-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, SDqhkGIVPZaXerKLbWo58pRzbCuyB8JDWoaBTPOeWrnpAW87vDCYOiEWPkwvX/7u i/qyL06nibKMoWuqHLwi1g== 0001047469-99-007255.txt : 19990226 0001047469-99-007255.hdr.sgml : 19990226 ACCESSION NUMBER: 0001047469-99-007255 CONFORMED SUBMISSION TYPE: 485APOS PUBLIC DOCUMENT COUNT: 10 FILED AS OF DATE: 19990225 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NORTHWESTERN MUTUAL VARIABLE LIFE ACCOUNT CENTRAL INDEX KEY: 0000742277 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] STATE OF INCORPORATION: WI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 485APOS SEC ACT: SEC FILE NUMBER: 033-89188 FILM NUMBER: 99549422 FILING VALUES: FORM TYPE: 485APOS SEC ACT: SEC FILE NUMBER: 811-03989 FILM NUMBER: 99549423 BUSINESS ADDRESS: STREET 1: 720 E WISCONSIN AVE CITY: MILWAUKEE STATE: WI ZIP: 53202 BUSINESS PHONE: 4142711444 MAIL ADDRESS: STREET 1: 720 EAST WISCONSIN AVENUE CITY: MILWAUKEE STATE: WI ZIP: 53202 485APOS 1 485APOS Registration No. 33-89188 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ---------------- POST-EFFECTIVE AMENDMENT NO. 4 TO FORM S-6 FOR REGISTRATION UNDER THE SECURITIES ACT OF 1933 OF SECURITIES OF UNIT INVESTMENT TRUSTS REGISTERED ON FORM N-8B-2 ---------------- NORTHWESTERN MUTUAL VARIABLE LIFE ACCOUNT (EXACT NAME OF TRUST) THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY (NAME OF DEPOSITOR) 720 EAST WISCONSIN AVENUE MILWAUKEE, WISCONSIN 53202 (COMPLETE ADDRESS OF DEPOSITOR'S PRINCIPAL EXECUTIVE OFFICES) JOHN M. BREMER, EXECUTIVE VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY 720 EAST WISCONSIN AVENUE MILWAUKEE, WISCONSIN 53202 (NAME AND COMPLETE ADDRESS OF AGENT FOR SERVICE) It is proposed that this filing will become effective ____ immediately upon filing pursuant to paragraph (b) ____ on (DATE) pursuant to paragraph (b) ____ 60 days after filing pursuant to paragraph (a)(1) _X__ on April 30, 1999 pursuant to paragraph (a)(1) of Rule 485 ____ this post-effective amendment designates a new effective date for a previously filed post-effective amendment ---------------- THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY NORTHWESTERN MUTUAL VARIABLE LIFE ACCOUNT CROSS-REFERENCE SHEET Cross reference sheet showing location in Prospectus of information required by Form N-8B-2.
Item Number Heading in Prospectus ----------- --------------------- 1. . . . . . . . . Cover Page 2 . . . . . . . . Cover Page; Northwestern Mutual Life 3 . . . . . . . . Not Applicable 4 . . . . . . . . Distribution of the Policies 5 . . . . . . . . The Account and its Divisions 6 . . . . . . . . The Account and its Divisions 7 . . . . . . . . Not Applicable 8 . . . . . . . . Not Applicable 9 . . . . . . . . Legal Proceedings 10(a) . . . . . . . Other Policy Provisions: OWNER 10(b) . . . . . . . Annual Dividends 10(c) and (d) . . . Death Benefit, Cash Value, Loans and Withdrawals, Right to Return Policy, Right to Exchange for a Fixed Benefit Policy, Payment Plans 10(e) . . . . . . . Premiums, Paid-Up Insurance, Reinstatement 10(f) . . . . . . . Voting Rights 10(g) . . . . . . . Voting Rights, Substitution of Fund Shares and Other Changes 10(h) . . . . . . . Voting Rights, Substitution of Fund Shares and Other Changes 10(i) . . . . . . . Premiums, Death Benefit, Annual Dividends, Other Policy Provisions: Payment Plans ------------- 11 . . . . . . . The Account, The Funds: NORTHWESTERN MUTUAL SERIES FUND, INC. -- 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, High Yield Bond Portfolio, Select Bond Portfolio, and Money Market Portfolio. RUSSELL INSURANCE FUNDS -- Multi-Style Equity Fund, Aggressive Equity Fund, Non-U.S. Fund, Real Estate Securities Fund, and Core Bond Fund 12 . . . . . . . . The Funds 13 . . . . . . . . Summary, The Funds, Deductions and Charges, Distribution of the Policies 14 . . . . . . . . Requirements for Insurance 15 . . . . . . . . Premiums, Allocations to the Account 16 . . . . . . . . The Account, The Funds, Allocations to the Account 17 . . . . . . . . Same Captions as Items 10(a), (c), and (d) 18 . . . . . . . . The Account, Annual Dividends 19 . . . . . . . . Reports 20 . . . . . . . . Not Applicable
-ii-
Item Number Payment Plans ----------- ------------- 21 . . . . . . . . Loans and Withdrawals 22 . . . . . . . . Not Applicable 23. . . . . . . . . Not Applicable 24 . . . . . . . . Not Applicable 25 . . . . . . . . Northwestern Mutual Life 26 . . . . . . . . The Funds, Deductions and Charges 27 . . . . . . . . Northwestern Mutual Life 28 . . . . . . . . Management 29 . . . . . . . . Not Applicable 30 . . . . . . . . Not Applicable 31 . . . . . . . . Not Applicable 32 . . . . . . . . Not Applicable 33 . . . . . . . . Not Applicable 34 . . . . . . . . Not Applicable 35 . . . . . . . . Northwestern Mutual Life 36 . . . . . . . . Not Applicable 37 . . . . . . . . Not Applicable 38 . . . . . . . . Distribution of the Policies 39 . . . . . . . . Distribution of the Policies 40 . . . . . . . . The Funds 41 . . . . . . . . The Fund, Distribution of the Policies 42 . . . . . . . . Not Applicable 43 . . . . . . . . Not Applicable 44 . . . . . . . . The Funds, Requirements for Insurance, Premiums, Death Benefit, Cash Value 45 . . . . . . . . Not Applicable 46 . . . . . . . . Same Captions as Items 10(c) and (d) 47 . . . . . . . . Not Applicable 48 . . . . . . . . Not Applicable 49 . . . . . . . . Not Applicable 50 . . . . . . . . The Account 51 . . . . . . . . Numerous Captions 52 . . . . . . . . Substitution of Fund Shares and Other Changes 53 . . . . . . . . Not Applicable 54 . . . . . . . . Not Applicable 55 . . . . . . . . Not Applicable 56 . . . . . . . . Not Applicable 57 . . . . . . . . Not Applicable 58 . . . . . . . . Not Applicable 59 . . . . . . . . Financial Statements
-iii- April 30, 1999 [LOGO] The Quiet Company-Registered Trademark- NORTHWESTERN MUTUAL VARIABLE COMPLIFE-Registered Trademark- Variable Whole Life Policy with Additional Protection (PHOTO) CompLife-Registered Trademark- is a registered service mark of Northwestern Mutual Life Insurance Company Northwestern Mutual Series Fund, Inc. and Russell Insurance Funds The Northwestern Mutual Life Insurance Company 720 East Wisconsin Avenue Milwaukee, Wisconsin 53202 (414) 271-1444 CONTENTS FOR THIS PROSPECTUS
Page ---- Prospectus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1 Summary 2 Variable Life Insurance . . . . . . . . . . . . . . . . . . . . . . . .2 The Account and its Divisions . . . . . . . . . . . . . . . . . . . . .2 The Policy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2 Premiums . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2 Death Benefit. . . . . . . . . . . . . . . . . . . . . . . . . . . . .2 Cash Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2 Deductions and Charges . . . . . . . . . . . . . . . . . . . . . . . .2 From Premiums . . . . . . . . . . . . . . . . . . . . . . . . . . . .2 From Policy Value . . . . . . . . . . . . . . . . . . . . . . . . . .3 From the Assets of the Account. . . . . . . . . . . . . . . . . . . .3 Transaction Charges . . . . . . . . . . . . . . . . . . . . . . . . .3 Surrender Charges . . . . . . . . . . . . . . . . . . . . . . . . . .3 From the Mutual Funds . . . . . . . . . . . . . . . . . . . . . . . .3 The Northwestern Mutual Life Insurance Company, Northwestern Mutual Variable Life Account Northwestern Mutual Series Fund, Inc and Russell Insurance Funds . . . . . . . . . . . . . . . . . . . . .5 Northwestern Mutual Life. . . . . . . . . . . . . . . . . . . . . . . .5 The Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 The Funds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 Northwestern Mutual Series Fund, Inc. . . . . . . . . . . . . . . . . .5 Small Cap Growth Stock Portfolio. . . . . . . . . . . . . . . . . . . .5 Aggressive Growth Stock Portfolio . . . . . . . . . . . . . . . . . . .5 International Equity Portfolio. . . . . . . . . . . . . . . . . . . . .5 Index 400 Stock Portfolio . . . . . . . . . . . . . . . . . . . . . . .6 Growth Stock Portfolio. . . . . . . . . . . . . . . . . . . . . . . . .6 Growth and Income Stock Portfolio . . . . . . . . . . . . . . . . . . .6 Index 500 Stock Portfolio . . . . . . . . . . . . . . . . . . . . . . .6 Balanced Portfolio. . . . . . . . . . . . . . . . . . . . . . . . . . .6 High Yield Bond Portfolio . . . . . . . . . . . . . . . . . . . . . . .6 Select Bond Portfolio . . . . . . . . . . . . . . . . . . . . . . . . .6 Money Market Portfolio. . . . . . . . . . . . . . . . . . . . . . . . .6 Russell Insurance Funds. . . . . . . . . . . . . . . . . . . . . . . . .6 Multi-Style Equity Fund . . . . . . . . . . . . . . . . . . . . . . . .6 Aggressive Equity Fund. . . . . . . . . . . . . . . . . . . . . . . . .6 Non-U.S. Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7 Real Estate Securities Fund . . . . . . . . . . . . . . . . . . . . . .7 Core Bond Fund. . . . . . . . . . . . . . . . . . . . . . . . . . . . .7 Detailed Information About the Policy. . . . . . . . . . . . . . . . . . .7 The Policy Design . . . . . . . . . . . . . . . . . . . . . . . . . . .7 Requirements for Insurance. . . . . . . . . . . . . . . . . . . . . . .8 Premiums. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8 Death Benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Policy Value and Paid-Up Additional Insurance . . . . . . . . . . . . 10 Allocations to the Account. . . . . . . . . . . . . . . . . . . . . . 11 Deductions and Charges. . . . . . . . . . . . . . . . . . . . . . . . 11 Deductions from Premiums . . . . . . . . . . . . . . . . . . . . . . 11 Charges Against the Policy Value . . . . . . . . . . . . . . . . . . 12 Charges Against the Account Assets . . . . . . . . . . . . . . . . . 12 Transaction Charges. . . . . . . . . . . . . . . . . . . . . . . . . 12 Surrender Charges. . . . . . . . . . . . . . . . . . . . . . . . . . 12 Guarantee of Premiums, Deductions and Charges. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Cash Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Annual Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Loans and Withdrawals. . . . . . . . . . . . . . . . . . . . . . . . 14 Excess Amount. . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Paid-Up Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . 15 Reinstatement. . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Right to Return Policy . . . . . . . . . . . . . . . . . . . . . . . 15 Right to Exchange for a Fixed Benefit Policy . . . . . . . . . . . . 15 Other Policy Provisions. . . . . . . . . . . . . . . . . . . . . . . 16 Owner. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Beneficiary. . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Incontestability . . . . . . . . . . . . . . . . . . . . . . . . . 16 Suicide. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Misstatement of Age or Sex . . . . . . . . . . . . . . . . . . . . 16 Collateral Assignment. . . . . . . . . . . . . . . . . . . . . . . 16 Payment Plans. . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Deferral of Determination and Payment. . . . . . . . . . . . . . . 16 Voting Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Substitution of Fund Shares and Other Changes . . . . . . . . . . . . . . . . . . . . . . . . . 16 Reports. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 Special Policy for Employers . . . . . . . . . . . . . . . . . . . . 17 Distribution of the Policies . . . . . . . . . . . . . . . . . . . . 17 Tax Treatment of Policy Benefits . . . . . . . . . . . . . . . . . . 17 Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 Year 2000 Issues . . . . . . . . . . . . . . . . . . . . . . . . . . 20 Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . . . . 20 Registration Statement . . . . . . . . . . . . . . . . . . . . . . . 20 Experts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . . 21 Report of Independent Accountants (for the two years ended December 31, 1998). . . . . . . . . . . . . 21 Financial Statements of the Account (for the two years ended December 31, 1998). . . . . . . . . . . . . 22 Financial Statements of Northwestern Mutual Life (for the three years ended December 31, 1998) . . . . . . . . . . . . . . . . . . . . . . . 28 Report of Independent Accountants (for the three years ended December 31, 1998) . . . . . . . . . . . . . . . . . . . . . . . . 41 Appendix. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
P R O S P E C T U S NORTHWESTERN MUTUAL VARIABLE COMPLIFE-Registered Trademark- VARIABLE WHOLE LIFE POLICY WITH ADDITIONAL PROTECTION This prospectus describes the Variable CompLife-Registered Trademark- Policy (the "Policy") offered by The Northwestern Mutual Life Insurance Company. We have designed the Policy to provide lifetime insurance coverage on the insured named in the Policy. We use Northwestern Mutual Variable Life Account (the "Account") to keep the money you invest separate from our general assets. Both the death benefit and the cash value provided by the Policy will vary daily to reflect the investment experience of the Account. You may allocate the net premiums to one or more of the sixteen divisions of the Account. The assets of each division will be invested in a corresponding Portfolio of Northwestern Mutual Series Fund, Inc. or one of the Russell Insurance Funds. The prospectuses for these mutual funds, attached to this prospectus, describe the investment objectives for all of the Portfolios and Funds. The Policy provides for a scheduled premium payable at least annually, but you may pay more than the scheduled amount. In some situations you may pay less than the scheduled amount. We guarantee that the death benefit will never be less than the Policy's initial amount of whole life insurance, regardless of the Account's investment experience, so long as you pay scheduled premiums when they are due and no Policy debt is outstanding. The Policy may include insurance which we guarantee for only a specified number of years. There is no guaranteed minimum cash value. In the early years of a Policy it is likely that the cash value will be less than the premium amounts accumulated at interest. This is because of the sales and insurance costs for a new Policy. We make deductions for sales costs and administrative expenses from the cash values of Policies surrendered during the early Policy years. Therefore you should purchase a Policy only if you intend to keep it in force for a reasonably long period. You may return a Policy for a full refund for a limited period of time. See "Right to Return Policy", p.15. IT MAY NOT BE ADVANTAGEOUS TO REPLACE EXISTING INSURANCE WITH A VARIABLE LIFE INSURANCE POLICY. SEE DEDUCTIONS AND CHARGES AND CASH VALUE. THIS PROSPECTUS IS VALID ONLY WHEN ACCOMPANIED BY THE CURRENT PROSPECTUSES FOR NORTHWESTERN MUTUAL SERIES FUND, INC. AND THE RUSSELL INSURANCE FUNDS WHICH ARE ATTACHED HERETO, AND SHOULD BE RETAINED FOR FUTURE REFERENCE. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. 1 SUMMARY THE FOLLOWING SUMMARY PROVIDES A BRIEF OVERVIEW OF THE ACCOUNT AND THE POLICY. IT OMITS DETAILS WHICH ARE INCLUDED ELSEWHERE IN THIS PROSPECTUS, IN THE ATTACHED MUTUAL FUND PROSPECTUSES AND IN THE TERMS OF THE POLICY. VARIABLE LIFE INSURANCE Variable life insurance is cash value life insurance and is similar in many ways to traditional fixed benefit life insurance. Variable life insurance allows the policyowner to direct the premiums, after certain deductions, among a range of investment options. The variable life insurance death benefit and cash value vary daily to reflect the performance of the selected investments. Since a substantial part of the premium pays for the insurance risk of death you should not consider variable life insurance unless your primary need is life insurance protection. THE ACCOUNT AND ITS DIVISIONS Northwestern Mutual Variable Life Account is the investment vehicle for the Policies. The Account has sixteen divisions. You determine how net premiums are to be apportioned. You may select up to ten divisions at any one point in time. We invest the assets of each division in a corresponding Portfolio of Northwestern Mutual Series Fund, Inc. or one of the Russell Insurance Funds. The eleven Portfolios of Northwestern Mutual Series Fund, Inc. 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 five Russell Insurance Funds are the Multi-Style Equity Fund, Aggressive Equity Fund, Non-U.S. Fund, Real Estate Securities Fund, and Core Bond Fund. For additional information about the funds see the attached prospectuses. THE POLICY PREMIUMS The Policy provides for a scheduled premium for the Minimum Guaranteed Death Benefit and any Additional Protection you purchase as part of the Policy. The Minimum Guaranteed Death Benefit is the initial amount of whole life insurance provided by the Policy. Additional Protection is insurance which does not have a lifetime guarantee, but we guarantee this insurance for a specified period. The scheduled premium may include additional amounts to purchase variable paid-up additional insurance or to increase Policy Value. The scheduled premium also includes the amount required for any additional benefits that you purchase with the Policy. You may pay optional unscheduled additional premiums, within limits, to purchase variable paid-up additional insurance or to increase Policy Value. You may suspend payment of premiums if we determine under a certain set of assumptions that the Policy Value is already sufficient to cover future insurance costs. You may have to resume payment of premiums in the future if the Policy Value becomes insufficient. The Policy Value reflects investment experience as well as premiums paid and the cost of insurance and other charges. After a Policy is issued you may increase or decrease the amount of scheduled premiums within limits. Premiums are payable at least annually. DEATH BENEFIT We guarantee that the Minimum Guaranteed Death Benefit provided by a Policy will be paid upon the death of the insured, regardless of investment experience, if you have paid scheduled premiums when they are due and no Policy debt is outstanding. The death benefit will be increased by the amount of any Additional Protection in force. We guarantee Additional Protection for a period which depends on the sex and risk classification and age of the insured when the Policy is issued and on the proportions of Minimum Guaranteed Death Benefit and Additional Protection. The death benefit will also be increased by the amount of any variable paid-up additional insurance, any excess Policy Value and any amount needed to meet federal income tax requirements for life insurance. CASH VALUE The cash value of a Policy is not guaranteed and varies daily to reflect investment experience. You may surrender a Policy for its cash value. A surrender charge applies during the first 15 policy years. We permit partial surrenders by administrative practice if the remaining Policy meets our minimum size requirements. DEDUCTIONS AND CHARGES FROM PREMIUMS - Deduction of 3.5% for state and federal taxes attributable to premiums - Sales load of 4.5% - Annual charge of $84, currently expected to be reduced to $60 after ten years - Annual charge of $0.12 per $1,000 of Minimum Guaranteed Death Benefit - Annual expense charge of $0.12 per $1,000 of Minimum Guaranteed Death Benefit and Additional Protection (currently expected to be charged for ten years only) 2 - Any extra premium charged for insureds who do not qualify as select, standard plus or standard risks - Any extra premium for additional benefits purchased with the Policy FROM POLICY VALUE - An annual charge, based on the amount at risk and the attained age and risk classification of the insured, with rates based on the 1980 CSO Mortality Tables. This charge also applies for the values which support any paid-up additional insurance. - Any surrender charges, administrative charges or decrease in Policy debt that may result from a withdrawal, a decrease in the face amount of insurance or a transfer of Policy Value to paid-up insurance FROM THE ASSETS OF THE ACCOUNT - A daily charge at the annual rate of .60% of the Account assets for mortality and expense risks TRANSACTION CHARGES - Fee of up to $25 (currently waived) for transfers among the Account Divisions - Fee of up to $25 (currently waived) for withdrawals of Excess Amount - Charge for administrative costs to process a partial surrender, currently expected to be $250 SURRENDER CHARGES - Surrender charges for sales and issuance expenses we deduct from Policy proceeds if you surrender the Policy during the first 15 years FROM THE MUTUAL FUNDS - A daily charge for investment advisory and other services provided to the mutual funds. The total expenses vary by Portfolio or Fund and currently fall in an approximate range of .21% to 2.37% of assets on an annual basis. The following table shows the annual expenses for each of the Portfolios and Funds, as a percentage of their average net assets of the Portfolio, based on 1998 operations. Expenses for the Portfolios and Funds which were not in operation during 1998 are estimated. NORTHWESTERN MUTUAL SERIES FUND, INC.
