 Beginning of Period* $1.000
End of Period $1.104 End of Period $0.987
Simplified Load Version Simplified Load Version
Beginning of Period* $1.000 Beginning of Period* $1.000
End of Period $1.100 End of Period $0.983
Number of Units Number of Units
Outstanding, End of Period Outstanding, End of Period
Front Load 79,144 Front Load 239,265
Simplified Load 230,607 Simplified Load 150,425
NON-U.S. DIVISION
Front Load Version
Beginning of Period* $1.000
End of Period $1.248
Simplified Load Version
Beginning of Period* $1.000
End of Period $1.243
Number of Units
Outstanding, End of Period
Front Load 151,721
Simplified Load 297,512
</TABLE>
*The initial investment was made on April 30, 1999.
8
<PAGE> 12
ACCUMULATION UNIT VALUES
CONTRACTS ISSUED BETWEEN APRIL 30, 1984 AND DECEMBER 31, 1991
NORTHWESTERN MUTUAL SERIES FUND, INC.
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31
---------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995 1994
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
SMALL CAP GROWTH STOCK DIVISION
Beginning of Period# $10.000 -- -- -- -- --
End of Period $18.611 -- -- -- -- --
Number of Units
Outstanding, End of Period 7,543 -- -- -- -- --
AGGRESSIVE GROWTH STOCK DIVISION
Beginning of Period* $39.854 $37.055 $32.543 $27.649 $19.849 $18.832
End of Period $57.304 $39.854 $37.055 $32.543 $27.649 $19.849
Number of Units
Outstanding, End of Period 1,627,058 1,801,179 1,935,434 1,944,411 1,397,885 1,239,328
INTERNATIONAL EQUITY DIVISION
Beginning of Period** $2.032 $1.938 $1.726 $1.427 $1.245 $1.246
End of Period $2.497 $2.032 $1.938 $1.726 $1.427 $1.245
Number of Units
Outstanding, End of Period 18,571,580 20,139,790 23,069,550 20,439,570 14,747,734 15,153,296
INDEX 400 STOCK DIVISION
Beginning of Period# $10.000 -- -- -- -- --
End of Period $11.283 -- -- -- -- --
Number of Units
Outstanding, End of Period 1,071 -- -- -- -- --
GROWTH STOCK DIVISION
Beginning of Period+ $26.399 $20.837 $16.047 $13.272 $10.145 --
End of Period $32.337 $26.399 $20.837 $16.047 $13.272 --
Number of Units
Outstanding, End of Period 792,443 651,556 482,897 378,236 63,881 --
GROWTH AND INCOME STOCK DIVISION
Beginning of Period+ $25.246 $20.502 $15.767 $13.143 $10.024 --
End of Period $27.135 $25.246 $20.502 $15,767 $13.143 --
Number of Units
Outstanding, End of Period 798,291 801,964 711,558 424,144 117,004 --
INDEX 500 STOCK DIVISION
Beginning of Period++ $46.522 $36.142 $27.134 $22.105 $16.105 $15.916
End of Period $56.250 $46.522 $36.142 $27.134 $22.105 $16.105
Number of Units
Outstanding, End of Period 2,756,358 2,699,180 2,558,205 2,386,284 2,232,983 2,284,637
BALANCED DIVISION
Beginning of Period $84.987 $71.491 $58.832 $51.856 $28.39 $41.029
End of Period $94.505 $84.987 $71.491 $58.832 $28.69 $51.856
Number of Units
Outstanding, End of Period 1,066,998 1,211,837 1,341,930 1,489,658 2,853,4 1,889,324
HIGH YIELD BOND DIVISION
Beginning of Period+ $16.385 $16.693 $14.409 $12.030 $10.302 --
End of Period $16.310 $16.385 $16.693 $14.409 $12.030 --
Number of Units
Outstanding, End of Period 205,407 301,661 235,585 119,423 21,583 --
SELECT BOND DIVISION
Beginning of Period $89.873 $83.939 $76.682 $74.223 $62.322 $64.139
End of Period $88.954 $89.873 $83.939 $76.682 $74.223 $62.322
Number of Units
Outstanding, End of Period 72,428 84,033 85,036 97,868 124,163 150,232
MONEY MARKET DIVISION
Beginning of Period $28.924 $27.435 $26.011 $24.706 $23.346 $22.436
End of Period $30.400 $28.924 $27.435 $26.011 $24.706 $23.346
Number of Units
Outstanding, End of Period 7,939 45,209 38,584 57,013 62,209 200,510
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31
--------------------------------------------------------------
1993 1992 1991 1990
---- ---- ---- ----
<S> <C> <C> <C> <C>
SMALL CAP GROWTH STOCK DIVISION
Beginning of Period# -- -- -- --
End of Period -- -- -- --
Number of Units
Outstanding, End of Period -- -- -- --
AGGRESSIVE GROWTH STOCK DIVISION
Beginning of Period* $15.810 $14.923 $10.000 --
End of Period $18.832 $15.810 $14.923 --
Number of Units
Outstanding, End of Period 910,764 594,531 40,650 --
INTERNATIONAL EQUITY DIVISION
Beginning of Period** $1.000 -- -- --
End of Period $1.246 -- -- --
Number of Units
Outstanding, End of Period 1,128,950 -- -- --
INDEX 400 STOCK DIVISION
Beginning of Period# -- -- -- --
End of Period -- -- -- --
Number of Units
Outstanding, End of Period -- -- -- --
GROWTH STOCK DIVISION
Beginning of Period+ -- -- -- --
End of Period -- -- -- --
Number of Units
Outstanding, End of Period -- -- -- --
GROWTH AND INCOME STOCK DIVISION
Beginning of Period+ -- -- -- --
End of Period -- -- -- --
Number of Units
Outstanding, End of Period -- -- -- --
INDEX 500 STOCK DIVISION
Beginning of Period++ $14.500 $13.519 $10.000 --
End of Period $15.916 $14.500 $13.519 --
Number of Units
Outstanding, End of Period 2,454,444 246,820 36,842 --
BALANCED DIVISION
Beginning of Period $41.036 $37.449 $35.557 $28.690
End of Period $41.029 $41.036 $37.449 $35.557
Number of Units
Outstanding, End of Period 2,327,834 2,660,165 2,787,942 2,872,612
HIGH YIELD BOND DIVISION
Beginning of Period+ -- -- -- --
End of Period -- -- -- --
Number of Units
Outstanding, End of Period -- -- -- --
SELECT BOND DIVISION
Beginning of Period $58.132 $54.335 $46.489 $42.915
End of Period $64.139 $58.132 $54.335 $46.489
Number of Units
Outstanding, End of Period 157,630 170,104 162,656 139,272
MONEY MARKET DIVISION
Beginning of Period $21.814 $21.110 $19.973 $18.488
End of Period $22.436 $21.814 $21.110 $19.973
Number of Units
Outstanding, End of Period 341,361 355,217 476,920 427,960
</TABLE>
# The initial investments in the Small Cap Growth Stock Division and the Index
400 Stock Division were made on April 30, 1999.
* The initial investment in the Aggressive Growth Stock Division was made on
January 25, 1991.
** The initial investment in the International Equity Division was made on April
30, 1993.
+ The initial investments in the Growth Stock Division, Growth and Income Stock
Division, and High Yield Bond Division were made on May 3, 1994.
++ The initial investment in the Index 500 Stock Division was made on January
16, 1991.
9
<PAGE> 13
ACCUMULATION UNIT VALUES
CONTRACTS ISSUED BETWEEN APRIL 30, 1984 AND DECEMBER 31, 1991 (CONTINUED)
RUSSELL INSURANCE FUNDS
- -----------------------
<TABLE>
<CAPTION>
FOR THE EIGHT MONTHS ENDED FOR THE EIGHT MONTHS ENDED
-------------------------- --------------------------
DECEMBER 31 DECEMBER 31
----------- -----------
1999 1999
---- ----
<S> <C> <C> <C>
MULTI-STYLE EQUITY DIVISION REAL ESTATE SECURITIES DIVISION
Beginning of Period* $10.000 Beginning of Period* $10.000
End of Period $10.760 End of Period $9.274
Number of Units Number of Units
Outstanding, End of Period 17,246 Outstanding, End of Period 3,723
AGGRESSIVE EQUITY DIVISION CORE BOND DIVISION
Beginning of Period* $10.000 Beginning of Period* $10.000
End of Period $11.091 End of Period $9.914
Number of Units Number of Units
Outstanding, End of Period 950 Outstanding, End of Period 0
NON-U.S. DIVISION
Beginning of Period* $10.000
End of Period $12.534
Number of Units
Outstanding, End of Period 0
</TABLE>
*The initial investment was made on April 30, 1999.
- --------------------------------------------------------------------------------
THE COMPANY
The Northwestern Mutual Life Insurance Company was organized by a special act of
the Wisconsin Legislature in 1857. It is the nation's fifth largest life
insurance company, based on total assets in excess of $85 billion on December
31, 1999, and is licensed to conduct a conventional life insurance business in
the District of Columbia and in all states of the United States.
Northwestern Mutual sells life and disability insurance policies and annuity
contracts through its own field force of approximately 6,000 full time producing
agents. The Home Office of Northwestern Mutual is located at 720 East Wisconsin
Avenue, Milwaukee, Wisconsin 53202.
"We" in this prospectus means Northwestern Mutual.
- --------------------------------------------------------------------------------
NML VARIABLE ANNUITY ACCOUNT C
We established the Account on July 22, 1970 by action of our Board of Trustees
in accordance with the provisions of the Wisconsin insurance law.
The Account has sixteen Divisions. The money you invest to provide variable
benefits under your Contract is placed in one or more of the Divisions as you
direct.
Under Wisconsin law, the investment operations of the Account are kept separate
from our other operations. The values for your Contract will not be affected by
income, gains or losses for the rest of our business. The income, gains or
losses, realized or unrealized, for the assets we place in the Account for your
Contract will determine the value of your Contract benefits and will not affect
the rest of our business. The assets in the Account are reserved for you and
other Contract owners, although the assets belong to us and we do not hold the
assets as a trustee. We and our creditors cannot reach those assets to satisfy
other obligations until our obligations under your Contract have been satisfied.
But all of our assets (except those we hold in some other separate accounts) are
available to satisfy our obligations under your Contract.
The Account is not registered as an investment company under the Investment
Company Act of 1940.
- --------------------------------------------------------------------------------
THE FUNDS
Northwestern Mutual Series Fund, Inc. is composed of eleven separate portfolios
which operate as separate mutual funds. The portfolios are the Small Cap Growth
Stock Portfolio, Aggressive Growth Stock Portfolio, International Equity
Portfolio, Index 400 Stock Portfolio, Growth Stock Portfolio, Growth and Income
Stock Portfolio, Index 500 Stock Portfolio, Balanced Portfolio, High Yield Bond
Portfolio, Select Bond Portfolio and Money Market Portfolio. The Account buys
shares of each Portfolio at net asset value, that is, without any sales charge.
Northwestern Mutual Investment Services, LLC ("NMIS"), our wholly-owned
subsidiary, is the investment adviser to the Fund. We provide the people and
facilities that NMIS uses in performing its
10
<PAGE> 14
investment advisory functions, and we are a party to the investment advisory
agreement. We and NMIS also perform certain administrative functions and act as
co-depositors of the Account. NMIS has retained J.P. Morgan Investment
Management, Inc. and Templeton Investment Counsel, Inc. under investment
sub-advisory agreements to provide investment advice to the Growth and Income
Stock Portfolio and the International Equity Portfolio.
The Russell Insurance Funds include five separate portfolios which operate as
separate mutual funds. These are the Multi-Style Equity Fund, Aggressive Equity
Fund, Non-U.S. Fund, Real Estate Securities Fund and Core Bond Fund. The Account
buys shares of each of the Russell Insurance Funds at net asset value, that is,
without any sales charge.
The assets of each of the Russell Insurance Funds are invested by one or more
investment management organizations researched and recommended by Frank Russell
Company ("Russell"), and an affiliate of Russell, Frank Russell Investment
Management Company ("FRIMCo"). FRIMCo also advises, operates and administers the
Russell Insurance Funds. Russell is our majority-owned subsidiary.
FOR MORE INFORMATION REGARDING THE MUTUAL FUNDS, INCLUDING INFORMATION ABOUT
THEIR INVESTMENT OBJECTIVES AND EXPENSES, SEE THE PROSPECTUSES FOR NORTHWESTERN
MUTUAL SERIES FUND, INC. AND RUSSELL INSURANCE FUNDS ATTACHED TO THIS
PROSPECTUS. YOU SHOULD READ THE MUTUAL FUND PROSPECTUSES CAREFULLY BEFORE YOU
INVEST IN THE CONTRACTS.
- --------------------------------------------------------------------------------
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, you may direct us to pay annuity benefits to the participant.
(See "Retirement Benefits", p. 12). We will then issue the Annuitant a
Certificate describing the benefits which have been selected. (See "Variable
Payment Plans", p. 12.) Benefits available to Participants are determined
entirely by the provisions of the Plan or Trust.
PURCHASE PAYMENTS UNDER THE CONTRACTS
AMOUNT AND FREQUENCY You determine the amount and frequency of purchase payments
subject to the provisions of the Plan or Trust. You may pay larger or additional
purchase payments. However, we 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.
You may pay purchase payments monthly, quarterly, semiannually, annually or on
any other frequency acceptable to us. If a purchase payment is not paid when
due, or if we decline to accept a purchase payment as provided above, the
Contract will continue in force unless you redeem all Accumulation Units for
their value. You may resume payment of purchase payments at any time the
Contract is in force.
APPLICATION OF PURCHASE PAYMENTS We credit net purchase payments to your
Contract, after deduction of any sales load or installation fee, and we allocate
the payments as you direct. To the extent that you direct a net purchase payment
to accumulate on a variable basis we place it in the Account and allocate it to
one or more Divisions. Assets we allocate to each Division we thereupon invest
in shares of the Portfolio or Fund which corresponds to that Division. If we
receive no allocation instructions, we will place the net purchase payment in
the Money Market Division.
We apply payments we place in the Account to provide "Accumulation Units" in one
or more Divisions. Accumulation Units represent your interest 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 next valuation of the
assets of the Division we make after we receive your purchase payment at our
Home Office. Receipt of purchase payments at a lockbox facility we have
designated will be considered the same as receipt at the Home Office. We value
assets as of the close of trading on the New York Stock Exchange for each day
the Exchange is open.
The number of your 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 your
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 or Fund. We determine the value of an
Accumulation Unit on any date 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", p. 12.) Since you bear the
investment risk, there is no guarantee as to the aggregate value of your
Accumulation Unit. That value may be less than, equal to or more than the
cumulative net purchase payments you have made.
11
<PAGE> 15
NET INVESTMENT FACTOR
For each Division the net investment factor for any period ending on a valuation
date is 1.000000 plus the net investment rate for the Division for that period.
Under the Contract the net investment rate is related to the assets of the
Division. However, since all amounts are simultaneously invested in shares of
the corresponding Portfolio or Fund when allocated to the Division, calculation
of the net investment rate for each of the Divisions may also be based upon the
change in value of a single share of the corresponding Portfolio or Fund.
Thus, for example, in the case of the Balanced Division the net investment rate
is equal to (a) the change in the net asset value of a Balanced Portfolio share
for the period from the immediately preceding valuation date up to and including
the current valuation date, plus the per share amount of any dividends and other
distributions made by the Balanced Portfolio during the valuation period, less a
deduction for any applicable taxes or for any expenses resulting from a
substitution of securities, (b) divided by the net asset value of a Balanced
Portfolio share 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. 15.)
The Portfolios and Funds will distribute investment income and realized capital
gains to the Account Divisions. We will reinvest those distributions in
additional shares of the same Portfolio or Fund. Unrealized capital gains and
realized and unrealized capital losses will be reflected by changes in the value
of the shares held by the Account.
BENEFITS PROVIDED UNDER THE CONTRACTS
The benefits provided under the Contracts consist of a surrender value and a
retirement benefit. Subject to the restrictions noted below, we will pay all of
these benefits in a lump sum or under the payment plans described below. We will
take the amounts required to pay benefits from the Divisions of the Account, or
from the value accumulated on a fixed basis, as you direct.
SURRENDER OR WITHDRAWAL VALUE To the extent permitted by the Plan or Trust, you
may terminate the Contract and redeem the value of Accumulation Units credited
to the Contract. We determine the value, which may be either greater or less
than the amount you have paid, as of the valuation date coincident with or next
following our receipt of a written request for termination. Request forms are
available from our Home Office and our agents.
You may surrender a portion of the Accumulation Units 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. We
base the withdrawal value on the Annuity Unit value on the withdrawal date, with
the unpaid payments discounted at the Assumed Investment Rate. (See "Description
of Payment Plans", below.)
RETIREMENT BENEFITS You may direct us to pay retirement benefits to an Annuitant
at any time while your Contract is in force. Upon your request, benefits may be
paid in a lump sum or under the Payment Plans described below. Your request will
state the Payment Plan you have 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.
We 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
We will pay part or all of the benefits under a Contract under a variable
payment plan you select. 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 you must
expect the amount of such payments 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. We will issue the Annuitant a Certificate
describing the variable annuity benefits and including beneficiary provisions of
annuity contracts we issue 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. 14.
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.
12
<PAGE> 16
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 we require for
annuity payment plans on the date you elect the plan. From time to time we may
establish payment plan rates with greater actuarial value than those stated in
the Contract and make them available at the time of settlement. We may also make
available other payment plans, with provisions and rates as we publish for those
plans.
AMOUNT OF ANNUITY PAYMENTS We will determine the amount of the first annuity
payment on the basis of the particular Payment Plan you select, the annuity
payment rate and, for plans involving life contingencies, the Annuitant's
adjusted age. We will calculate the amount of the first annuity payment on a
basis that takes into account the length of time over which we expect annuity
payments to continue. The first payment will be lower for an Annuitant who is
younger when payments begin, and higher for an Annuitant who is older, if the
payment plan involves life contingencies. The first payment will be lower if the
payment plan includes a longer certain period. Variable annuity payments after
the first will vary from month to month 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 You may change the allocation of
net purchase payments among the Divisions or transfer Accumulation Units from
one Division to another at any time. 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 we
receive a written request at our Home Office or on a future specified date.
We will adjust the number of Accumulation or Annuity Units to be credited to
reflect the respective value of the Accumulation and Annuity Units in each of
the Divisions. You may transfer Accumulation Units among the Divisions up to
twelve times in a Contract year without charge. The charge for each additional
transfer is $25. We may set charges and waiting periods for transfers of Annuity
Units.
If you contemplate the transfer of funds from one Division to another, you
should consider the risk inherent in a switch from one investment medium to
another. In general, frequent transfers based on short-term expectations for the
securities markets, especially transfers of large sums, will tend to accentuate
the danger that a transfer will be made at an inopportune time.
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. In this
prospectus, "you" means the owner or a prospective purchaser of a Contract. 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 We reserve 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 shares of a
Portfolio or Fund 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 us to
dispose of securities we own, or to determine the value of Accumulation or
Annuity Units.
DIVIDENDS The Contracts share in our divisible surplus, except while payments
are being made under a payment plan. Our divisible surplus is determined
annually. We credit each Contract's share, if any, as a dividend on the Contract
anniversary. Under the terms of the Contract,
13
<PAGE> 17
we will apply any dividend 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 2000, 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 We reserve the right to (a) substitute other securities
for shares of each Portfolio or 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. We 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. You will be given prompt notice after any substitution
or change.
AMENDMENTS AND TERMINATION After the fifth Contract year, we 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 not become effective until after we have given you at least 30
days' written notice. An Amendment to the payment rate tables will not apply to
a Payment Plan that starts before the amendment becomes effective.
We reserve the right to terminate a Contract if representations you have made to
us are or become incorrect. You may terminate a Contract in whole or in part at
any time and we will pay you the value of the Accumulation Units.
FINANCIAL STATEMENTS Financial statements of the Account and financial
statements of Northwestern Mutual appear in the Statement of Additional
Information.
- --------------------------------------------------------------------------------
FEDERAL INCOME TAXES
We offer the Contracts only for use under tax-qualified plans meeting the
requirements of Sections 401 and 403(a) of the Code. However, in the event we
should issue Contracts 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.
CONTRIBUTION LIMITS
Any employer, including a self-employed person, can establish a plan under
Section 401(a) or 403(a) for participating employees. As a general rule, annual
contributions to a defined contribution plan made by the employer and the
employee cannot exceed the lesser of $30,000 or 25% of compensation or earned
income (up to $170,000, indexed).
Qualified plans are subject to minimum coverage, nondiscrimination and spousal
consent requirements. In addition, "top heavy" rules apply if more than 60% of
the contributions or benefits are allocated to certain highly compensated
employees. Violations of the contribution limits or other requirements may
disqualify the plan and/or subject the employer to taxes and penalties.
TAXATION OF CONTRACT BENEFITS
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. 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
14
<PAGE> 18
from service and payments are either paid in substantially equal installments
over the life or life expectancy of the employee or are paid on account of early
retirement after age 55 or unless payments are made for medical expenses in
excess of 7.5% of the employee's Adjusted Gross Income.
A loan from the Plan to an employee, other than an owner-employee, may be
taxable as ordinary income depending on the amount and terms of the loan. A loan
to an owner-employee is a prohibited transaction under the Code and could
disqualify the Plan.
Benefit payments will be subject to mandatory 20% withholding unless (1) they
are rolled over directly to an eligible 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."
MINIMUM DISTRIBUTION REQUIREMENTS As a general rule, the Plan is required to
make certain required distributions to the employee during the employee's life
and to the employee's beneficiary following the employee's death. A 50% penalty
tax may be imposed on payments to the extent they are less than these required
minimum amounts.
The Plan must make the first required distribution by the "required beginning
date" and subsequent required distributions by December 31 of that year and each
year thereafter. Payments must be made over the life or life expectancy of the
employee or the lives or life expectancies of the employee and the employee's
beneficiary. The required beginning date is April 1 of the calendar year
following the later of the calendar year in which the employee attains age 70
1/2 or, if the employee is not a "5% owner" of the employer, the calendar year
in which the employee retires. Upon the death of the employee, the Plan must
make distributions under one of the following two rules.
If the employee dies on or after the required beginning date, any remaining
interest of the employee must be distributed at least as rapidly as it was under
the method of distribution in effect on the date of death. The method of
distribution is determined by the age of the employee and the beneficiary and
whether their life expectancies are being recalculated each year.
If the employee dies before the required beginning date, the employee's entire
interest must be distributed by December 31 of the calendar year containing the
fifth anniversary of the employee's death. If the employee's interest is payable
to a beneficiary designated by the employee, the employee's interest may be paid
over the life or life expectancy of that beneficiary, provided distribution
begins by December 31 of the calendar year following the year of the employee's
death. If the sole designated beneficiary is the employee's spouse, the spouse
may roll over the Contract into an IRA owned by the spouse.
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. You should consult
qualified tax counsel before you adopt an HR-10 pension or profit-sharing plan
or trust.
TAXATION OF NORTHWESTERN MUTUAL
We may charge the appropriate Contracts with their shares of any tax liability
which may result from the maintenance or operation of the Divisions of the
Account. We are currently making no charge. (See "Net Investment Factor", p. 12
and "Deductions", p. 15.)
- --------------------------------------------------------------------------------
DEDUCTIONS
We will make the following deductions:
1. Deductions from Purchase Payments.
FRONT-LOAD CONTRACT
We deduct a sales load from all purchase payments we receive. The sales load
compensates us for the costs we incur in selling the Contracts. We base the
deduction on the cumulative amounts we have 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..........................0.5%
</TABLE>
SIMPLIFIED-LOAD CONTRACT
We deduct an installation fee in the amount of $750 from the first purchase
payment we receive. Alternatively, you may pay the fee separately when you
submit the application for the Contract. 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. 12) we use in determining the value of
Accumulation and Annuity Units reflects a charge on each valuation date for
mortality and expense risks we have assumed. For the front-load Contract the
charge on an annual basis is 0.65% 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. We may increase this charge to a maximum
15
<PAGE> 19
of 1.00% for the front-load Contract and 1.50% for the simplified-load Contract.
After the fifth Contract year we may amend the maximum. (See "Amendments and
Termination", p. 14.)
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 we make may be insufficient to cover the
actual costs we incur in connection with the Contracts. We assume these risks
for the duration of the Contract.
The net investment factor also reflects the deduction of any reasonable expenses
which may result if there were a substitution of other securities for shares of
the mutual funds as described under "Substitution and Change", p. 14, and the
deduction of any applicable taxes. Applicable taxes could include any tax
liability we have paid or reserved for resulting from the maintenance or
operation of a Division of the Account. We do not presently anticipate that any
deduction will be made for federal income taxes (see "Federal Income Taxes" p.
14), nor do we anticipate that maintenance or operation of the Account will give
rise to any deduction for state or local taxes. However, we reserve the right to
charge the appropriate Contracts with their shares of any tax liability which
may result under present or future tax laws from the maintenance or operation of
the Account or to deduct any such tax liability in the computation of the net
investment factor for such Contracts.
3. Administration Fee. We 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 we may charge an administration fee
of $150 annually on the Contract anniversary.
4. Premium Taxes. The Contracts provide for the deduction of applicable premium
taxes, if any, from purchase payments or from Contract benefits. Various
jurisdictions levy premium taxes. Premium taxes presently range from 0% to 2% of
total purchase payments. Many jurisdictions presently exempt from premium taxes
annuities such as the Contracts. As a matter of current practice, we do not
deduct premium taxes from purchase payments received under the Contracts or from
Contract benefits. However, we reserve the right to deduct premium taxes in the
future.
5. Expenses for the Portfolios and Funds. The expenses borne by the Portfolios
and Funds in which the assets of the Account are invested are described in the
prospectuses for Northwestern Mutual Series Fund, Inc. and the Russell Insurance
Funds. See the prospectuses attached to this prospectus.
- --------------------------------------------------------------------------------
DISTRIBUTION OF THE CONTRACTS
We will sell the Contracts through individuals who are licensed insurance agents
appointed by Northwestern Mutual and are registered representatives of
Northwestern Mutual Investment Services, LLC, our wholly-owned subsidiary.
Northwestern Mutual Investment Services, LLC is 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, these 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 Contract values for each Contract year. We do not expect total
commissions, on average, 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; 0.4% on the
next $100,000; 0.2% on the next $200,000; and 0.1% on the balance over $500,000
of cumulative purchase payments. 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 0.5% on
the first $100,000; 0.4% on the next $100,000; 0.3% on the next $100,000; 0.2%
on the next $200,000; and 0.1% on the balance over $500,000. The charge for
annuity rate and expense risks may not exceed 0.25% of the Account assets held
for these Contracts (unless the Contracts are amended after the fifth Contract
year), and we currently are making no charge for these risks. These Contracts
contain no provisions for accumulation of funds on a fixed basis. See the table
of accumulation unit values on page 9.
16
<PAGE> 20
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
FINANCIAL STATEMENTS OF THE
ACCOUNT (for the two years ended
December 31, 1999).......................B-5
REPORT OF INDEPENDENT
ACCOUNTANTS (for the two years
ended December 31, 1999)................B-17
FINANCIAL STATEMENTS OF
NORTHWESTERN MUTUAL
(for the three years ended December
31, 1999)...............................B-18
REPORT OF INDEPENDENT
ACCOUNTANTS (for the three years
ended December 31, 1999).................B-29
</TABLE>
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 1-888-455-2232.
- --------------------------------------------------------------------------------
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> 21
More information about Northwestern Mutual Series Fund, Inc. is included in the
Fund's Statement of Additional Information (SAI), incorporated by reference in
this prospectus, which is available free of charge.
More information about the Fund's investments is included in the Fund's annual
and semi-annual reports, which discuss the market conditions and investment
strategies that significantly affected each Portfolio's performance during the
previous fiscal period.
To request a free copy of the Fund's SAI, or current annual or semi-annual
report, call us at 1-888-455-2232. Information about the Fund (including the
SAI) can be reviewed and copied at the Public Reference Room of the Securities
and Exchange Commission (SEC) in Washington, DC. Information on the operation of
the Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330.
Reports and other information about the Fund are available on the SEC's Internet
site at http://www.sec.gov. Copies of this information may be obtained, upon
payment of a duplicating fee, by writing the Public Reference Section of the
SEC, Washington, DC 20549-6009.
N O R T H W E S T E R N M U T U A L
GROUP COMBINATION ANNUITY CONTRACTS
for Retirement Plans of Self-Employed Persons
and Their Employees
NML VARIABLE ANNUITY ACCOUNT C
NORTHWESTERN MUTUAL SERIES FUND, INC.
RUSSELL INSURANCE FUNDS
P r o s p e c t u s e s
Investment Company Act File Nos. 811-3990 and 811-5371
[NORTHWESTERN MUTUAL (TM) LOGO]
PO Box 3095
Milwaukee WI 53201-3095
Change Service Requested
<PAGE> 22
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")
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 28, 2000.
The date of this Statement of Additional Information is April 28, 2000.
B-1
<PAGE> 23
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 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, are registered representatives of Northwestern Mutual Investment
Services, LLC ("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:
<TABLE>
<CAPTION>
Year Amount
---- ------
<S> <C> <C>
1999 $133,785
1998 $162,781
1997 $120,550
</TABLE>
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. 12, including "Description of Payment Plans", p. 12, "Amount
of Annuity Payments", p. 13, and "Assumed Investment Rate", p. 13; "Dividends",
p. 13; "Net Investment Factor", p. 12; and "Deductions", p. 15.
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 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.
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 credited to the Annuitant in the
Division by the value of an Annuity Unit for the Division on (a) the fifth
B-2
<PAGE> 24
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).
<TABLE>
<S> <C>
(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
</TABLE>
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> 25
For the sake of simplicity the foregoing example assumes that all of
the Annuity Units are in the Balanced Division. If there are Annuity Units in
two or more Divisions, the annuity payment from each Division is calculated
separately, in the manner illustrated, and the total monthly payment is the sum
of the payments from the Divisions.
VALUATION OF ASSETS OF THE ACCOUNT
The value of Portfolio or Fund shares held in each Division of the
Account at the time of each valuation is the redemption value of such shares at
such time. If the right to redeem shares of a Portfolio or Fund has been
suspended, or payment of redemption value has been postponed, for the sole
purpose of computing annuity payments the shares held in the Account (and
Annuity Units) may be valued at fair value as determined in good faith by the
Board of Trustees of Northwestern Mutual.
TRANSFERABILITY RESTRICTIONS
Ownership of a Contract 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 must be received
at the Home Office of Northwestern Mutual. 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. Northwestern Mutual will
not be responsible for the validity or effect of the assignment or for any
payment or other action taken by Northwestern Mutual before Northwestern Mutual
consents to the assignment.
EXPERTS
The financial statements of the Account as of December 31, 1999 and for
each of the two years in the period ended December 31, 1999 and of Northwestern
Mutual as of December 31, 1999 and 1998 and for each of the three years in the
period ended December 31, 1999 included in this Statement of Additional
Information have been so included in reliance on the reports of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting. PricewaterhouseCoopers LLP
provides audit services for the Account. The address of PricewaterhouseCoopers
LLP is 100 East Wisconsin Avenue, Suite 1500, Milwaukee, Wisconsin 53202.
B-4
<PAGE> 26
NML VARIABLE ANNUITY ACCOUNT C
Statement of Assets and Liabilities
December 31, 1999
(in thousands)
<TABLE>
<CAPTION>
<S> <C> <C>
ASSETS
Investments at Market Value:
Northwestern Mutual Series Fund, Inc.
Small Cap Growth Stock
529 shares (cost $746)............................. $ 949
Aggressive Growth Stock
29,072 shares (cost $89,365)....................... 139,739
International Equity
36,249 shares (cost $57,060)....................... 64,556
Index 400 Stock
425 shares (cost $442)............................. 473
Growth Stock
14,977 shares (cost $30,335)....................... 39,776
Growth and Income Stock
26,336 shares (cost $39,527)....................... 41,105
Index 500 Stock
56,622 shares (cost $120,560)...................... 220,075
Balanced
75,364 shares (cost $128,710)...................... 167,444
High Yield Bond
7,763 shares (cost $7,873)......................... 6,380
Select Bond
15,508 shares (cost $18,559)....................... 17,537
Money Market
19,346 shares (cost $19,346)....................... 19,341
Russell Insurance Funds
Multi-Style Equity
102 shares (cost $1,642)........................... 1,706
Aggressive Equity
26 shares (cost $326).............................. 352
Non-U.S.