INVESTMENT ADVISORY OTHER TOTAL PORTFOLIO FEE EXPENSES EXPENSES - --------- ---------- -------- -------- Small Cap Growth Stock. . . . .80% .12% .92% Aggressive Growth Stock. . . . .52% .00% .52% International Equity . . . . . .67% .09% .76% Index 400 Stock. . . . . . . . .25% .10% .35% Growth Stock . . . . . . . . . .45% .01% .46% Growth and Income Stock. . . . .57% .01% .58% Index 500 Stock. . . . . . . . .20% .01% .21% Balanced . . . . . . . . . . . .30% .00% .30% High Yield Bond. . . . . . . . .49% .01% .50% Select Bond . . . . . . . . . .30% .00% .30% Money Market . . . . . . . . . .30% .00% .30%
RUSSELL INSURANCE FUNDS
INVESTMENT ADVISORY OTHER TOTAL FUND FEE * EXPENSES* EXPENSES - ---- ---------- --------- -------- Multi-Style Equity Fund. . . . 0.78% 0.43% 1.21% Aggressive Equity Fund . . . . 0.95% 0.72% 1.67% Non-U.S. Fund . . . . . . . . 0.95% 1.42% 2.37% Real Estate Securities Fund. . 0.85% 0.31% 1.16% Core Bond Fund . . . . . . . . 0.60% 0.68% 1.28%
*MULTI-STYLE EQUITY FUND Frank Russell Investment Company's (FRIC's) advisor, Frank Russell Investment Management Company (FRIMCo) has voluntarily agreed to waive a portion of its 0.78% management fee, up to the full amount of that fee, equal to the amount by which the Fund's total operating expenses exceed 0.92% of the Fund's average daily net assets on an annual basis. FRIMCo has voluntarily agreed to reimburse the Fund for all remaining expenses after fee waivers which exceed 0.92% of the average daily net assets on an annual basis. This waiver may be revised or eliminated at any time without notice to shareholders. Taking the fee waivers into account, the actual gross annual total operating expenses were 0.92% of the average net assets of the Multi-Style Fund. AGGRESSIVE EQUITY FUND FRIMCo has voluntarily agreed to waive a portion of its 0.95% management fee, up to the full amount of that fee, equal to the amount by which the Fund's total operating expenses exceed 1.25% of the Fund's average daily net assets on an annual basis. FRIMCo has voluntarily agreed to reimburse the Fund for all remaining expenses after fee waivers which exceed 1.25% of the average daily net assets on an annual basis. This waiver may be revised or eliminated at any time without notice to shareholders. Taking the fee waivers into account, the actual gross annual total operating expenses were 1.25% of the average net assets of the Aggressive Equity Fund. NON-U.S. FUND FRIMCo has voluntarily agreed to waive a portion of its 0.95% management fee, up to the full amount of that fee, equal to the amount by which the Fund's total operating expenses exceed 1.30% of the Fund's average daily net assets on an annual basis. FRIMCo has voluntarily agreed to reimburse the Fund for all remaining expenses after fee waivers which exceed 1.30% of the average daily net assets on an annual basis. This waiver may be revised or eliminated at any time without notice to shareholders. Taking the fee waivers into account, the actual gross annual total operating expenses were 1.30% of the average net assets of the Non-U.S. Fund. REAL ESTATE SECURITIES FUND FRIMCo has voluntarily agreed to waive a portion of its ___% management fee, up to the full amount of that fee, equal to the amount by which the Fund's total operating expenses exceed ___5% of the Fund's average daily net assets on an annual basis. FRIMCo has voluntarily agreed to reimburse the Fund for all remaining expenses after fee waivers which exceed ___% of the average daily net assets on an annual 3 basis. This waiver may be revised or eliminated at any time without notice to shareholders. Operating expenses are based on average net assets expected to be invested during the year ending December 31, 1999. During the course of this period, expenses may be more or less than the amount shown. Taking the fee waivers into account, the actual gross annual total operating expenses were ___% of the average net assets of the Real Estate Securities Fund. CORE BOND FUND FRIMCo has voluntarily agreed to waive a portion of its 0.60% management fee, up to the full amount of that fee, equal to the amount by which the Fund's total operating expenses exceed .80% of the Fund's average daily net assets on an annual basis. FRIMCo has voluntarily agreed to reimburse the Fund for all remaining expenses after fee waivers which exceed .80% of the average daily net assets on an annual basis. This waiver may be revised or eliminated at any time without notice to shareholders. Taking the fee waivers into account, the actual gross annual total operating expenses were .80% of the average net assets of the Core Bond Fund. 4 THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY, NORTHWESTERN MUTUAL VARIABLE LIFE ACCOUNT, NORTHWESTERN MUTUAL SERIES FUND, INC. AND RUSSELL INSURANCE FUNDS NORTHWESTERN MUTUAL LIFE The Northwestern Mutual Life Insurance Company is a mutual life insurance company organized by a special act of the Wisconsin Legislature in 1857. It is the nation's fourth largest life insurance company, based on total assets in excess of $77 billion on December 31, 1998 and is licensed to conduct a conventional life insurance business in the District of Columbia and in all states of the United States. Northwestern Mutual Life sells life and disability insurance policies and annuity contracts through its own field force of approximately 6,000 full time producing agents. The Internal Revenue Service Employer Identification Number of Northwestern Mutual Life is 39-0509570. "We" in this prospectus means Northwestern Mutual Life. THE ACCOUNT We established Northwestern Mutual Variable Life Account by action of our Trustees on November 23, 1983, in accordance with the provisions of Wisconsin insurance law. Under Wisconsin law the income, gains and losses, realized or unrealized, of the Account are credited to or charged against the assets of the Account without regard to our other income, gains or losses. We use the Account only for variable life insurance policies. However, the policies issued prior to the introduction of Variable CompLife-Registered Trademark- (October 11, 1995 in most states) are different from the Variable CompLife-Registered Trademark- Policies described in this prospectus. The older policies are described in a separate prospectus and are no longer offered. We also use the Account for other variable life insurance policies which are described in other prospectuses. The Account is registered with the Securities and Exchange Commission as a unit investment trust under the Investment Company Act of 1940. This registration does not involve supervision of management or investment practices or policies. The Account has sixteen divisions. All of the assets of each division are invested in shares of the corresponding Portfolio or Fund described below. THE FUNDS NORTHWESTERN MUTUAL SERIES FUND, INC. Northwestern Mutual Series Fund, Inc. is a mutual fund of the series type registered under the Investment Company Act of 1940 as an open-end diversified management investment company. The Account buys shares of each Portfolio at their net asset value without any sales charge. The investment adviser for the Fund is Northwestern Mutual Investment Services, LLC ("NMIS"), our wholly-owned subsidiary. The investment advisory agreements for the respective Portfolios provide that NMIS will provide services and bear certain expenses of the Fund. For providing investment advisory and other services and bearing Fund expenses, the Fund pays NMIS a fee at an annual rate which ranges from .20% of the aggregate average daily net assets of the Index 500 Stock Portfolio to a maximum of .67% for the International Equity Portfolio, based on 1998 asset size. Other expenses borne by the Portfolios range from 0% for the Select Bond, Money Market and Balanced Portfolios to .09% for the International Equity Portfolio. We provide the people and facilities NMIS uses in performing its investment advisory functions and we are a party to the investment advisory agreement. 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 investment objectives and types of investments for each of the eleven Portfolios of the Fund are set forth below. There can be no assurance that the Portfolios will realize their objectives. For more information about the investment objectives and policies, the attendant risk factors and expenses see the attached prospectus for Northwestern Mutual Series Fund, Inc. SMALL CAP GROWTH STOCK PORTFOLIO The investment objective of the Small Cap Growth Stock Portfolio is long-term growth of capital. The Portfolio will seek to achieve this objective primarily by investing in the common stocks of companies which can reasonably be expected to increase sales and earnings at a pace which will exceed the growth rate of the U.S. economy over an extended period. AGGRESSIVE GROWTH STOCK PORTFOLIO. The investment objective of the Aggressive Growth Stock Portfolio is to achieve long-term appreciation of capital primarily by investing in the common stocks of companies which can reasonably be expected to increase their sales and earnings at a pace which will exceed the growth rate of the nation's economy over an extended period. INTERNATIONAL EQUITY PORTFOLIO. The investment objective of the International Equity Portfolio is long-term capital growth. It pursues its objective through a 5 flexible policy of investing in stocks and debt securities of companies and governments outside the United States. INDEX 400 STOCK PORTFOLIO The investment objective of the Index 400 Stock Portfolio is to achieve investment results that approximate the performance of the Standard & Poor's MidCap 400 Index ("S&P 400 Index"). The Portfolio will attempt to meet this objective by investing in stocks included in the S&P 400 Index. GROWTH STOCK PORTFOLIO. The investment objective of the Growth Stock Portfolio is long-term growth of capital; current income is secondary. The Portfolio will seek to achieve this objective by selecting investments in companies which have above average earnings growth potential. GROWTH AND INCOME STOCK PORTFOLIO. The investment objective of the Growth and Income Stock Portfolio is long-term growth of capital and income. Ordinarily the Portfolio pursues its investment objectives by investing primarily in dividend-paying common stock. INDEX 500 STOCK PORTFOLIO. The investment objective of the Index 500 Stock Portfolio is to achieve investment results that approximate the performance of the Standard & Poor's 500 Composite Stock Price Index ("S&P 500 Index"). The Portfolio will attempt to meet this objective by investing in stocks included in the S&P 500 Index. Stocks are generally more volatile than debt securities and involve greater investment risks. BALANCED PORTFOLIO. The investment objective of the Balanced Portfolio is to realize as high a level of long-term total rate of return as is consistent with prudent investment risk. The Balanced Portfolio will invest in common stocks and other equity securities, bonds and money market instruments. Investment in the Balanced Portfolio necessarily involves the risks inherent in stocks and debt securities of varying maturities, including the risk that the Portfolio may invest too much or too little of its assets in each type of security at any particular time. HIGH YIELD BOND PORTFOLIO. The investment objective of the High Yield Bond Portfolio is to achieve high current income and capital appreciation by investing primarily in fixed income securities that are rated below investment grade by the major rating agencies. SELECT BOND PORTFOLIO. The primary investment objective of the Select Bond Portfolio is to provide as high a level of long-term total rate of return as is consistent with prudent investment risk. A secondary objective is to seek preservation of shareholders' capital. The Select Bond Portfolio will invest primarily in debt securities. The value of debt securities will tend to rise and fall inversely with the rise and fall of interest rates. MONEY MARKET PORTFOLIO. The investment objective of the Money Market Portfolio is to realize maximum current income consistent with liquidity and stability of capital. The Money Market Portfolio will invest in money market instruments and other debt securities with maturities generally not exceeding one year. The return produced by these securities will reflect fluctuations in short-term interest rates. RUSSELL INSURANCE FUNDS The Russell Insurance Funds also comprise a mutual fund of the series type registered under the Insurance Company Act of 1940 as an open-end diversified management investment company. The Account buys shares of each of the Russell Insurance Funds at their net asset value without any sales charge. The assets of each of the Russell Insurance Funds are invested by one or more investment management organization 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. The investment objectives and types of investments for each of the five Russell Insurance Funds are set forth below. There can be no assurance that the Funds will realize their objectives. A table showing the expense ratios for each of the Russell Insurance Funds is included in the Summary above, at page 3. For more information about the investment objectives and policies, the attendant risk factors and expenses see the attached prospectus for the Russell Insurance Funds. MULTI-STYLE EQUITY FUND. The investment objective of the Multi-Style Equity Fund is to provide income and capital growth by investing principally in equity securities. The Multi-Style Equity Fund invests primarily in common stocks of medium and large capitalization companies. These companies are predominately US-based, although the Fund may invest a limited portion of its assets in non-US firms from time to time. AGGRESSIVE EQUITY FUND. The investment objective of the Aggressive Equity Fund is to provide capital appreciation by assuming a higher level of volitility than is ordinarily expected from Multi-Style Equity Fund by investing in equity securities. The Aggressive Equity Fund invests primarily in common stocks of small and medium capitalization companies. These companies are predominately US-based, although the Fund may invest in non-US firms from time to time. 6 NON-U.S. FUND. The investment objective of the Non-U.S. Fund is to provide favorable total return and additional diversification for US investors by investing primarily in equity and fixed-income securities of non-US companies, and securities issued by non-US governments. The Non-U.S. Fund invests primarily in equity securities issued by companies domiciled outside the United States and in depository receipts, which represent ownership of securities of non-US companies. REAL ESTATE SECURITIES FUND. The investment objective of the Real Estate Securities Fund is to generate a high level of total return through above average current income, while maintaining the potential for capital appreciation. The Fund seeks to achieve its objective by concentrating its investments in equity securities of issuers whose value is derived primarily from development, management and market pricing of underlying real estate properties. CORE BOND FUND. The investment objective of the Core Bond Fund is to maximize total return, through capital appreciation and income, by assuming a level of volatility consistent with the broad fixed-income market, by investing in fixed-income securities. The Core Bond Fund invests primarily in fixed-income securities. In particular, the Fund holds debt securities issued or guaranteed by the US government, or to a lesser extent by non-US governments, or by their respective agencies and instrumentalities. It also holds mortgage-backed securities, including collateralized mortgage obligations. The Fund also invests in corporate debt securities and dollar-denominated obligations issued in the US by non-US banks and corporations (Yankee Bonds). A majority of the Fund's holdings are US dollar-denominated. From time to time the Fund may invest in municipal debt obligations. - ------------------------------------------------------------------------------- DETAILED INFORMATION ABOUT THE POLICY THE POLICY DESIGN We have included this simplified description of the Variable CompLife-Registered Trademark- Policy design in this section to help you understand how the Policy is constructed. It omits details and important qualifications which are discussed in the following sections. The Policy combines a Minimum Guaranteed Death Benefit with Additional Protection in an integrated policy design. The Minimum Guaranteed Death Benefit represents permanent life insurance guaranteed for the lifetime of the insured if premiums are paid when due and no Policy debt is outstanding. The Additional Protection is guaranteed for a period of years which depends on the sex and risk classification and age of the insured when the Policy is issued and the relative proportions of Minimum Guaranteed Death Benefit and Additional Protection. For an insured aged less than 43 the guaranteed period is not less than ten years. It is generally longer for younger insureds and shorter for insureds who are older, but will not be less than six years. We place net premiums in the Account divisions you select. The net premiums increase the Policy Value. The Policy Value is the cumulative amount invested, adjusted for investment results, reduced by the cost of insurance. The cost of insurance is based on the net amount at risk. This is the amount of insurance in force less the Policy Value. The cost of insurance also reflects the attained age of the insured each year. If you pay premiums when they are due, and investment experience is favorable, the Policy Value will increase year by year. We have designed the Policy so that the increase in Policy Value over time should reduce the net amount at risk. The reduction in the net amount at risk offsets the rising cost of the mortality risk as the age of the insured increases, reducing the total cost of insurance which we subtract from the Policy Value each year. This scenario depends, however, on the investment experience which is a principal factor in determining Policy Value. Investment experience is not guaranteed. If investment experience does not produce a sufficient rate of return, the amount of Additional Protection will be reduced in later Policy years, or you will need to pay additional premium to keep the Additional Protection from falling. For a typical Policy the average annual net investment rate of return required to maintain the initial amount of Additional Protection, without additional premium, should be between 4% and 6%, based on the current charges and dividend scale. Any excess Policy Value (we call it the "Excess Amount") is simply added to the death benefit and the cash value, dollar for dollar, unless a greater increase in the death benefit is required to meet tax requirements for life insurance. See "Excess Amount", p.15. The Policy also allows you to pay of additional premiums to purchase variable paid-up additional insurance. We calculate the values for the additional insurance separately from those which support the initial amount of insurance. The values for the variable paid-up additional insurance do not affect the Policy Value. We allow unscheduled additional premiums to purchase variable paid-up additional 7 insurance, subject to insurability of the insured when we accept the premiums. REQUIREMENTS FOR INSURANCE The minimum amount we require for the Minimum Guaranteed Death Benefit is $100,000, reduced to $50,000 if the insured is below age 15 or over age 59. If the initial premium is at least $10,000 ($5,000 for ages below 15) the required minimum for the Minimum Guaranteed Death Benefit is $1,000. A lower minimum may apply in some circumstances and will apply if the Policy is purchased for an employer-sponsored benefit plan. See "Special Policy for Employers", p. 17. The Minimum Guaranteed Death Benefit must always be at least $1,000. Before issuing a Policy, we will require satisfactory evidence of insurability. Non-smokers who meet preferred underwriting requirements are considered select risks. Nonsmokers in the second best classification are considered standard plus risks. The best class of smokers are considered standard risks. The premium is different for each risk classification. We charge a higher premium for insureds who do not qualify as select, standard plus or standard risks. The amount of extra premium depends on the risk classification in which we place the insured. PREMIUMS The Policy provides for a level scheduled premium to be paid annually at the beginning of each Policy year. Premiums are payable at our Home Office or to an authorized Agent of Northwestern Mutual Life. By administrative practice, we accept premiums on a monthly, quarterly or semi-annual schedule. If you pay premiums more frequently than annually, we place the scheduled net annual premium in the Account on each Policy anniversary. We advance this amount on this date and we are reimbursed as we receive your premium payments. You have no obligation to repay the amount that we have advanced, but failure to pay the premiums when due will cause (a) premium payments to be suspended (subject to the conditions described later in this section), (b) the Policy to continue in force as a reduced amount of paid-up insurance, or (c) the Policy to terminate. If you do not pay premiums when they are due, we will reduce the Account assets supporting the Policy to reflect the premiums due later in the Policy year. Premiums you pay other than on an annual basis are increased to (1) reflect the time value of money, based on an 8% interest rate, and (2) cover the administrative costs to process the additional premium payments. A monthly premium is currently equal to the annual premium times .0863 plus 50 cents. Thus, the total of monthly premiums for a year is currently 3.56% plus $6.00 higher than a premium paid annually. You may pay monthly premiums only through an automatic payment plan arranged with your bank. A quarterly premium is currently equal to the annual premium times .2573 plus $2.00. A semiannual premium is equal to the annual premium times .5096 plus $1.35. The scheduled premium includes the premium for the Minimum Guaranteed Death Benefit and the premium for any Additional Protection. The amount of the premium depends on the amount of the Minimum Guaranteed Death Benefit and the amount of Additional Protection, as well as the insured's age and risk classification. The amount of the premium also reflects the sex of the insured except where state or federal law requires that premiums and other charges and values be determined without regard to sex. We send a notice to you not less than two weeks before each premium is due. You may select the proportions of Minimum Guaranteed Death Benefit and Additional Protection, subject to the required minimum amount for the Minimum Guaranteed Death Benefit. See "Requirements for Insurance", above. Policies that include Additional Protection are subject to a minimum premium that is equal to 70% of the premium for a Policy that consists solely of Minimum Guaranteed Death Benefit. The premium for the Additional Protection consists of two times the cost of term insurance (for the insured's age when the Policy was issued) as long as this amount in combination with the premium for the Minimum Guaranteed Death Benefit meets the 70% requirement. If this combination does not meet the 70% requirement the premium for Additional Protection is increased to bring the total up to the 70% level. In addition to the premium required for the Minimum Guaranteed Death Benefit and any Additional Protection, the scheduled premium may include additional premium to purchase paid-up additional insurance or to increase the Policy Value. The scheduled premium will also include the premium required for any additional benefit included as part of the Policy. After the Policy is issued we will reduce the additional premium included in the scheduled premium at any time upon your request. You may increase the additional premium included in the scheduled premium, or you may pay optional unscheduled additional premiums, at any time before the Policy anniversary nearest to the insured's 85th birthday, subject to our insurability requirements and issue limits. 8 If the Policy includes Additional Protection, we may require an increased premium after the guaranteed period to prevent a reduction of the amount of Additional Protection. We determine the increased premium, if required, each year as of the date 25 days before the Policy anniversary. You are entitled to pay the increased premium required to keep the Additional Protection from falling until the insured reaches age 80 but this right terminates as of the first Policy anniversary on which you do not pay the increased premium when it is due. You may suspend payment of scheduled premiums, at your option, if as of 25 days prior to the Policy anniversary on or before the due date of the premium, (1) the Excess Amount exceeds one year's minimum premium, and (2) the Policy Value exceeds the sum of the net single premium for the amount of insurance then in force, plus the present value of future charges for expenses, additional benefits, and any extra mortality. See "Excess Amount", p. 15. The minimum premium is the sum of the premiums for the Minimum Guaranteed Death Benefit, the Additional Protection and any additional benefit included in the Policy. We will calculate the net single premium and the present value of future charges using the mortality basis for the cost of insurance charges with 6% interest. See "Charges Against the Policy Value", p. 12. While payment of premiums is suspended, certain charges ordinarily deducted from premiums will reduce the Policy Value instead. You may resume payment of scheduled premiums as of any Policy anniversary. You must resume payment of scheduled premiums as of the next Policy anniversary if the Excess Amount, as of 25 days prior to the Policy anniversary, is determined to be less than one year's minimum premium. You may pay unscheduled additional premiums while suspension of scheduled premiums is in effect, subject to our insurability requirements and issue limits. The Policy provides for a grace period of 31 days for any premium that is not paid when due. The Policy remains in force during this period. If you pay a premium during the grace period, the values for the Policy will be the same as if you had paid the premium when it was due. If you do not pay the premium within the grace period, and the Policy does not qualify for premium suspension, the Policy will terminate as of the date when the premium was due and will no longer be in force, unless it is continued as paid-up insurance. See "Paid-Up Insurance", p. 15. If you surrender a Policy, its cash value will be paid. See "Cash Value", p. 13. The following table shows representative annual premiums for a Policy with an initial amount of $400,000, divided equally between Minimum Guaranteed Death Benefit and Additional Protection, for male select, standard plus and standard risks, at three ages.
PREMIUM FOR MINIMUM MINIMUM GUARANTEED GUARANTEED PREMIUM FOR AGE AT DEATH DEATH ADDITIONAL ADDITIONAL TOTAL ISSUE BENEFIT BENEFIT PROTECTION PROTECTION PREMIUM - ------ ---------- ----------- ---------- ----------- ------- SELECT 15 . . . . . . . . . . $200,000 $1,292 $200,000 $ 588 $ 1,880 35 . . . . . . . . . . 200,000 2,610 200,000 1,010 3,620 55 . . . . . . . . . . 200,000 6,618 200,000 3,320 9,938 STANDARD PLUS 15 . . . . . . . . . . $200,000 $1,406 $200,000 $ 608 $ 2,014 35 . . . . . . . . . . 200,000 2,874 200,000 1,118 3,992 55 . . . . . . . . . . 200,000 7,196 200,000 4,428 11,624 STANDARD 15 . . . . . . . . . . $200,000 $1,612 $200,000 $ 740 $ 2,352 35 . . . . . . . . . . 200,000 3,362 200,000 1,310 4,672 55 . . . . . . . . . . 200,000 8,650 200,000 6,380 15,030
9 DEATH BENEFIT The death benefit for a Policy includes the Minimum Guaranteed Death Benefit, any Additional Protection in effect, any Excess Amount and any paid-up additional insurance. It is reduced by the amount of any Policy debt outstanding and by an adjustment for any unpaid premiums which have been applied to purchase paid-up additional insurance. The Minimum Guaranteed Death Benefit you select when the Policy is issued will neither increase nor decrease, regardless of the investment experience of the Account divisions where assets for the Policy are held, so long as you pay scheduled premiums when they are due and no Policy debt is outstanding. In setting the premium rates for the Minimum Guaranteed Death Benefit we have assumed that the Account assets will grow at a net annual rate of 4%. We bear the risk that the rate of growth will be less. A higher rate of growth results in an increase in the Policy Value. The Additional Protection included in a Policy when it is issued will not increase by reason of investment experience more favorable than the assumed 4% net annual rate of growth. It will not decrease, regardless of investment experience, until expiration of the guaranteed period, so long as you pay scheduled premiums when they are due and no Policy debt is outstanding. A condition for this guarantee is that you must use any dividends paid on the Policy to increase Policy Value until the end of the guaranteed period unless the Policy has an Excess Amount. See "Excess Amount" p. 15. After the guaranteed period, the Additional Protection may be reduced unless the Policy Value exceeds the amount defined by the formula in the Policy. We calculate the amount of Policy Value, and the amount of increased premium required to prevent a reduction in the Additional Protection, 25 days before each Policy anniversary. You may pay any increased premium required to prevent a reduction in the Additional Protection each year until the Policy anniversary nearest the insured's 80th birthday, but this right terminates the first time you do not pay any required increased premium when it is due. The Policy Value represents the total cumulative net premiums for the Minimum Guaranteed Death Benefit and the Additional Protection, including any additional net premiums or Policy dividends which have been used to increase the Policy Value, adjusted for investment experience, less the cost of insurance which we deduct from the Policy Value on each Policy anniversary. The Policy Value may exceed the amount required to support the Minimum Guaranteed Death Benefit and the Additional Protection. This may result from favorable investment experience or from additional premium or Policy dividends used to increase the Policy Value. The amount by which the Policy Value exceeds the amount needed to support the Minimum Guaranteed Death Benefit and the Additional Protection under a specified set of assumptions is called the Excess Amount. See "Excess Amount", p. 15. Any Excess Amount will increase the death benefit for the Policy, dollar-for-dollar, except as described in the next paragraph. The Policy Value and any Excess Amount change daily. We have designed the Policy to meet the definitional requirements for life insurance in Section 7702 of the Internal Revenue Code. See "Tax Treatment of Policy Benefits," p. 17. These rules require that the death benefit will never be less than the Policy Value divided by the net single premium per dollar of death benefit. The required difference between the death benefit and the Policy Value is higher at younger ages than at older ages. The Policy provides for an increase in the death benefit to the extent required to meet this test. After the death benefit has been increased to meet this requirement an increase in the Policy Value will cause a greater than dollar-for-dollar increase in the death benefit, and a decrease in the Policy Value will cause a greater than dollar-for-dollar decrease in the death benefit. The death benefit is increased by the amount of any paid-up additional insurance purchased with additional premium or Policy dividends. The amount and value of the paid-up additional insurance vary daily to reflect investment experience and are not guaranteed. The amount of any paid-up additional insurance is its value used as a net single premium at the attained age of the insured. POLICY VALUE AND PAID-UP ADDITIONAL INSURANCE We determine the Policy Value and the value of any paid-up additional insurance daily by separate calculations. An increase or decrease in the Policy Value has no effect on the value of any paid-up additional insurance, and an increase or decrease in the value of any paid-up additional insurance has no effect on the Policy Value. You may increase or decrease the amount of scheduled additional premium which you are paying to increase the Policy Value or to increase the amount of paid-up additional insurance, and you may change the allocation for applying this additional premium. You must make changes in the scheduled additional premium and its allocation by written request. We may require evidence of insurability. We do not permit increases in the scheduled additional premium after the Policy anniversary nearest the insured's 85th birthday. 10 You may transfer the value of paid-up additional insurance to increase the Policy Value by written request. This will generally result in a decrease in the total death benefit. You may not transfer Policy Value to the value of paid-up additional insurance. ALLOCATIONS TO THE ACCOUNT We place the first net annual premium for the Policy, including any net scheduled additional premium, in the Account on the Policy date. We place the net scheduled annual premium in the Account on each Policy anniversary thereafter even if you are paying premiums on an other-than-annual frequency. We will place net unscheduled premiums in the Account on the date they are received at our Home Office. Net premiums are premiums less the deductions from premiums. See "Deductions from Premiums", below. We invest premiums placed in the Account prior to the initial allocation date in the Money Market Division of the Account. The initial allocation date is identified in the Policy and is the latest of the Policy date, 45 days after the date of the completed application or 32 days after we approve the application. On the initial allocation date we invest the amount in the Money Market Division in the Account divisions as you have directed in the application for the Policy. You may change the allocation for future net premiums at any time by written request and the change will be effective for premiums placed in the Account thereafter. If you allocate any portion of a premium to a division, the division must receive at least 10% of that premium. You may apportion the Account assets supporting your Policy among as many as ten divisions of the Account at any one time. You may transfer accumulated amounts from one division of the Account to another as often as twelve times in a Policy year. Transfers are effective on the date we receive a written request at our Home Office. We reserve the right to charge a fee of up to $25 to cover administrative costs of transfers. No fee is presently charged. DEDUCTIONS AND CHARGES DEDUCTIONS FROM PREMIUMS We deduct a charge for taxes attributable to premiums from each premium. The total amount of this deduction is 3.5% of the premium. Of this amount 2.25% is for state premium taxes. Premium taxes vary from state to state and currently range from .5% to 3.5% of life insurance premiums. The 2.25% rate is an average. The tax rate for a particular state may be lower, higher, or equal to the 2.25% deduction. We do not expect to profit from this charge. The remainder of the deduction, 1.25% of each premium, is for federal income taxes measured by premiums. We believe that this charge does not exceed a reasonable estimate of an increase in our federal income taxes resulting from a change in the Internal Revenue Code relating to deferred acquisition costs. We deduct a charge of 4.5% for sales costs from each premium. We expect to recover our sales expenses from this amount, over the period while the Policies are in force, and from the surrender charges described below. The amounts we deduct for sales costs in a Policy year are not specifically related to sales costs incurred that year. To the extent that sales expenses exceed the amounts deducted, we will pay the expenses from our other assets. These assets may include, among other things, any gain realized from the charge against the assets of the Account for the mortality and expense risks we have assumed. See "Charges Against the Account Assets", p. 12. To the extent that the amounts deducted for sales costs exceed the amounts needed, we will realize a gain. We deduct an annual charge of $60 from premiums each year for administrative costs to maintain the Policy. These expenses include costs of premium billing and collection, processing claims, keeping records and communicating with Policyowners. We retain the right to increase this charge after 10 years, but it is guaranteed not to exceed $84 plus 12 cents per $1,000 of both the Minimum Guaranteed Death Benefit and the Additional Protection. We do not expect to profit from this charge. We deduct an annual charge from premiums each of the first 10 years to compensate us for expenses, other than sales expenses, incurred in conjunction with issuance of the Policy. These expenses include the costs of processing applications, medical examinations, determining insurability and establishing records. The annual amount of this charge is $24 plus 12 cents per $1,000 of Minimum Guaranteed Death Benefit and Additional Protection. If you surrender the Policy before these charges have been deducted for 10 years, the remaining charges will be reflected in the administrative surrender charge. See "Surrender Charges", p. 12. We deduct an annual charge of 12 cents per $1,000 of Minimum Guaranteed Death Benefit from premiums each year to compensate us for the risk we have assumed by guaranteeing the Minimum Guaranteed Death Benefit, as long as you pay all premiums when they are due, no matter how unfavorable investment performance may be. We will also deduct any extra amounts we charge for insureds who do not qualify as select, standard plus or standard risks, plus the cost of any additional benefits purchased with the Policy, to determine the net annual premium. 11 CHARGES AGAINST THE POLICY VALUE We deduct a cost of insurance charge from the Policy Value on each Policy Anniversary. We determine the amount by multiplying the net amount at risk by the cost of insurance rate. The net amount at risk is the projected insurance amount, discounted at 4%, less the Policy Value. The projected insurance amount is the amount of insurance at the end of the Policy year, assuming that the Policy Value increases by the 4% annual growth rate assumed in constructing the Policy. The cost of insurance rate reflects the attained age of the insured. For select and standard risks, the cost of insurance rate is based on the Commissioners 1980 Standard Ordinary Smoker and Non-Smoker Mortality Tables. For other risks, the cost of insurance rate is based on the Commissioners 1980 Standard Ordinary Mortality Tables. The cost of insurance rates are included in the Policy. We also deduct a cost of insurance charge from the cash value of any paid-up additional insurance on each Policy anniversary. If we receive an unscheduled premium on a day other than a Policy anniversary and the net amount at risk increases as a result, we will deduct a cost of insurance charge on that day, reflecting the increase in the net amount at risk and the portion of the Policy year remaining. While payment of premiums is suspended, a portion of the annual charges which we would ordinarily deduct from premiums will be deducted from the Policy Value instead. We will also make this deduction on the Policy anniversary each year. We will also reduce the Policy Value by any surrender charges, administrative charges or decrease in Policy debt that may result from a withdrawal, a decrease in the face amount of insurance or a change to variable benefit paid-up insurance. CHARGES AGAINST THE ACCOUNT ASSETS There is a daily charge to the Account for the mortality and expense risks that we have assumed. The charge is at the annual rate of .60% of the assets of the Account. The mortality risk is that insureds may not live as long as we estimated. The expense risk is that expenses of issuing and administering the Policies may exceed the estimated costs. We will realize a gain from this charge to the extent it is not needed to provide benefits and pay expenses under the Policies. The actual mortality and expense experience under the Policies will be the basis for determining dividends. See "Annual Dividends", p. 13. The Policies provide that a charge for taxes may be made against the assets of the Account. We are not currently making a daily charge for federal income taxes we have incurred. In no event will the charge for taxes exceed that portion of our actual tax expenses which is fairly allocable to the Policies. TRANSACTION CHARGES The Policy provides for a fee of up to $25 for a transfer of assets among the Account divisions and for a fee of up to $25 for a withdrawal of Excess Amount. We are currently waiving these charges. SURRENDER CHARGES If you surrender the Policy before you have paid the premium that is due at the beginning of the fifteenth year, we will deduct surrender charges from the Policy Value. A table of surrender charges is in the Policy. The surrender charges consist of an administrative surrender charge and a premium surrender charge. The administrative surrender charge is equal to the sum of the issue expense charges which we have not deducted. The administrative surrender charge in the first Policy year is $216, plus $1.08 per $1,000 of Minimum Guaranteed Death Benefit and Additional Protection. This charge grades down linearly each year as you pay the premium (or payment of premiums is suspended) and is zero after you have paid the premium that is due at the beginning of the tenth Policy year (or it is suspended). The premium surrender charge is a percentage (shown in the table below) of the surrender charge base. If payment of the premium for a Policy year has been suspended, the premium surrender charge percentage will be as if you had paid the annual premium. During the first five policy years, if you pay premiums more frequently than annually we will adjust the premium surrender charge percentages to reflect the actual period for which you have paid premiums. If none of the premium payments during the first five Policy years have been suspended, the surrender charge base equals the sum of an annual premium for the Minimum Guaranteed Death Benefit (exclusive of the Policy fee and exclusive of any charge for extra mortality) plus a term insurance premium for the initial amount of Additional Protection. If any of the premium payments during the first five Policy years have been suspended, the surrender charge base equals the lesser of (1) the sum of an annual premium for the Minimum Guaranteed Death Benefit (exclusive of the Policy fee and exclusive of any charge for extra mortality) plus a term insurance premium for the initial amount of Additional Protection, and (2) the sum of the total premiums paid (exclusive of any premiums for additional benefits purchased with the Policy, and premiums for extra mortality, and any extra amount for premiums paid more often than annually) divided by the number of years (including fractions), but not more than five, for which premiums have been paid or suspended. 12
FOR POLICIES PREMIUM SURRENDER CHARGE SURRENDERED AFTER PERCENTAGE PAYMENT OF THE -------------------------------------- BEGINNING OF YEAR ISSUE AGE 65 AND UNDER ISSUE AGE 75 ----------------- ---------------------- ------------ 1 24% 24% 2 28% 25.5% 3 32% 27% 4 36% 28.5% 5 through 10 40% 30% 11 32% 24% 12 24% 18% 13 16% 12% 14 8% 6% 15 and later 0% 0%
For issue ages 66 through 74, the percentages are determined by linear interpolation between the percentages shown. GUARANTEE OF PREMIUMS, DEDUCTIONS AND CHARGES We guarantee and may not increase the premiums for the Minimum Guaranteed Death Benefit and the charge for mortality and expense risks. These amounts will not increase regardless of future changes in longevity or increases in expenses. CASH VALUE The cash value for the Policy will change daily in response to investment results. No minimum cash value is guaranteed. The cash value is equal to the Policy Value plus the value of any paid-up additional insurance, reduced by any Policy debt outstanding and the surrender charges. If you are not paying premiums on an annual basis we reduce the cash value for any premiums due later in the Policy year. We determine the cash value for a Policy at the end of each valuation period. Each business day, together with any non-business days before it, is a valuation period. A business day is any day on which the New York Stock Exchange is open for trading. In accordance with the requirements of the Investment Company Act of l940, we may also determine the cash value for a Policy on any other day on which there is sufficient trading in securities to materially affect the value of the securities held by the Portfolios or Funds. You may surrender your Policy for the cash value at any time during the lifetime of the insured. Alternatively, you may request that we apply the cash value to provide a reduced amount of fixed or variable paid-up insurance. See "Paid-Up Insurance", p.15. We will permit partial surrenders of the Policies so long as the Policy that remains meets the regular minimum size requirements. A partial surrender will cause the Policy to be split into two Policies. One Policy will be surrendered; the other will continue in force on the same terms as the original Policy except that the premiums will be based on the reduced amount of insurance. You will receive a new Policy document. The cash value and the death benefit will be proportionately reduced. We will make a deduction from the Policy proceeds for a proportionate part of the surrender charges if a partial surrender takes place before you have paid the premium that is due at the beginning of the fifteenth Policy year. We will make a transaction charge when a partial surrender is effected. The amount of the transaction charge will not exceed the actual administrative costs for the transaction. We currently expect this charge to be $250. ANNUAL DIVIDENDS The Policies share in divisible surplus to the extent we determine annually. We will distribute a Policy's share annually as a dividend payable on each Policy anniversary. Dividends under participating policies may be described as refunds of premiums which adjust the cost of a policy to the actual level of cost emerging over time after the policy's issue. Thus participating policies generally have gross premiums which are higher than those for comparable non-participating policies. Both federal and state tax law recognize that a dividend is considered to be a refund of a portion of the premium paid. Dividend illustrations published at the time a life insurance policy is issued reflect the actual recent experience of the issuing company with respect to investment earnings, mortality and expenses. State law generally prohibits a company from projecting or estimating future results. State law also requires that dividends be paid out of surplus, after certain necessary amounts are set aside, and that such surplus be apportioned equitably among participating policies. In summary, dividends must be based on actual experience and cannot be guaranteed at issue of a policy. Our actuary annually examines current and recent experience and compares these results with those which were assumed in determining premium rates when each class of policies was issued. We determine classes by such factors as year of issue, age, plan of insurance and risk classification. The actuary then determines the amount of dividends to be equitably apportioned to each class of policies. Following the actuary's recommendations, our Trustees adopt a dividend scale each year, thereby authorizing the distribution of the dividend. We have no significant actual mortality experience with variable life insurance policies. For purposes of the current dividend scale used for the illustrations in this prospectus, we have assumed that mortality experience in connection with the Policies will be 13 comparable to that actually experienced with fixed benefit life insurance. Dividends for variable life insurance are generally lower than those for participating fixed benefit life insurance, primarily because a variable life insurance policy provides a contractual mechanism for translation of investment experience into a variable death benefit and variable cash value. For participating fixed benefit life insurance the dividend includes amounts produced by favorable investment results. Dividends based on the Minimum Guaranteed Death Benefit for the Policies described in this prospectus are expected be relatively low during the first 15 Policy years. The prospectus illustrations show dividends being used to increase the Policy Value. If the Policy has Additional Protection in force, the dividends will be used to increase the Policy Value unless the Policy has Excess Amount. See "Excess Amount", p. 15. If the Policy has Excess Amount, or if no Additional Protection is in force, you may use dividends to purchase variable benefit paid-up additional insurance, or to pay premiums, or we will pay the dividend in cash. If the Policy is in force as fixed benefit paid-up insurance, you may use dividends to purchase fixed benefit paid-up additional insurance or we will pay you the dividend in cash. If the Policy is in force as variable benefit paid-up insurance, you may use the dividends to purchase variable benefit paid-up additional insurance or we will pay you the dividend in cash. LOANS AND WITHDRAWALS You may borrow up to 90% of the Policy's cash value using the Policy as security. If a Policy loan is already outstanding, the maximum amount for any new loan is 90% of the amount of cash value the Policy would have if there were no loan, less the amount already borrowed. You may take loan proceeds in cash or you may apply them to pay premiums on the Policy. Interest on a Policy loan accrues and is payable on a daily basis. We add unpaid interest to the amount of the loan. If the amount of the loan equals or exceeds the Policy's cash value, the Policy will terminate. We will send you a notice at least 31 days before the termination date. The notice will show how much you must be repay to keep the Policy in force. You select the Policy loan interest rate. A specified annual effective rate of 5% is one choice. The other choice is a variable rate based on a corporate bond yield index. We will adjust the variable rate annually, but it will not be less than 5%. We will take the amount of a Policy loan, including interest as it accrues, from the Account divisions in proportion to the amounts in the divisions. We will transfer the amounts withdrawn to our general account and will credit those amounts on a daily basis with an annual earnings rate equal to the Policy loan interest rate less a charge for the mortality and expense risks we have assumed and for expenses, including taxes. The aggregate charge is currently at the annual rate of .90% for the 5% specified Policy loan interest rate and .90% for the variable Policy loan interest rate. For example, the earnings rate corresponding to the specified 5% Policy loan interest rate is currently 4.10%. A Policy loan, even if it is repaid, will have a permanent effect on the Policy Value and cash value because the amounts borrowed will not participate in the Account's investment results while the loan is outstanding. The effect may be either favorable or unfavorable depending on whether the earnings rate credited to the loan amount is higher or lower than the rate credited to the unborrowed amount left in the Account. Except when the Policy is in force as fixed benefit paid-up insurance, we will allocate a Policy loan between Policy Value and variable paid-up additional insurance in proportion to the amount of cash value attributable to each. You may repay a Policy loan, and any accrued interest outstanding, in whole or in part, at any time. We will credit payments as of the date we receive them and transfer them from our general account to the Account divisions, in proportion to the amounts in the divisions, as of the same date. You may make a withdrawal if the Excess Amount is sufficient. See "Excess Amount", p. 15. A withdrawal may neither decrease the Excess Amount to less than the surrender charge which would apply if the Policy were surrendered nor reduce the loan value to less than any Policy debt outstanding. The minimum amount for withdrawals is $250. An administrative charge of up to $25 may apply, but we are currently waiving that charge. A withdrawal of Policy Value decreases the death benefit by the same amount. If the death benefit for a Policy has been increased to meet the federal tax requirements for life insurance, the decrease in the death benefit caused by a subsequent withdrawal may be larger than the amount of the withdrawal. If cumulative withdrawals exceed the cumulative additional premiums which have been used to increase the Policy Value, with both withdrawals and premiums increased by 4% annual interest, subsequent unfavorable investment experience may cause the Policy to lapse unless you pay an additional unscheduled premium to increase the Policy Value. The due date for this premium is the Policy anniversary following written notice to you. 14 EXCESS AMOUNT The Excess Amount is the amount by which the Policy Value exceeds the Tabular Cash Value for the sum of the Minimum Guaranteed Death Benefit and any Additional Protection in effect. The Tabular Cash Value is an amount equal to a Policy Value calculated assuming (1) a whole life Policy with a face amount equal to the sum of the Minimum Guaranteed Death Benefit and the Additional Protection, (2) all premiums are paid when due, (3) no additional premiums or dividends used to increase Policy Value, (4) a 4% level annual rate of return, and (5) maximum Policy charges apply. If you are not paying premiums on an annual basis, the Excess Amount is reduced for any premiums due later in the Policy year. PAID-UP INSURANCE If you do not pay a premium within the 31-day grace period, and the Policy does not qualify for suspension of premium payments, the Policy will continue in force as a reduced amount of fixed benefit paid-up insurance. Alternatively you may select a reduced amount of variable benefit paid-up insurance. You must make this selection during the grace period or sooner. If the Policy is in force as a reduced amount of fixed benefit paid-up insurance, we will transfer the amount of the cash value from the Account to our general account. Thereafter the Policy will not participate in the Account's investment results unless the Policy is subsequently reinstated. See "Reinstatement", below. The minimum cash value for fixed benefit paid-up insurance is $1,000. If the cash value is less than $1,000 as of the last day of the grace period we will treat the Policy as surrendered. You may select variable benefit paid-up insurance only if the cash value of the Policy is at least $5,000. We determine the amount of paid-up insurance by applying the amount of cash value plus any Policy debt as a net single premium at the attained age. Paid-up insurance has cash and loan values. For fixed benefit paid-up insurance the amounts of these are guaranteed. For variable paid-up insurance neither the death benefit or the cash value is guaranteed. Paid-up insurance remains in force for the lifetime of the insured unless you surrender or terminate the Policy. While the Policy is in force as either fixed or variable benefit paid-up insurance the Minimum Guaranteed Death Benefit and any Additional Protection will not be in effect. Any Policy debt will continue. REINSTATEMENT If a premium is due and remains unpaid after the grace period expires, the Policy may be reinstated while the insured is alive within three years after the premium due date. The insured must provide satisfactory evidence of insurability unless reinstatement takes place within 31 days after the end of the grace period. We may require a substantial payment. Following reinstatement the Policy will have the same Minimum Guaranteed Death Benefit, Additional Protection, Policy Value and paid-up additional insurance as if minimum premiums had been paid when due. We will credit a 4% rate of investment earnings for the period from the due date of the overdue premium to the date of reinstatement. We will make an adjustment for any Policy debt or the debt may be reinstated. The Policy may not be reinstated if you have surrendered it for its cash value. RIGHT TO RETURN POLICY You may return a Policy for a full refund of the premium you paid within 45 days after you sign the application for insurance, or within 10 days after you received the Policy, or within 10 days after a Notice of Cancellation Right is mailed or delivered to you, whichever date is latest. You may mail or deliver the Policy to the agent who sold it or to our Home Office. If returned, we will consider the Policy void from the beginning. RIGHT TO EXCHANGE FOR A FIXED BENEFIT POLICY You may exchange a Policy for a whole life insurance policy with benefits that do not vary with the investment experience of a separate account. You may elect the exchange at any time within twenty-four months after the issue date of the Policy provided premiums are duly paid. We do not require evidence of insurability. The new policy will be on the life of the same insured and will have the same initial guaranteed death benefit, policy date and issue age. The premiums and cash values will be the same as those for fixed benefit policies we issued on the issue date of the Policy. The exchange will be subject to an equitable cash adjustment. The amount will recognize the difference in premiums and investment performance of the two policies. An exchange will be effective when we receive a proper written request, as well as the Policy and any amount due on the exchange. You may also exchange a Policy for a fixed benefit policy if either of the mutual funds changes its investment adviser or if there is a material change in the investment policies of a Portfolio or Fund. You will be given notice of any such change and will have 60 days to make the exchange. 