40 shares (cost $493).............................. 565
Real Estate Securities
12 shares (cost $108).............................. 102
Core Bond
40 shares (cost $399).............................. 384 $720,484
--------
Due from Sale of Fund Shares.............................. 798
Due from Northwestern Mutual Life Insurance Company....... 395
Due from Participants..................................... 232
--------
Total Assets..................................... $721,909
========
LIABILITIES
Due to Northwestern Mutual Life Insurance Company......... $ 798
Due on Purchase of Fund Shares............................ 395
--------
Total Liabilities................................ 1,193
--------
EQUITY (NOTE 8)
Group Variable Annuity Contracts Issued:
Before December 17, 1981 or between April 30, 1984 and
December 31, 1991...................................... 453,199
After December 16, 1981 and Prior to May 1, 1984........ 4,972
After December 31, 1991 -- Front Load Version........... 62,645
After December 31, 1991 -- Simplified Load Version...... 199,900
--------
Total Equity..................................... 720,716
--------
Total Liabilities and Equity..................... $721,909
========
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements
B-5 Account C Financial Statements
<PAGE> 27
NML VARIABLE ANNUITY ACCOUNT C
<TABLE>
<CAPTION>
Statement of Operations SMALL CAP
(in thousands) GROWTH STOCK AGGRESSIVE GROWTH
COMBINED DIVISION# STOCK DIVISION
---------------------------- ------------ ----------------------------
EIGHT MONTHS
YEAR ENDED YEAR ENDED ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1999 1998
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividend Income............................ $ 43,813 $26,993 $ 32 $ 3,671 $ 4,152
Annuity Rate and Expense Guarantees........ 3,444 3,155 2 576 591
-------- ------- ---- ------- -------
Net Investment Income...................... 40,369 23,838 30 3,095 3,561
-------- ------- ---- ------- -------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Realized Gain (Loss) on Investments........ 41,106 29,249 1 10,070 7,961
Unrealized Appreciation (Depreciation) of
Investments During the Period............ 36,856 37,108 202 28,576 (3,919)
-------- ------- ---- ------- -------
Net Gain (Loss) on Investments............. 77,962 66,357 203 38,646 4,042
-------- ------- ---- ------- -------
Increase (Decrease) in Equity Derived from
Investment Activity...................... $118,331 $90,195 $233 $41,741 $ 7,603
======== ======= ==== ======= =======
</TABLE>
# The initial investment in this Division was made on April 30, 1999.
The Accompanying Notes are an Integral Part of the Financial Statements
Account C Financial Statements B-6
<PAGE> 28
<TABLE>
<CAPTION>
INDEX 400
STOCK GROWTH & INCOME
INTERNATIONAL EQUITY DIVISION DIVISION# GROWTH STOCK DIVISION STOCK DIVISION
----------------------------- --------------- --------------------------- ---------------------------
EIGHT MONTHS
YEAR ENDED YEAR ENDED ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1999 1998 1999 1998
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 8,184 $ 3,732 $ 6 $1,223 $ 447 $ 4,566 $ 343
254 289 2 137 92 208 180
------- ------- --- ------ ------ ------- ------
7,930 3,443 4 1,086 355 4,358 163
------- ------- --- ------ ------ ------- ------
3,203 3,560 1 2,143 1,374 1,267 780
837 (4,426) 31 3,567 3,304 (3,007) 5,917
------- ------- --- ------ ------ ------- ------
4,040 (866) 32 5,710 4,678 (1,740) 6,697
------- ------- --- ------ ------ ------- ------
$11,970 $ 2,577 $36 $6,796 $5,033 $ 2,618 $6,860
======= ======= === ====== ====== ======= ======
<CAPTION>
INDEX 500
STOCK DIVISION
---------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1999 1998
---------------------------
<C> <C>
$ 4,675 $ 5,271
895 721
------- -------
3,780 4,550
------- -------
13,954 7,377
19,628 27,279
------- -------
33,582 34,656
------- -------
$37,362 $39,206
======= =======
</TABLE>
B-7 Account C Financial Statements
<PAGE> 29
NML VARIABLE ANNUITY ACCOUNT C
<TABLE>
<CAPTION>
Statement of Operations BALANCED DIVISION HIGH YIELD BOND DIVISION SELECT BOND DIVISION
(in thousands) ---------------------------- ---------------------------- ----------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
(CONTINUED) 1999 1998 1999 1998 1999 1998
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividend Income.................. $ 18,031 $ 9,909 $ 759 $ 883 $ 1,570 $1,357
Annuity Rate and Expense
Guarantees..................... 954 906 35 39 136 142
-------- ------- ----- ------- ------- ------
Net Investment Income............ 17,077 9,003 724 844 1,434 1,215
-------- ------- ----- ------- ------- ------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Realized Gain (Loss) on
Investments.................... 11,189 7,790 (775) (56) 48 463
Unrealized Appreciation
(Depreciation) of Investments
During the Period.............. (11,272) 10,517 (39) (1,081) (1,810) (483)
-------- ------- ----- ------- ------- ------
Net Gain (Loss) on Investments... (83) 18,307 (814) (1,137) (1,762) (20)
-------- ------- ----- ------- ------- ------
Increase (Decrease) in Equity
Derived from Investment
Activity....................... $ 16,994 $27,310 $ (90) $ (293) $ (328) $1,195
======== ======= ===== ======= ======= ======
</TABLE>
# The initial investment in this Division was made on April 30, 1999.
The Accompanying Notes are an Integral Part of the Financial Statements
Account C Financial Statements B-8
<PAGE> 30
<TABLE>
<CAPTION>
RUSSELL RUSSELL RUSSELL RUSSELL RUSSELL
MULTI-STYLE EQUITY# AGGRESSIVE EQUITY# NON-U.S.# REAL ESTATE SECURITIES# CORE BOND#
MONEY MARKET DIVISION ------------------- ------------------ ------------ ----------------------- ------------
- ------------------------------- EIGHT MONTHS EIGHT MONTHS EIGHT MONTHS EIGHT MONTHS EIGHT MONTHS
YEAR ENDED YEAR ENDED ENDED ENDED ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1999 1999 1999 1999
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$1,015 $899 $ 48 $ 1 $13 $ 4 $ 15
236 195 5 1 2 -- 1
------ ---- ---- --- --- --- ----
779 704 43 -- 11 4 14
------ ---- ---- --- --- --- ----
-- -- -- 5 -- -- --
-- -- 64 26 73 (6) (14)
------ ---- ---- --- --- --- ----
-- -- 64 31 73 (6) (14)
------ ---- ---- --- --- --- ----
$ 779 $704 $107 $31 $84 $(2) $ --
====== ==== ==== === === === ====
</TABLE>
B-9 Account C Financial Statements
<PAGE> 31
NML VARIABLE ANNUITY ACCOUNT C
<TABLE>
<CAPTION>
Statement of Changes in Equity SMALL CAP
(in thousands) GROWTH STOCK AGGRESSIVE GROWTH
COMBINED DIVISION# STOCK DIVISION
---------------------------- ------------ ----------------------------
EIGHT MONTHS
YEAR ENDED YEAR ENDED ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1999 1998
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
OPERATIONS
Net Investment Income...................... $ 40,369 $ 23,838 $ 30 $ 3,095 $ 3,561
Net Realized gain (loss)................... 41,106 29,249 1 10,070 7,961
Net Change in Unrealized Appreciation
(Depreciation)........................... 36,856 37,108 202 28,576 (3,919)
-------- -------- ---- -------- --------
Increase (Decrease) in Equity Derived from
Investment Activity........................ 118,331 90,195 233 41,741 7,603
-------- -------- ---- -------- --------
EQUITY TRANSACTIONS
Contract Owners' Net Payments.............. 74,900 93,657 184 13,136 16,937
Annuity Payments........................... (67) (54) -- (3) (2)
Surrenders and Other (net)................. (119,041) (87,761) 1 (22,025) (20,805)
Transfers from Other Divisions or
Sponsor.................................. 70,710 72,485 581 4,719 3,375
Transfers to Other Divisions or Sponsor.... (69,203) (71,425) (50) (10,185) (6,341)
-------- -------- ---- -------- --------
Increase (Decrease) in Equity Derived from
Equity Transactions........................ (42,701) 6,902 716 (14,358) (6,836)
-------- -------- ---- -------- --------
Net Increase (Decrease) in Equity............ 75,630 97,097 949 27,383 767
EQUITY
Beginning of Period........................ 645,086 547,989 -- 112,357 111,590
-------- -------- ---- -------- --------
End of Period.............................. $720,716 $645,086 $949 $139,740 $112,357
======== ======== ==== ======== ========
</TABLE>
# The initial investment in this Division was made on April 30, 1999.
The Accompanying Notes are an Integral Part of the Financial Statements
Account C Financial Statements B-10
<PAGE> 32
<TABLE>
<CAPTION>
INDEX 400
STOCK GROWTH & INCOME
INTERNATIONAL EQUITY DIVISION DIVISION# GROWTH STOCK DIVISION STOCK DIVISION
----------------------------- --------------- --------------------------- ---------------------------
EIGHT MONTHS
YEAR ENDED YEAR ENDED ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1999 1998 1999 1998
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 7,930 $ 3,443 $ 4 $ 1,086 $ 355 $ 4,358 $ 163
3,203 3,560 1 2,143 1,374 1,267 780
837 (4,426) 31 3,567 3,304 (3,007) 5,917
------- ------- ---- ------- ------- ------- -------
11,970 2,577 36 6,796 5,033 2,618 6,860
------- ------- ---- ------- ------- ------- -------
6,164 8,353 174 3,912 3,452 5,168 6,130
(2) (1) -- (4) (3) -- --
(9,838) (8,855) (9) (3,980) (2,332) (7,856) (3,594)
3,026 2,281 273 10,514 9,371 7,271 8,719
(6,029) (8,966) -- (5,282) (3,548) (6,450) (5,246)
------- ------- ---- ------- ------- ------- -------
(6,679) (7,188) 438 5,160 6,940 (1,867) 6,009
------- ------- ---- ------- ------- ------- -------
5,291 (4,611) 474 11,956 11,973 751 12,869
59,265 63,876 -- 27,820 15,847 40,354 27,485
------- ------- ---- ------- ------- ------- -------
$64,556 $59,265 $474 $39,776 $27,820 $41,105 $40,354
======= ======= ==== ======= ======= ======= =======
<CAPTION>
INDEX 500
STOCK DIVISION
---------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1999 1998
---------------------------
<C> <C>
$ 3,780 $ 4,550
13,954 7,377
19,628 27,279
-------- --------
37,362 39,206
-------- --------
20,768 21,772
(5) (3)
(23,604) (18,000)
12,396 12,300
(10,168) (5,878)
-------- --------
(613) 10,191
-------- --------
36,749 49,397
183,326 133,929
-------- --------
$220,075 $183,326
======== ========
</TABLE>
B-11 Account C Financial Statements
<PAGE> 33
NML VARIABLE ANNUITY ACCOUNT C
<TABLE>
<CAPTION>
Statement of Changes in Equity BALANCED DIVISION HIGH YIELD BOND DIVISION SELECT BOND DIVISION
(in thousands) ---------------------------- ---------------------------- ----------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
(CONTINUED) 1999 1998 1999 1998 1999 1998
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS
Net Investment Income............ $ 17,077 $ 9,003 $ 724 $ 844 $ 1,434 $ 1,215
Net Realized gain (loss)......... 11,189 7,790 (775) (56) 48 463
Net Change in unrealized
appreciation (depreciation).... (11,272) 10,517 (39) (1,081) (1,810) (483)
-------- -------- ------- ------- ------- -------
Increase (Decrease) in Equity
Derived from Investment
Activity......................... 16,994 27,310 (90) (293) (328) 1,195
-------- -------- ------- ------- ------- -------
EQUITY TRANSACTIONS
Contract Owners' Net Payments.... 12,945 17,458 947 1,310 2,929 3,811
Annuity Payments................. (46) (41) (1) -- (4) (3)
Surrenders and Other (net)....... (31,240) (22,224) (652) (1,191) (4,651) (3,378)
Transfers from Other Divisions or
Sponsor........................ 7,114 9,934 516 2,932 1,606 4,393
Transfers to Other Divisions or
Sponsor........................ (11,295) (13,201) (2,951) (716) (2,769) (3,323)
-------- -------- ------- ------- ------- -------
Increase (Decrease) in Equity
Derived from Equity
Transactions..................... (22,522) (8,074) (2,141) 2,335 (2,889) 1,500
-------- -------- ------- ------- ------- -------
Net Increase (Decrease) in
Equity........................... (5,528) 19,236 (2,231) 2,042 (3,217) 2,695
EQUITY
Beginning of Period.............. 172,971 153,735 8,611 6,569 20,754 18,059
-------- -------- ------- ------- ------- -------
End of Period.................... $167,443 $172,971 $ 6,380 $ 8,611 $17,537 $20,754
======== ======== ======= ======= ======= =======
</TABLE>
# The initial investment in this Division was made on April 30, 1999.
The Accompanying Notes are an Integral Part of the Financial Statements
Account C Financial Statements B-12
<PAGE> 34
<TABLE>
<CAPTION>
RUSSELL RUSSELL RUSSELL RUSSELL RUSSELL
MULTI-STYLE EQUITY# AGGRESSIVE EQUITY# NON-U.S.# REAL ESTATE SECURITIES# CORE BOND#
MONEY MARKET DIVISION ------------------- ------------------ ------------ ----------------------- ------------
- ------------------------------- EIGHT MONTHS EIGHT MONTHS EIGHT MONTHS EIGHT MONTHS EIGHT MONTHS
YEAR ENDED YEAR ENDED ENDED ENDED ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1999 1999 1999 1999
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 779 $ 704 $ 43 $ -- $ 11 $ 4 $ 14
-- -- -- 5 -- -- --
-- -- 64 26 73 (6) (14)
-------- -------- ------ ---- ---- ---- ----
779 704 107 31 84 (2) --
-------- -------- ------ ---- ---- ---- ----
7,746 14,434 485 96 124 16 106
(2) (1) -- -- -- -- --
(15,180) (7,382) 1 (5) -- -- (3)
20,425 19,180 1,230 244 405 109 281
(13,822) (24,206) (118) (15) (48) (21) --
-------- -------- ------ ---- ---- ---- ----
(833) 2,025 1,598 320 481 104 384
-------- -------- ------ ---- ---- ---- ----
(54) 2,729 1,705 351 565 102 384
19,628 16,899 -- -- -- -- --
-------- -------- ------ ---- ---- ---- ----
$ 19,574 $ 19,628 $1,705 $351 $565 $102 $384
======== ======== ====== ==== ==== ==== ====
</TABLE>
B-13 Account C Financial Statements
<PAGE> 35
NML VARIABLE ANNUITY ACCOUNT C
Notes to Financial Statements
December 31, 1999
NOTE 1 -- NML Variable Annuity Account C (the "Account") is a segregated asset
account of The Northwestern Mutual Life Insurance Company ("Northwestern Mutual"
or "Sponsor") used to fund variable annuity contracts ("contracts") for H-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 1/2% 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. and the
Russell Insurance Funds (collectively known as "the Funds"). The shares are
valued at the Funds' offering and redemption prices per share.
The Funds are open-end investment companies registered under the Investment
Company Act of 1940.
NOTE 4 -- Annuity reserves are based on published annuity tables with age
adjustments 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 Funds is recorded on the record date of the
dividends. Transactions in the Funds 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 the Funds shares for the period ended December 31, 1999
by each Division are shown below:
<TABLE>
<CAPTION>
DIVISION PURCHASES SALES
-------- --------- -----
<S> <C> <C>
Small Cap Growth Stock.... $ 759,215 $ 13,802
Aggressive Growth Stock... 12,206,930 23,468,462
International Equity...... 13,196,712 11,938,339
Index 400 Stock........... 468,108 26,390
Growth Stock.............. 11,622,415 5,373,768
Growth & Income Stock..... 12,666,073 10,170,106
Index 500 Stock........... 24,489,112 21,511,153
Balanced.................. 27,037,531 32,467,107
High Yield Bond........... 1,696,507 3,114,104
Select Bond............... 3,699,428 5,152,171
Money Market.............. 22,540,096 22,822,933
Russell Multi-Style Equity
Fund.................... 1,676,900 35,224
Russell Aggressive Equity
Fund.................... 763,162 443,034
Russell Non-U.S. Fund..... 494,961 2,369
Russell Real Estate
Securities Fund......... 109,105 569
Russell Core Bond Fund.... 403,049 4,229
</TABLE>
NOTE 6 -- A deduction for annuity rate and expense guarantees is determined
daily and paid to Northwestern Mutual as compensation for assuming the risk that
annuity payments will continue for longer periods than anticipated because the
annuitants as a group live longer than expected, and the risk that the changes
made by Northwestern Mutual 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 guarantee is determined daily at annual rates of 6 1/2/10 of 1% and
1 1/4%, respectively, of the net assets of each Division attributable to these
contracts and is paid to Northwestern Mutual. For these contracts, the rates may
be increased or decreased by the Board of Trustees of Northwestern Mutual not to
exceed 1% and 1 1/2% annual rates, respectively.
For contracts issued after December 16, 1981, and prior to May 1, 1984, the
deduction is determined daily at an annual rates of 1/2% of 1% of the net
assets of each Division attributable to these contracts and is paid to
Northwestern Mutual. For these contracts, the rate may be increased or
Notes to Financial Statements B-14
<PAGE> 36
decreased by the Board of Trustees of Northwestern Mutual not to exceed 3/4% of
1% annual rate.
Since 1996, Northwestern Mutual has paid a dividend to certain contracts. The
dividend is re-invested in the Account and has been reflected as a Contract
Owners' Net Deposit in the accompanying financial statements.
NOTE 7 -- Northwestern Mutual is taxed as a "life insurance company" under the
Internal Revenue Code and the operations of the Account form part of and are
taxed with those of Northwestern Mutual. Under current law, no federal income
taxes are payable with respect to the Account. Accordingly, no provision for any
such liability has been made.