15 OTHER POLICY PROVISIONS OWNER. The owner is identified in the Policy. The owner may exercise all rights under the Policy while the insured is living. Ownership may be transferred to another. Written proof of the transfer must be received by Northwestern Mutual Life at its Home Office. In this prospectus "you" means the owner or prospective purchaser of a Policy. BENEFICIARY. The beneficiary is the person to whom the death benefit is payable. The beneficiary is named in the application. After the Policy is issued you may change the beneficiary in accordance with the Policy provisions. INCONTESTABILITY. We will not contest a Policy after it has been in force during the lifetime of the insured for two years from the date of issue. SUICIDE. If the insured dies by suicide within one year from the date of issue, the amount payable under the Policy will be limited to the premiums paid, less the amount of any Policy debt and withdrawals and less the cash value of any variable paid-up insurance surrendered. MISSTATEMENT OF AGE OR SEX. If the age or sex of the insured has been misstated, we will adjust benefits under a Policy to reflect the correct age and sex. COLLATERAL ASSIGNMENT. You may assign a Policy as collateral security. We are not responsible for the validity or effect of a collateral assignment and will not be deemed to know of an assignment before receipt of the assignment in writing at our Home Office. PAYMENT PLANS. The Policy provides a variety of payment plans for Policy benefits. Any Northwestern Mutual Life agent authorized to sell the Policies can explain these provisions on request. DEFERRAL OF DETERMINATION AND PAYMENT. So long as premiums have been paid when due, we will ordinarily pay Policy benefits within seven days after we receive all required documents at our Home Office. However, we may defer determination and payment of benefits during any period when it is not reasonably practicable to value securities because the New York Stock Exchange is closed or an emergency exists or the Securities and Exchange Commission, by order, permits deferral for the protection of Policyowners. If a Policy is in force as fixed benefit paid-up insurance, we have the right to defer payment of the cash value for up to six months from the date of a Policy loan or surrender. If payment is deferred for 30 days or more we will pay interest at an annual effective rate of 4%. VOTING RIGHTS We are the owner of the mutual fund shares in which all assets of the Account are invested. As the owner of the shares we will exercise our right to vote the shares to elect directors of the funds, to vote on matters required to be approved or ratified by mutual fund shareholders under the Investment Company Act of 1940 and to vote on any other matters that may be presented to any shareholders' meeting of the funds. However, we will vote the shares held in the Account in accordance with instructions from owners of the Policies. We will vote any shares held in our general account in the same proportions as the shares for which voting instructions are received. If the applicable laws or regulations change so as to permit us to vote the shares in our own discretion, we may elect to do so. The number of mutual fund shares for each division of the Account for which the owner of a Policy may give instructions is determined by dividing the amount of the Policy's cash value apportioned to that division, if any, by the per share value for the corresponding Portfolio or Fund. The number will be determined as of a date we choose, but not more than 90 days before the shareholders' meeting. Fractional votes are counted. We will solicit voting instructions with written materials at least 14 days before the meeting. We will vote shares as to which we receive no instructions in the same proportion as the shares as to which we receive instructions. We may, if required by state insurance officials, disregard voting instructions which would require mutual fund shares to be voted for a change in the sub-classification or investment objectives of a Portfolio or Fund, or to approve or disapprove an investment advisory agreement for either of the mutual funds. We may also disregard voting instructions that would require changes in the investment policy or investment adviser for either a Portfolio or a Fund, provided that we reasonably determine to take this action in accordance with applicable federal law. If we disregard voting instructions we will include a summary of the action and reasons therefor in the next semiannual report to the owners of the Policies. SUBSTITUTION OF FUND SHARES AND OTHER CHANGES If, in our judgment, a Portfolio or Fund becomes unsuitable for continued use with the Policies because of a change in investment objectives or restrictions, we may substitute shares of another Portfolio or Fund or another mutual fund. Any substitution of shares will be subject to any required approval of the Securities and Exchange Commission, the Wisconsin Commissioner of Insurance or other regulatory authority. We have also reserved the right, subject to applicable federal and state law, to operate the Account or any of its 16 divisions as a management company under the Investment Company Act of 1940, or in any other form permitted, or to terminate registration of the Account if registration is no longer required, and to change the provisions of the Policies to comply with any applicable laws. REPORTS For each Policy year (unless a Policy is in force as fixed benefit paid-up insurance) you will receive a statement showing the death benefit, cash value and any Policy loan (including interest charged) as of the anniversary date. This report will show the apportionment of invested assets among the Account divisions. You will also receive annual and semiannual reports for the Account and both of the mutual funds, including financial statements. SPECIAL POLICY FOR EMPLOYERS A reduced minimum amount applies for Policies where the insurance involves an employer sponsored benefit plan or arrangement. The sum of the Minimum Guaranteed Death Benefit and the Additional Protection must be at least $10,000, of which the Minimum Guaranteed Death Benefit must be at least $1,000. The premium for the Additional Protection is two times the cost of term insurance for the insured's age when the Policy is issued. These Policies for employers may include a provision to permit the amount of Additional Protection to increase after issue. Any such increase amount must be based on the terms of the benefit plan or arrangement and may not be subject to the discretion of the insured or the insured's beneficiary. A description of the method of determining the amount of any increase is included in the Policy. Changes to the amount of Additional Protection will be effective on Policy anniversaries. The surrender charge and all charges for issue and administrative expenses will be based on the initial amount of Additional Protection. For certain situations where the insurance involves an employer sponsored benefit plan or arrangement, federal law and the laws of certain states may require that premiums and annuity rates be determined without regard to sex. Special Policies are available for this purpose. You are urged to review any questions in this area with qualified counsel. DISTRIBUTION OF THE POLICIES We sell the Policies through individuals who, in addition to being licensed life insurance agents of Northwestern Mutual Life, are registered representatives of Northwestern Mutual Investment Services, LLC ("NMIS"), our wholly-owned subsidiary. NMIS is a registered broker-dealer under the Securities Exchange Act of 1934 and is a member of the National Association of Securities Dealers. NMIS was organized in 1968 and is a Wisconsin limited liability company. Its address is 720 East Wisconsin Avenue, Milwaukee, Wisconsin 53202. The Internal Revenue Service Employer Identification Number of NMIS is 39-0509570. Commissions paid to the agents will not exceed 40% of the premium for the first year, 6% of the premium for the second through tenth years, and 2-3/4% of the premium thereafter. Agents who meet certain productivity and persistency standards receive additional compensation. We may pay new agents differently during a training period. General agents and district agents who are registered representatives of NMIS and have supervisory responsibility for sales of the Policies receive commission overrides and other compensation. TAX TREATMENT OF POLICY BENEFITS The Policies are "life insurance contracts" as that term is defined in Sections 7702 and 817(h) of the Internal Revenue Code. Increases in cash value under a Policy are not taxable until actual surrender of the Policy. Upon surrender, the amount received is taxable at ordinary income rates under Section 72(e) of the Code to the extent it exceeds the amount of the premiums paid under the Policy less any dividends or other amounts previously received tax-free (basis of the Policy). Death benefits are excludable from the beneficiary's gross income under Section l0l(a) of the Code. Under certain limited circumstances, all or part of a partial surrender or a withdrawal during the first 15 years may be taxable on a "gain first basis" to the extent that the cash value of the Policy exceeds the basis of the Policy. This means the amount surrendered or withdrawn may be taxable even if that amount is less than the basis of the Policy. We believe that loans received under the Policies (except modified endowment contracts as described below) will be construed as indebtedness of an owner in the same manner as loans under a fixed benefit life insurance policy and that no part of any loan under a Policy will constitute income to the owner. Policies will be classified as modified endowment contracts under Section 7702A of the Internal Revenue Code if the aggregate premium paid during the first 7 years exceeds a defined "7-pay limit". Generally, this can occur if significant additional premiums are paid or the death benefit is reduced within the first 7 years or if additional benefits are added to the Policy. For Policies that are modified endowment contracts, withdrawals, partial surrenders, Policy loans and dividends paid in cash are taxable as income on a gain 17 first basis. The taxable portion of these distributions would also be subject to a 10% penalty if received prior to age 59 1/2, disability or annuitization. For purposes of determining taxable income, all Policies that are modified endowment contracts (including any fixed dollar policies that are modified endowment contracts) issued by Northwestern Mutual Life to the Policyowner during the same calendar year are aggregated. Federal estate and state and local estate, inheritance and other tax consequences of ownership or receipt of Policy proceeds depend upon the circumstances of each Policy owner or beneficiary. The foregoing summary does not purport to be complete or to cover all situations. Counsel and other competent advisers you should consult for more complete information. - ------------------------------------------------------------------------------ OTHER INFORMATION MANAGEMENT Northwestern Mutual Life is managed by a Board of Trustees. The Trustees and senior officers of Northwestern Mutual Life and their positions including Board committee memberships, and their principal occupations, are as follows: TRUSTEES
Principal Occupation During Last Name Five Years - ---- --------------------------------- R. Quintus Anderson (A) ............... Chairman, Aarque Capital Corporation since 1997, prior thereto; Chairman, The Aarque Companies, Jamestown, NY (diversified metal products manufacturing) Edward E. Barr (HR) ................... Chairman, Sun Chemical Corporation, Fort Lee, New Jersey (graphic arts) since 1998; prior thereto, President and Chief Executive Officer. President and Chief Executive Officer, DIC Americas, Inc., Fort Lee, NJ Gordon T. Beaham, III (OT). ........... Chairman of the Board and President, Faultless Starch/Bon Ami Company, Kansas city, MO (consumer products manufacturer) Robert C. Buchanan (A, E, F) .......... President and Chief Executive Officer, Fox Valley Corporation, Appleton, WI (manufacturer of gift wrap and writing paper) Robert E. Carlson (E) ................. Executive Vice President of Northwestern Mutual Life George A. Dickerman (AM) .............. Chairman of the Board, Spalding Sports Worldwide, Chicopee, MA (manufacturer of sporting equipment) since 1998; prior thereto, President Pierre S. du Pont (AM) ................ Attorney, Richards, Layton and Finger, Wilmington, DE James D. Ericson (AM, E, F. HR, OT) ... President and Chief Executive Officer of Northwestern Mutual Life J. E. Gallegos (A) .................... Attorney at Law; President, Gallegos Law Firm, Santa Fe, New Mexico Stephen N. Graff (E, F, OT) ........... Retired Partner, Arthur Andersen LLP (public accountants) Patricia Albjerg Graham (HR) .......... Professor, Graduate School of Education, Harvard University, Cambridge, MA, and President, The Spencer Foundation (social and behavioral sciences) Stephen F. Keller (HR) ................ Attorney. Former Chairman, Santa Anita Realty Enterprises since 1997; prior thereto, Chairman Barbara A. King (AM) .................. President, Landscape Structures, Inc., Delano, MN (manufacturer of playground equipment) J. Thomas Lewis (HR) .................. Attorney (retired), New Orleans, LA since 1998; prior thereto, Attorney with Monroe & Lemann, New Orleans, LA 18 Daniel F. McKeithan, Jr. (E, F, HR) ... President, Tamarack Petroleum Company, Inc., Milwaukee, WI (operator of oil and gas wells); President, Active Investor Management, Inc., Milwaukee, WI Guy A. Osborn (E, F, OT) .............. Retired Chairman of Universal Foods Corporation, Milwaukee, WI since 1997; prior thereto, Chairman and Chief Executive Officer Timothy D. Proctor (A) ................ Director, Worldwide Human Resources of Glaxo Wellcome plc, Research Triangle Park, NC, since 1998; prior thereto, Senior Vice President Human Resources, General Counsel & Secretary (pharmaceuticals) Donald J. Schuenke (AM, E, F) ......... Retired Chairman of Northwestern Mutual Life H. Mason Sizemore, Jr. (AM) ........... President and Chief Operating Officer, The Seattle Times, Seattle, WA (publishing) Harold B. Smith (OT) .................. Chairman, Executive Committee, Illinois Tool Works, Inc., Chicago, IL (engineered components and industrial systems and consumables) Sherwood H. Smith, Jr. (AM) ........... Chairman of the Board of Carolina Power & Light since 1997; prior thereto, Chairman of the Board and Chief Executive Officer John E. Steuri (OT) ................... Chairman, Advanced Thermal Technologies, Little Rock, AR since 1997 (heating, air-conditioning and humidity control). Retired since 1996 as Chairman and Chief Executive Officer of ALLTEL Information Services, Inc., Little Rock, AR (application software) John J. Stollenwerk (AM, E, F) ........ President and Owner, Allen-Edmonds Shoe Corporation, Port Washington, WI Barry L. Williams (HR) ................ President and Chief Executive Officer of Williams Pacific Ventures, Inc., Redwood City, CA (venture capital) Kathryn D. Wriston (A) ................ Director of various corporations, New York, NY
A -- Member, Audit Committee AM -- Member, Agency and Marketing Committee E -- Member, Executive Committee F -- Member, Finance Committee HR -- Member, Human Resources and Public Policy Committee OT -- Member, Operations and Technology Committee SENIOR OFFICERS (OTHER THAN TRUSTEES)
Position With Name Northwestern Mutual Life - -------------------------------------------------------------------------------------- John M. Bremer Executive Vice President, General Counsel and Secretary Peter W. Bruce Executive Vice President Edward J. Zore Executive Vice President Deborah A. Beck Senior Vice President William H. Beckley Senior Vice President Mark G. Doll Senior Vice President Richard L. Hall Senior Vice President William C. Koenig Senior Vice President and Chief Actuary Donald L. Mellish Senior Vice President Mason G. Ross Senior Vice President Leonard F. Stecklein Senior Vice President 19 Frederic H. Sweet Senior Vice President Dennis Tamcsin Senior Vice President Walter J. Wojcik Senior Vice President Gary E. Long Vice President and Controller
REGULATION We are subject to the laws of Wisconsin governing insurance companies and to regulation by the Wisconsin Commissioner of Insurance. We file an annual statement in a prescribed form with the Department of Insurance on or before March 1 in each year covering operations for the preceding year and including financial statements. Regulation by the Wisconsin Insurance Department includes periodic examination to determine solvency and compliance with insurance laws. We are also subject to the insurance laws and regulations of the other jurisdictions in which we are licensed to operate. YEAR 2000 ISSUES Since early 1996 we have been preparing for the computer requirements associated with the approaching turn of the century. We completed assessment of our internal systems in 1996. As of the date of this prospectus the necessary system changes are substantially complete. System testing is in process and we expect testing of all critical systems to be completed during the first six months of 1999. The work on these computer systems extends to software packages we purchase from vendors. In addition, we have been communicating formally with our business partners to identify and assess potential exposure that could result from their failure to address these computer issues on a timely basis. Each of our departments has prepared a contingency plan. We and our business partners bear all of the costs of identifying and resolving the computer systems issues associated with the year 2000. These costs will have no effect on the performance of the Account. The Policies permit some charges for administrative expenses to be increased up to the guaranteed maximum rates. However, we do not expect our costs for year 2000 compliance to have any significant effect on the benefits or values provided by the Policies. We believe that our computer systems will be ready for the year 2000 well in advance of the deadline. By their nature, however, the issues in this area carry the risk of unforeseen problems, both at Northwestern Mutual Life and at all the other sites where supporting functions and interaction take place. There can be no assurance that these problems will not have a material adverse impact on the operations of Northwestern Mutual Life and the Account. LEGAL PROCEEDINGS We are engaged in litigation of various kinds which in our judgment is not of material importance in relation to our total assets. There are no legal proceedings pending to which the Account is a party. REGISTRATION STATEMENT We have filed a registration statement with the Securities and Exchange Commission, Washington, D.C. under the Securities Act of 1933, as amended, with respect to the Policies. This prospectus does not contain all the information set forth in the registration statement. A copy of the omitted material is available from the main office of the SEC in Washington, D.C. upon payment of the prescribed fee. Further information about the Policies is also available from the Home Office of Northwestern Mutual Life. The address and telephone number are on the cover of this prospectus. EXPERTS The financial statements of Northwestern Mutual Life as of December 31, 1998 and 1997 and for each of the three years in the period ended December 31, 1998 and of the Account as of December 31, 1998 and for each of the two years in the period ended December 31, 1998 included in this prospectus 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. Actuarial matters included in this prospectus have been examined by William C. Koenig, F.S.A., Senior Vice President and Chief Actuary of Northwestern Mutual Life. His opinion is filed as an exhibit to the registration statement. 20 VARIABLE LIFE ACCOUNTANTS' REPORT [LOGO] Report of Independent Accountants To The Northwestern Mutual Life Insurance Company and Policyowners of Northwestern Mutual Variable Life Account In our opinion, the accompanying combined statement of assets and liabilities and the related combined and separate statements of operations and changes in equity present fairly, in all material respects, the financial position of Northwestern Mutual Variable Life Account and Aggressive Growth Stock Division, International Equity Division, Growth Stock Division, Growth and Income Stock Division, Index 500 Stock Division, Balanced Division, High Yield Bond Division, Select Bond Division, and the Money Market Division thereof at December 31, 1998, the results of each of their operations and the changes in each of their equity for each of the two years in the period ended December 31, 1998, in conformity with generally accepted accounting principles. These financial statements are the responsibility of The Northwestern Mutual Life Insurance Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included direct confirmation of the number of shares owned at December 31, 1998 with Northwestern Mutual Series Fund, Inc., provide a reasonable basis for the opinion expressed above. /s/ PricewaterhouseCoopers LLP Milwaukee, Wisconsin January 25, 1999 21 VARIABLE LIFE FINANCIAL STATEMENTS NORTHWESTERN MUTUAL VARIABLE LIFE ACCOUNT Financial Statements DECEMBER 31, 1998 STATEMENT OF ASSETS AND LIABILITIES (IN THOUSANDS) ASSETS Investments at Market Value: Northwestern Mutual Series Fund, Inc. Aggressive Growth Stock 34,420 shares (cost $102,404).............. $ 119,230 International Equity 46,760 shares (cost $73,163)............... 78,416 Growth Stock 29,383 shares (cost $49,267)............... 66,025 Growth and Income Stock 43,428 shares (cost $60,081)............... 70,528 Index 500 Stock 58,115 shares (cost $126,062).............. 191,141 Balanced 71,092 shares (cost $108,217).............. 158,110 High Yield Bond 15,509 shares (cost $16,804)............... 14,516 Select Bond 10,143 shares (cost $12,181)............... 12,669 Money Market 39,300 shares (cost $39,300)............... 39,300 $ 749,935 --------- Due from Sale of Fund Shares.................................. 95 Due from Northwestern Mutual Life Insurance Company........... 328 --------- Total Assets.................................................. $ 750,358 --------- --------- LIABILITIES Due to Northwestern Mutual Life Insurance Company........... $ 95 Due on Purchase of Fund Shares.............................. 328 --------- Total Liabilities....................................... 423 --------- EQUITY (NOTE 8) Variable Life Policies Issued Before October 11, 1995....... 392,772 Variable Complife Policies Issued On or After October 11, 1995....................................................... 356,862 Variable Executive Life Policies Issued On or After March 2, 1998....................................................... 301 --------- Total Equity............................................ 749,935 --------- Total Liabilities and Equity............................ $ 750,358 --------- ---------
The Accompanying Notes are an Integral Part of the Financial Statements 22 VARIABLE LIFE FINANCIAL STATEMENTS NORTHWESTERN MUTUAL VARIABLE LIFE ACCOUNT Statements of Operations and Changes in Equity (IN THOUSANDS)
AGGRESSIVE GROWTH INTERNATIONAL EQUITY COMBINED STOCK DIVISION DIVISION ----------------------------- ----------------------------- ----------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, 1998 1997 1998 1997 1998 1997 ------------- ------------- ------------- ------------- ------------- ------------- INVESTMENT INCOME Dividend Income............... $ 24,922 $ 24,262 $ 3,287 $3,345 $ 3,591 $ 1,286 Mortality and Expense Risks... 2,755 1,788 424 271 308 197 Taxes......................... 1,178 767 181 116 132 85 ------------- ------------- ------------- ------------- ------------- ------------- Net Investment Income......... 20,989 21,707 2,682 2,958 3,151 1,004 ------------- ------------- ------------- ------------- ------------- ------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Realized Gain on Investments............... 4,332 4,871 523 231 284 203 Unrealized Appreciation (Depreciation) of Investments During the Period.................... 68,780 42,532 4,928 5,109 (1,424) 2,358 ------------- ------------- ------------- ------------- ------------- ------------- Net Gain (Loss) on Investments............... 73,112 47,403 5,451 5,340 (1,140) 2,561 ------------- ------------- ------------- ------------- ------------- ------------- Increase in Equity Derived from Investment Activity.................. 94,101 69,110 8,133 8,298 2,011 3,565 ------------- ------------- ------------- ------------- ------------- ------------- EQUITY TRANSACTIONS Policyowners' Net Deposits.................. 258,672 170,672 30,145 21,502 20,672 12,656 Policy Loans, Surrenders, and Death Benefits........ (37,427) (23,728) (6,454) (4,003) (4,327) (2,787) Mortality and Other (net)... (39,611) (28,427) (5,193) (3,791) (3,785) (2,368) Transfers from Other Divisions................. 133,775 86,366 20,371 19,008 15,743 14,866 Transfers to Other Divisions................. (133,773) (86,366) (6,419) (4,091) (5,013) (2,149) ------------- ------------- ------------- ------------- ------------- ------------- Increase in Equity Derived from Equity Transactions.... 181,636 118,517 32,450 28,625 23,290 20,218 ------------- ------------- ------------- ------------- ------------- ------------- Net Increase in Equity........ 275,737 187,627 40,583 36,923 25,301 23,783 EQUITY Beginning of Year........... 474,198 286,571 78,647 41,724 53,116 29,333 ------------- ------------- ------------- ------------- ------------- ------------- End of Year................. $749,935 $474,198 $119,230 $78,647 $78,417 $53,116 ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
The Accompanying Notes are an Integral Part of the Financial Statements 23 VARIABLE LIFE FINANCIAL STATEMENTS NORTHWESTERN MUTUAL VARIABLE LIFE ACCOUNT Statements of Operations and Changes in Equity (IN THOUSANDS)
GROWTH & INCOME INDEX 500 GROWTH STOCK DIVISION STOCK DIVISION STOCK DIVISION ----------------------------- ----------------------------- ----------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, 1998 1997 1998 1997 1998 1997 ------------- ------------- ------------- ------------- ------------- ------------- INVESTMENT INCOME Dividend Income............... $ 956 $ 1,413 $ 537 $ 7,776 $ 4,530 $ 2,579 Mortality and Expense Risks... 211 105 234 120 671 395 Taxes......................... 91 45 100 52 287 169 ------------- ------------- ------------- ------------- ------------- ------------- Net Investment Income......... 654 1,263 203 7,604 3,572 2,015 ------------- ------------- ------------- ------------- ------------- ------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Realized Gain on Investments............... 143 172 220 173 1,125 2,375 Unrealized Appreciation (Depreciation) of Investments During the Period.................... 10,533 4,151 10,574 (1,823) 31,738 17,772 ------------- ------------- ------------- ------------- ------------- ------------- Net Gain (Loss) on Investments............... 10,676 4,323 10,794 (1,650) 32,863 20,147 ------------- ------------- ------------- ------------- ------------- ------------- Increase in Equity Derived from Investment Activity.................. 11,330 5,586 10,997 5,954 36,435 22,162 ------------- ------------- ------------- ------------- ------------- ------------- EQUITY TRANSACTIONS Policyowners' Net Deposits.................. 12,991 7,334 14,771 7,537 29,665 19,733 Policy Loans, Surrenders, and Death Benefits........ (2,859) (1,314) (2,902) (1,842) (8,924) (5,039) Mortality and Other (net)... (2,494) (1,329) (2,847) (1,457) (5,367) (4,127) Transfers from Other Divisions................. 16,839 8,851 17,225 10,673 37,076 20,024 Transfers to Other Divisions................. (2,015) (1,341) (3,106) (1,104) (5,443) (3,783) ------------- ------------- ------------- ------------- ------------- ------------- Increase in Equity Derived from Equity Transactions.... 22,462 12,201 23,141 13,807 47,007 26,808 ------------- ------------- ------------- ------------- ------------- ------------- Net Increase in Equity........ 33,792 17,787 34,138 19,761 83,442 48,970 EQUITY Beginning of Year........... 32,233 14,446 36,389 16,628 107,699 58,729 ------------- ------------- ------------- ------------- ------------- ------------- End of Year................. $66,025 $32,233 $70,527 $36,389 $191,141 $107,699 ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
The Accompanying Notes are an Integral Part of the Financial Statements 24 VARIABLE LIFE FINANCIAL STATEMENTS NORTHWESTERN MUTUAL VARIABLE LIFE ACCOUNT Statements of Operations and Changes in Equity (IN THOUSANDS)
BALANCED DIVISION HIGH YIELD BOND DIVISION SELECT BOND DIVISION ----------------------------- ----------------------------- ----------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, 1998 1997 1998 1997 1998 1997 ------------- ------------- ------------- ------------- ------------- ------------- INVESTMENT INCOME Dividend Income............... $ 8,344 $ 5,105 $ 1,489 $1,370 $ 743 $ 436 Mortality and Expense Risks... 681 558 53 29 51 35 Taxes......................... 292 239 22 12 22 15 ------------- ------------- ------------- ------------- ------------- ------------- Net Investment Income......... 7,371 4,308 1,414 1,329 670 386 ------------- ------------- ------------- ------------- ------------- ------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Realized Gain on Investments............... 1,893 1,655 47 26 97 36 Unrealized Appreciation (Depreciation) of Investments During the Period.................... 14,317 15,262 (1,828) (531) (58) 234 ------------- ------------- ------------- ------------- ------------- ------------- Net Gain (Loss) on Investments............... 16,210 16,917 (1,781) (505) 39 270 ------------- ------------- ------------- ------------- ------------- ------------- Increase in Equity Derived from Investment Activity.................. 23,581 21,225 (367) 824 709 656 ------------- ------------- ------------- ------------- ------------- ------------- EQUITY TRANSACTIONS Policyowners' Net Deposits.................. 17,811 15,394 3,490 1,922 2,004 1,820 Policy Loans, Surrenders, and Death Benefits........ (8,879) (7,260) (690) (349) (620) (311) Mortality and Other (net)... (3,232) (3,395) (641) (339) (250) (560) Transfers from Other Divisions................. 7,905 4,266 5,399 3,276 3,951 2,000 Transfers to Other Divisions................. (5,398) (4,734) (1,476) (425) (2,217) (756) ------------- ------------- ------------- ------------- ------------- ------------- Increase in Equity Derived from Equity Transactions.... 8,207 4,271 6,082 4,085 2,868 2,193 ------------- ------------- ------------- ------------- ------------- ------------- Net Increase in Equity........ 31,788 25,496 5,715 4,909 3,577 2,849 EQUITY Beginning of Year........... 126,322 100,826 8,801 3,892 9,092 6,243 ------------- ------------- ------------- ------------- ------------- ------------- End of Year................. $158,110 $126,322 $14,516 $8,801 $12,669 $9,092 ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- MONEY MARKET DIVISION ----------------------------- YEAR ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, 1998 1997 ------------- ------------- INVESTMENT INCOME Dividend Income............... $ 1,445 $ 952 Mortality and Expense Risks... 122 78 Taxes......................... 51 34 ------------- ------------- Net Investment Income......... 1,272 840 ------------- ------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Realized Gain on Investments............... -- -- Unrealized Appreciation (Depreciation) of Investments During the Period.................... -- -- ------------- ------------- Net Gain (Loss) on Investments............... -- -- ------------- ------------- Increase in Equity Derived from Investment Activity.................. 1,272 840 ------------- ------------- EQUITY TRANSACTIONS Policyowners' Net Deposits.................. 127,123 82,774 Policy Loans, Surrenders, and Death Benefits........ (1,772) (823) Mortality and Other (net)... (15,802) (11,061) Transfers from Other Divisions................. 9,266 3,402 Transfers to Other Divisions................. (102,686) (67,983) ------------- ------------- Increase in Equity Derived from Equity Transactions.... 16,129 6,309 ------------- ------------- Net Increase in Equity........ 17,401 7,149 EQUITY Beginning of Year........... 21,899 14,750 ------------- ------------- End of Year................. $39,300 $21,899 ------------- ------------- ------------- -------------
The Accompanying Notes are an Integral Part of the Financial Statements 25 NOTES TO FINANCIAL STATEMENTS NORTHWESTERN MUTUAL VARIABLE LIFE ACCOUNT Notes to Financial Statements DECEMBER 31, 1998 NOTE 1 -- Northwestern Mutual Variable Life Account (the "Account") is registered as a unit investment trust under the Investment Company Act of 1940 and is a segregated asset account of The Northwestern Mutual Life Insurance Company ("Northwestern Mutual") used to fund variable life insurance policies. NOTE 2 -- The preparation of the financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Principal accounting policies are summarized below. NOTE 3 -- All assets of each Division of the Account are invested in shares of the corresponding Portfolio of Northwestern Mutual Series Fund, Inc. (the "Fund"). The shares are valued at the Fund's offering and redemption price per share. The Fund is a diversified open-end investment company registered under the Investment Company Act of 1940. NOTE 4 -- Dividend income from the Fund is recorded on the record date of the dividends. Transactions in Fund shares are accounted for on the trade date. The basis for determining cost on sale of Fund shares is identified cost. Purchases and sales of Fund shares for the year ended December 31, 1998 by each Division are shown below:
PURCHASES SALES ------------ ------------ Aggressive Growth Division....... $ 36,381,397 $ 1,248,015 International Equity Division.... 27,429,118 990,001 Growth Stock Division............ 23,393,892 279,458 Growth & Income Stock Division....................... 24,059,882 715,896 Index 500 Stock Division......... 52,625,759 2,046,627 Balanced Division................ 20,647,579 5,068,597 High Yield Bond Division......... 8,131,249 635,946 Select Bond Division............. 5,351,461 1,813,834 Money Market Division............ 47,332,350 29,930,945
NOTE 5 -- A deduction for mortality and expense risks is determined daily and paid to Northwestern Mutual. Generally, for Variable Life policies issued before October 11, 1995, and Variable Complife policies issued on or after October 11, 1995 the deduction is at an annual rate of .50% and .60%, respectively, of the net assets of the Account. A deduction for the mortality and expense risks for the Variable Executive Life policies issued on or after March 3, 1998 is determined monthly at an annual rate of .75% of the amount invested in the Account for the Policy for the first ten Policy years, and .30% thereafter. The mortality risk is that insureds may not live as long as estimated. The expense risk is that expenses of issuing and administering the policies may exceed the estimated costs. Certain deductions are also made from the annual, single or other premiums before amounts are allocated to the Account. These deductions are for (1) sales load, (2) administrative expenses, (3) taxes and (4) a risk charge for the guaranteed minimum death benefit. Additional mortality costs are deducted from the policy annually and are paid to Northwestern Mutual to cover the cost of providing insurance protection. This cost is actuarially calculated based upon the insured's age, the 1980 Commissioners Standard Ordinary Mortality Table and the amount of insurance provided under the policy. NOTE 6 -- Northwestern Mutual is taxed as a "life insurance company" under the Internal Revenue Code. The variable life insurance policies which are funded in the Account are taxed as part of the operations of Northwestern Mutual. Policies provide that a charge for taxes may be made against the assets of the Account. Generally, for Variable Life policies issued before October 11, 1995, Northwestern Mutual charges the Account at an annual rate of .20% of the Account's net assets and reserves the right to increase, decrease or eliminate the charge for taxes in the future. Generally, for Variable Complife policies issued on or after October 11, 1995, and for Variable Executive Life policies issued on or after March 3, 1998, there is no charge being made against the assets of the Account for federal income taxes, but Northwestern Mutual reserves the right to charge for taxes in the future. NOTE 7 -- The Account is credited for the policyowners' net annual premiums at the respective policy anniversary dates regardless of when policyowners actually paid their premiums. Northwestern Mutual's equity represents any unpaid portion of net annual premiums. This applies to Variable Life and Variable Complife policies only. 26 NOTES TO FINANCIAL STATEMENTS NORTHWESTERN MUTUAL VARIABLE LIFE ACCOUNT Notes to Financial Statements (in thousands) DECEMBER 31, 1998 NOTE 8 -- Equity Values by Division are shown below:
VARIABLE LIFE POLICIES ISSUED BEFORE OCTOBER 11, 1995 EQUITY OF: ------------------------ TOTAL POLICYOWNERS NML EQUITY ------------- --------- --------- Aggressive Growth Stock Division......................................................... $ 42,391 $ 3,793 $ 46,184 International Equity Division............................................................ 32,539 3,074 35,613 Growth Stock Division.................................................................... 22,888 1,510 24,398 Growth and Income Stock Division......................................................... 26,309 1,808 28,117 Index 500 Stock Division................................................................. 95,615 4,943 100,558 Balanced Division........................................................................ 134,029 5,006 139,035 High Yield Bond Division................................................................. 4,916 428 5,344 Select Bond Division..................................................................... 6,911 417 7,328 Money Market Division.................................................................... 5,918 277 6,195 ------------- --------- --------- $ 371,516 $ 21,256 $ 392,772 ------------- --------- --------- ------------- --------- ---------
VARIABLE COMPLIFE POLICIES ISSUED ON OR AFTER OCTOBER 11, 1995 EQUITY OF: ------------------------ TOTAL POLICYOWNERS NML EQUITY ------------- --------- --------- Aggressive Growth Stock Division........................................................ $ 54,132 $ 18,846 $ 72,978 International Equity Division........................................................... 31,302 11,492 42,794 Growth Stock Division................................................................... 30,575 11,026 41,601 Growth and Income Stock Division........................................................ 30,515 11,841 42,356 Index 500 Stock Division................................................................ 65,609 24,890 90,499 Balanced Division....................................................................... 14,142 4,909 19,051 High Yield Bond Division................................................................ 6,565 2,594 9,159 Select Bond Division.................................................................... 4,161 1,171 5,332 Money Market Division................................................................... 13,154 19,938 33,092 ------------- --------- --------- $ 250,155 $ 106,707 $ 356,862 ------------- --------- --------- ------------- --------- ---------
VARIABLE EXECUTIVE LIFE POLICIES ISSUED ON OR AFTER MARCH 2, 1998 ------------------------- TOTAL EQUITY ------------------------- Aggressive Growth Stock Division...................................................................... $ 67 International Equity Division......................................................................... 10 Growth Stock Division................................................................................. 25 Growth and Income Stock Division...................................................................... 55 Index 500 Stock Division.............................................................................. 84 Balanced Division..................................................................................... 24 High Yield Bond Division.............................................................................. 13 Select Bond Division.................................................................................. 9 Money Market Division................................................................................. 14 ----- $ 301 ----- -----
27 THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY CONSOLIDATED STATEMENT OF FINANCIAL POSITION (IN MILLIONS) The following financial statements of Northwestern Mutual should be considered only as bearing upon the ability of Northwestern Mutual Life to meet its obligations under the Policies.
DECEMBER 31, --------------------- 1998 1997 --------- --------- ASSETS Bonds......................................... $ 34,888 $ 32,359 Common and preferred stocks................... 6,576 6,524 Mortgage loans................................ 12,250 10,835 Real estate................................... 1,481 1,372 Policy loans.................................. 7,580 7,163 Other investments............................. 1,839 2,026 Cash and temporary investments................ 1,275 572 Due and accrued investment income............. 827 795 Other assets.................................. 1,313 1,275 Separate account assets....................... 9,966 8,160 --------- --------- Total assets.............................. $ 77,995 $ 71,081 --------- --------- --------- --------- LIABILITIES AND SURPLUS Reserves for policy benefits.................. $ 51,815 $ 47,343 Policy benefit and premium deposits........... 1,709 1,624 Policyowner dividends payable................. 2,870 2,640 Interest maintenance reserve.................. 606 461 Asset valuation reserve....................... 1,994 1,974 Income taxes payable.......................... 1,161 1,043 Other liabilities............................. 3,133 3,735 Separate account liabilities.................. 9,966 8,160 --------- --------- Total liabilities......................... 73,254 66,980 Surplus....................................... 4,741 4,101 --------- --------- Total liabilities and surplus............. $ 77,995 $ 71,081 --------- --------- --------- ---------
The accompanying notes are an integral part of these financial statements. 28 THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY CONSOLIDATED STATEMENT OF OPERATIONS (IN MILLIONS)
FOR THE YEAR ENDED DECEMBER 31, --------------------------------- 1998 1997 1996 --------- --------- --------- REVENUE Premium income................................ $ 8,021 $ 7,294 $ 6,667 Net investment income......................... 4,536 4,171 3,836 Other income.................................. 922 861 759 --------- --------- --------- Total revenue............................. 13,479 12,326 11,262 --------- --------- --------- BENEFITS AND EXPENSES Benefit payments to policyowners and beneficiaries................................ 3,602 3,329 2,921 Net additions to policy benefit reserves...... 4,521 4,026 3,701 Net transfers to separate accounts............ 564 566 579 --------- --------- --------- Total benefits............................ 8,687 7,921 7,201 Operating expenses............................ 1,297 1,138 1,043 --------- --------- --------- Total benefits and expenses............... 9,984 9,059 8,244 --------- --------- --------- Gain from operations before dividends and taxes... 3,495 3,267 3,018 Policyowner dividends............................. 2,869 2,636 2,341 --------- --------- --------- Gain from operations before taxes................. 626 631 677 Income tax expense................................ 301 356 452 --------- --------- --------- Net gain from operations.......................... 325 275 225 Net realized capital gains........................ 484 414 395 --------- --------- --------- Net income................................ $ 809 $ 689 $ 620 --------- --------- --------- --------- --------- ---------
The accompanying notes are an integral part of these financial statements. 29 THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY CONSOLIDATED STATEMENT OF CHANGES IN SURPLUS (IN MILLIONS)
FOR THE YEAR ENDED DECEMBER 31, ------------------------------- 1998 1997 1996 ------- ------- ------- BEGINNING OF YEAR BALANCE......................... $4,101 $3,515 $2,786 Net income...................................... 809 689 620 Increase (decrease) in net unrealized gains..... (147) 576 295 Increase in investment reserves................. (20) (526) (176) Other, net...................................... (2) (153) (10) ------- ------- ------- Net increase in surplus......................... 640 586 729 ------- ------- ------- END OF YEAR BALANCE............................... $4,741 $4,101 $3,515 ------- ------- ------- ------- ------- -------
The accompanying notes are an integral part of these financial statements. 30 THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY CONSOLIDATED STATEMENT OF CASH FLOWS (IN MILLIONS)
FOR THE YEAR ENDED DECEMBER 31, ---------------------------------- 1998 1997 1996 -------- -------- -------- CASH FLOWS FROM OPERATING ACTIVITIES Insurance and annuity premiums.................. $ 8,876 $ 8,093 $ 7,361 Investment income received...................... 4,216 3,928 3,634 Disbursement of policy loans, net of repayments..................................... (416) (360) (326) Benefits paid to policyowners and beneficiaries.................................. (3,572) (3,316) (2,912) Net transfers to separate accounts.............. (564) (565) (579) Policyowner dividends paid...................... (2,639) (2,347) (2,105) Operating expenses and taxes.................... (1,749) (1,722) (1,663) Other, net...................................... (83) 124 (59) -------- -------- -------- NET CASH PROVIDED BY OPERATING ACTIVITIES..... 4,069 3,835 3,351 -------- -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES PROCEEDS FROM INVESTMENTS SOLD OR MATURED Bonds......................................... 28,720 38,284 31,942 Common and preferred stocks................... 10,359 9,057 4,570 Mortgage loans................................ 1,737 1,012 1,253 Real estate................................... 159 302 178 Other investments............................. 768 398 316 -------- -------- -------- 41,743 49,053 38,259 -------- -------- -------- COST OF INVESTMENTS ACQUIRED Bonds......................................... 30,873 41,169 35,342 Common and preferred stocks................... 9,642 9,848 4,463 Mortgage loans................................ 3,135 2,309 2,455 Real estate................................... 268 202 125 Other investments............................. 567 359 255 -------- -------- -------- 44,485 53,887 42,640 -------- -------- -------- NET INCREASE (DECREASE) IN SECURITIES LENDING AND OTHER...................................... (624) 440 1,617 -------- -------- -------- NET CASH USED IN INVESTING ACTIVITIES......... (3,366) (4,394) (2,764) -------- -------- -------- NET INCREASE (DECREASE) IN CASH AND TEMPORARY INVESTMENTS...................................... 703 (559) 587 CASH AND TEMPORARY INVESTMENTS, BEGINNING OF YEAR............................................. 572 1,131 544 -------- -------- -------- CASH AND TEMPORARY INVESTMENTS, END OF YEAR....... $ 1,275 $ 572 $ 1,131 -------- -------- -------- -------- -------- --------
The accompanying notes are an integral part of these financial statements. 31 THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED STATUTORY FINANCIAL STATEMENTS DECEMBER 31, 1998, 1997 AND 1996 1. PRINCIPAL ACCOUNTING POLICIES The accompanying consolidated statutory financial statements include the accounts of The Northwestern Mutual Life Insurance Company ("Company") and its wholly-owned life insurance subsidiary, Northwestern Long Term Care Insurance Company ("Subsidiary"). The Company 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, 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 the codification guidance that would also be effective upon its planned implementation effective January 1, 2001. It is expected that the Office of the Commissioner of Insurance of the State of Wisconsin ("OCI") will adopt the codification, but it is not known whether the OCI will make any changes to that guidance. The potential effect of the codification on the Company will depend upon the guidance adopted by the OCI. 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
32 THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED STATUTORY FINANCIAL STATEMENTS DECEMBER 31, 1998, 1997 AND 1996 TEMPORARY INVESTMENTS Temporary investments consist of debt securities that have maturities of one year or less at acquisition. NET INVESTMENT INCOME Net investment income includes interest and dividends received or due and accrued on debt securities and stocks, equity in unconsolidated subsidiaries' earnings and the Company's 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. 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 December 31, 1998 and 1997 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. 33 THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED STATUTORY FINANCIAL STATEMENTS DECEMBER 31, 1998, 1997 AND 1996 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 Office of the Commissioner of Insurance of the State of Wisconsin. 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 1997 and 1996 have been reclassified to conform to the current year presentation. 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. The Company records unrealized losses for debt securities considered impaired. 34 THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED STATUTORY FINANCIAL STATEMENTS DECEMBER 31, 1998, 1997 AND 1996 Statement value, which principally represents amortized cost, and estimated fair value of the Company's debt securities at December 31, 1998 and 1997 were as follows:
RECONCILIATION TO ESTIMATED FAIR VALUE --------------------------------------- GROSS GROSS ESTIMATED STATEMENT UNREALIZED UNREALIZED FAIR DECEMBER 31, 1998 VALUE APPRECIATION DEPRECIATION VALUE - -------------------------------------------------- --------- ------------ ------------ --------- (IN MILLIONS) US 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 --------- ------------ ------ --------- --------- ------------ ------ --------- RECONCILIATION TO ESTIMATED FAIR VALUE --------------------------------------- GROSS GROSS ESTIMATED STATEMENT UNREALIZED UNREALIZED FAIR DECEMBER 31, 1997 VALUE APPRECIATION DEPRECIATION VALUE - -------------------------------------------------- --------- ------------ ------------ --------- (IN MILLIONS) US Government and political obligations........... $ 3,695 $ 336 $ (3) $ 4,028 Mortgage-backed securities........................ 7,015 264 (4) 7,275 Corporate and other debt securities............... 21,649 1,098 (208) 22,539 --------- ------------ ------ --------- 32,359 1,698 (215) 33,842 Preferred stocks.................................. 167 4 (2) 169 --------- ------------ ------ --------- Total............................................. $32,526 $1,702 $(217) $34,011 --------- ------------ ------ --------- --------- ------------ ------ ---------
The statement value of debt securities by contractual maturity at December 31, 1998 and 1997 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.
DECEMBER 31, DECEMBER 31, 1998 1997 ------------ ------------ (IN MILLIONS) Due in one year or less........................... $ 655 $ 605 Due after one year through five years............. 5,031 4,878 Due after five years through ten years............ 10,286 9,760 Due after ten years............................... 11,748 10,268 ------------ ------------ 27,720 25,511 Mortgage-backed securities........................ 7,357 7,015 ------------ ------------ $35,077 $32,526 ------------ ------------ ------------ ------------
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. 35 THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED STATUTORY FINANCIAL STATEMENTS DECEMBER 31, 1998, 1997 AND 1996 The adjusted cost of common and preferred stock held by the Company at December 31, 1998 and 1997 was $4.8 billion and $5.0 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, 1998 and 1997 was approximately $12.9 billion and $11.5 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, 1998 and 1997, real estate includes $61 million acquired through foreclosure at each date and $120 million and $124 million, respectively, of home office real estate. In 1998, 1997 and 1996, the Company recorded unrealized losses of $5 million, $2 million and $43 million, respectively, for the excess of statement value over fair value of certain real estate investments and mortgage loans. REALIZED GAINS AND LOSSES Realized investment gains and losses for the years ended December 31, 1998, 1997 and 1996 were as follows:
FOR THE YEAR ENDED FOR THE YEAR ENDED FOR THE YEAR ENDED DECEMBER 31, 1998 DECEMBER 31, 1997 DECEMBER 31, 1996 ------------------------------ ------------------------------ ------------------------------ NET NET NET REALIZED REALIZED REALIZED REALIZED REALIZED GAINS REALIZED REALIZED GAINS REALIZED REALIZED GAINS GAINS LOSSES (LOSSES) GAINS LOSSES (LOSSES) GAINS LOSSES (LOSSES) -------- -------- -------- -------- -------- -------- -------- -------- -------- (IN MILLIONS) Bonds......................... $ 514 $ (231) $ 283 $ 518 $ (269) $ 249 $ 396 $ (383) $ 13 Common and preferred stocks... 885 (240) 645 533 (150) 383 580 (115) 465 Mortgage loans................ 18 (11) 7 14 (14) - 2 (15) (13) Real estate................... 41 - 41 100 (2) 98 36 - 36 Other investments............. 330 (267) 63 338 (105) 233 204 (51) 153 -------- -------- -------- -------- -------- -------- -------- -------- -------- 1,788 (749) 1,039 1,503 (540) 963 1,218 (564) 654 -------- -------- -------- -------- -------- -------- -------- -------- -------- Less: Capital gains taxes..... 358 340 224 Less: IMR deferrals........... 197 209 35 -------- -------- -------- Net realized capital gains.... $ 484 $ 414 $ 395 -------- -------- -------- -------- -------- --------
SECURITIES LENDING The Company has entered into a securities lending agreement whereby certain securities are loaned to third parties, primarily major brokerage firms. The Company's policy requires a minimum of 102 percent of the fair value of the loaned securities as collateral, calculated on a daily basis in the form of either cash or securities. Collateral assets received and related liability due to counterparties of $1.5 billion are included in the consolidated 36 THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED STATUTORY FINANCIAL STATEMENTS DECEMBER 31, 1998, 1997 AND 1996 statements of financial position for each of the periods ended at December 31, 1998 and 1997, and approximate the statement value of securities loaned at those dates. INVESTMENT IN MGIC The Company owns 11.0% (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, 1998 and 1997, the fair value of the Company's investment in MGIC exceeded the statement value of $180 million and $273 million, respectively, by $296 million and $768 million, respectively. In July 1995, the Company entered into a forward contract with a brokerage firm to deliver 8.9 million to 10.7 million shares of MGIC (or cash in an amount equal to the market value of the MGIC shares at contract maturity) in August, 1998, in exchange for a fixed cash payment of $247 million ($24 per share). The Company's objective in entering into the forward contract was to hedge against depreciation in the value of its MGIC holdings during the contract period below the initial spot price of $24, while partially participating in appreciation, if any, during the forward contract's duration. In August 1998, the Company delivered 8.9 million shares to settle the 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. The Company held the following positions for hedging purposes at December 31, 1998 and 1997:
DERIVATIVE FINANCIAL INSTRUMENT NOTIONAL AMOUNTS - --------------------------------------------- --------------------------------------- (IN MILLIONS) DECEMBER 31, 1998 DECEMBER 31, 1997 ------------------ ------------------ Foreign Currency Forward Contracts................................... $601 $564 Common Stock Futures......................... 657 327 Bond Futures................................. 379 95 Options to acquire Interest Rate Swaps....... 419 530 Foreign Currency and Interest Rate Swaps..... 94 209 DERIVATIVE FINANCIAL INSTRUMENT RISKS REDUCED - --------------------------------------------- --------------------------------------------- Foreign Currency Forward Currency exposure on foreign-denominated Contracts................................... investments. Common Stock Futures......................... Stock market price fluctuation. Bond Futures................................. Bond market price fluctuation. Options to acquire Interest Rate Swaps....... Interest rates payable on certain annuity and insurance contracts. Foreign Currency and Interest Rate Swaps..... Interest rates on variable rate notes and currency exposure on foreign-denominated bonds.
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 1997 and 1998. The notional amount of equity swaps outstanding at December 31, 1998 and 1997 was $188 million and $143 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 37 THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED STATUTORY FINANCIAL STATEMENTS DECEMBER 31, 1998, 1997 AND 1996 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 1998, net realized and unrealized gains on investments were partially offset by net realized losses of $104 million and net unrealized losses of $58 million on derivative instruments. The effect of derivative instruments in 1997 and 1996 was not material to the Company's results of operations. 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 two years of disability) with interest rates ranging from 3% to 5 1/2%. Use of these actuarial tables and methods involves estimation of future mortality and morbidity based on past experience. Actual future experience could differ from these estimates. 4. EMPLOYEE AND AGENT BENEFIT PLANS The Company sponsors noncontributory defined benefit retirement plans for all eligible employees and agents. The expense associated with these plans is generally recorded by the Company in the period contributions to the plans are funded. As of January 1, 1998, the most recent actuarial valuation date available, the qualified defined benefit plans were fully funded. The Company recorded a liability of $98 million and $87 million for nonqualified defined benefit plans at December 31, 1998 and 1997, 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 $29 million, $27 million and $25 million of total expense related to its defined benefit and defined contribution plans for the years ended December 31, 1998, 1997 and 1996, respectively. The defined benefit and defined contribution plans' assets of $1.9 billion and $1.7 billion at December 31, 1998 and 1997, 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, 1998, 1997 and 1996 were a net expense (benefit) of $1.8 million, ($1.3) million and 38 THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED STATUTORY FINANCIAL STATEMENTS DECEMBER 31, 1998, 1997 AND 1996 ($12.0) million, respectively. Net benefits were primarily a result of favorable differences between actuarial assumptions and actual experience.