B- 15 Notes to Financial Statements
<PAGE> 37
NML VARIABLE ANNUITY ACCOUNT C
Notes to Financial Statements
December 31, 1999
(in thousands)
NOTE 8 -- Equity Values by Division are shown below:
<TABLE>
<CAPTION>
GROUP VARIABLE ANNUITY CONTRACTS 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
DIVISION UNIT VALUE OUTSTANDING EQUITY UNIT VALUE OUTSTANDING EQUITY
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Small Cap Growth Stock................ $18.610781 8 $ 140 $18.548596 -- $ 8
Aggressive Growth Stock............... 57.304251 1,627 93,234 54.800923 1 79
International Equity.................. 2.497127 18,572 46,377 2.415234 24 59
Index 400 Stock....................... 11.283278 1 12 11.245478 -- --
Growth Stock.......................... 32.336967 793 25,627 31.433960 -- 4
Growth and Income Stock............... 27.134671 799 21,661 26.376796 1 36
Index 500 Stock....................... 56.249780 2,756 155,044 53.786850 8 446
Balanced.............................. 94.505378 1,067 100,837 86.395292 38 3,239
High Yield Bond....................... 16.310402 206 3,352 15.854730 -- 3
Select Bond........................... 88.954059 73 6,443 81.280078 -- 37
Money Market.......................... 30.399653 8 242 27.823703 -- --
Russell Multi-Style Equity............ 10.760032 17 183 10.723983 -- --
Russell Aggressive Equity............. 11.091435 -- 10 11.054275 -- --
Russell Non-U.S. ..................... 12.534266 -- -- 12.492336 -- 6
Russell Real Estate Securities........ 9.274172 4 37 9.243071 -- --
Russell Core Bond..................... 9.914196 -- -- 9.880973 -- --
-------- ------
Equity.............................. 453,199 3,917
Annuity Reserves.................... -- 1,055
-------- ------
Total Equity........................ $453,199 $4,972
======== ======
</TABLE>
<TABLE>
<CAPTION>
GROUP COMBINATION ANNUITY CONTRACTS ISSUED:
---------------------------------------------------------------------------------
AFTER DECEMBER 31, 1991 AFTER DECEMBER 31, 1991
FRONT LOAD VERSION SIMPLIFIED LOAD VERSION
-------------------------------------- ---------------------------------------
ACCUMULATION UNITS ACCUMULATION UNITS
DIVISION UNIT VALUE OUTSTANDING EQUITY UNIT VALUE OUTSTANDING EQUITY
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Small Cap Growth Stock................ $1.853001 73 $ 135 $1.845580 360 $ 664
Aggressive Growth Stock............... 3.588119 2,777 9,964 5.427804 6,707 36,404
International Equity.................. 2.391284 2,302 5,505 2.297694 5,480 12,591
Index 400 Stock....................... 1.123423 13 15 1.118909 399 446
Growth Stock.......................... 3.116901 996 3,104 3.012947 3,647 10,988
Growth and Income Stock............... 2.615436 1,705 4,459 2.528256 5,913 14,950
Index 500 Stock....................... 3.938401 4,132 16,273 4.918509 9,809 48,247
Balanced.............................. 2.520233 6,183 15,584 7.473141 6,320 47,231
High Yield Bond....................... 1.572112 410 645 1.519653 1,556 2,365
Select Bond........................... 1.558775 2,265 3,531 6.996057 1,068 7,472
Money Market.......................... 1.366307 1,879 2,567 2.528768 6,539 16,536
Russell Multi-Style Equity............ 1.071323 297 318 1.067018 1,126 1,201
Russell Aggressive Equity............. 1.104316 79 87 1.099895 231 254
Russell Non-U.S. ..................... 1.247967 151 188 1.242993 298 370
Russell Real Estate Securities........ 0.923380 37 34 0.919674 37 34
Russell Core Bond..................... 0.987105 239 236 0.983142 150 147
------- --------
Equity.............................. 62,645 199,900
Annuity Reserves.................... -- --
------- --------
Total Equity........................ $62,645 $199,900
======= ========
</TABLE>
Notes to Financial Statements B-16
<PAGE> 38
[PRICEWATERHOUSECOOPERS LLC - LETTERHEAD]
Report of Independent Accountants
To The Northwestern Mutual Life Insurance Company and
Contract Owners of 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 of changes in
equity present fairly, in all material respects, the financial position of NML
Variable Annuity Account C and the Small Cap Growth Stock Division, Aggressive
Growth Stock Division, International Equity Division, Index 400 Stock Division,
Growth Stock Division, Growth & Income Stock Division, Index 500 Stock Division,
Balanced Division, High Yield Bond Division, Select Bond Division, Money Market
Division, Russell Multi-Style Equity Division, Russell Aggressive Equity
Division, Russell Non-U.S. Division, Russell Real Estate Securities Division and
Russell Core Bond Division thereof at December 31, 1999, the results of each of
their operations for each of the two years or the period then ended and the
changes in each of their equity for the two years or the period then ended in
conformity with accounting principles generally accepted in the United States.
These financial statements are the responsibility of The Northwestern Mutual
Life Insurance Company's management; our responsibility is to express an opinion
on these financial statements based on our audits. We conducted our audits of
these financial statements in accordance with auditing standards generally
accepted in the United States which require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included direct confirmation of the number of shares owned at
December 31, 1999 with Northwestern Mutual Series Fund, Inc. and the Russell
Insurance Funds, provide a reasonable basis for the opinion expressed above.
[PRICEWATERHOUSECOOPERS LLC]
Milwaukee, Wisconsin
January 27, 2000
B- 17 Accountants' Report
<PAGE> 39
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
Consolidated Statement of Financial Position
(in millions)
The following financial statements of Northwestern Mutual should be considered
only as bearing upon the ability of Northwestern Mutual Life to meet its
obligations under the Policies.
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1999 1998
- -------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Bonds..................................................... $36,792 $34,888
Common and preferred stocks............................... 7,108 6,062
Mortgage loans............................................ 13,416 12,250
Real estate............................................... 1,666 1,481
Policy loans.............................................. 7,938 7,580
Other investments......................................... 3,443 2,353
Cash and temporary investments............................ 1,159 1,275
------- -------
TOTAL INVESTMENTS....................................... 71,522 65,889
Due and accrued investment income......................... 893 827
Other assets.............................................. 1,409 1,313
Separate account assets................................... 12,161 9,966
------- -------
TOTAL ASSETS............................................ $85,985 $77,995
======= =======
LIABILITIES AND SURPLUS
Reserves for policy benefits.............................. $56,246 $51,815
Policy benefit and premium deposits....................... 1,746 1,709
Policyowner dividends payable............................. 3,100 2,870
Interest maintenance reserve.............................. 491 606
Asset valuation reserve................................... 2,371 1,994
Income taxes payable...................................... 1,192 1,161
Other liabilities......................................... 3,609 3,133
Separate account liabilities.............................. 12,161 9,966
------- -------
TOTAL LIABILITIES....................................... 80,916 73,254
Surplus................................................... 5,069 4,741
------- -------
TOTAL LIABILITIES AND SURPLUS........................... $85,985 $77,995
======= =======
</TABLE>
The Accompanying Notes are an Integral Part of these Financial Statements
Consolidated Statement of Financial Position
B-18
<PAGE> 40
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
Consolidated Statement of Operations
(in millions)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
-------------------------------
1999 1998 1997
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUE
Premiums and deposits..................................... $ 8,344 $ 8,021 $ 7,294
Net investment income..................................... 4,766 4,536 4,171
Other income.............................................. 970 922 861
------- ------- -------
TOTAL REVENUE......................................... 14,080 13,479 12,326
------- ------- -------
BENEFITS AND EXPENSES
Benefit payments to policyowners and beneficiaries........ 4,023 3,602 3,329
Net additions to policy benefit reserves.................. 4,469 4,521 4,026
Net transfers to separate accounts........................ 516 564 566
------- ------- -------
TOTAL BENEFITS........................................ 9,008 8,687 7,921
Operating expenses........................................ 1,287 1,297 1,138
------- ------- -------
TOTAL BENEFITS AND EXPENSES........................... 10,295 9,984 9,059
------- ------- -------
GAIN FROM OPERATIONS BEFORE DIVIDENDS AND TAXES....... 3,785 3,495 3,267
Policyowner dividends....................................... 3,091 2,869 2,636
------- ------- -------
GAIN FROM OPERATIONS BEFORE TAXES..................... 694 626 631
Income tax expense.......................................... 203 301 356
------- ------- -------
NET GAIN FROM OPERATIONS.............................. 491 325 275
Net realized capital gains.................................. 846 484 414
------- ------- -------
NET INCOME............................................ $ 1,337 $ 809 $ 689
======= ======= =======
</TABLE>
The Accompanying Notes are an Integral Part of these Financial Statements
B-19 Consolidated Statement of Operations
<PAGE> 41
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
Consolidated Statement of Changes in Surplus
(in millions)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31,
--------------------------------
1999 1998 1997
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
BEGINNING OF YEAR........................................... $4,741 $4,101 $3,515
Net income................................................ 1,337 809 689
Increase (decrease) in net unrealized gains............... 213 (147) 576
Increase in investment reserves........................... (377) (20) (526)
Charge-off of goodwill (Note 7)........................... (842) -- --
Other, net................................................ (3) (2) (153)
------ ------ ------
NET INCREASE IN SURPLUS................................... 328 640 586
------ ------ ------
END OF YEAR BALANCE......................................... $5,069 $4,741 $4,101
====== ====== ======
</TABLE>
The Accompanying Notes are an Integral Part of these Financial Statements
Consolidated Statement of Changes in Surplus
B-20
<PAGE> 42
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
Consolidated Statement of Cash Flows
(in millions)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
-----------------------------------
1999 1998 1997
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Insurance and annuity premiums............................ $ 9,260 $ 8,876 $ 8,093
Investment income received................................ 4,476 4,216 3,928
Disbursement of policy loans, net of repayments........... (358) (416) (360)
Benefits paid to policyowners and beneficiaries........... (4,012) (3,572) (3,316)
Net transfers to separate accounts........................ (516) (564) (565)
Policyowner dividends paid................................ (2,862) (2,639) (2,347)
Operating expenses and taxes.............................. (1,699) (1,749) (1,722)
Other, net................................................ (56) (83) 124
------- ------- -------
NET CASH PROVIDED BY OPERATING ACTIVITIES............ 4,233 4,069 3,835
------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
PROCEEDS FROM INVESTMENTS SOLD OR MATURED
Bonds.................................................. 20,788 28,720 38,284
Common and preferred stocks............................ 13,331 10,359 9,057
Mortgage loans......................................... 1,356 1,737 1,012
Real estate............................................ 216 159 302
Other investments...................................... 830 768 398
------- ------- -------
36,521 41,743 49,053
------- ------- -------
COST OF INVESTMENTS ACQUIRED
Bonds.................................................. 22,849 30,873 41,169
Common and preferred stocks............................ 13,794 9,642 9,848
Mortgage loans......................................... 2,500 3,135 2,309
Real estate............................................ 362 268 202
Other investments...................................... 1,864 567 359
------- ------- -------
41,369 44,485 53,887
------- ------- -------
Net increase (decrease) in securities lending and other... 499 (624) 440
------- ------- -------
NET CASH USED IN INVESTING ACTIVITIES................ (4,349) (3,366) (4,394)
------- ------- -------
NET (DECREASE) INCREASE IN CASH AND TEMPORARY
INVESTMENTS......................................... (116) 703 (559)
Cash and temporary investments, beginning of year........... 1,275 572 1,131
------- ------- -------
Cash and temporary investments, end of year................. $ 1,159 $ 1,275 $ 572
======= ======= =======
</TABLE>
The Accompanying Notes are an Integral Part of these Financial Statements
B-21 Consolidated Statement of Cash Flows
<PAGE> 43
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
Notes to Consolidated Statutory Financial Statements
December 31, 1999, 1998 and 1997
NOTE 1 -- BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying consolidated statutory financial statements include the
accounts of The Northwestern Mutual Life Insurance Company ("Company") and its
wholly-owned subsidiary, Northwestern Long Term Care Insurance Company
("Subsidiary"). The Company and its Subsidiary offer life, annuity, disability
income and long-term care products to the personal, business, estate and
tax-qualified markets.
The consolidated financial statements have been prepared using accounting
policies prescribed or permitted by the Office of the Commissioner of Insurance
of the State of Wisconsin ("statutory basis of accounting").
In 1998, the National Association of Insurance Commissioners ("NAIC") adopted
the Codification of Statutory Accounting Principles ("Codification") guidance,
which will replace the current Accounting Practices and Procedures manual as the
NAIC's primary guidance on statutory accounting. The NAIC is now considering
amendments to Codification that would also be effective upon implementation.
Codification provides guidance for areas where statutory accounting has been
silent and changes current statutory accounting in some areas (e.g., deferred
income taxes are recorded). The Office of the Commissioner of Insurance of the
State of Wisconsin ("OCI") intends to adopt Codification effective January 1,
2001. The Company has not determined the potential effect of Codification, and
the eventual effect of adoption could differ if changes are made prior to the
effective date of January 1, 2001.
Financial statements prepared on the statutory basis of accounting vary from
financial statements prepared on the basis of generally accepted accounting
principles ("GAAP") primarily because on a GAAP basis: (1) policy acquisition
costs are deferred and amortized, (2) investment valuations and insurance
reserves are based on different assumptions, (3) funds received under
deposit-type contracts are not reported as premium revenue, and (4) deferred
taxes are provided for temporary differences between book and tax basis of
certain assets and liabilities. The effects on the financial statements of the
differences between the statutory basis of accounting and GAAP are material to
the Company.
The preparation of financial statements in conformity with the statutory basis
of accounting requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual future results could differ from these estimates.
INVESTMENTS
The Company's investments are valued on the following bases:
Bonds -- Amortized cost using the interest method; loan-backed and structured
securities are amortized using estimated prepayment rates and, generally, the
prospective adjustment method
Common and preferred stocks -- Common stocks are carried at fair value,
preferred stocks are generally carried at cost, and unconsolidated subsidiaries
are recorded using the equity method
Mortgage loans -- Amortized cost
Real estate -- Lower of cost, less depreciation and encumbrances, or estimated
net realizable value
Policy loans -- Unpaid principal balance, which approximates fair value
Other investments -- Consists primarily of joint venture investments which are
valued at equity in ventures' net assets
Cash and temporary investments -- Amortized cost, which approximates fair value
TEMPORARY INVESTMENTS
Temporary investments consist of debt securities that have maturities of one
year or less at acquisition.
NET INVESTMENT INCOME AND CAPITAL GAINS
Net investment income includes interest and dividends received or due and
accrued on investments, equity in unconsolidated subsidiaries' earnings and the
Company's share of joint venture income. Net investment income is reduced by
investment management expenses, real estate depreciation, depletion related to
energy assets and costs associated with securities lending.
Realized investment gains and losses are reported in income based upon specific
identification of securities sold. Unrealized investment gains and losses
include changes in the fair
Notes to Consolidated Statutory Financial Statements
B- 22
<PAGE> 44
value of common stocks and changes in valuation allowances made for bonds,
preferred stocks, mortgage loans and other investments considered by management
to be impaired.
INTEREST MAINTENANCE RESERVE
The Company is required to maintain an interest maintenance reserve ("IMR"). The
IMR is used to defer realized gains and losses, net of tax, on fixed income
investments resulting from changes in interest rates. Net realized gains and
losses deferred to the IMR are amortized into investment income over the
approximate remaining term to maturity of the investment sold.
INVESTMENT RESERVES
The Company is required to maintain an asset valuation reserve ("AVR"). The AVR
establishes a general reserve for invested asset valuation using a formula
prescribed by state regulations. The AVR is designed to stabilize surplus
against potential declines in the value of investments. In addition, the Company
maintained a $200 million voluntary investment reserve at each of December 31,
1999 and 1998 to absorb potential investment losses exceeding those considered
by the AVR formula. Increases or decreases in these investment reserves are
recorded directly to surplus.
SEPARATE ACCOUNTS
Separate account assets and related policy liabilities represent the segregation
of funds deposited by "variable" life insurance and annuity policyowners.
Policyowners bear the investment performance risk associated with variable
products. Separate account assets are invested at the direction of the
policyowner in a variety of Company-managed mutual funds. Variable product
policyowners also have the option to invest in a fixed interest rate annuity in
the general account of the Company. Separate account assets are reported at fair
value.
PREMIUM REVENUE AND OPERATING EXPENSES
Life insurance premiums are recognized as revenue at the beginning of each
policy year. Annuity and disability income premiums are recognized when received
by the Company. Operating expenses, including costs of acquiring new policies,
are charged to operations as incurred.
OTHER INCOME
Other income includes considerations on supplementary contracts, ceded
reinsurance expense allowances and miscellaneous policy charges.
BENEFIT PAYMENTS TO POLICYOWNERS AND BENEFICIARIES
Benefit payments to policyowners and beneficiaries include death, surrender and
disability benefits, matured endowments and supplementary contract payments.
RESERVES FOR POLICY BENEFITS
Reserves for policy benefits are determined using actuarial estimates based on
mortality and morbidity experience tables and valuation interest rates
prescribed by the OCI. (See Note 3.)
POLICYOWNER DIVIDENDS
Almost all life insurance policies, and certain annuity and disability income
policies issued by the Company are participating. Annually, the Company's Board
of Trustees approves dividends payable on participating policies in the
following fiscal year, which are accrued and charged to operations when
approved.
RECLASSIFICATION
Certain financial statement balances for 1998 and 1997 have been reclassified to
conform to the current year presentation.
Notes to Consolidated Statutory Financial Statements
B- 23
<PAGE> 45
NOTE 2 -- INVESTMENTS
DEBT SECURITIES
Debt securities consist of all bonds and fixed-maturity preferred stocks. The
estimated fair values of debt securities are based upon quoted market prices, if
available. For securities not actively traded, fair values are estimated using
independent pricing services or internally developed pricing models.