DECEMBER 31, DECEMBER 31, 1998 1997 -------------------- -------------------- Unfunded postretirement benefit obligation for retirees and other fully eligible employees (Accrued in statement of financial position).................... $35 million $34 million Estimated postretirement benefit obligation for active non-vested employees (Not accrued until employee vests)....................... $56 million $50 million Discount rate................. 7% 7% Health care cost trend rate... 10% to an ultimate 10% to an ultimate 5%, declining 1% for 5%, declining 1% for 5 years 5 years
If the health care cost trend rate assumptions were increased by 1%, the accrued postretirement benefit obligation as of December 31, 1998 and 1997 would have been increased by $5 million and $4 million, respectively. At December 31, 1998 and 1997, the recorded postretirement benefit obligation was reduced by $23 million and $20 million, respectively, for assets funded for postretirement health care benefits. 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 on coverage type. The amounts shown in the accompanying consolidated financial statements are net of reinsurance. Policy benefit reserves at December 31, 1998 and 1997 were reported net of ceded reserves of $518 million and $435 million, respectively. The effect of reinsurance on premiums and benefits for the years ended December 31, 1998, 1997 and 1996 was as follows:
1998 1997 1996 ------- ------- ------- (IN MILLIONS) Direct premiums................................... $8,426 $7,647 $7,064 Premiums ceded.................................... (405) (353) (397) ------- ------- ------- Net premium revenue............................... $8,021 $7,294 $6,667 ------- ------- ------- ------- ------- ------- Benefits to policyowners and beneficiaries........ $8,869 $8,057 $7,348 Benefits ceded.................................... (182) (136) (147) ------- ------- ------- Net benefits to policyowners and beneficiaries.... $8,687 $7,921 $7,201 ------- ------- ------- ------- ------- -------
39 THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED STATUTORY FINANCIAL STATEMENTS DECEMBER 31, 1998, 1997 AND 1996 In addition, the Company received $121 million, $115 million and $93 million for the years ended December 31, 1998, 1997 and 1996, 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 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. 6. INCOME TAXES Provisions for income taxes are based on current income tax payable without recognition of deferred taxes. The Company files a consolidated life-nonlife federal income tax return. Federal income tax returns for years through 1988 are closed as to further assessment of tax. Adequate provision has been made in the financial statements for any additional taxes which may become due with respect to the open years. The Company's effective tax rate on gains from operations before taxes for the years ended December 31, 1998, 1997 and 1996 was 48%, 56%, and 67% respectively. The Company's effective tax rate exceeds the federal corporate rate of 35% primarily because, (1) the Company pays a tax that is assessed only on the surplus of mutual life insurance companies ("equity tax"), and (2) the Company must capitalize and amortize (as opposed to immediately deducting) an amount deemed to represent the cost of acquiring new business ("DAC tax"). 7. ACQUISITION OF FRANK RUSSELL COMPANY Pursuant to an Agreement and Plan of Merger, dated as of August 10, 1998, the Company acquired Frank Russell Company 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. In connection with its acquisition of Frank Russell Company, the Company will be required in 1999 to charge-off directly from surplus approximately $341 million, which represents the amount of acquisition goodwill less 10% of the Company's surplus at December 31, 1998. In addition, the Company will request permission from the OCI to charge-off the remaining $474 million of acquisition goodwill in 1999 and currently intends to do so. In connection with the acquisition, the Company has unconditionally guaranteed certain debt obligations of Frank Russell Company, including $350 million of senior notes and up to $150 million of other credit facilities. 8. CONTINGENCIES The Company has guaranteed certain obligations of its affiliates. These guarantees totaled approximately $133 million at December 31, 1998 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 $2.1 billion at December 31, 1998 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. 40 [LETTERHEAD] REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Trustees and Policyowners of The Northwestern Mutual Life Insurance Company We have audited the accompanying consolidated statement of financial position of The Northwestern Mutual Life Insurance Company and its subsidiary as of December 31, 1998 and 1997, 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, 1998. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. As described in Note 1, these consolidated financial statements were prepared in conformity with accounting practices prescribed or permitted by the Office of the Commissioner of Insurance of the State of Wisconsin (statutory basis of accounting), which practices differ from generally accepted accounting principles. Accordingly, the consolidated financial statements are not intended to represent a presentation in accordance with generally accepted accounting principles. The effects on the consolidated financial statements of the variances between the statutory basis of accounting and generally accepted accounting principles, although not reasonably determinable, are presumed to be material. In our opinion, the consolidated financial statements audited by us (1) do not present fairly in conformity with generally accepted accounting principles, the financial position of The Northwestern Mutual Life Insurance Company and its subsidiary at December 31, 1998 and 1997, or the results of their operations or their cash flows for each of the three years in the period ended December 31, 1998 because of the effects of the variances between the statutory basis of accounting and generally accepted accounting principles referred to in the preceding paragraph and (2) do present fairly, in all material respects, the financial position of The Northwestern Mutual Life Insurance Company and its subsidiary at December 31, 1998 and 1997 and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1998, on the basis of accounting described in Note 1. /s/ PricewaterhouseCoopers LLP January 25, 1999 41 APPENDIX ILLUSTRATIONS OF DEATH BENEFITS, CASH VALUES AND ACCUMULATED PREMIUMS. The tables on the following pages illustrate how the death benefit and cash value for a Policy would vary over time based on hypothetical investment results. The tables assume gross (after tax) investment return rates of 0%, 6% and 12% on assets of the Account. The Policies illustrated are for male insureds, select risks, age 35. The first two illustrations, on pages 43-44, are for a policy with a Minimum Guaranteed Death Benefit of $200,000 and no Additional Protection, based (1) on current charges and the current dividend scale and (2) on maximum charges and zero dividends. The other two illustrations are for a Policy with a Minimum Guaranteed Death Benefit of $200,000 and Additional Protection of $200,000. The death benefits and cash values would be different from those shown if the gross investment return rate averaged 0%, 6% or 12%, but fluctuated over and under the average rate at various points in time. The values would also be different, depending on the Account divisions selected by the owner of the Policy, if the Portfolios or Funds return rate averaged 0%, 6% or 12%, but the rates for each individual Portfolio or Fund varied over and under the average. The amounts shown as the death benefits and cash values reflect the deductions from premiums, deductions from Policy Value and the charge at the annual rate of .60% of the Account's assets for mortality and expense risks. The amounts shown as the cash values reflect the deduction of the surrender charge during the first fifteen Policy years. The amounts shown also reflect the average of the investment advisory fees and other expenses applicable to each of the nine Portfolios which were in operation during 1998 at the annual rate of .44% of the Portfolios' net assets. See "The Funds", p. 5. Thus the 0%, 6% and 12% gross hypothetical return rates on the Fund's assets are equivalent to the net rates of -1.04%, 4.96% and 10.96% on the assets of the Account. The second column of each table shows the amount which would accumulate if an amount equal to the annual premium were invested to earn interest, after taxes, at a 5% interest rate compounded annually. The death benefits and corresponding cash values shown on pages 43 and 45 illustrate benefits which we would pay if investment returns of 0%, 6% and 12% are realized, if mortality and expense experience in the future is as currently experienced and if the current dividend scale remains unchanged. See "Annual Dividends," p. 13. HOWEVER, THERE IS NO GUARANTEE AS TO THE AMOUNT OF DIVIDENDS, IF ANY, THAT WE WILL PAY UNDER A POLICY. Although the tables are based on the assumption that dividends will be used to increase the Policy Value, other dividend options are available. The use of dividends for other purposes during the guaranteed period for Additional Protection may cause the guaranteed period to terminate. See "Death Benefit", p. 10. We will prepare a comparable illustration based on a proposed insured's age, sex and risk classification and proposed face amount or premium upon request. 42 VARIABLE WHOLE LIFE WITH ADDITIONAL PROTECTION INSURANCE POLICY MALE ISSUE AGE 35 -- SELECT UNDERWRITING RISK $200,000 VARIABLE WHOLE LIFE, $0 ADDITIONAL PROTECTION $2,610 ANNUAL PREMIUM (1) CURRENT CHARGES AND DIVIDEND SCALE (2) DIVIDENDS USED TO INCREASE POLICY VALUE
DEATH BENEFIT (3) CASH SURRENDER VALUE (3) ---------------------------------- ----------------------------------- PREMIUM ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS ACCUMULATED ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF END OF AT 5% INTEREST POLICY YEAR PER YEAR 0% 6% 12% 0% 6% 12% - ----------- ---------- -------- -------- ---------- -------- -------- ---------- 1 $ 2,741 $200,000 $200,025 $ 200,143 $ 906 $ 1,023 $ 1,141 2 5,618 200,000 200,074 200,445 2,765 3,122 3,494 3 8,639 200,000 200,146 200,929 4,587 5,311 6,094 4 11,812 200,000 200,242 201,617 6,371 7,595 8,970 5 15,143 200,000 200,367 202,542 8,114 9,973 12,147 6 18,641 200,000 200,517 203,727 9,911 12,548 15,759 7 22,313 200,000 200,702 205,218 11,664 15,226 19,741 8 26,169 200,000 200,928 207,055 13,374 18,013 24,140 9 30,218 200,000 201,201 209,287 15,044 20,919 29,005 10 34,470 200,000 201,527 211,968 16,676 23,952 34,394 15 59,136 200,000 205,338 235,707 26,028 43,158 73,527 20 90,617 200,000 213,575 320,030 34,607 67,571 139,792 25 130,796 200,000 226,427 495,177 41,369 98,005 249,881 30 (age 65) 182,076 200,000 245,892 747,803 45,578 136,000 430,817 35 247,523 200,000 282,988 1,119,719 45,800 183,328 725,388 40 331,052 200,000 334,861 1,669,267 37,646 239,887 1,195,830 45 437,658 200,000 393,008 2,486,669 11,105 305,218 1,931,196
(1) If premiums are paid more frequently than annually the payments would be $1,331.41 semiannually, $673.55 quarterly, or $225.74 monthly. (2) Dividends illustrated are based on current scale and experience and are not guaranteed. (3) Assumes no policy loan has been made. IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RESULTS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND UPON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY AN OWNER AND THE DIFFERENT RATES OF RETURN OF THE FUND PORTFOLIOS. THE DEATH BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL INVESTMENT RATES OF RETURN AVERAGED 0%, 6% AND 12% OVER A PERIOD OF YEARS, BUT FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATIONS CAN BE MADE THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER A PERIOD OF TIME. 43 VARIABLE WHOLE LIFE WITH ADDITIONAL PROTECTION INSURANCE POLICY MALE ISSUE AGE 35 -- SELECT UNDERWRITING RISK $200,000 VARIABLE WHOLE LIFE, $0 ADDITIONAL PROTECTION $2,610 ANNUAL PREMIUM (1) MAXIMUM CHARGES AND ZERO DIVIDENDS
DEATH BENEFIT (2) CASH SURRENDER VALUE (2) ---------------------------------- ----------------------------------- PREMIUM ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS ACCUMULATED ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF END OF AT 5% INTEREST POLICY YEAR PER YEAR 0% 6% 12% 0% 6% 12% - ----------- -------- -------- ------- --------- ------- ------- --------- 1 2,741 200,000 200,019 200,136 899 1,016 1,134 2 5,618 200,000 200,060 200,430 2,752 3,108 3,479 3 8,639 200,000 200,123 200,902 4,568 5,289 6,068 4 11,812 200,000 200,209 201,574 6,346 7,561 8,926 5 15,143 200,000 200,322 202,475 8,083 9,927 12,081 6 18,641 200,000 200,459 203,632 9,880 12,491 15,663 7 22,313 200,000 200,628 205,080 11,630 15,151 19,603 8 26,169 200,000 200,829 206,857 13,335 17,915 23,942 9 30,218 200,000 201,064 209,001 14,990 20,782 28,718 10 34,470 200,000 201,333 211,556 16,597 23,759 33,981 15 59,136 200,000 203,319 232,488 24,539 41,139 70,308 20 90,617 200,000 206,633 293,125 29,615 60,629 128,040 25 130,796 200,000 211,724 435,404 31,688 83,302 219,718 30(age 65) 182,076 200,000 219,136 628,152 28,856 109,244 361,884 35 247,523 200,000 229,526 891,515 16,927 138,230 577,550 40 331,052 200,000 243,692 1,253,161 0 170,166 897,739 45 437,658 200,000 263,494 1,751,289 0 204,634 1,360,086
(1) If premiums are paid more frequently than annually the payments would be $1,331.41 semiannually, $673.55 quarterly, or $225.74 monthly. (2) Assumes no policy loan has been made. IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RESULTS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND UPON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY AN OWNER AND THE DIFFERENT RATES OF RETURN OF THE FUND PORTFOLIOS. THE DEATH BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL INVESTMENT RATES OF RETURN AVERAGED 0%, 6% AND 12% OVER A PERIOD OF YEARS, BUT FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATIONS CAN BE MADE THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER A PERIOD OF TIME. 44 VARIABLE WHOLE LIFE WITH ADDITIONAL PROTECTION INSURANCE POLICY MALE ISSUE AGE 35 -- SELECT UNDERWRITING RISK $200,000 VARIABLE WHOLE LIFE PLUS $100,000 ADDITIONAL PROTECTION(1) $3,620 ANNUAL PREMIUM (2) CURRENT CHARGES AND DIVIDEND SCALE (3) DIVIDENDS USED TO INCREASE POLICY VALUE
DEATH BENEFIT (4) CASH SURRENDER VALUE (4) ---------------------------------- ----------------------------------- PREMIUM ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS ACCUMULATED ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF END OF AT 5% INTEREST POLICY YEAR PER YEAR 0% 6% 12% 0% 6% 12% - ----------- -------- ------- ------- --------- ------- ------- --------- 1 3,801 400,000 400,000 400,000 1,348 1,501 1,653 2 7,792 400,000 400,000 400,000 3,961 4,435 4,926 3 11,983 400,000 400,000 400,000 6,525 7,495 8,542 4 16,383 400,000 400,000 400,000 9,042 10,690 12,541 5 21,003 400,000 400,000 400,000 11,500 14,015 16,955 6 25,854 400,000 400,000 400,000 14,009 17,587 21,942 7 30,948 400,000 400,000 400,000 16,454 21,297 27,438 8 36,296 400,000 400,000 400,000 18,838 25,158 33,508 9 41,912 400,000 400,000 400,000 21,167 29,180 40,222 10 47,809 400,000 400,000 401,953 23,447 33,382 47,663 15 82,020 400,000 400,000 425,361 35,810 59,260 101,001 20 125,684 400,000 400,000 482,643 46,201 91,233 190,635 25 181,411 400,000 400,000 675,571 52,717 129,848 340,913 30(age 65) 252,534 395,239 400,000 1,021,210 53,561 176,682 588,329 35 343,307 363,477 416,622 1,529,939 46,675 234,030 991,140 40 459,160 329,222 449,402 2,281,552 25,758 302,350 1,634,458 45 607,020 211,272 498,527 3,399,436 0 382,707 2,640,070
(1) Additional Protection is guaranteed to be $100,000 for at least 15 years, so long as all premiums are paid when due and all dividends are used to increase Policy Value. (2) If premiums are paid more frequently than annually the payments would be $1,846.10 semiannually, $933.43 quarterly, or $312.91 monthly. (3) Dividends illustrated are based on current scale and experience and are not guaranteed. (4) Assumes no policy loan has been made. IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RESULTS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND UPON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY AN OWNER AND THE DIFFERENT RATES OF RETURN OF THE FUND PORTFOLIOS. THE DEATH BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL INVESTMENT RATES OF RETURN AVERAGED 0%, 6% AND 12% OVER A PERIOD OF YEARS, BUT FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATIONS CAN BE MADE THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER A PERIOD OF TIME. 45 VARIABLE WHOLE LIFE WITH ADDITIONAL PROTECTION INSURANCE POLICY MALE ISSUE AGE 35 -- SELECT UNDERWRITING RISK $200,000 VARIABLE WHOLE LIFE PLUS $100,000 ADDITIONAL PROTECTION(1) $3,620 ANNUAL PREMIUM (2) MAXIMUM CHARGES AND ZERO DIVIDENDS
DEATH BENEFIT (3) CASH SURRENDER VALUE (3) ---------------------------------- ----------------------------------- PREMIUM ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS ACCUMULATED ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF END OF AT 5% INTEREST POLICY YEAR PER YEAR 0% 6% 12% 0% 6% 12% - ----------- -------- ------- ------- --------- ------- ------- --------- 1 3,801 400,000 400,000 400,000 1,169 1,322 1,474 2 7,792 400,000 400,000 400,000 3,588 4,050 4,530 3 11,983 400,000 400,000 400,000 5,944 6,877 7,886 4 16,383 400,000 400,000 400,000 8,235 9,805 11,572 5 21,003 400,000 400,000 400,000 10,455 12,833 15,618 6 25,854 400,000 400,000 400,000 12,717 16,077 20,177 7 30,948 400,000 400,000 400,000 14,895 19,418 25,167 8 36,296 400,000 400,000 400,000 16,992 22,861 30,638 9 41,912 400,000 400,000 400,000 18,996 26,401 36,635 10 47,809 400,000 400,000 400,000 20,911 30,045 43,220 15 82,020 400,000 400,000 412,402 29,623 50,501 88,042 20 125,684 333,952 400,000 450,311 34,571 71,764 158,303 25 181,411 283,402 400,000 537,792 36,571 93,213 271,386 30(age 65) 252,534 250,500 400,000 780,130 33,794 111,705 449,441 35 343,307 230,680 400,000 1,110,813 22,181 120,065 719,618 40 459,160 218,221 222,640 1,564,553 0 132,059 1,120,815 45 607,020 211,257 222,640 2,189,269 0 156,016 1,700,230
(1) Additional Protection is guaranteed to be $100,000 for at least 15 years, so long as all premiums are paid when due and all dividends are used to increase Policy Value. (2) If premiums are paid more frequently than annually the payments would be $1,846.10 semiannually, $933.43 quarterly, or $312.91 monthly. (3) Assumes no policy loan has been made. IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RESULTS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND UPON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY AN OWNER AND THE DIFFERENT RATES OF RETURN OF THE FUND PORTFOLIOS. THE DEATH BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL INVESTMENT RATES OF RETURN AVERAGED 0%, 6% AND 12% OVER A PERIOD OF YEARS, BUT FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATIONS CAN BE MADE THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER A PERIOD OF TIME. 46 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 1-800-519-4665. 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 L I F E NORTHWESTERN MUTUAL VARIABLE COMPLIFE-Registered Trademark- NORTHWESTERN MUTUAL VARIABLE LIFE ACCOUNT NORTHWESTERN MUTUAL SERIES FUND, INC. RUSSELL INSURANCE FUNDS P R O S P E C T U S Investment Company Act File No. 811-3990 NORTHWESTERN MUTUAL LIFE-Registered Trademark- PO Box 3095 Milwaukee WI 53201-3095 Change Service Requested 47 PART II CONTENTS OF REGISTRATION STATEMENT This amendment to the registration statement comprises the following papers and documents: The facing sheet The cross-reference sheet The prospectus consisting of 46 pages The undertaking with respect to fees and charges The signatures Written consents of the following persons: PricewaterhouseCoopers LLP (filed herewith as Exhibit C(1)) William C. Koenig, F.S.A. (included in his opinion filed herewith as Exhibit C(6)) The following exhibits: Exhibit A(5)(a) Variable Whole Life Insurance Policy With Additional Protection, QQ.VCL, with application and supplemental application, including Policy amendment (sex distinct) Exhibit A(5)(b) Variable Whole Life Insurance Policy With Additional Protection, QQ.VCL, with application and supplemental application, including Policy amendment (sex neutral: for employers) Exhibit A(5)(c) Forms of Optional Riders to Variable Whole Life Insurance Policy QQ.VCL: (i) Waiver of Premium Benefit (ii) Additional Purchase Benefit Exhibit A(5)(d) Form of notice of short-term cancellation right Exhibit A(5)(e) Application forms are included in Exhibits A(5)(a) and A(5)(b) above Exhibit A(9)(a) Form of Participation Agreement Among Russell Insurance Funds, Russell Fund Distributors, Inc. and The Northwestern Mutual Life Insurance Company Exhibit A(9)(b) Form of Administrative Service Fee Agreement between The Northwestern Mutual Life Insurance Company and Frank Russell Company Exhibit C(1) Consent of PricewaterhouseCoopers LLP Exhibit C(6) Opinion and consent of William C. Koenig, F.S.A. Exhibit 27 Financial Data Schedule for period ended December 31, 1998 II-1 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 UNDERTAKING The Northwestern Mutual Life Insurance Company hereby represents that the fees and charges deducted under the contracts registered by this registration statement, in the aggregate, are reasonable in relation to the services rendered, the expenses expected to be incurred, and the risks assumed by the insurance company. II-2 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant, Northwestern Mutual Variable Life Account, has duly caused this Amended Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Milwaukee, and State of Wisconsin, on the 25th day of February, 1999. NORTHWESTERN MUTUAL VARIABLE LIFE ACCOUNT (Registrant) By THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY (Depositor) Attest: JOHN M. BREMER By: JAMES D. ERICSON ------------------------------- ------------------------------- John M. Bremer, Executive Vice James D. Ericson, President and President, General Counsel Chief Executive Officer and Secretary By NORTHWESTERN MUTUAL INVESTMENT SERVICES, LLC (Depositor) Attest: MERRILL C. LUNDBERG By: RICHARD L. HALL ------------------------------- ------------------------------- Merrill C. Lundberg, Secretary Richard L. Hall, President and CEO Pursuant to the requirements of the Securities Act of 1933, the depositors have duly caused this Amended Registration Statement to be signed on their behalf by the undersigned, thereunto duly authorized, and their seals to be hereunto affixed, all in the City of Milwaukee, and State of Wisconsin, on the 25th day of February, 1999. THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY (Depositor) Attest: JOHN M. BREMER By: JAMES D. ERICSON ------------------------------- ------------------------------- John M. Bremer, Executive Vice James D. Ericson, President and President, General Counsel Chief Executive Officer and Secretary NORTHWESTERN MUTUAL INVESTMENT SERVICES, LLC (Depositor) Attest: MERRILL C. LUNDBERG By: RICHARD L. HALL ------------------------------- ------------------------------- Merrill C. Lundberg, Secretary Richard L. Hall, President and CEO Pursuant to the requirements of the Securities Act of 1933, this Amended Registration Statement has been signed by the following persons in the capacities with the depositor and on the dates indicated:
Signature Title - --------- ----- JAMES D. ERICSON Trustee, President and Dated - --------------------- Principal Executive and February 25, James D. Ericson Financial Officer 1999 II-3 GARY E. LONG Vice President, Controller - --------------------- and Principal Accounting Gary E. Long Officer HAROLD B. SMITH* Trustee - --------------------- Harold B. Smith J. THOMAS LEWIS* Trustee - --------------------- J. Thomas Lewis PATRICIA ALBJERG GRAHAM* Trustee - ------------------------ Patricia Albjerg Graham DONALD J. SCHUENKE* Trustee - ------------------------ Donald J. Schuenke R. QUINTUS ANDERSON* Trustee - ------------------------ R. Quintus Anderson STEPHEN F. KELLER* Trustee Dated - ------------------------ February 25, 1999 Stephen F. Keller PIERRE S. DU PONT* Trustee - ------------------------ Pierre S. du Pont J. E. GALLEGOS* Trustee - ------------------------ J. E. Gallegos KATHRYN D. WRISTON* Trustee - ------------------------ Kathryn D. Wriston BARRY L. WILLIAMS* Trustee - ------------------------ Barry L. Williams GORDON T. BEAHAM III* Trustee - ------------------------ Gordon T. Beaham III DANIEL F. MCKEITHAN, JR.* Trustee - ------------------------ Daniel F. McKeithan, Jr. ROBERT E. CARLSON* Trustee - ------------------------ Robert E. Carlson II-4 EDWARD E. BARR* Trustee - ------------------------ Edward E. Barr ROBERT C. BUCHANAN* Trustee - ------------------------ Robert C. Buchanan SHERWOOD H. SMITH, JR.* Trustee - ------------------------ Sherwood H. Smith, Jr. H. MASON SIZEMORE, JR.* Trustee - ------------------------ H. Mason Sizemore, Jr. JOHN J. STOLLENWERK* Trustee - ------------------------ John J. Stollenwerk GEORGE A. DICKERMAN* Trustee - ------------------------ George A. Dickerman GUY A. OSBORN* Trustee Dated - ------------------------ February 25, 1999 Guy A. Osborn JOHN E. STEURI* Trustee - ------------------------ John E. Steuri STEPHEN N. GRAFF* Trustee - ------------------------ Stephen N. Graff BARBARA A. KING* Trustee - ------------------------ Barbara A. King TIMOTHY D. PROCTOR* Trustee - ------------------------ Timothy D. Proctor *By: JAMES D. ERICSON ------------------------------------ James D. Ericson, Attorney in fact, pursuant to the Power of Attorney attached hereto
II-5 CONSENT OF ACTUARY The Consent of William C. Koenig, F.S.A., is contained in his opinion filed as Exhibit C(6). CONSENT OF INDEPENDENT ACCOUNTANTS The Consent of PricewaterhouseCoopers LLP is filed as Exhibit C(1). II-6 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, 1998 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 22nd day of July, 1998. 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 II-7 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 II-8 TIMOTHY D. PROCTOR Trustee ------------------------------ Timothy D. Proctor DONALD J. SCHUENKE Trustee ------------------------------ Donald J. Schuenke H. MASON SIZEMORE, JR. Trustee ------------------------------ H. Mason Sizemore, Jr. HAROLD B. SMITH Trustee ------------------------------ Harold B. Smith SHERWOOD H. SMITH, JR. Trustee ------------------------------ Sherwood H. Smith, Jr. JOHN E. STEURI Trustee ------------------------------ John E. Steuri JOHN J. STOLLENWERK Trustee ------------------------------ John J. Stollenwerk BARRY L. WILLIAMS Trustee ------------------------------ Barry L. Williams KATHRYN D. WRISTON Trustee ------------------------------ Kathryn D. Wriston II-9 EXHIBIT INDEX EXHIBITS FILED WITH FORM S-6 POST-EFFECTIVE AMENDMENT NO. 4 TO REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 FOR NORTHWESTERN MUTUAL VARIABLE COMPLIFE
Exhibit Number Exhibit Name - -------------- ------------ Exhibit A(5)(a) Variable Whole Life Insurance Policy With Additional Protection, QQ.VCL, with application and supplemental application, including Policy amendment (sex distinct) Exhibit A(5)(b) Variable Whole Life Insurance Policy With Additional Protection, QQ.VCL, with application and supplemental application, including Policy amendment (sex neutral: for employers) Exhibit A(5)(c) Forms of Optional Riders to Variable Whole Life Insurance Policy QQ.VCL: (i) Waiver of Premium Benefit (ii) Additional Purchase Benefit Exhibit A(5)(d) Form of notice of short-term cancellation right Exhibit A(5)(e) Application forms are included in Exhibits A(5)(a) and A(5)(b) above Exhibit A(9)(a) Form of Participation Agreement Among Russell Insurance Funds, Russell Fund Distributors, Inc. and The Northwestern Mutual Life Insurance Company Exhibit A(9)(b) Form of Administrative Service Fee Agreement between The Northwestern Mutual Life Insurance Company and Frank Russell Company Exhibit C(1) Consent of PricewaterhouseCoopers LLP Exhibit C(6) Opinion of William C. Koenig, F.S.A. Exhibit 27 Financial Data Schedule for period ended December 31, 1998