Statement value, which principally represents amortized cost, and estimated fair
value of the Company's debt securities at December 31, 1999 and 1998 were as
follows:
<TABLE>
<CAPTION>
RECONCILIATION TO ESTIMATED FAIR VALUE
-----------------------------------------------
GROSS GROSS ESTIMATED
STATEMENT UNREALIZED UNREALIZED FAIR
DECEMBER 31, 1999 VALUE GAINS LOSSES VALUE
----------------- --------- ---------- ---------- ---------
(IN MILLIONS)
<S> <C> <C> <C> <C>
U.S. Government and
political
obligations........ $ 3,855 $ 72 $ (167) $ 3,760
Mortgage-backed
securities......... 7,736 65 (256) 7,545
Corporate and other
debt securities.... 25,201 249 (1,088) 24,362
------- ------ ------- -------
36,792 386 (1,511) 35,667
Preferred stocks..... 85 2 -- 87
------- ------ ------- -------
Total........... $36,877 $ 388 $(1,511) $35,754
======= ====== ======= =======
</TABLE>
<TABLE>
<CAPTION>
RECONCILIATION TO ESTIMATED FAIR VALUE
-----------------------------------------------
GROSS GROSS ESTIMATED
STATEMENT UNREALIZED UNREALIZED FAIR
DECEMBER 31, 1998 VALUE GAINS LOSSES VALUE
----------------- --------- ---------- ---------- ---------
(IN MILLIONS)
<S> <C> <C> <C> <C>
U.S. Government and
political
obligations........ $ 3,904 $ 461 $ (11) $ 4,354
Mortgage-backed
securities......... 7,357 280 (15) 7,622
Corporate and other
debt securities.... 23,627 1,240 (382) 24,485
------- ------ ------- -------
34,888 1,981 (408) 36,461
Preferred stocks..... 189 4 (1) 192
------- ------ ------- -------
Total........... $35,077 $1,985 $ (409) $36,653
======= ====== ======= =======
</TABLE>
The statement value and estimated fair value of debt securities by contractual
maturity at December 31, 1999 is shown below. Expected maturities may differ
from contractual maturities because borrowers may have the right to call or
prepay obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
STATEMENT ESTIMATED
VALUE FAIR VALUE
--------- ----------
(IN MILLIONS)
<S> <C> <C>
Due in one year or less.......... $ 931 $ 942
Due after one year through five
years.......................... 5,420 5,412
Due after five years through ten
years.......................... 11,168 10,796
Due after ten years.............. 11,622 11,059
------- -------
29,141 28,209
Mortgage-backed securities....... 7,736 7,545
------- -------
$36,877 $35,754
======= =======
</TABLE>
STOCKS
The estimated fair values of common and perpetual preferred stocks are based
upon quoted market prices, if available. For securities not actively traded,
fair values are estimated using independent pricing services or internally
developed pricing models.
The adjusted cost of common and preferred stock held by the Company at December
31, 1999 and 1998 was $4.9 billion and $4.3 billion, respectively.
MORTGAGE LOANS AND REAL ESTATE
Mortgage loans are collateralized by properties located throughout the United
States and Canada. The Company attempts to minimize mortgage loan investment
risk by diversification of geographic locations and types of collateral
properties.
The fair value of mortgage loans as of December 31, 1999 and 1998 was $13.2
billion and $12.9 billion, respectively. The fair value of the mortgage loan
portfolio is estimated by discounting the future estimated cash flows using
current interest rates of debt securities with similar credit risk and
maturities, or utilizing net realizable values.
At December 31, 1999 and 1998, real estate includes $39 million and $61 million,
respectively, acquired through foreclosure and $114 million and $120 million,
respectively, of home office real estate.
Notes to Consolidated Statutory Financial Statements
B-24
<PAGE> 46
REALIZED AND UNREALIZED GAINS AND LOSSES
Realized investment gains and losses for the years ended December 31, 1999, 1998
and 1997 were as follows:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31, 1999
--------------------------------
NET
REALIZED
REALIZED REALIZED GAINS
GAINS LOSSES (LOSSES)
-------- -------- --------
(IN MILLIONS)
<S> <C> <C> <C>
Bonds..................... $ 219 $(404) $ (185)
Common and preferred
stocks.................. 1,270 (255) 1,015
Mortgage loans............ 22 (12) 10
Real estate............... 92 -- 92
Other invested assets..... 308 (189) 119
------ ----- ------
$1,911 $(860) 1,051
====== ===== ------
Less: Capital gains
taxes................... 244
Less: IMR (losses)
gains................... (39)
------
Net realized capital
gains................... $ 846
======
</TABLE>
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31, 1998
--------------------------------
NET
REALIZED
REALIZED REALIZED GAINS
GAINS LOSSES (LOSSES)
-------- -------- --------
(IN MILLIONS)
<S> <C> <C> <C>
Bonds..................... $ 514 $(231) $ 283
Common and preferred
stocks.................. 885 (240) 645
Mortgage loans............ 18 (11) 7
Real estate............... 41 -- 41
Other invested assets..... 330 (267) 63
------ ----- ------
$1,788 $(749) 1,039
====== ===== ------
Less: Capital gains
taxes................... 358
Less: IMR (losses)
gains................... 197
------
Net realized capital
gains................... $ 484
======
</TABLE>
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31, 1997
--------------------------------
NET
REALIZED
REALIZED REALIZED GAINS
GAINS LOSSES (LOSSES)
-------- -------- --------
(IN MILLIONS)
<S> <C> <C> <C>
Bonds..................... $ 518 $(269) $249
Common and preferred
stocks.................. 533 (150) 383
Mortgage loans............ 14 (14) --
Real estate............... 100 (2) 98
Other invested assets..... 338 (105) 233
------ ----- ----
$1,503 $(540) 963
====== ===== ----
Less: Capital gains
taxes................... 340
Less: IMR (losses)
gains................... 209
----
Net realized capital
gains................... $414
====
</TABLE>
Changes in unrealized net investment gains and losses for the years ended
December 31, 1999, 1998 and 1997 were as follows:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31,
----------------------
1999 1998 1997
---- ---- ----
(IN MILLIONS)
<S> <C> <C> <C>
Bonds......................... $(178) $ (97) $ 43
Common and preferred stocks... 415 29 528
Mortgage loans................ (10) (16) (7)
Real estate................... (2) -- --
Other......................... (12) (63) 12
----- ----- ----
$ 213 $(147) $576
===== ===== ====
</TABLE>
SECURITIES LENDING
The Company has entered into securities lending agreements whereby certain
securities are loaned to third parties, primarily major brokerage firms. The
Company's policy requires a minimum of 102% of the fair value of the loaned
securities as collateral, calculated on a daily basis in the form of either cash
or securities. Collateral assets received and related liability due to
counterparties of $2.1 billion and $1.5 billion, respectively, are included in
the consolidated statements of financial position at December 31, 1999 and 1998,
and approximate the statement value of securities loaned at those dates.
INVESTMENT IN MGIC
The Company owns 11.3% (11.9 million shares) of the outstanding common stock of
MGIC Investment Corporation ("MGIC"). This investment is accounted for using the
equity method. At December 31, 1999 and 1998, the fair value of the Company's
investment in MGIC exceeded the statement value of $201 million and $180
million, respectively, by $518 million and $296 million, respectively.
In August 1998, the Company delivered 8.9 million shares of MGIC to a brokerage
firm to settle a forward contract. In conjunction with the settlement, the
Company recorded a $114 million realized gain.
DERIVATIVE FINANCIAL INSTRUMENTS
In the normal course of business, the Company enters into transactions to reduce
its exposure to fluctuations in interest rates, foreign currency exchange rates
and market volatility. These hedging strategies include the use of forwards,
futures, options and swaps.
Notes to Consolidated Statutory Financial Statements
B-25
<PAGE> 47
The Company held the following positions for hedging purposes at December 31,
1999 and 1998:
<TABLE>
<CAPTION>
NOTIONAL AMOUNTS
---------------------------
DECEMBER 31, DECEMBER 31,
DERIVATIVE FINANCIAL INSTRUMENT 1999 1998 RISKS REDUCED
------------------------------- ------------ ------------ -------------
(IN MILLIONS)
<S> <C> <C> <C>
Foreign Currency
Forward Contracts...................... $967 $601 Currency exposure on foreign-denominated
investments
Common Stock Futures..................... 620 657 Stock market price fluctuation.
Bond Futures............................. 50 379 Bond market price fluctuation.
Options to acquire Interest Rate Swaps... 419 419 Interest rates payable on certain annuity
and insurance contracts.
Foreign Currency and
Interest Rate Swaps.................... 203 94 Interest rates on variable rate notes and
currency exposure on foreign-denominated
bonds.
Default Swaps............................ 52 -- Default exposure on certain bond
investments.
</TABLE>
The notional or contractual amounts of derivative financial instruments are used
to denominate these types of transactions and do not represent the amounts
exchanged between the parties.
In addition to the use of derivatives for hedging purposes, equity swaps were
held for investment purposes during 1999 and 1998. The notional amount of equity
swaps outstanding at December 31, 1999 and 1998 was $136 million and $138
million, respectively.
Foreign currency forwards, foreign currency swaps, stock futures and equity
swaps are reported at fair value. Resulting gains and losses on these contracts
are unrealized until expiration of the contract. There is no statement value
reported for interest rate swaps, bond futures and options to acquire interest
rate swaps prior to the settlement of the contract, at which time realized gains
and losses are deferred to IMR. Changes in the value of derivative instruments
are expected to offset gains and losses on the hedged investments. During 1999
and 1998, net realized and unrealized gains on investments were partially offset
by net realized losses of $55 million and $104 million, respectively, and net
unrealized gains (losses) of $17 million and $(58) million, respectively, on
derivative instruments. The effect of derivative instruments in 1997 was not
material to the Company's results of operations.
NOTE 3 -- RESERVES FOR POLICY BENEFITS
Life insurance reserves on substantially all policies issued since 1978 are
based on the Commissioner's Reserve Valuation Method with interest rates ranging
from 3 1/2% to 5 1/2%. Other life policy reserves are primarily based on the net
level premium method employing various mortality tables at interest rates
ranging from 2% to 4 1/2%.
Deferred annuity reserves on contracts issued since 1985 are valued primarily
using the Commissioner's Annuity Reserve Valuation Method with interest rates
ranging from 3 1/2% to 6 1/4%. Other deferred annuity reserves are based on
contract value. Immediate annuity reserves are based on present values of
expected benefit payments at interest rates ranging from 3 1/2% to 7 1/2%.
Active life reserves for disability income ("DI") policies issued since 1987 are
primarily based on the two-year preliminary term method using a 4% interest rate
and the 1985 Commissioner's Individual Disability Table A ("CIDA") for
morbidity. Active life reserves for prior DI policies are based on the net level
premium method, a 3% to 4% interest rate and the 1964 Commissioner's Disability
Table for morbidity. Disabled life reserves for DI policies are based on the
present values of expected benefit payments primarily using the 1985 CIDA
(modified for Company experience in the first four years of disability) with
interest rates ranging from 3% to 5 1/2%.
Use of these actuarial tables and methods involves estimation of future
mortality and morbidity. Actual future experience could differ from these
estimates.
NOTE 4 -- EMPLOYEE AND AGENT BENEFIT PLANS
The Company sponsors noncontributory defined benefit retirement plans for all
eligible employees and agents. The expense associated with these plans is
generally recorded by the Company in the period contributions are funded. As of
Notes to Consolidated Statutory Financial Statements
B-26
<PAGE> 48
January 1, 1999, the most recent actuarial valuation date available, the
qualified defined benefit plans were fully funded. The Company recorded a
liability of $109 million and $98 million for nonqualified defined benefit plans
at December 31, 1999 and 1998, respectively. In addition, the Company has a
contributory 401(k) plan for eligible employees and a noncontributory defined
contribution plan for all full-time agents. The Company's contributions are
expensed in the period contributions are made to the plans. The Company recorded
$31 million, $29 million and $27 million of total expense related to its defined
benefit and defined contribution plans for the years ended December 31, 1999,
1998 and 1997, respectively. The defined benefit and defined contribution plans'
assets of $2.2 billion and $1.9 billion at December 31, 1999 and 1998,
respectively, were primarily invested in the separate accounts of the Company.
In addition to pension and retirement benefits, the Company provides certain
health care and life insurance benefits ("postretirement benefits") for retired
employees. Substantially all employees may become eligible for these benefits if
they reach retirement age while working for the Company. Postretirement benefit
costs for the years ended December 31, 1999, 1998 and 1997 were a net expense
(benefit) of $5.0 million, $1.8 million and ($1.3) million, respectively.
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1999 1998
------------------ ------------------
<S> <C> <C>
Unfunded postretirement
benefit obligation
for retirees and
other fully eligible
employees (Accrued in
statement of
financial
position)............ $40 million $35 million
Estimated
postretirement
benefit obligation
for active non-vested
employees (Not
accrued until
employee vests)...... $68 million $56 million
Discount rate.......... 7% 7%
Health care cost trend 10% to an ultimate 10% to an ultimate
rate................. 5%, declining 1% 5%, declining 1%
for 5 years for 5 years
</TABLE>
If the health care cost trend rate assumptions were increased by 1%, the accrued
postretirement benefit obligation as of December 31, 1999 and 1998 would have
been increased by $6 million and $5 million, respectively.
At December 31, 1999 and 1998, the recorded postretirement benefit obligation
was reduced by $28 million and $23 million, respectively, for health care
benefit plan assets. These assets were primarily invested in the separate
accounts of the Company.
NOTE 5 -- REINSURANCE
In the normal course of business, the Company seeks to limit its exposure to
loss on any single insured and to recover a portion of benefits paid by ceding
to reinsurers under excess coverage and coinsurance contracts. The Company
retains a maximum of $25 million of coverage per individual life and $35 million
maximum of coverage per joint life. The Company has an excess reinsurance
contract for disability income policies with retention limits varying based upon
coverage type.
The amounts shown in the accompanying consolidated financial statements are net
of reinsurance. Reserves for policy benefits at December 31, 1999 and 1998 were
reported net of ceded reserves of $584 million and $518 million, respectively.
The effect of reinsurance on premiums and benefits for the years ended December
31, 1999, 1998 and 1997 was as follows:
<TABLE>
<CAPTION>
1999 1998 1997
------ ------ ------
(IN MILLIONS)
<S> <C> <C> <C>
Direct premiums and
deposits................... $8,785 $8,426 $7,647
Premiums ceded............... (441) (405) (353)
------ ------ ------
Net premium and deposits..... $8,344 $8,021 $7,294
====== ====== ======
Benefits to policyowners and
beneficiaries.............. 9,205 $8,869 $8,057
Benefits ceded............... (197) (182) (136)
------ ------ ------
Net benefits to policyowners
and beneficiaries.......... $9,008 $8,687 $7,921
====== ====== ======
</TABLE>
In addition, the Company received $133 million, $121 million and $115 million
for the years ended December 31, 1999, 1998 and 1997, respectively, from
reinsurers representing allowances for reimbursement of commissions and other
expenses. These amounts are included in other income in the consolidated
statement of operations.
Reinsurance contracts do not relieve the Company from its obligations to
policyowners. Failure of reinsurers to honor
Notes to Consolidated Statutory Financial Statements
B-27
<PAGE> 49
their obligations could result in losses to the Company; consequently,
allowances are established for amounts deemed uncollectible. The Company
evaluates the financial condition of its reinsurers and monitors concentrations
of credit risk arising from similar geographic regions, activities or economic
characteristics of the reinsurers to minimize its exposure to significant losses
from reinsurer insolvencies.
NOTE 6 -- INCOME TAXES
Provisions for income taxes are based on current income tax payable without
recognition of deferred taxes. The Company files a consolidated life-nonlife
federal income tax return. Federal income tax returns for years through 1995 are
closed as to further assessment of tax. Adequate provision has been made in the
financial statements for any additional taxes, which may become due with respect
to the open years.
The Company's taxable income can vary significantly from gain from operations
before taxes due to differences between book and tax valuation of assets and
liabilities (e.g., investments and policy benefit reserves). The Company pays a
tax that is assessed only on the surplus of mutual life insurance companies
("equity tax"), and also, the Company must capitalize and amortize, as opposed
to immediately deducting, an amount deemed to represent the cost of acquiring
new business ("DAC tax").
The Company's effective tax rate on gains from operations before taxes for the
years ended December 31, 1999, 1998 and 1997 was 29%, 48%, and 56% respectively.
In 1999, the effective rate was less than the federal corporate rate of 35% due
primarily to differences between book and tax investment income. In 1998 and
1997, the effective rate was greater than 35% due primarily to the equity tax
and DAC tax.
NOTE 7 -- RELATED PARTY TRANSACTIONS
The Company acquired Frank Russell Company ("Frank Russell") effective January
1, 1999 for a purchase price of approximately $950 million. Frank Russell is a
leading investment management and consulting firm, providing investment advice,
analytical tools and investment vehicles to institutional and individual
investors in more than 30 countries. This investment is accounted for using the
equity method and is included in common stocks in the consolidated statement of
financial position. In 1999, the Company charged-off directly from surplus
approximately $842 million, representing the total goodwill associated with the
acquisition. The Company has received permission from the OCI for this
charge-off. The Company has unconditionally guaranteed certain debt obligations
of Frank Russell, including $350 million of senior notes and up to $150 million
of other credit facilities.
During 1999, the Company transferred appreciated equity investments to a
wholly-owned subsidiary as a capital contribution to the subsidiary. A realized
capital gain of $287 million was recorded on this transaction based on the fair
value of the assets upon transfer.
NOTE 8 -- CONTINGENCIES
The Company has guaranteed certain obligations of its other affiliates. These
guarantees totaled approximately $101 million at December 31, 1999 and are
generally supported by the underlying net asset values of the affiliates.
In addition, the Company routinely makes commitments to fund mortgage loans or
other investments in the normal course of business. These commitments aggregated
to $1.9 billion at December 31, 1999 and were extended at market interest rates
and terms.
The Company is engaged in various legal actions in the normal course of its
investment and insurance operations. In the opinion of management, any losses
resulting from such actions would not have a material effect on the Company's
financial position.
Notes to Consolidated Statutory Financial Statements
B- 28
<PAGE> 50
[PRICEWATERHOUSECOOPERS LLP - LETTERHEAD]
R EPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Trustees and Policyowners of
The Northwestern Mutual Life Insurance Company
We have audited the accompanying consolidated statement of financial position of
The Northwestern Mutual Life Insurance Company and its subsidiary as of December
31, 1999 and 1998, and the related consolidated statements of operations, of
changes in surplus and of cash flows for each of the three years in the period
ended December 31, 1999. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
As described in Note 1 to the financial statements, the Company prepared these
consolidated financial statements using accounting practices prescribed or
permitted by the Office of the Commissioner of Insurance of the State of
Wisconsin (statutory basis of accounting), which practices differ from
accounting principles generally accepted in the United States. Accordingly, the
consolidated financial statements are not intended to represent a presentation
in accordance with generally accepted accounting principles. The effects on the
consolidated financial statements of the variances between the statutory basis
of accounting and generally accepted accounting principles, although not
reasonably determinable, are presumed to be material.
In our opinion, the consolidated financial statements audited by us (1) do not
present fairly in conformity with generally accepted accounting principles, the
financial position of The Northwestern Mutual Life Insurance Company and its
subsidiary as of December 31, 1999 and 1998, or the results of their operations
or their cash flows for each of the three years in the period ended December 31,
1999 because of the effects of the variances between the statutory basis of
accounting and generally accepted accounting principles referred to in the
preceding paragraph and (2) do present fairly, in all material respects, the
financial position of The Northwestern Mutual Life Insurance Company and its
subsidiary as of December 31, 1999 and 1998 and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 1999, on the basis of accounting described in Note 1.
/s/ PriceWaterhousecoopers LLP
January 24, 2000
Accountants' Report B- 29
<PAGE> 51
TABLE OF CONTENTS
<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
FINANCIAL STATEMENTS OF THE ACCOUNT.............................................................................B-5
(for the two years ended December 31, 1999)
REPORT OF INDEPENDENT ACCOUNTANTS..............................................................................B-17
(for the two years ended December 31, 1999)
FINANCIAL STATEMENTS OF NORTHWESTERN MUTUAL....................................................................B-18
(for the three years ended December 31, 1999)
REPORT OF INDEPENDENT ACCOUNTANTS..............................................................................B-29
(for the three years ended December 31, 1999)
</TABLE>
B-30
<PAGE> 52
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 the two years ended December 31, 1999)
Statement of Assets and Liabilities
Statement of Operations
Changes in Equity
Notes to Financial Statements
Report of Independent Accountants
The Northwestern Mutual Life Insurance Company (for the three
years ended December 31, 1999)
Consolidated Statement of Financial Position
Consolidated Statement of Operations
Consolidated Statement of Changes in Surplus
Consolidated Statement of Cash Flows
Notes to Consolidated Statutory Financial Statements
Report of Independent Accountants
(b) Exhibits
Exhibit B(10) Consent of PricewaterhouseCoopers LLP
The following documents, previously included in the Registration
Statement and amendments thereto, are herein restated in electronic
format:
Exhibit B(1)(a) Resolution of the Board of Trustees of The
Northwestern Mutual Life Insurance Company
creating the Account
Exhibit B(1)(b) Resolution of the Board of Trustees of The
Northwestern Mutual Life Insurance Company to use
the Account to facilitate the issuance and
maintenance of the Contracts and renaming the
Account "NML Variable Annuity Account C"
The following exhibits were filed in electronic format with
Post-Effective Amendment No. 19 on Form N-4 for NML Variable Annuity
Account C, File No. 2-89905-01, CIK 0000790163, dated February 25,
1999, and are incorporated herein by reference:
Exhibit B(4)(a) Group Combination Annuity Contract, NVP.1C.(0594),
with amended application, including Contract
amendment (sex neutral)
Exhibit B(5) The application form is included in Exhibit
B(4)(a) above
C-1
<PAGE> 53
Exhibit B(8)(a) Form of Participation Agreement Among Russell
Insurance Funds, Russell Fund Distributors, Inc.
and The Northwestern Mutual Life Insurance
Company
Exhibit B(8)(b) Form of Administrative Service Fee Agreement
between The Northwestern Mutual Life Insurance
Company and Frank Russell Company
The following exhibit was filed in electronic format with the
Registration Statement on Form S-6 for Northwestern Mutual Variable
Life Account, File No. 333-59103, CIK 0000742277, dated July 15, 1998,
and is incorporated herein by reference:
Exhibit A(6)(b) Amended By-Laws of The Northwestern Mutual Life
Insurance Company dated January 28, 1998
The following exhibit was filed in electronic format with
Post-Effective Amendment No. 16 on Form N-4 for NML Variable Annuity
Account C, File No. 2-89905-01, CIK 0000790163, dated April 26, 1996,
and is incorporated herein by reference:
EX-99.B1 Restated Articles of Incorporation of The Northwestern
Mutual Life Insurance Company
Item 25. Directors and Officers of the Depositor
The following lists include all of the Trustees, executive officers and
other officers of The Northwestern Mutual Life Insurance Company as of April 1,
2000, without regard to their activities relating to variable annuity contracts
or their authority to act or their status as "officers" as that term is used for
certain purposes of the federal securities laws and rules thereunder.
TRUSTEES
<TABLE>
<CAPTION>
Name Business Address
- ---- ----------------
<S> <C>
R. Quintus Anderson Aarque Capital Corporation
20 West Fairmount Avenue
P.O. Box 109
Lakewood, NY 14750-0109
Edward E. Barr Sun Chemical Corporation
222 Bridge Plaza South
Fort Lee, NJ 07024
Gordon T. Beaham III Faultless Starch/Bon Ami Co.
1025 West Eighth Street
Kansas City, MO 64101
Robert C. Buchanan Fox Valley Corporation
100 West Lawrence Street
P.O. Box 727
Appleton, WI 54911
</TABLE>
C-2
<PAGE> 54
<TABLE>
<S> <C>
George A. Dickerman Spalding Sports Worldwide
425 Meadow Street
P.O. Box 901
Chicopee, MA 01021-0901
Pierre S. du Pont Richards, Layton and Finger
P.O. Box 551
1 Rodney Square
Wilmington, DE 19899
James D. Ericson The Northwestern Mutual Life
Insurance Company
720 East Wisconsin Avenue
Milwaukee, WI 53202
J. E. Gallegos Gallegos Law Firm
460 St. Michaels Drive
Building 300
Santa Fe, NM 87505
Stephen N. Graff 805 Lone Tree Road
Elm Grove, WI 53122-2014
Patricia Albjerg Graham Graduate School of Education
Harvard University
420 Gutman
Cambridge, MA 02138
Stephen F. Keller 101 South Las Palmas Avenue
Los Angeles, CA 90004
Barbara A. King Landscape Structures, Inc.
Route 3, 601 - 7th Street South
Delano, MN 55328
J. Thomas Lewis 228 St. Charles Avenue
Suite 1024
New Orleans, LA 70130
Daniel F. McKeithan Jr. Tamarack Petroleum Company, Inc.
Suite 1920
777 East Wisconsin Avenue
Milwaukee, WI 53202
Guy A. Osborn Universal Foods Corp.
433 East Michigan Street
Milwaukee, WI 53202
Timothy D. Proctor Diageo plc
8 Henrietta Place
London W1M 9AG
United Kingdom
</TABLE>
C-3
<PAGE> 55
<TABLE>
<S> <C>
H. Mason Sizemore, Jr. The Seattle Times
Fairview Avenue North and John Street
P.O. Box 70
Seattle, WA 98109
Harold B. Smith, Jr. Illinois Tool Works, Inc.
3600 West Lake Avenue
Glenview, IL 60625-5811
Sherwood H. Smith, Jr. Carolina Power & Light Company
411 Fayetteville Street Mall
P.O. Box 1551
Raleigh, NC 27602
Peter M. Sommerhauser Godfrey & Kahn, S.C.
780 North Water Street
Milwaukee, WI 53202-3590
John E. Steuri Advanced Thermal Technologies
2102 Riverfront Drive, Suite 120
Little Rock, AR 72202-1747
John J. Stollenwerk Allen-Edmonds Shoe Corporation
201 East Seven Hills Road
P.O. Box 998
Port Washington, WI 53074-0998
Barry L. Williams Williams Pacific Ventures, Inc.
100 First Street
Suite 2350
San Francisco, CA 94105
Kathryn D. Wriston c/o Shearman & Sterling
599 Lexington Avenue
Room 1126
New York, NY 10022
Edward J. Zore The Northwestern Mutual Life
Insurance Company
720 East Wisconsin Avenue
Milwaukee, WI 53202
</TABLE>
EXECUTIVE OFFICERS
<TABLE>
<CAPTION>
Name Title
- ---- -----
<S> <C>
Deborah A. Beck Executive Vice President
William H. Beckley Executive Vice President
Robert J. Berdan Vice President and General Counsel
John M. Bremer Senior Executive Vice President and Secretary
Peter W. Bruce Senior Executive Vice President
Steven T. Catlett Vice President
</TABLE>
C-4
<PAGE> 56
<TABLE>
<S> <C>
Mark G. Doll Senior Vice President
Thomas E. Dyer Vice President
James D. Ericson Chairman and Chief Executive Officer, Trustee
Christina H. Fiasca Vice President
Richard L. Hall Senior Vice President
William C. Koenig, FSA Senior Vice President and Chief Actuary
Gary E. Long Vice President and Controller
Susan A. Lueger Vice President
Meridee J. Maynard Vice President
Donald L. Mellish Senior Vice President
Bruce L. Miller Executive Vice President
Gregory C. Oberland Vice President
Barbara F. Piehler Vice President
James F. Reiskytl Vice President
Lora A. Rosenbaum Vice President
Mason G. Ross Senior Vice President
John E. Schlifske Senior Vice President
Leonard F. Stecklein Senior Vice President - Policyowner Services
Frederic H. Sweet Senior Vice President
J. Edward Tippets Vice President
Martha M. Valerio Vice President
David B. Wescoe Vice President
W. Ward White Vice President
Walt J. Wojcik Senior Vice President
Edward J. Zore President and Trustee
</TABLE>
OTHER OFFICERS
<TABLE>
<CAPTION>
Name Title
- ---- -----
<S> <C>
John M. Abbott Associate Director - Benefits Research
Carl G. Amick Director - Disability Benefits
Thomas R. Anderson Director - Trust Services
Maria J. Avila Associate Director - Investment Accounting
Michael J. Backus Associate Director - Information Systems
John E. Bailey Senior Actuary
Nicholas H. Bandow Assistant Director - Information Systems
Margaret A. Barkley Director - Agency
Walter L. Barlow Assistant Director - Education
Rebekah B. Barsch Director NML Foundation
Sandra L. Barton Assistant Director - Marketing
Bradford P. Bauer Assistant Director - Advanced Marketing
Beth M. Berger Assistant General Counsel & Assistant Secretary
Frederick W. Bessette Assistant General Counsel & Assistant Secretary
Carrie L. Bleck Assistant Director
D. Rodney Bluhm Assistant General Counsel
Jessica J. Borgmann Assistant Director - Agency
Willette Bowie Employee Relations Director
Martin R. Braasch Director - Underwriting Standards & Services
Patricia R. Braeger Associate Director - Information Systems
James A. Brewer Investment Research Officer
William J. Buholzer Employee Relations Director
</TABLE>
C-5
<PAGE> 57
<TABLE>
<S> <C>
Michael S. Bula Assistant General Counsel
Jerry C. Burg Associate Director - Field Benefits
Pency P. Byhardt Assistant Director - New Business
Gregory B. Bynan Director - Corporate Services
Kim M. Cafaro Assistant Director - Annuity Marketing
John E. Cain Assistant Director - Life Benefits
Gwen C. Canady Assistant Director-Mutual Funds
Shanklin B. Cannon, M.D. Medical Director - Life Products/Research
Terese J. Capizzi Director - Long Term Care
Kurt P. Carbon Associate Regional Director
John P. Carrick Assistant Director - Information Systems
Michael G. Carter Director - Corporate Planning
William W. Carter Associate Actuary
John E. Caspari Assistant Director - Advertising & Corporate
Information
Walter J. Chossek Associate Controller
Thomas R. Christenson Director - Life Marketing
Eric P. Christophersen Director - Marketing
Alan E. Close Associate Controller
Carolyn M. Colbert Assistant Director - New Business
Margaret Winter Combe Director - Agency Development
Robyn S. Cornelius Assistant Director - Field Financial
Virginia A. Corwin Assistant Director - New Business
Barbara E. Courtney Associate Director - Mutual Funds
Dennis J. Darland Assistant Director - Disability Income
Thomas H. Davis Associate Director - Information Systems
Nicholas De Fino Assistant Director
Glen W. DeZeeuw Director - Agency Development
Carol A. Detlaf Director - Annuity Administration
Colleen Devlin Assistant Director - Communications
Glen W. DeZeeuw Director - Agency Services
Joseph Dobering, III Associate Director - Underwriting Standards & Services
Jennifer L. Docea Assistant Actuary
Lisa C. Dodd Director - Policyowner Services
Richard P. Dodd Assistant Director - Agency
Daniel C. Dougherty Director - Personal Markets
Margaret T. Dougherty Associate Director - Information Systems
John R. Dowell Director - Workforce Diversity
William O. Drehfal Assistant Director - Media Services
Steven J. Dryer Assistant Director - Marketing
Jeffrey S. Dunn Vice President
John E. Dunn Assistant General Counsel & Secretary
Somayajulu Durvasula Director - Field Financial
James R. Eben Assistant General Counsel and Assistant
Secretary
Magda El Sayed Assistant Director - Information Systems
Michael S. Ertz Director - Agency
Thomas F. Fadden Assistant Director - Information Systems
Zenia J. Fieldbinder Assistant Director - Annuity Accumulation
Richard F. Fisher Senior Actuary
Marcia L. Fitzgerald Assistant Director - New Business
Dennis J. Fitzpatrick Director - Advanced Marketing
Jon T. Flaschner Director - Policyowner Services
</TABLE>
C-6
<PAGE> 58
<TABLE>
<S> <C>
Kate M. Fleming Assistant General Counsel and Secretary
Carol J. Flemma Director - Marketing
Laurie Flessas Assistant Director - Life Marketing
John E. Fobes II Assistant Director - Agency Services
Donald Forecki Investment Officer
Phillip B. Franczyk Vice President
Stephen H. Frankel Vice President
James Frasher Assistant General Counsel and Assistant Secretary
Peter Q. Fraser Director - Development
Anne A. Frigo Assistant Director - New Business
Richard R. Garthwait Vice President - Field Financial
David L. Georgenson Director - Agent Development
Timothy L. Gergens Financial Officer
Paulette A. Getschman Assistant Director - Policyowner Services
James W. Gillespie Vice President
Walter M. Givler Director - New Business
Edwin P. Glass, Jr. Vice President - Trust Services
Robert P. Glazier Director - New Business
Robert K. Gleeson, M.D. Vice President - Medical Director
Mark J. Gmach Director - Agency
Jason G. Goetze Assistant Director - Long Term Care
David Lee Gosse Assistant Director - Disability Benefits
William F. Grady Director of Field Finances
John M. Grogan Director - Disability Income
Thomas C. Guay Director - Field Financial
Gerald A. Haas Assistant Director - Information Systems
Patricia Ann Hagen Associate Director - Information Systems
Ronald D. Hagen Vice President
Lori A. Hanes Director - Human Resources
William M. Harris Assistant Regional Director - South
Dennis R. Hart Assistant Director - Agent Development
James C. Hartwig Vice President - Advanced Marketing
Paul F. Heaton Assistant General Counsel and Assistant Secretary
William L. Hegge Associate Director of Telecommunications
Wayne F. Heidenreich Medical Director
Susan J. Heinzelman Assistant Actuary
Jacquelyn F. Heise Associate Director - Information Systems
Robert L. Hellrood Director - New Business
Herbert F. Hellwig Assistant Director - Personal Markets
Jane A. Herman Director - Term Upgrade
Gary M. Hewitt Vice President & Treasurer
John G. Hickmann Assistant Director - Field Financial
Donna R. Higgins Associate Director - Information Systems
David L. Hilbert Investment Officer
Karla D. Hill Human Resource Officer
Susan G. Hill Assistant Director
John D. Hillmer Assistant Director - Information Systems
Hugh L. Hoffman Assistant Director - Information Systems
Richard S. Hoffmann Vice President - Audit
Terence J. Holahan Assistant Director - Long Term Care
Bruce Holmes Associate Actuary
Elizabeth S. Idleman Assistant General Counsel and Secretary
Scott C. Iodice Assistant Director - Agency
</TABLE>
C-7
<PAGE> 59
<TABLE>
<S> <C>
Joseph P. Jansky Assistant Director - Corporate Planning
Michael D. Jaquint Assistant Actuary
Dolores A. Juergens Associate Director - Agency
Mark A. Kaprelian Assistant General Counsel and Assistant Secretary
Marilyn J. Katz Assistant Director - Medical Consultants
John C. Kelly Associate Controller
Kevin C. Kennedy Assistant Director - Architecture
James B. Kern Regional Director - Central Region
Donald C. Kiefer Vice President
Jason T. Klawonn Assistant Actuary
Allen B. Kluz Director - Human Resources
Beatrice C. Kmiec Assistant Regional Director - East