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 EX-99.A(5)(A) 2 EXHIBIT 99.A(5)(A) Exhibit A(5)(a) ================================================================================ The Northwestern Mutual Life Insurance Company agrees to pay the benefits provided in this policy, subject to its terms and conditions. Signed at Milwaukee, Wisconsin on the Date of Issue. /s/ James D. Ericson /s/ John M. Bremer PRESIDENT AND C.E.O. SECRETARY VARIABLE WHOLE LIFE POLICY WITH ADDITIONAL PROTECTION Eligible For Annual Dividends Insurance payable at death of Insured. Premiums payable for period shown on page 3. Benefits reflect investment results. Variable benefits described in Sections 1, 3, 6, 7 and 8. THE DEATH BENEFIT MAY INCREASE OR DECREASE DAILY DEPENDING ON INVESTMENT RESULTS. HOWEVER, IF NO PREMIUM IS UNPAID AS OF ITS DUE DATE, THE DEATH BENEFIT WILL NOT BE LESS THAN THE MINIMUM GUARANTEED DEATH BENEFIT SHOWN ON PAGE 3, LESS ANY POLICY DEBT. THE CASH VALUE UNDER THIS POLICY MAY INCREASE OR DECREASE DAILY DEPENDING ON INVESTMENT RESULTS. THERE IS NO GUARANTEED MINIMUM CASH VALUE. Right To Return Policy - Please read this policy carefully. The policy may be returned by the Owner for any reason within (1) ten days after it was received or (2) forty-five days after the application was signed, whichever is later. The policy may be returned to your agent or to the Home Office of the Company at 720 East Wisconsin Avenue, Milwaukee, WI 53202. If returned, the policy will be considered void from the beginning. Any premium paid will then be refunded. NORTHWESTERN MUTUAL LIFE (R) ================================================================================ Insured John J Doe Age and Sex 35 Male Policy Date June 1, 1995 Policy Number 12 345 678 Plan Variable Whole Life Initial Total With Additional Protection Death Benefit $ 150,519 This policy is a legal contract between the Owner and The Northwestern Mutual Life Insurance Company. Read your policy carefully. GUIDE TO POLICY PROVISIONS BENEFITS AND PREMIUMS SECTION 1. THE CONTRACT Life Insurance Benefit payable on death of Insured. Incontestablity. Suicide. Definition of dates. SECTION 2. OWNERSHIP Rights of the Owner. Assignment as collateral. SECTION 3. ADDITIONAL PROTECTION Description of Additional Protection. Reduction by Company. Owners right to continue existing protection. SECTION 4. PREMIUMS AND REINSTATEMENT Payment of premiums. Grace period of 31 days to pay premium. Amount of premium and premium adjustments. Unscheduled additional premium payments. Premium suspension. How to reinstate the policy. SECTION 5. DIVIDENDS Annual dividends. Use of dividends. Dividend at death. SECTION 6. THE SEPARATE ACCOUNT The Separate Account and the investment divisions. Allocation of net premiums, dividends and deductions. Transfer of assets. SECTION 7. DETERMINATION OF VALUES Policy Value. Cost of insurance charges. Excess amount. Variable paid-up additional insurance. SECTION 8. CASH VALUES AND PAID-UP INSURANCE Cash value. Paid-up insurance if premium is not paid. Surrender. SECTION 9. LOANS AND WITHDRAWALS Policy loans. Interest on loans. Withdrawals. SECTION 10. EXCHANGE OF POLICY SECTION 11. BENEFICIARIES Naming and change of beneficiaries. Marital deduction provision for spouse of Insured. Succession in interest of beneficiaries. SECTION 12. PAYMENT OF POLICY BENEFITS Payment of death or surrender proceeds. Payment plans for policy proceeds. Right to increase income under payment plans. Guaranteed payment tables. ADDITIONAL BENEFITS (if any) APPLICATION BENEFITS AND PREMIUMS DATE OF ISSUE - JUNE 1, 1995 Initial Annual Payable Plan and Additional Benefits Amount Premiums for Variable Whole Life With Additional Protection Minimum Guaranteed Death Benefit $100,000 $1,347.00 Life Additional Protection 50,000* 189.00 Life Premiums To Increase Policy Value Scheduled Additional Premium 1,000.00 Life Excess Amount 519# Initial Totals $150,519# $2,536.00 * This amount of Additional Protection is guaranteed to June 1, 2006 unless the guaranteed period is terminated sooner under section 3.1. To continue this amount of Additional Protection after June 1, 2006, an increased premium may be required under section 3.2. # This amount may increase or decrease daily depending on investment results. A premium is payable June 1, 1995 and every June 1 after that. The first premium is $2,536.00. The initial minimum premium is $1,536.00. This policy is issued on a select basis. Direct Beneficiary Jane M Doe, spouse of the Insured Owner John J Doe, the Insured Insured John J Doe Age and Sex 35 Male Policy Date June 1, 1995 Policy Number 12 345 678 Plan Variable Whole Life Initial Total With Additional Protection Death Benefit $ 150,519 Page 3 POLICY NUMBER 12 345 678 -LIST OF CONTRACTUAL MINIMUMS- The minimum increase in the scheduled additional premium is $100.00. The minimum unscheduled additional premium is $100.00. The minimum withdrawal amount is $250.00. TABLE OF DEDUCTIONS FROM ANNUAL PREMIUMS (see section 4.5) an amount not more than $114.00; plus an amount not more than 8% of the remainder of the premium TABLE OF DEDUCTIONS FROM ADDITIONAL PREMIUMS (see section 4.5) an amount not more than 8% TABLE OF CHARGES UNDER PREMIUM SUSPENSION (see section 7.1) if premiums are suspended as described in section 4.6. an amount of not more than $104.88 per year TABLE OF SURRENDER CHARGES (see section 8.1) Following Payment Policy of Premium Due on Surrender Year June 1, Charge 1 1995 $ 703.80 2 1996 716.10 3 1997 728.40 4 1998 740.70 5 1999 753.00 6 2000 711.00 7 2001 669.00 8 2002 627.00 9 2003 585.00 10 2004 543.00 11 2005 434.40 12 2006 325.80 13 2007 217.20 14 2008 108.60 15 and later 2009 0.00 Page 4 POLICY NUMBER 12 345 678 TABLE OF COST OF INSURANCE RATES Beginning Beginning of Policy of Policy Year June 1, Rate Year June 1, Rate 1 1995 .00169 36 2030 .03463 2 1996 .00177 37 2031 .03891 3 1997 .00188 38 2032 .04256 4 1998 .00200 39 2033 .04744 5 1999 .00214 40 2034 .05292 6 2000 .00229 41 2035 .05880 7 2001 .00247 42 2036 .06506 8 2002 .00265 43 2037 .07164 9 2003 .00286 44 2038 .07847 10 2004 .00307 45 2039 .08572 11 2005 .00332 46 2040 .09367 12 2006 .00359 47 2041 .10252 13 2007 .00388 48 2042 .11252 14 2008 .00419 49 2043 .12379 15 2009 .00454 50 2044 .13611 16 2010 .00491 51 2045 .14920 17 2011 .00535 52 2046 .16280 18 2012 .00586 53 2047 .17679 19 2013 .00643 54 2048 .19089 20 2014 .00709 55 2049 .20529 21 2015 .00782 56 2050 .22019 22 2016 .00863 57 2051 .23584 23 2017 .00949 58 2052 .25275 24 2018 .01042 59 2053 .27163 25 2019 .01147 60 2054 .29565 26 2020 .01264 61 2054 .32996 27 2021 .01394 62 2055 .38455 28 2022 .01542 63 2056 .48020 29 2023 .01711 64 2057 .65798 30 2024 .01902 65 2058 1.00000 31 2025 .02113 32 2026 .02340 33 2027 .02586 34 2028 .02850 35 2029 .03138 Page 5 POLICY NUMBER 12 345 678 TABLE OF MAXIMUM ANNUAL PREMIUMS PER $1,000 OF TERM INSURANCE Beginning Beginning of Policy of Policy Year June 1, Rate Year June 1, Rate 11 2005 $ 3.59 41 2035 $ 61.58 12 2006 3.88 42 2036 68.12 13 2007 4.18 43 2037 75.00 14 2008 4.50 44 2038 82.14 15 2009 4.87 45 2039 89.72 16 2010 5.26 46 2040 98.02 17 2011 5.72 47 2041 107.27 18 2012 6.25 48 2042 117.73 19 2013 6.85 49 2043 129.50 20 2014 7.54 50 2044 142.38 21 2015 8.30 51 2045 156.06 22 2016 9.14 52 2046 170.28 23 2017 10.04 53 2047 184.90 24 2018 11.02 54 2048 199.63 25 2019 12.11 55 2049 214.68 26 2020 13.34 56 2050 230.26 27 2021 14.69 57 2051 246.61 28 2022 16.24 58 2052 264.29 29 2023 18.01 59 2053 284.02 30 2024 20.00 60 2054 309.12 31 2025 22.21 61 2055 344.98 32 2026 24.58 62 2056 402.04 33 2027 27.15 63 2057 502.01 34 2028 29.21 64 2058 687.81 35 2029 32.92 65 2059 1,000.00 36 2030 36.32 37 2031 40.79 38 2032 44.61 39 2033 49.71 40 2034 55.43 The last term premium increase date is June 1, 2039. Page 6 POLICY NUMBER 12 345 678 SEPARATE ACCOUNT (see section 6.1) Account Divisions Select Bond Division International Equity Division Money Market Division Balanced Division Index 500 Stock Division Aggressive Growth Stock Division High Yield Bond Division Growth Stock Division Growth & Income Stock Division Index 400 Stock Division Small Cap Growth Stock Division Russell Multi-Style Equity Division Russell Aggressive Equity Division Russell Non-US Division Russell Real Estate Securities Division Russell Core Bond Division The maximum number of Divisions for allocation is ten. The initial allocation date as used in section 6.2 is July 1, 1999. The maximum transfer fee is $ 25.00. The maximum withdrawal charge is $ 25.00. See section 9.8. Page 7 POLICY NUMBER 12 345 678 TABLE OF TABULAR VALUES PER $1.00 OF INSURANCE End End of Policy Tabular of Policy Tabular Year June 1, Value Year June 1, Value 1 1996 .01018 36 2031 .56194 2 1997 .02070 37 2032 .57992 3 1998 .03155 38 2033 .59785 4 1999 .04275 39 2034 .61536 5 2000 .05428 40 2035 .63237 6 2001 .06617 41 2036 .64887 7 2002 .07839 42 2037 .66487 8 2003 .09096 43 2038 .68042 9 2004 .10388 44 2039 .69559 10 2005 .11718 45 2040 .71045 11 2006 .13083 46 2041 .72495 12 2007 .14484 47 2042 .73904 13 2008 .15922 48 2043 .75262 14 2009 .17389 49 2044 .76555 15 2010 .18910 50 2045 .77777 16 2011 .20461 51 2046 .78929 17 2012 .22047 52 2047 .80018 18 2013 .23667 53 2048 .81054 19 2014 .25318 54 2049 .82055 20 2015 .26998 55 2050 .83041 21 2016 .28705 56 2051 .84031 22 2017 .30438 57 2052 .85052 23 2018 .32197 58 2053 .86134 24 2019 .33982 59 2054 .87320 25 2020 .35789 60 2055 .88639 26 2021 .37617 61 2056 .90105 27 2022 .39463 62 2057 .91703 28 2023 .41321 63 2058 .93375 29 2024 .43187 64 2059 .95015 30 2025 .45054 65 2060 1.00000 31 2026 .46920 32 2027 .48783 33 2028 .50643 34 2029 .52499 35 2030 .54352 The mortality basis is the Commissioners 1980 Standard Ordinary Mortality Table for male nonsmokers. The annual effective interest rate used to calculate quantities (a) and (b) of section 4.6 is 6%. All other net single premiums and tabular values are based on an annual effective interest rate of 4%. All values assume that claims are paid at the end of policy years. The nonforfeiture factor is .01139284. Page 8 SECTION 1. THE CONTRACT 1.1 LIFE INSURANCE BENEFIT The Northwestern Mutual Life Insurance Company will pay a benefit on the death of the Insured. Subject to the terms and conditions of the policy: o payment of the death proceeds will be made after proof of the death of the Insured is received at the Home Office; and o payment will be made to the beneficiary or other payee under Sections 11 and 12. The amount of the death proceeds when all premiums due have been paid will be: o the Insurance Amount; plus o the amount of variable paid-up additional insurance under Section 7.4; less o if premiums are not paid on an annual basis, an adjustment for any premiums used to purchase variable paid-up additional insurance that are due later in the policy year; plus o the amount of any dividend at death (Section 5.3); less o the amount of any policy debt (Section 9.3). These amounts will be determined as of the date of death. The Insurance Amount will be the greater of (a) and (b) where: (a) is the sum of: o the Minimum Guaranteed Death Benefit shown on page 3; plus o the amount of Additional Protection then in force under Section 3; plus o the Excess Amount determined under Section 7.3; and (b) is the amount of paid-up insurance which could be purchased by the Policy Value applied as a net single premium using the basis of values shown on page 8. If premiums are not paid on an annual basis, this amount of paid-up insurance will be reduced by an adjustment for any premiums due later in the policy year. The amount of the death proceeds when the Insured dies during the grace period following the due date of an a unpaid premium will be: o the amount determined above assuming the overdue premium had been paid; less o the amount of the unpaid premium. The amount of the death proceeds when the Insured dies while the policy is in force as paid-up insurance will be determined under Section 8. 1.2 ENTIRE CONTRACT; CHANGES This policy with the attached application is the entire contract. Statements in the application are representations and not warranties. A change in the policy is valid only if it is approved in writing by an officer of the Company. The Company may require that the policy be sent to it for endorsement to show a change. No agent has the authority to change the policy or to waive any of its terms. 1.3 INCONTESTABILITY The Company will not contest insurance under this policy after the insurance has been in force during the lifetime of the Insured for two years from the Date of Issue. In issuing the insurance, the Company has relied on the application. While the insurance is contestable, the Company, on the basis of a misstatement in the application, may rescind the insurance or deny a claim. 1.4 SUICIDE If the Insured dies by suicide within one year from the Date of Issue, the amount payable by the Company will be limited to the premiums paid, less the amount of any policy debt and withdrawals and less the cash value of any variable paid-up insurance surrendered. 1.5 POLICY DATE AND DATE OF ISSUE Policy months, years and anniversaries are computed from the Policy Date. The contestable and suicide periods begin with the Date of Issue. These dates are shown on page 3. The Date of Issue for any increase in insurance issued under Additional Premiums Scheduled After Issue (Section 4.2) or any Optional Unscheduled Additional Premium (Section 4.3) will be shown on an amendment to the Schedule of Benefits and Premiums. 1.6 MISSTATEMENT OF AGE OR SEX If the age or sex of the Insured has been misstated, the amount payable will be the amount which the premiums paid would have purchased at the correct age and sex. 1.7 PAYMENTS BY THE COMPANY All payments by the Company under this policy are payable at its Home Office. 1.8 INSURABILITY REQUIREMENTS To make some changes under this policy, the Insured must meet the Company's insurability requirements. These requirements are as follows: o evidence of insurability must be given that is satisfactory to the Company; and o under the Company's underwriting standards, the Insured is in an underwriting classification that is the same as, or is better than, the one for this policy. 9 SECTION 2. OWNERSHIP 2.1 THE OWNER The Owner is named on page 3. The Owner, his successor or his transferee may exercise policy rights without the consent of any beneficiary. After the death of the Insured, policy rights may be exercised only as provided in Sections 11 and 12. 2.2 TRANSFER OF OWNERSHIP The Owner may transfer the ownership of this policy. Written proof of transfer satisfactory to the Company must be received at its Home Office. The transfer will then take effect as of the date that it was signed. The Company may require that the policy be sent to it for endorsement to show the transfer. 2.3 COLLATERAL ASSIGNMENT The Owner may assign this policy as collateral security. The Company is not responsible for the validity or effect of the collateral assignment. The Company will not be responsible to an assignee for any payment or other action taken by the Company before receipt of the assignment in writing at its Home Office. The interest of any beneficiary will be subject to any collateral assignment made either before or after the beneficiary is named. The collateral assignee is not an Owner. A collateral assignment is not a transfer of ownership. Ownership can be transferred only by complying with Section 2.2. SECTION 3. ADDITIONAL PROTECTION 3.1 ADDITIONAL PROTECTION Additional Protection is insurance guaranteed for the period shown on page 3. The initial amount of and premium for Additional Protection are shown on page 3. Additional Protection will terminate on any policy anniversary on which: o the Owner has directed that dividends be used other than to increase Policy Value; and o the policy does not have Excess Amount. 3.2 REDUCTION BY COMPANY; OWNER'S RIGHT TO CONTINUE EXISTING PROTECTION For any policy year after the end of the guaranteed period, the Company may reduce the amount of Additional Protection if, at the attained age of the Insured: o the net annual policy premium; plus o the excess, if any, of: o the Policy Value 25 days before the policy anniversary plus any dividend payable on the policy anniversary; over o the tabular value of the Minimum Guaranteed Death Benefit on the policy anniversary; is less than: o the Minimum Guaranteed Death Benefit times the nonforfeiture factor (shown on page 8); plus o that portion of the cost of insurance charge for the Insurance Amount which the Company determines applies to Additional Protection. The amount of Additional Protection will be reduced to equal the amount of term insurance which could be purchased by the premium for Additional Protection plus any dividend payable on the policy anniversary. The premium rates for term insurance will not be more than the rates shown on page 6. The Company will send written notice of the reduction. The Owner may prevent a reduction that would occur on or before the last term insurance premium increase date shown on page 6. This may be done by the payment of an increased minimum premium as determined under Section 4.2. The increased premium will be payable for the remainder of the premium paying period. The premium must be received at the Home Office within 31 days of the date the reduction would take effect. The right of the Owner to continue the amount of Additional Protection will terminate as of the first policy anniversary on which the Owner fails to pay an increased premium when due. SECTION 4. PREMIUMS AND REINSTATEMENT 4.1 PREMIUM PAYMENT Payment. All premiums after the first are payable at the Home Office or to an authorized agent. A receipt signed by an officer of the Company will be furnished on request. A premium must be paid on or before its due date. The date when each premium is due and the number of years for which premiums are payable are described on page 3. No premiums may be paid while this policy is in force as paid-up insurance under Section 8, except as provided in Reinstatement (Section 4.7). Frequency. Premiums are payable annually. Premiums may be paid on any other frequency, with the consent of the Company. Grace Period. A grace period of 31 days will be allowed to pay a premium that is not paid on its due date. The policy will be in full force during this period. If a premium is paid during the grace period, policy values will be the same as if the premium had been paid on the premium due date. If the Insured dies during the grace period, any overdue premium will be paid from the proceeds of the policy. If a premium is not paid within the grace period, and the policy does not qualify for Premium Suspension (Section 4.6), the policy will terminate as of the due date unless it continues as paid-up insurance under Section 8. 10 4.2 AMOUNT OF PREMIUM; ADJUSTMENTS Scheduled and Minimum Premiums. The premium due on this policy is the scheduled premium plus any required unscheduled additional premium due under Section 4.4. The scheduled premium is the sum of the minimum premium, any scheduled additional premium used to purchase variable paid-up additional insurance or to increase Policy Value, and any premium that is due for any additional benefit that is a part of this policy. The minimum premium is the premium for the Minimum Guaranteed Death Benefit and Additional Protection. The premium amounts at issue are shown on page 3. An increase in the minimum premium under Section 3.2 will be determined by adding the premium for the Minimum Guaranteed Death Benefit to the term insurance premium for the amount of Additional Protection at the attained age of the Insured. The premium rates for term insurance will not be more than the rates shown on page 6. The minimum premium will not be increased after the last term insurance premium increase date shown on page 6. Additional Premiums Scheduled At Issue. This policy may have been issued with level additional premiums in excess of the minimum premium. The amount of these additional premiums is shown on page 3. Additional Premiums Scheduled After Issue. The Owner may pay additional premiums by requesting that the level premium payable on the policy be increased. An increase in the level amount may be made at any time before the policy anniversary that is nearest to the 85th birthday of the Insured. The minimum amount of increase is shown on page 4. Additional premiums may be scheduled only if, at the time the increases are applied for: o the insurance in force after applying the scheduled additional premiums will be within the Company's issue limit; and o the Company's insurability requirements are met. Owner's Right To Decrease Scheduled Additional Premiums. The Owner may decrease the amount of additional premium scheduled at issue or after issue. This may be done at any time by written request sent to the Home Office. Later increases in the level amount may be made only as provided in the preceding paragraph. Effective Date. A premium change will take effect on the first premium due date that follows the receipt at the Home Office of the Owner's written request for change. When the Owner increases or decreases premiums, the Company will send an amendment to the Schedule of Benefits and Premiums. Additional Premiums Used To Purchase Paid-Up Additional Insurance Or Increase Policy Value. As directed by the Owner each scheduled additional premium paid will be used to purchase variable paid-up additional insurance or to increase Policy Value as shown on page 3. The Owner may change this direction by written notice sent to the Home Office, subject to evidence of insurability. The purchase or increase will be made as of the policy anniversary. 4.3 OPTIONAL UNSCHEDULED ADDITIONAL PREMIUM Unscheduled additional premiums may be paid to the Company at any time before the policy anniversary that is nearest to the Insured's 85th birthday. An unscheduled additional premium may be paid only if, at the time the premium is paid: o the insurance in force after applying the unscheduled additional premium will be within the Company's issue limits; and o the Company's insurability requirements are met. Each unscheduled additional premium may not be less than the minimum amount shown on page 4. As directed by the Owner, each net unscheduled additional premium will be used, as of the date the premium is received by the Company, to purchase variable paid-up additional insurance or to increase Policy Value. 4.4 REQUIRED UNSCHEDULED ADDITIONAL PREMIUM If a withdrawal has been made, the Company may require an unscheduled additional premium to be paid. The due date of the required unscheduled additional premium is the policy anniversary following written notice by the Company. The net unscheduled additional premium will be used to increase Policy Value. The amount of required unscheduled additional premium due on a policy anniversary will be the lesser of (a) and (b) where: (a) is o the tabular value for the Minimum Guaranteed Death Benefit; minus o the Policy Value, 25 days prior to the anniversary; and (b) is o the accumulation at 4% annual interest of all amounts withdrawn; minus o the accumulation at 4% annual interest of all additional premiums used to increase Policy Value. If either (a) or (b) is zero or less than zero, no unscheduled additional premium will be required. 4.5 NET PREMIUMS Net Annual Policy Premium. The net annual policy premium is: o the annual premium for the Minimum Guaranteed Death Benefit; plus o the annual premium for Additional Protection; plus o the annual scheduled additional premium used to increase Policy Value; less o deductions for expenses; less o deductions for any classified mortality. The deductions for expenses and classified mortality will not be more than the amounts shown in the Table of Deductions from Annual Premiums shown on page 4. 11 Net Scheduled Additional Premium Used to Purchase Variable Paid-up Insurance. A net scheduled additional premium used to purchase variable paid-up insurance is: o the annual scheduled additional premium used to purchase additional insurance; less o deductions for expenses; less o any classified mortality charge. The deductions for expenses and the charge for classified mortality will not be more than the amounts shown in the Table of Deductions from Additional Premiums shown on page 4. Net Unscheduled Additional Premium. A net unscheduled additional premium is: o an optional or required unscheduled additional premium; less o deductions for expenses; less o any classified mortality charge. The deductions for expenses and the charge for classified mortality will not be more than the amounts shown in the Table of Deductions from Additional Premiums shown on page 4. 4.6 PREMIUM SUSPENSION A policy qualifies for premium suspension if at the end of the grace period: o the Excess Amount as of 25 days prior to the previous policy anniversary is greater than or equal to one year's minimum premium plus one year's premium for any additional benefits; o the Company determines that the Policy Value 25 days prior to the previous policy anniversary is greater than the sum of (a) plus (b) where: (a) is the net single premium on that anniversary for the Insurance Amount. This net single premium will be calculated using the basis of values for premium suspension shown on page 8; and (b) is the present value of charges for premium suspension for all future years. The present value will be calculated using: o amounts which the Company is then charging for premium suspension; and o the basis of values for premium suspension shown on page 8; and o no withdrawals have been made after a date 25 days prior to the previous policy anniversary. If a policy qualifies for premium suspension: o the scheduled premium otherwise currently due does not need to be paid; and o the policy will not terminate because of the failure to pay the premium. The Owner may pay unscheduled additional premiums as provided under Section 4.3. While premiums are being suspended, contract charges will be deducted from the Policy Value on each policy anniversary, subject to the maximum charges shown on page 4. If the premium frequency is other than annual, a deduction will be made from Policy Value to pay a premium for the remainder of the policy year and the premium frequency will be changed to annual. The payment of premiums must resume as of a policy anniversary if either: o the Excess Amount as of 25 days prior to a policy anniversary is less than the sum of one year's minimum premium plus one year's premium for any additional benefits; or o the Owner elects to end premium suspension by written request sent to the Home Office. If a withdrawal of Policy Value is made, premiums will no longer be suspended unless the policy requalifies for premium suspension as of the next policy anniversary. 4.7 REINSTATEMENT This policy may be reinstated within three years after the due date of the overdue premium. All unpaid minimum premiums and premiums for any additional benefits that are a part of this policy (and interest as required below) must be received by the Company while the Insured is alive. The policy may not be reinstated if the policy was surrendered. After reinstatement, the policy will have the same Minimum Guaranteed Death Benefit, Additional Protection, Policy Value and variable paid-up additional insurance as if: o all minimum premiums had been paid when due; o investment earnings for all Divisions, less charges against the Separate Account, had been credited at an annual effective interest rate of 4% from the due date of the overdue premium until the date of reinstatement; and o loan interest, less charges by the Company for expenses and taxes, had been credited to Policy Value and to the cash value of variable paid-up additional insurance at an annual effective interest rate of 4%, from the due date of the overdue premium until the date of reinstatement. In addition, for the policy to be reinstated more than 31 days after the end of the grace period, the Company's insurability requirements must be met and an amount must be paid equal to the greater of: o all unpaid minimum premiums and premiums for additional benefits with interest from the due date of each premium at an annual effective rate of 5%; and o 110% of the excess of the cash value of the policy upon reinstatement over the cash value of the policy just before reinstatement, plus all unpaid premiums for additional benefits with interest from the due date of each premium at an annual effective rate of 5%. Any policy debt on the due date of the overdue premium, with interest at an annual effective interest rate of 5% from that date, must be repaid or reinstated. 12 SECTION 5. DIVIDENDS 5.1 ANNUAL DIVIDENDS This policy will share in the divisible surplus of the Company. This surplus is determined each year. This policy's share will be credited as a dividend on the policy anniversary. 5.2 USE OF DIVIDENDS Policy In Force As Variable Whole Life With Additional Protection. If Additional Protection is in force and there is no Excess Amount, dividends will be used to increase Policy Value. If Additional Protection is not in force, or if there is Excess Amount, dividends may be paid in cash or used for one of the following: o Policy Value. Dividends will be used to increase Policy Value. o Paid-Up Additional Insurance. Dividends will purchase variable benefit paid-up additional insurance. o Premium Payment. Dividends will be used to reduce premiums. If the dividend is greater than the premium, the balance will be used to increase Policy Value. Other uses of dividends may be made available by the Company. If no direction is given for the use of dividends, they will be used to increase Policy Value. Policy In Force As Fixed Benefit Paid-Up Insurance. Dividends may be paid in cash or used to purchase fixed benefit paid-up additional insurance. Other uses of dividends may be made available by the Company. If no direction is given for the use of dividends, they will be used to purchase fixed benefit paid-up additional insurance. Policy In Force As Variable Benefit Paid-Up Insurance. Dividends may be paid in cash or used to purchase variable paid-up additional insurance. Other uses of dividends may be made available by the Company. If no direction is given for the use of dividends, they will be used to purchase variable paid-up additional insurance. 5.3 DIVIDEND AT DEATH If a dividend is payable for the period from the beginning of the policy year to the date of the Insured's death, the dividend is payable as part of the policy proceeds. SECTION 6. THE SEPARATE ACCOUNT 6.1 DESCRIPTION The Northwestern Mutual Variable Life Account (the Separate Account) has been established by the Company pursuant to Wisconsin law and is registered as a unit investment trust under the Investment Company Act of 1940. The Separate Account has several Divisions, as shown on page 7. Assets of the Separate Account are invested in shares of Northwestern Mutual Series Fund, Inc. (the Fund). The Fund is registered under the Investment Company Act of 1940 as an open-end, diversified investment company. The Fund has one Portfolio for each Division. Assets of each Division of the Separate Account are invested in shares of the corresponding Portfolio of the Fund. Shares of the Fund are purchased for the Separate Account at their net asset value. The Company may make available additional Divisions and Portfolios. Assets will be allocated to the Separate Account to support the operation of this policy (except when in force as fixed benefit paid-up insurance) and other variable life insurance policies. Assets may also be allocated for other purposes, but not to support the operation of any contracts or policies other than variable life insurance. Income and realized and unrealized gains and losses from assets in the Separate Account are credited to or charged against it without regard to other income, gains or losses of the Company. The assets of the Separate Account will be valued on each valuation day. They are the property of the Company. The portion of these assets equal to policy reserves and liabilities will not be charged with liabilities arising out of any other business the Company may conduct. The Company reserves the right to transfer assets of the Separate Account in excess of these reserves and liabilities to its General Account. The Owner may exchange this policy for a fixed benefit life insurance policy if the Fund changes its investment advisor or if a Portfolio has a material change in its investment objectives or restrictions. The Company will notify the Owner if there is any such change. The Owner may exchange this policy within 60 days after the notice or the effective date of the change, whichever is later. If, in the judgment of the Company, a Portfolio no longer suits the purposes of this policy due to a change in its investment objectives or restrictions, the Company may substitute shares of another Portfolio of the Fund or shares of another mutual fund. Any such substitution will be subject to any required approval of the Securities and Exchange Commission (SEC), the Wisconsin Commissioner of Insurance or other regulatory authority. The Company also may, to the extent permitted by applicable laws and regulations (including any order of the SEC), make changes as follows: o the Separate Account or a Division may be operated as a management company under the Investment Company Act of 1940, or in any other form permitted by law, if deemed by the Company to be in the best interest of the policyowners. o the Separate Account may be deregistered under the Investment Company Act of 1940 in the event registration is no longer required. o the provisions of this and other policies may be modified to comply with any other applicable federal or state laws. 13 In the event of a substitution or change, the Company may make appropriate endorsement of this and other policies having an interest in the Separate Account and take other actions as may be necessary to effect the substitution or change. 