James A. Koelbl Assistant General Counsel and Secretary
John L. Kordsmeier Director - Human Resources
Robert J. Kowalsky Chief Architect - Information Systems
Carol L. Kracht Assistant General Counsel & Assistant Secretary
Martha Krawczak Officer - Life and Disability
Patricia A. Krueger Assistant Director - Annuity Products
Jeffrey J. Krygiel Assistant Actuary
Todd L. Laszewski Associate Actuary
Patrick J. Lavin Assistant Director - Disability Benefits
James L. Lavold Associate Director - Meetings
Elizabeth J. Lentini Assistant General Counsel & Secretary
Sally Jo Lewis Assistant General Counsel & Assistant Secretary
Mark P. Lichtenberger Associate Director - LINK Technical Planning
Paul E. Lima Vice President-International Insurance Operations
Steven M. Lindstedt Associate Director - Information Systems
Melissa C. Lloyd Assistant Director - Advanced Marketing
James Lodermeier Assistant Director - Tax Planning
George R. Loxton Assistant General Counsel & Assistant Secretary
Mary M. Lucci Director - New Business
Christine M. Lucia Human Resources Officer
Mark J. Lucius Corporate Information Officer
Merrill C. Lundberg Assistant General Counsel & Assistant Secretary
Jon K. Magalska Associate Actuary
Jean M. Maier Vice President - Policyowner Services
Joseph Maniscalco Associate Director - Information Systems
Raymond J. Manista Assistant General Counsel and Secretary
Steven C. Mannebach Director - Field Financial Services
Jeffrey S. Marks Multi Life, Research & Reinsurance Officer
Steve Martinie Assistant General Counsel & Assistant Secretary
Ted A. Matchulat Actuarial Products Officer
Shawn P. Mauser Assistant Director Personal Markets
Margaret McCabe Director - Policy Benefits Systems
Richard A. McComb Director - Human Resources
William L. McCown Vice President & Investment Counsel
Paul E. McElwee Assistant General Counsel & Assistant Secretary
Allen J. McDonell Assistant Director - Compliance
James L. McFarland Assistant General Counsel & Secretary
Daniel E. McGinley Director - Management Development
Mark J. McLennon Assistant Director
Arthur J. Mees, Jr. Assistant Actuary
Robert J. Meiers Ad Valorem Tax Manager
</TABLE>
C-8
<PAGE> 60
<TABLE>
<S> <C>
Larry S. Meihsner Assistant General Counsel & Assistant Secretary
Robert G. Meilander Vice President
Richard E. Meyers Assistant General Counsel
Patricia A. Michel Assistant Director - Policyowner Services
Lynn A. Milewski Assistant Director - Annuity Products
Jay W. Miller Vice President & Tax Counsel
Sara K. Miller Vice President
Jill Mocarski Associate Medical Director
Tom M. Mohr Long Term Care Officer
Richard C. Moore Associate Actuary
Scott J. Morris Assistant General Counsel and Assistant Secretary
Sharon A. Morton Investment Officer
Adrian J. Mullin Assistant Director - Personal Markets
Timothy P. Murphy Assistant Director-Marketing
Randolph J. Musil Assistant Director - Advanced Marketing
John E. Muth Assistant Director - Advanced Marketing
David K. Nelson Assistant General Counsel
Ronald C. Nelson Director - Annuity Products
Timothy Nelson Assistant Director - Marketing
Leon W. Nesbitt Vice President-Agency
Karen M. Niessing Director - Policyowner Services
Daniel J. O'Meara Director - Field Financial
Mary Joy O'Meara Assistant Director - Advanced Marketing
Mary S. Ogorchock Assistant General Counsel and Assistant Secretary
Kathleen A. Oman Director - Information Systems
Thomas A. Pajewski Investment Research Officer
Arthur V. Panighetti Director - Tax Planning
Christen L. Partleton Associate Director - Policyowner Services
Jeffrey L. Pawlowski Assistant Director - Agency
David W. Perez Assistant General Counsel
Judith L. Perkins Assistant General Counsel & Assistant Secretary
Wilson D. Perry Assistant General Counsel & Assistant Secretary
Peter T. Petersen Assistant Director - Long Term Care
Gary N. Peterson Actuary
John C. Peterson Director of Policyowner Services - West
Harvey W. Pogoriler Assistant General Counsel
Randolph R. Powell, M.D. Medical Director
Brian D. Powers Director - Trust Services
Mark A. Prange Associate Director - Information Systems
Brian R. Pray Assistant Regional Director - New Business
Thomas O. Rabenn Assistant General Counsel and Secretary
Steven M. Radke Legislative Representative
David R. Remstad Senior Actuary
David R. Retherford Assistant Director of New Business - Central
Stephen M. Rhode Assistant Director - Qualified Benefits
Richard R. Richter Vice President
Daniel A. Riedl Assistant General Counsel
Marcia Rimai Vice President - Litigation Counsel
Kathleen M. Rivera Vice President - Insurance Counsel
Bethany M. Rodenhuis Assistant General Counsel and Assistant Secretary
Faith B. Rodenkirk Assistant Director - Group Marketing
James S. Rolfsmeyer Assistant Director - Information Systems
Robert K. Roska Associate Director - Information Systems
</TABLE>
C-9
<PAGE> 61
<TABLE>
<S> <C>
Sue M. Roska Director - Systems and Services
Harry L. Ruppenthal Assistant Director of Policyowner Services - East
Stephen G. Ruys Associate Director - Information Systems
Mary Ann Schachtner Director - Field Training & Development
Linda Ann Schaefer Associate Director - Marketing
Timothy G. Schaefer Assistant Director - Information Systems
Thomas F. Scheer Assistant General Counsel & Assistant Secretary
Carlen A. Schenk Associate Director
Jane A. Schiltz Vice President - Disability Income
Kathleen H. Schluter Assistant General Counsel & Secretary
Calvin R. Schmidt Associate Director - Information Systems
Rodd Schneider Assistant General Counsel and Secretary
Sarah R. Schneider Assistant Director - Corporate Planning
John O. Schnorr Assistant Director
Margaret R. Schoewe Vice President - Information Systems
John F. Schroeder Associate Director of Field Office Real Estate
Donna L. Schwartz Assistant Director - New Business
Melva T. Seabron Director - Corporate Services
Norman W. Seguin, II Investment Officer - Ad Valorem Taxes
Catherine L. Shaw Assistant General Counsel & Assistant Secretary
John E. Sheaffer, Jr. Assistant Director - Agent Development
Janet Z. Silverman Director - New Business
Stephen M. Silverman Assistant General Counsel
David W. Simbro Managing Director - Life Marketing
Paul W. Skalecki Associate Actuary
Cynthia S. Slavik Assistant Director - Environmental Engineer
Mark W. Smith Assistant General Counsel & Assistant Secretary
Warren L. Smith, Jr. Investment Officer - Architecture
Steven W. Speer Director - Public Markets
Robert J. Spellman, M.D. Vice President & Chief Medical Director
Steve P. Sperka Assistant Actuary
Mark A. Stalsberg Assistant Director - Agency
Barbara J. Stansberry Director - New Business
Bonnie L. Steindorf Director - Department Operations
Steven H. Steidinger Assistant Director - Marketing
Karen J. Stevens Assistant General Counsel & Assistant Secretary
Steven J. Stribling Actuary
Stephen J. Strommen Associate Actuary
Theodore H. Strupp Associate Director - Communications
Daniel J. Suprenant Director - Group Disability Marketing
Victoria A. Sweigart Human Resources Officer
Rachel L. Taknint Assistant General Counsel & Assistant Secretary
Thomas Talajkowski Assistant Director - Tax Compliance
Paul B. Tews Director - Investment Planning
Deanna L. Tillisch Assistant Director - Media Relations
Susan M. Tompkins Director - Agency
Thomas W. Towers Director - Public Relations
Gloria E. Tracy Assistant Director - Marketing
Linda K. Tredupp Assistant Director - Information Systems
Chris G. Trost Actuary
Mark J. Van Cleave Assistant Director of Marketing Research
Michael T. Van Grinsven Assistant Director - Management Development
Mary Beth Van Groll Vice President - Information Systems
</TABLE>
C-10
<PAGE> 62
<TABLE>
<S> <C>
Gloria J. Venski Associate Director - Disability Benefits
Janine L. Wagner Assistant Director - Information Systems
Scott E. Wallace Assistant Director - Policyowner Services
Hal W. Walter Vice President
P. Andrew Ware Vice President
Mary L. Wehrle-Schnell Associate Director - Information Systems
Daniel T. Weidner Assistant Director - Information Systems
Joel S. Weiner Assistant Medical Director
Ronald J. Weir Associate Director - Information Systems
Kenneth R. Wentland Assistant Director of Policyowner Services - East
Sandra D. Wesley Associate Director of Special Projects
Catherine A. Wilbert Assistant General Counsel & Secretary
David L. Wild Director - Corporate Services
Donald R. Wilkinson Vice President - Agency
Becki L. Williams Assistant Director - Marketing Development
Jeffrey B. Williams Risk Manager
John K. Wilson Director - Personal Markets
Scott J. Witt Assistant Actuary
Penelope A. Woodcock Associate Director - Benefit Systems
Richard W. Woody Assistant Director - Agency
Robert J. Wright Industry Trends Officer
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 Associate Director
Rick T. Zehner Director - Corporate Development
Patricia A. Zimmermann Investment Officer - Real Estate Systems
Ray Zimmermann Director - LINK Information Network
Philip R. Zwieg Vice President - Technical Support
Robert E. Zysk Director - Tax Compliance
</TABLE>
The business addresses for all of the executive officers and other officers is
720 East Wisconsin Avenue, Milwaukee, Wisconsin 53202.
Item 26. Persons Controlled By or Under Common Control with the Depositor or
Registrant
The subsidiaries of The Northwestern Mutual Life Insurance Company
("Northwestern Mutual"), as of December 31, 1999, are set forth on pages C-13
and C-14. In addition to the subsidiaries set forth on pages C-13 and C-14, the
following separate investment accounts (which include the Registrant) may be
deemed to be either controlled by, or under common control with, Northwestern
Mutual:
1. NML Variable Annuity Account A
2. NML Variable Annuity Account B
3. NML Variable Annuity Account C
4. Northwestern Mutual Variable Life Account
Northwestern Mutual Series Fund, Inc. and Russell Insurance Funds (the
"Funds") shown on page C-13 as subsidiaries of Northwestern Mutual, are
investment companies registered under the Investment Company Act of 1940,
offering their shares to the separate accounts identified above; and the
C-11
<PAGE> 63
shares of the Funds held in connection with certain of the accounts are voted by
Northwestern Mutual in accordance with voting instructions obtained from the
persons who own, or are receiving payments under, variable annuity contracts or
variable life insurance policies issued in connection with the accounts, or in
the same proportions as the shares which are so voted.
C-12
<PAGE> 64
NORTHWESTERN MUTUAL CORPORATE STRUCTURE*
(AS OF DECEMBER 31, 1999)
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
General Account
NML Variable Annuity Account A
NML Variable Annuity Account B
NML Variable Annuity Account C
NML Group Annuity Separate Account
NML Variable Life Account
Eiger Corporation - 100%
Frank Russell Company and its subsidiaries - 100%
Bradford, Inc. - 100%
NML/Tallahassee, Inc. - 100%
Northwestern Investment Management Company - 100%
Northwestern Mutual Las Vegas, Inc. - 100%
Northwestern Long Term Care Insurance Company - 100%
Northwestern International Holdings, Inc. - 100%
Northwestern Foreign Holdings B.V. - 100%
Saskatoon Centre, Limited - 100% (inactive)
Northwestern Mutual Series Fund, Inc. (and its 11 portfolios) - 100%
Russell Insurance Funds (and its 5 funds) - 70.8%
Mason Street Funds, Inc. (and its 11 funds) - 77.03%
MGIC Investment Corporation - 11%.
MGIC holds 100% of the voting stock of the following:
Mortgage Guaranty Reinsurance Corporation, MGIC, MGIC Reinsurance
Corporation of Wisconsin, MGIC Mortgage Insurance Corporation, and various
subsidiaries.
Baird Financial Corporation - 80%. Baird Financial Corporation holds 80% of
the voting stock of Robert W. Baird & Co., Incorporated and various
subsidiaries.
Northwestern Mutual Investment Services, LLC - 100%
Northwestern Reinsurance Holdings N.V. - 100%
Northwestern Financial Group LLC - 100% (inactive)
NML - CBO, LLC - 49%
<TABLE>
<S> <C>
NML REAL ESTATE HOLDINGS, LLC - 100%
The Grand Avenue Corporation - 98.54% Mitchell, Inc. - 100%
Marina Pacific, Ltd. - 100% Cass Corporation - 100%
Solar Resources, Inc. - 100% Burgundy, Inc. - 100%
Rocket Sports, Inc. - 100% (inactive) Amber, Inc. - 100%
Summit Sports, Inc. - 100% (inactive) Olive, Inc. - 100%
Greenway Sports, Inc. - 100% (inactive) Bayridge, Inc. - 100%
RE Corporation - 100% Ryan, Inc. - 100%
INV Corp. - 100% Pembrook, Inc. - 100%
Buffalo Promotions, Inc. - 100% (inactive) PBClub, Inc. - 100%
NW Greenway #1 - 100% (inactive) Diversey, Inc. - 100%
NW Greenway #9 - 100% (inactive) Larkin, Inc. - 100% (inactive)
Logan, Inc. - 100% Russet, Inc. - 100% (inactive)
</TABLE>
* Except for MGIC Investment Corporation and its subsidiaries, includes all NML
mutual funds and other corporations of which 50% or more voting power is
controlled by NML.
C-13
<PAGE> 65
NORTHWESTERN MUTUAL CORPORATE STRUCTURE, CONTINUED*
(AS OF DECEMBER 31, 1999)
NML SECURITIES HOLDINGS, LLC-100%
<TABLE>
<S> <C>
NW Pipeline, Inc. - 100% Kristina International Sales, Inc. - 100%
Painted Rock Development Corporation - 100% NML/Mid Atlantic, Inc. - 100%
NML Development Corporation - 100% KerryAnne International Sales, Inc. - 100%
Stadium and Arena Management, Inc. - 100% Regina International Sales, Inc. - 100%
Carlisle Ventures, Inc. - 100%
Park Forest Northeast, Inc. - 100%
Travers International Sales, Inc. - 100%
Highbrook International Sales, Inc. - 100%
Elderwood International Sales, Inc. - 100%
Mallon International Sales, Inc. - 100%
Higgins, Inc. - 100%
Hobby, Inc. - 100%
Baraboo, Inc. - 100%
Elizabeth International Sales, Inc. - 100%
Sean International Sales, Inc. - 100%
Alexandra International Sales, Inc. - 100%
Brian International Sales, Inc. - 100%
Jack International Sales, Inc. - 100%
Brendan International Sales, Inc. - 100%
Justin International FSC, Inc. - 100%
Mason & Marshall, Inc. - 100%
North Van Buren, Inc. - 100%
Northwestern Mutual Life
International, Inc. - 100%
White Oaks, Inc. - 100%
Hazel, Inc. - 100%
Maroon, Inc. - 100%
Coral, Inc. - 100%
Lydell, Inc. - 100%
Klode, Inc. - 100%
Chateau, Inc. - 100% (inactive)
Lake Bluff, Inc. - 100% (inactive)
Nicolet, Inc. - 100% (inactive)
Tupelo, Inc. - 100% (inactive)
</TABLE>
* Except for MGIC Investment Corporation and its subsidiaries, includes all NML
mutual funds and other corporations of which 50% or more voting power is
controlled by NML.
C-14
<PAGE> 66
Item 27. Number of Contract Owners
As of March 31, 2000, the number of contract owners of NML Variable
Annuity Account C was 781. 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 relating to
indemnification of Trustees and officers is set forth in full in Article VII of
the By-laws of Northwestern Mutual, amended by resolution and previously filed
herein as an exhibit to the Registration Statement.
Item 29. Principal Underwriters
(a) Northwestern Mutual Investment Services, LLC ("NMIS"), the
broker-dealer subsidiary of Northwestern Mutual, 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 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:
<TABLE>
<CAPTION>
Name Position
- ---- --------
<S> <C>
Ronald C. Alberts Vice President - Fixed Income Securities
Maria J. Avila Assistant Treasurer
Barbara Bay Assistant Director, Equity Compliance, NMIS
Office of Supervisory Jurisdiction
Deborah A. Beck Director and Vice President, Variable Life
Administration
William H. Beckley Executive Vice President, Sales
Peter W. Bruce Director
Thomas A. Carroll Vice President - Common Stocks
Walter J. Chossek Treasurer
Timothy S. Collins Vice President - Fixed Income Securities
Barbara E. Courtney Assistant Treasurer
Jefferson V. De Angelis Vice President - Fixed Income Securities
Mark G. Doll Executive Vice President, Investment Advisory Services
James R. Eben Assistant Secretary
Richard L. Hall Vice President, Variable Life Marketing
Lisa M. Heise Assistant Director, Equity Compliance, NMIS Office of
Supervisory Jurisdiction
Laila V. Hick Assistant Director, Equity Compliance, NMIS Office of
Supervisory Jurisdiction
Beatrice C. Kmiec Assistant Vice President, Variable Life Administration
Merrill C. Lundberg Secretary
Meridee J. Maynard President and CEO
Varun Mehta Vice President - Fixed Income Securities
Allan J. McDonell Vice President and Chief Compliance Officer
Ignatius L. Smetek Vice President - Common Stocks
</TABLE>
C-15
<PAGE> 67
<TABLE>
<S> <C>
Leonard F. Stecklein Vice President, Trust Services
Steven P. Swanson Vice President
Carla A. Thoke Director, Equity Compliance, NMIS Office of
Supervisory Jurisdiction
J. Edward Tippetts Vice President, Sales Support
Julie Van Cleave Vice President - Common Stocks
Patricia L. Van Kampen Vice President - Common Stocks
William R. Walker Vice President
Edward J. Zore Director
Robert J. Ziegler Assistant Treasurer
</TABLE>
The address for each director and officer of NMIS is 720 East Wisconsin Avenue,
Milwaukee, Wisconsin 53202.
(c) During 1999 life insurance agents of Northwestern Mutual who are
also registered representatives of NMIS received commissions, including general
agent overrides, in the aggregate amount of $133,785 for sales of variable
annuity contracts, and interests therein, issued in connection with the
Registrant. NMIS received compensation for its investment advisory services from
Northwestern Mutual Series Fund, Inc., the investment company in which assets of
the Registrant are invested.
Item 30. Location of Accounts and Records
All accounts, books or other documents required to be maintained in
connection with the Registrant's operations are maintained in the physical
possession of Northwestern Mutual at 720 East Wisconsin Avenue, Milwaukee,
Wisconsin 53202.
Item 31. Management Services
There are no contracts, other than those referred to in Part A or Part
B of this Registration Statement, under which management-related services are
provided to the Registrant and pursuant to which total payments of $5,000 or
more were made during any of the last three fiscal years.
Item 32. Undertakings
(a) The Registrant undertakes to file a post-effective amendment to
this Registration Statement as frequently as is necessary to ensure that the
audited financial statements in the Registration Statement are never more than
16 months old for so long as payments under the variable annuity contracts may
be accepted.
(b) The Registrant undertakes to include either (1) as part of any
application to purchase a contract offered by the prospectus, a space that an
applicant can check to request a Statement of Additional Information, or (2) a
post card or similar written communication affixed to or included in the
prospectus that the applicant can remove to send for a Statement of Additional
Information.
(c) The Registrant undertakes to deliver any Statement of Additional
Information and any financial statements required to be made available under
this Form promptly upon written or oral request.
(d) Reference is made to the indemnification provisions disclosed in
response to Item 28. Insofar as indemnification for liabilities arising under
the Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore,
C-16
<PAGE> 68
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the registered
securities, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
C-17
<PAGE> 69
SIGNATURES
As required by the Securities Act of 1933, the Registrant, NML Variable
Annuity Account C, certifies that it meets all of the requirements for
effectiveness of this Amended Registration Statement pursuant to rule 485(b)
under the Securities Act of 1933 and has duly caused this Amended Registration
Statement to be signed on its behalf, in the City of Milwaukee, and State of
Wisconsin, on the 25th day of April, 2000.
<TABLE>
<S> <C>
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 Executive Vice James D. Ericson, Chairman
President and Secretary and Chief Executive Officer
</TABLE>
As required by the Securities Act of 1933, this Amended Registration
Statement has been signed by the Depositor on the 25th day of April, 2000.
<TABLE>
<S> <C>
THE NORTHWESTERN MUTUAL LIFE
INSURANCE COMPANY
(Depositor)
Attest: JOHN M. BREMER By: JAMES D. ERICSON
---------------------------------------- -----------------------------------------
John M. Bremer, Senior Executive Vice James D. Ericson, Chairman
President and Secretary and Chief Executive Officer
</TABLE>
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:
<TABLE>
<CAPTION>
Signature Title
- --------- -----
<S> <C> <C>
Trustee, Chairman and
JAMES D. ERICSON Principal Executive and
- ------------------------------------- Financial Officer
James D. Ericson
EDWARD J. ZORE President and Trustee
- -------------------------------------
Edward J. Zore
Dated
April 25, 2000
GARY E. LONG Vice President, Controller
- ------------------------------------- and Principal Accounting
Gary E. Long Officer
HAROLD B. SMITH* Trustee
- -------------------------------------
Harold B. Smith
</TABLE>
C-18
<PAGE> 70
<TABLE>
<S> <C> <C>
J. THOMAS LEWIS* Trustee
- -------------------------------------
J. Thomas Lewis
PATRICIA ALBJERG GRAHAM* Trustee
- -------------------------------------
Patricia Albjerg Graham*
R. QUINTUS ANDERSON* Trustee
- -------------------------------------
R. Quintus Anderson
STEPHEN F. KELLER* Trustee
- -------------------------------------
Stephen F. Keller
PIERRE S. du PONT* Trustee
- -------------------------------------
Pierre S. du Pont
J. E. GALLEGOS* Trustee Dated
- ------------------------------------- April 25, 2000
J. E. Gallegos
KATHRYN D. WRISTON* Trustee
- --------------------------------------
Kathryn D. Wriston
BARRY L. WILLIAMS* Trustee
- --------------------------------------
Barry L. Williams
GORDON T. BEAHAM III* Trustee
- --------------------------------------
Gordon T. Beaham III
DANIEL F. McKEITHAN, JR.* Trustee
- --------------------------------------
Daniel F. McKeithan, Jr.
EDWARD E. BARR* Trustee
- --------------------------------------
Edward E. Barr
ROBERT C. BUCHANAN* Trustee
- --------------------------------------
Robert C. Buchanan
SHERWOOD H. SMITH, JR.* Trustee
- --------------------------------------
Sherwood H. Smith, Jr.
</TABLE>
C-19
<PAGE> 71
<TABLE>
<S> <C> <C>
H. MASON SIZEMORE, JR.* Trustee
- ----------------------------------------
H. Mason Sizemore, Jr.
JOHN J. STOLLENWERK* Trustee
- ----------------------------------------
John J. Stollenwerk
GEORGE A. DICKERMAN* Trustee Dated
- ---------------------------------------- April 25, 2000
George A. Dickerman
GUY A. OSBORN* Trustee
- ----------------------------------------
Guy A. Osborn
JOHN E. STEURI* Trustee
- ----------------------------------------
John E. Steuri
STEPHEN N. GRAFF* Trustee
- ----------------------------------------
Stephen N. Graff
BARBARA A. KING* Trustee
- ----------------------------------------
Barbara A. King
TIMOTHY D. PROCTOR* Trustee
- ----------------------------------------
Timothy D. Proctor
PETER M. SOMMERHAUSER* Trustee
- ----------------------------------------
Peter M. Sommerhauser
</TABLE>
*By: JAMES D. ERICSON
-------------------------------------------
James D. Ericson, Attorney in Fact,
pursuant to the Power of Attorney
attached hereto
C-20
<PAGE> 72
POWER OF ATTORNEY
The undersigned Trustees of THE NORTHWESTERN MUTUAL LIFE INSURANCE
COMPANY hereby constitute and appoint James D. Ericson and Robert E. Carlson, or
either of them, their true and lawful attorneys and agents to sign the names of
the undersigned Trustees to (1) the registration statement or statements to be
filed under the Securities Act of 1933 and to any instrument or document filed
as part thereof or in connection therewith or in any way related thereto, and
any and all amendments thereto in connection with variable contracts issued or
sold by The Northwestern Mutual Life Insurance Company or any separate account
credited therein and (2) the Form 10-K Annual Report or Reports of The
Northwestern Mutual Life Insurance Company and/or its separate accounts for its
or their fiscal year ended December 31, 1999 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 28th day of July, 1999.
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-21
<PAGE> 73
PIERRE S. du PONT Trustee
----------------------------------------
Pierre S. du Pont
JAMES D. ERICSON Trustee
----------------------------------------
James D. Ericson
J. E. GALLEGOS Trustee
----------------------------------------
J. E. Gallegos
STEPHEN N. GRAFF Trustee
----------------------------------------
Stephen N. Graff
PATRICIA ALBJERG GRAHAM Trustee
----------------------------------------
Patricia Albjerg Graham
STEPHEN F. KELLER Trustee
----------------------------------------
Stephen F. Keller
BARBARA A. KING Trustee
----------------------------------------
Barbara A. King
J. THOMAS LEWIS Trustee
----------------------------------------
J. Thomas Lewis
DANIEL F. McKEITHAN, JR. Trustee
----------------------------------------
Daniel F. McKeithan, Jr.
GUY A. OSBORN Trustee
----------------------------------------
Guy A. Osborn
C-22
<PAGE> 74
TIMOTHY D. PROCTOR Trustee
----------------------------------------
Timothy D. Proctor
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
PETER M. SOMMERHAUSER Trustee
----------------------------------------
Peter M. Sommerhauser
C-23
<PAGE> 75
EXHIBIT INDEX
EXHIBITS FILED WITH FORM N-4
POST-EFFECTIVE AMENDMENT NO. 20 TO
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
FOR
NML VARIABLE ANNUITY ACCOUNT C
<TABLE>
<CAPTION>
Exhibit Number Exhibit Name
-------------- ------------
<S> <C>
Exhibit B(10) Consent of PricewaterhouseCoopers LLP
The following documents, previously included in the Registration
Statement and amendments thereto, are herein restated in electronic
format:
Exhibit B(1)(a) Resolution of the Board of Trustees of The
Northwestern Mutual Life Insurance Company
creating the Account
Exhibit B(1)(b) Resolution of the Board of Trustees of The
Northwestern Mutual Life Insurance Company to use
the Account to facilitate the issuance and
maintenance of the Contracts and renaming the
Account "NML Variable
Annuity Account C"
</TABLE>
<PAGE> 1
Exhibit B(10)
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Statement of Additional Information
constituting part of this Post-Effective Amendment No. 20 to the registration
statement on Form N-4 (the "Registration Statement") of our report dated January
24, 2000, relating to the financial statements of The Northwestern Mutual Life
Insurance Company, and of our report dated January 27, 2000, 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.
PricewaterhouseCoopers LLP
Milwaukee, Wisconsin
April 25, 2000
<PAGE> 1
EXHIBIT B(1)(A)
BE IT RESOLVED by the Board of Trustees of The Northwestern Mutual Life
Insurance Company (the "Company") that:
1. The Company shall and does hereby establish a separate account ("NML
Separate Account C") in accordance with the provisions of Section 206.385 of the
Wisconsin Statutes of 1967 to facilitate the issuance of certain agreements (the
"Agreements") which may be offered by the Company to the trustees of certain
pension and profit sharing plans in connection with the purchase of life
insurance policies and annuity contracts.
2. The amounts paid to the Company in connection with the Agreements,
less stated amounts as set forth therein, shall be allocated to Account C.
3. The income, if any, and gains or losses, realized or unrealized, of
Account C shall be credited to or charged against the amount so allocated to
Account C in accordance with the terms and conditions of the Agreements without
regard to the other income, gains or losses of the Company, and the assets
thereof shall not be chargeable with any liabilities arising out of any other
separate account or any other business of the Company.
4. Amounts paid to the Company in connection with the Agreements and
allocated to Account C shall be invested in shares of NML Fund, Inc. (the
"Fund") at the net asset value of such shares, except that other securities may
be substituted for the shares of the Fund as provided in the Agreements, and the
Company shall make appropriate arrangements with the Fund for the purchase by
Account C or shares of the Fund at the net asset value thereof.
5. Account C shall be registered as a unit investment trust under the
Investment Company Act of 1940.
6. $50,000,000 offering price of the Agreements or Units thereof or
such lesser amount as may be designated by the President of the Company, shall
be registered for sale under the Securities Act of 1933.
7. The officers of the Company are hereby authorized and directed to
take all action necessary or desirable to comply with the Investment Company Act
of 1940 and the Securities Act of 1933 and other applicable state and federal
laws in connection with offering the Agreements for sale and operation of
Account C, including, without limitation, the filing of registration statements,
and amendments and exhibits thereto and the securing of such exemptions from
such state and federal laws as they deem advisable.
BE IT FURTHER RESOLVED, that the President of the Company and other
officers of the Company are authorized and directed, under such directions as
may be
<PAGE> 2
specified, from time to time, by the Executive Committee to execute and deliver
such instruments and to do such acts and things as may be necessary or desirable
to carry out the purpose and intent of the foregoing resolution in the form or
substantially the form as adopted, including, without limitation, determination
of the terms and conditions of the Agreements; determination of the state or
states in which appropriate action shall be taken to obtain the requisite
qualification, registration and/or authorization for the sale of the Agreements;
performance on behalf of the Company of any and all such acts as they may deem
necessary or advisable to comply with applicable securities, insurance and other
laws of any such states and in connection therewith to execute and file all
requisite documents, including, but not limited to, contracts, applications,
reports, surety bonds, and irrevocable consents and appointments of attorneys
for service or process; and execution of such contracts on behalf of the Company
as may be necessary or desirable to efficiently engage in the sale and
distribution of the Agreements including, without limitation, such contracts for
custodial, safekeeping, transfer, accounting, legal or disbursing services as
may be necessary or desirable. The execution by such officers of any document or
the performance of any act in connection with the foregoing matters shall
conclusively establish their authority therefore from the Company and the
approval and ratification by the Company of the documents so executed and the
action so taken.
2
<PAGE> 1
Exhibit B(1)(b)
RESOLUTION FOR GROUP VARIABLE ANNUITY CONTRACTS
ACCOUNT C
WHEREAS, NML Separate Account C ("Account C") was established by a
Resolution of the Board of Trustees on July 22, 1970 in accordance with the
Wisconsin Insurance Laws to facilitate the issuance of certain agreements (the
"Agreements") which have been offered and sold to certain pension and
profit-sharing plans; and
WHEREAS, the operations of Account C and the terms of the Agreements have
been modified from time to time as authorized by Committees of the Board of
Trustees and officers of the Company acting pursuant to delegated authority; and
WHEREAS, it is desired to offer group variable annuity contracts (the
"Contracts") for use in connection with (a) corporate pension and profit-sharing
plans meeting the requirements of Section 401(a) of the Internal Revenue Code of
1954, as amended (the "Code"), and (b) plans (commonly referred to as "H.R.-10
Plans") providing retirement benefits to self-employed individuals and their
employees and meeting the requirements of Section 401 or 403(a) of the Code.
NOW, THEREFORE, BE IT RESOLVED as follows:
1. Account C shall be operated by the Company to facilitate the issuance
and maintenance of the Agreements and the Contracts in accordance with their
terms, and the amounts paid to the Company in connection with the Agreements and
Contracts, less stated amounts as set forth therein, shall be allocated to
Account C.
2. The income, if any, and gains or losses, realized or unrealized, of
Account C shall be credited to or charged against the amounts so allocated to
Account C in accordance with the terms and conditions of the Agreements and the
Contracts without regard to the other income, gains or losses of the Company,
and the assets thereof shall not be chargeable with any liabilities arising out
of any other separate account or any other business of the Company.
3. Amounts allocated to Account C shall continue to be invested in shares
of NML Stock Fund, Inc., NML Bond Fund, Inc., NML Money Market Fund, Inc. and
NML One Fund, Inc. (the "Funds") at the net asset value of such shares, except
that other securities may be substituted for the shares of the Funds as provided
in the Agreements and the Contracts, and the Company shall maintain appropriate
arrangements with the Funds for the purchase by Account C of shares of the Funds
at the net asset value thereof.
4. $250,000,000 offering price of the Contracts, or units thereof, or such
lesser amount as may be designated by the President of the Company, to be
offered in connection with H.R.-10 Plans, shall be registered for sale under the
Securities Act of 1933.
<PAGE> 2
5. The offering of the Agreements and the Contracts shall be limited to
H.R.-10 Plans and corporate pension and profit-sharing plans which meet the
requirements of Section 401(a) of the Code so as to preclude the necessity for
registration of Account C as a unit investment trust or otherwise under the
Investment Company Act of 1940, as amended.
6. The officers of the Company are hereby authorized and directed to take
all action necessary or desirable to comply with the Securities Act of 1933 and
other applicable state and federal laws in connection with the offering of
Contracts for sale and the operation of Account C, including, without
limitation, the filing of registration statements, and amendments and exhibits
thereto; and the securing of such exemptions from and determinations and rulings
as to the application of state and federal laws as they deem advisable. The
Secretary of the Company is hereby appointed the agent of the Company to receive
any and all notices and communications from the Securities and Exchange
Commission in relation to such registration statements and amendments and
applications for such exemptions.
7. The officers of the Company are authorized and directed, under such
directions as may be specified from time to time by the Insurance Products and
Marketing Committee, to execute and deliver such instruments and to do such acts
and things as may be necessary or desirable to carry out the purpose and intent
of the foregoing resolution in the form or substantially the form as adopted,
including, without limitation, determination of the terms and conditions of the
Contracts; determination of the state or states in which appropriate action
shall be taken to obtain the requisite qualification, registration and/or
authorization for the sale of the Contracts as such officers may deem advisable;
performance on behalf of the Company of any and all such acts as they may deem
necessary or advisable to comply with applicable securities, insurance and other
laws of any such states and in connection therewith to execute and file all
requisite documents, including, but not limited to, contracts, applications,
reports, surety bonds, and irrevocable consents and appointments of attorneys
for service of process; and execution of such Contracts on behalf of the Company
as may be necessary or desirable to efficiently engage in the sale and
distribution of the Contracts including, without limitation, such contracts for
custodial, safekeeping, transfer, accounting, legal or disbursing services as
may be necessary or desirable. The execution by such officers of any document or
the performance of any act in connection with the foregoing matters shall
conclusively establish their authority therefor from the Company and the
approval and ratification by the Company of the documents so executed and the
actions so taken.
8. The name of Account C is hereby changed to "NML Variable Annuity Account
C".
9. To the extent that this resolution is inconsistent with the resolution
which established Account C, this resolution shall control. In all other
respects, the resolution which established Account C shall remain in full force
and effect.
2