6.2 ALLOCATION OF NET PREMIUMS, DIVIDENDS AND DEDUCTIONS The first net annual policy premium and any net scheduled additional premium used to purchase variable paid-up insurance will be allocated to the Money Market Division on the Policy Date. Any net unscheduled additional premium received prior to the Initial Allocation Date will be allocated to the Money Market Division on the later of the Policy Date and the date the Company receives the premium. The Initial Allocation Date is shown on page 7. On the Initial Allocation Date, amounts in the Money Market Division will be allocated in accordance with the application. This allocation will remain in effect for later net premiums unless changed by the Owner by written request. Any change in allocation will be in effect for net premiums credited to the policy following the receipt of the written request at the Home Office. Allocations must be in whole percentages. If a Division is to receive an allocation, the allocation must be at least 10%. An allocation will not be permitted that results in assets invested for this policy being apportioned among more than the maximum number of Divisions for allocation shown on page 7. Any deduction from Policy Value or from the value of variable paid-up additional insurance, other than a decrease due to investment results, will be allocated in proportion to the values in the Divisions. 6.3 TRANSFER OF ASSETS On or after the Initial Allocation Date, the Owner may transfer the assets (other than policy debt) invested for this policy to any of the Divisions, as long as these assets, following the transfer, are allocated among not more than the maximum number of Divisions for allocation shown on page 7. Transfers may be made as often as twelve times in a policy year. The transfer will take effect on the date a written request is received in the Home Office. A fee may be required. The maximum fee is shown on page 7. SECTION 7. DETERMINATION OF VALUES 7.1 POLICY VALUE On the Policy Date, the Policy Value is equal to the net annual policy premium plus any net unscheduled additional premium credited to Policy Value on the Policy Date, less the cost of insurance charge. On any day after that, the Policy Value is equal to what it was on the previous day plus these items: o any increase due to investment results of all amounts invested in all Divisions for the Policy Value; o interest on the Policy Value's share of policy debt at an annual rate equal to the loan interest rate less a charge by the Company for expenses and taxes; o on each policy anniversary, if the premium due is paid within the grace period, the net annual policy premium; o any net unscheduled additional premium used to increase Policy Value credited that day; o any policy dividend payable on that day directed to increase Policy Value; and o any amounts transferred to Policy Value from variable paid-up additional insurance; and minus any of these items applicable on that day: o any decrease due to investment results of all amounts invested in all Divisions for the Policy Value; o a charge against the Separate Account at a rate of not more than 0.0016389% a day (0.60% a year) for mortality and expense risks that the Company assumes; o any amount charged against the Separate Account for taxes; o if the annual premium is suspended under the Premium Suspension provision (Section 4.6), any charges required under that provision; o the cost of insurance charge for the Insurance Amount; o any withdrawals; and o any surrender charges, administrative charges or reduction in policy debt that may result from a withdrawal, a decrease in face amount or a change to variable benefit paid-up insurance In addition, Policy Value will be adjusted for any increase or decrease, other than on a policy anniversary, in the amount of scheduled additional premiums used to increase Policy Value. 7.2 COST OF INSURANCE CHARGES FOR THE INSURANCE AMOUNT A cost of insurance charge is deducted from the Policy Value on each policy anniversary and is used in the determination of the Policy Value on the Policy Date. The cost of insurance charge is the cost of insurance rate times the net amount at risk. The cost of insurance rate is based on the attained age of the Insured. The cost of insurance rates are shown on page 5. The net amount at risk is (a) minus (b) where: (a) is the projected Insurance Amount divided by 1.04. The projected Insurance Amount is what the Insurance Amount would be at the end of the policy year assuming a 4% annual effective interest rate on invested funds; and (b) is the Policy Value. 14 If an unscheduled additional premium paid on a date other than a policy anniversary results in an increase in the net amount at risk, a cost of insurance charge for the portion of the policy year remaining will be deducted from Policy Value on the date the unscheduled additional premium is received by the Company. 7.3 EXCESS AMOUNT The Excess Amount is: o the Policy Value; less o the tabular value of the Minimum Guaranteed Death Benefit; less o the tabular value of the amount of Additional Protection; less o an adjustment, if premiums are not paid on an annual basis, for premiums due later in the policy year. If the amount determined above is less than zero, the Excess Amount will be zero. 7.4 VARIABLE PAID-UP ADDITIONAL INSURANCE Additional premiums and dividends used to purchase variable paid-up additional insurance will immediately increase the death proceeds payable under Section 1.1. These amount are not included in the Additional Protection. The amount of variable paid-up additional insurance is equal to the cash value of variable paid-up additional insurance divided by the net single premium using the basis of values shown on page 8. On the Policy Date, the cash value of variable paid-up additional insurance is equal to any net additional premium used to purchase variable paid-up additional insurance less the cost of insurance charge for the variable paid-up additional insurance. On any day after that, the cash value of variable paid-up additional insurance is equal to what it was on the previous day plus these items: o any increase due to investment results of all amounts invested in all Divisions for the variable paid-up additional insurance; o interest on the variable paid-up additional insurance's share of policy debt at an annual rate equal to the loan interest rate less a charge by the Company for expenses and taxes; o on each policy anniversary, if the premium due is paid within the grace period, the net scheduled additional premium used to purchase variable paid-up additional insurance; o any net unscheduled additional premium used to purchase variable paid-up additional insurance credited that day; and o any policy dividend payable on that day directed to purchase variable paid-up additional insurance; and minus any of these items applicable on that day: o any decrease due to investment results of all amounts invested in all Divisions for the variable paid-up additional insurance; o a charge against the Separate Account at a rate of not more than 0.0016389% a day (0.60% a year) for mortality and expense risks that the Company assumes; o any amount charged against the Separate Account for taxes; o the cost of insurance charge for the variable paid-up additional insurance; o any surrender of variable paid-up additional insurance; and o any amount transferred to Policy Value. In addition, variable paid-up additional insurance will be adjusted for any increase or decrease, other than on a policy anniversary, in the amount of scheduled additional premiums used to purchase variable paid-up additional insurance. Transfer Of Cash Value Of Variable Paid-Up Additional Insurance To Policy Value. The Owner may transfer the cash value of any variable paid-up additional insurance to Policy Value. The transfer will take effect on the date a written request to transfer is received at the Home Office. Policy Value may not be transferred to the cash value of variable paid-up additional insurance. 7.5 COST OF INSURANCE CHARGES FOR VARIABLE PAID UP ADDITIONAL INSURANCE A cost of insurance charge is deducted from the cash value of variable paid-up additional insurance on each policy anniversary and is used in the determination of the cash value of variable paid-up additional insurance on the Policy Date. The cost of insurance charge is the cost of insurance rate times the net amount at risk. The cost of insurance rate is based on the attained age of the Insured. The cost of insurance rates are shown on page 5. On a policy anniversary, the net amount at risk is (a) minus (b) where: (a) is the amount of variable paid-up additional insurance divided by 1.04; and (b) is the cash value of variable paid-up additional insurance on the policy anniversary. If a net unscheduled additional premium is credited to the cash value of variable paid-up additional insurance on a day other than the policy anniversary, there will be a cost of insurance charge for the remainder of the policy year based on the increase in the net amount at risk resulting from the unscheduled additional premium. 7.6 VALUATION DAY AND VALUATION PERIOD A valuation day is any day on which the assets of the Separate Account are valued. A valuation period is a valuation day and any immediately preceding days which are not valuation days. Assets are valued as of the close of trading on the New York Stock Exchange on each day the Exchange is open. Each Division's share of amounts allocated, transferred or added to a Division or of amounts deducted, loaned, transferred or withdrawn from a Division on any day will be determined as of the end of the valuation period that contains that day. 15 SECTION 8. CASH VALUES AND PAID-UP INSURANCE 8.1 CASH VALUE The cash value of this policy on any date when all premiums due have been paid, during the grace period following the due date of an unpaid premium, or when this policy is in force as variable benefit paid-up insurance is equal to: o the Policy Value; plus o the cash value of variable paid-up additional insurance; less o any policy debt; less o the surrender charge for the policy year shown on page 4. There is no surrender charge if the policy is in force as variable benefit paid-up insurance. If premiums are not paid on an annual basis, the cash value will reflect a reduction for any premiums due later in the policy year. 8.2 FIXED BENEFIT PAID-UP INSURANCE If any premium is unpaid on the last day of the grace period and if the cash value is at least $1,000 on the last day of the grace period, this policy will be in force as fixed benefit paid-up insurance. If the cash value is less than $1,000 as of the last day of the grace period, the policy will be treated as surrendered under Section 8.4. When the policy is in force as fixed benefit paid-up insurance, the Minimum Guaranteed Death Benefit, Additional Protection and Policy Value will not be in effect. The amount of fixed benefit paid-up insurance will be determined by using the cash value plus the policy debt, both as of the last day of the grace period, as a net single premium at the attained age of the Insured. However, if a portion of the cash value is attributable to variable paid-up additional insurance, that portion will be applied to purchase fixed benefit paid-up additions. The variable paid-up additional insurance will no longer be in force. The cash value of fixed benefit paid-up insurance or fixed benefit paid-up additions will be the net single premium for that insurance at the attained age of the Insured less any policy debt. If fixed benefit paid-up insurance is surrendered within 31 days after a policy anniversary, the cash value will not be less than the cash value on that anniversary reduced by any later surrender of paid-up additions and adjusted for any later change in policy debt. The amount of the death proceeds when this policy is in force as fixed benefit paid-up insurance will be: o the amount of fixed benefit paid-up insurance determined above; plus o the amount of any fixed benefit paid-up additions then in force; plus o the amount of any dividend at death; less o the amount of any policy debt. These amounts will be determined as of the date of death. Any policy debt will continue on fixed benefit paid-up insurance. Fixed benefit paid-up insurance will share in divisible surplus. 8.3 VARIABLE BENEFIT PAID-UP INSURANCE Variable benefit paid-up insurance may be selected in place of fixed benefit paid-up insurance provided the cash value of the policy is at least $5,000 on the last day of the grace period. A written request must be received at the Home Office no later than the last day of the grace period. When the policy is in force as variable benefit paid-up insurance, the Minimum Guaranteed Death Benefit and Additional Protection will not be in effect. On the due date of the unpaid premium, the Policy Value is set equal to the cash value plus the policy debt. The cash value of variable paid-up additional insurance is set at zero. The amount of the death proceeds when this policy is in force as variable benefit paid-up insurance will be: o the Policy Value of variable benefit paid-up insurance divided by the net single premium using the basis of values on page 8; plus o the amount of any in force variable paid-up additional insurance purchased by dividends; plus o the amount of any dividend at death; less o the amount of any policy debt. These amounts will be determined as of the date of death. Any policy debt will continue on variable benefit paid-up insurance. Variable benefit paid-up insurance will share in divisible surplus. 8.4 SURRENDER The Owner may surrender this policy for its cash value. A written surrender of all claims, satisfactory to the Company, will be required. The date of surrender will be the date of receipt at the Home Office of the written surrender. The policy will terminate, and the cash value will be determined, as of the end of the valuation period which includes the date of surrender, or, in the case of fixed benefit paid-up insurance, as of the date of surrender. The Company may require that the policy be sent to it. 16 8.5 DEFERRAL OF PAYMENTS Variable Insurance. During any period when: o the sale of securities or the determination of investment results is not reasonably practicable because (i) the New York Stock Exchange is closed; or (ii) conditions are such that, under rules and regulations adopted by the SEC, trading is deemed to be restricted or an emergency is deemed to exist; or o the SEC, by order, permits deferral for the protection of the Company's policy owners; the Company reserves the right: o to defer determination of cash value and payment of the cash value; o to defer payment of a loan or withdrawal; o to defer determination of a change in the amount of variable insurance or other variable amounts payable on death, and, if such determination has been deferred, to defer payment of any portion of the death benefit based on a variable amount; and o if payment of all or part of the death benefit is deferred, to defer application of the death proceeds to a payment plan under Section 12. Fixed Benefit Insurance. The Company may defer paying the cash value of the fixed benefit paid-up insurance for up to six months from the date of surrender. If payment is deferred for 30 days or more, interest will be paid on the cash value at an annual effective rate of 4% from the date of surrender to the date of payment. The Company may defer making a loan for up to six months. 8.6 TABULAR VALUES The tabular value of the Minimum Guaranteed Death Benefit is equal to the Minimum Guaranteed Death Benefit times the tabular value per $1 of insurance. The tabular value of Additional Protection is equal to the amount of Additional Protection times the tabular value per $1 of insurance. Tabular values per $1 of insurance are shown on page 8 for each policy anniversary. Tabular values during a policy year will reflect the time elapsed in that year. Tabular values are the net level premium reserves for a whole life policy calculated using the basis of values shown on page 8. Calculations assume annual premiums are paid at the beginning of the policy year and claims are paid at the end of the policy year. Tabular values are used to determine: o whether the amount of Additional Protection may be reduced under Section 3.2; o to determine the amount of any required unscheduled additional premium under Section 4.4; o whether the policy qualifies for premium suspension under Section 4.6; and o the Excess Amount under Section 7.3. SECTION 9. LOANS AND WITHDRAWALS 9.1 POLICY LOANS The Owner may obtain a loan from the Company in an amount that, when added to existing policy debt, is not more than the loan value. A loan may be obtained on written request or to pay an overdue premium if the premium loan provision is in effect on this policy and premiums are not suspended under Section 4.6. If the loan value is not large enough to pay the overdue premium, a premium will be paid for any other frequency permitted by the Company for which the loan value is large enough. The Owner may elect or revoke the premium loan provision by written request received at the Home Office. 9.2 LOAN VALUE The loan value is 90% of the sum of the cash value and any existing policy debt on the date of the loan. 9.3 POLICY DEBT Policy debt consists of all outstanding loans and accrued interest. It may be paid to the Company at any time. Any policy debt will be deducted from the policy proceeds. If the cash value decreases to zero, this policy will terminate unless a sufficient portion of the policy debt is repaid. Termination occurs 31 days after a notice has been mailed to the Owner and to any assignee on record at the Home Office. The notice will state the amount that must be repaid to keep the policy in force. 9.4 ALLOCATION OF LOANS Except when this policy is in force as fixed benefit paid-up insurance, a loan will be allocated between Policy Value and variable paid-up additional insurance in proportion to the amount of cash value attributable to Policy Value and the cash value of variable paid-up additional insurance. On the date a loan is made, or on the date unpaid interest is added to the loan, the amounts invested for this policy in each Division will be reduced in proportion to the amounts in each Division. On the date a loan repayment is made, the amounts invested for this policy in each Division will be increased in proportion to the amounts in each Division. 17 9.5 LOAN INTEREST Interest accrues and is payable on a daily basis from the date of the loan on loans requested by the Owner and from the premium due date on loans to pay premiums. Unpaid interest is added to the loan. The Specified Rate loan interest option or the Variable Rate loan interest option is elected on the application. The Owner may change this election at any time, but the change will not take effect until the January 1st following receipt of a written request at the Company's Home Office. 9.6 SPECIFIED RATE LOAN INTEREST OPTION Interest is payable at an annual effective rate of 5%. 9.7 VARIABLE RATE LOAN INTEREST OPTION Interest is payable at an annual effective rate that is set by the Company annually and applied to new or outstanding policy debt during the year beginning each January 1. The highest loan interest rate that may be set by the Company is the greater of: o a rate 1% higher than the rate shown on page 8 used to calculate tabular values; and o a rate based on the Corporate Bond Yield Averages -- Monthly Average Corporates for the immediately preceding October. This Average is published by Moody's Investors Service, Inc. If it is no longer published, the highest loan interest rate will be based on some other similar average established by the insurance supervisory official of the state in which this policy is delivered. The loan interest rate set by the Company will not exceed the maximum rate permitted by the laws of the state in which this policy is delivered. The loan interest rate will not be changed unless the change in the annual effective rate is at least 1/2%. The Company will give notice: o of the initial loan interest rate in effect at the time a policy loan is made. o of an increase in loan interest rate on outstanding policy debt no later than 30 days before the January 1st on which the increase takes effect. This policy will not terminate during a policy year as the sole result of an increase in the loan interest rate during that policy year. 9.8 WITHDRAWALS The Owner may make a withdrawal of Policy Value. A fee may be charged subject to the maximum shown on page 7. However, the Owner may not: o withdraw more than the Excess Amount less the surrender charge shown on page 4; o withdraw an amount which would reduce the loan value to less than the policy debt; o withdraw less than the minimum withdrawal amount shown on page 4; or o make more than four withdrawals in a policy year. Any withdrawal from Policy Value will be allocated between the Divisions in proportion to the amount attributable to each Division. SECTION 10. EXCHANGE OF POLICY Within 24 months after the Date of Issue shown on page 3, provided premiums are duly paid, the Owner may exchange this policy without evidence of insurability for a fixed benefit life insurance policy on the life of the Insured. The new policy will be on a form determined by the Company to be similar to this policy. To effect the change the Owner must send this policy, a completed application for change, and any required payment to the Home Office of the Company. The change will be effective on the later of the date of the application or the date the required items are received at the Home Office. The new policy will have the same initial guaranteed death benefit, policy date and issue age as this one, and the premiums and cash values will be the same as those for whole life policies issued on the Date of Issue of this policy. Any additional benefit included in this policy will be included with the new policy only to the extent that such provisions were being offered with the new policy on the Date of Issue of this policy. 18 SECTION 11. BENEFICIARIES 11.1 DEFINITION OF BENEFICIARIES The term "beneficiaries" as used in this policy includes direct beneficiaries, contingent beneficiaries and further payees. 11.2 NAMING AND CHANGE OF BENEFICIARIES By Owner. The Owner may name and change the beneficiaries of death proceeds: o while the Insured is living. o during the first 60 days after the date of death of the Insured, if the Insured was not the Owner immediately prior to the Insured's death. A change made during this 60 days may not be revoked. By Direct Beneficiary. A direct beneficiary may name and change the contingent beneficiaries and further payees of the direct beneficiary's share of the proceeds: o if the direct beneficiary is the Owner; o if, at any time after the death of the Insured, no contingent beneficiary or further payee of that share is living; or o if, after the death of the Insured, the direct beneficiary elects a payment plan. The interest of any other beneficiary in the share of that direct beneficiary will end. These direct beneficiary rights are subject to the Owner's rights during the 60 days after the date of death of the Insured. By Spouse (Marital Deduction Provision). o Power To Appoint. The spouse of the Insured will have the power alone and in all events to appoint all amounts payable to the spouse under the policy if: a. immediately before the Insured's death, the Insured was the Owner; and b. the spouse is a direct beneficiary; and c. the spouse survives the Insured. o To Whom Spouse Can Appoint. Under this power, the spouse can appoint: a. to the estate of the spouse; or b. to any other persons as contingent beneficiaries and further payees. o Effect Of Exercise. As to the amounts appointed, the exercise of this power will: a. revoke any other designation of beneficiaries; b. revoke any election of payment plan as it applies to them; and c. cause any provision to the contrary in Section 11 or 12 of this policy to be of no effect. Effective Date. A naming or change of a beneficiary will be made on receipt at the Home Office of a written request that is acceptable to the Company. The request will then take effect as of the date that it was signed. The Company is not responsible for any payment or other action that is taken by it before the receipt of the request. The Company may require that the policy be sent to it to be endorsed to show the naming or change. 11.3 SUCCESSION IN INTEREST OF BENEFICIARIES Direct Beneficiaries. The proceeds of this policy will be payable in equal shares to the direct beneficiaries who survive and receive payment. If a direct beneficiary dies before receiving all or part of the direct beneficiary's full share, the unpaid portion will be payable in equal shares to the other direct beneficiaries who survive and receive payment. Contingent Beneficiaries. At the death of all of the direct beneficiaries, the proceeds, or the present value of any unpaid payments under a payment plan, will be payable in equal shares to the contingent beneficiaries who survive and receive payment. If a contingent beneficiary dies before receiving all or part of the contingent beneficiary's full share, the unpaid portion will be payable in equal shares to the other contingent beneficiaries who survive and receive payment. Further Payees. At the death of all of the direct and contingent beneficiaries, the proceeds, or the present value of any unpaid payments under a payment plan, will be paid in one sum: o in equal shares to the further payees who survive and receive payment; or o if no further payees survive and receive payment, to the estate of the last to die of all of the direct and contingent beneficiaries who survive the Insured. Owner Or The Owner's Estate. If no beneficiaries are alive when the Insured dies, the proceeds will be paid to the Owner or to the Owner's estate. 11.4 GENERAL Transfer Of Ownership. A transfer of ownership of itself will not change the interest of a beneficiary. Claims Of Creditors. So far as allowed by law, no amount payable under this policy will be subject to the claims of creditors of a beneficiary. Succession Under Payment Plans. A direct or contingent beneficiary who succeeds to an interest in a payment plan will continue under the terms of the plan. 19 SECTION 12. PAYMENT OF POLICY BENEFITS 12.1 PAYMENT OF PROCEEDS Death proceeds will be paid under the payment plan that takes effect on the date of death of the Insured. The Interest Income Plan (Option A) will be in effect if no patient plan has been elected. Interest will accumulate from the date of death until a payment plan is elected or the proceeds are withdrawn in cash. Surrender proceeds will be paid in cash or under a payment plan that is elected. 12.2 PAYMENT PLANS Interest Income Plan (Option A). The proceeds will earn interest which may be received each month or accumulated. The first payment is due one month after the date on which the plan takes effect. Interest that has accumulated may be withdrawn at any time. Part or all of the proceeds may be withdrawn at any time. Installment Income Plans. Payments will be made each month on the terms of the plan that is elected. The first payment is due on the date that the plan takes effect. o Specified Period (Option B). The proceeds with interest will be paid over a period of from one to 30 years. The present value of any unpaid installments may be withdrawn at any time. o Specified Amount (Option D). Payments of not less than $10 per $1,000 of proceeds will be made until all of the proceeds with interest have been paid. The balance may be withdrawn at any time. Life Income Plans. Payments will be made each month on the terms of the plan that is elected. The first payment is due on the date that the plan takes effect. Proof of the date of birth, acceptable to the Company, must be furnished for each person on whose life the payments are based. o Single Life Income (Option C). Payments will be made for a chosen period and, after that, for the life of the person on whose life the payments are based. The choices for the period are: a. zero years; b. 10 years; c. 20 years; or d. a refund period which continues until the sum of the payments that have been made is equal to the proceeds that were placed under the plan. o Joint And Survivor Life Income (Option E). Payments are based on the lives of two persons. Level payments will be made for a period of 10 years and, after that, for as long as one or both of the persons are living. o Other Selections. The Company may offer other selections under the Life Income Plans. o Withdrawal. The present value of any unpaid payments that are to be made for the chosen period (Option C) or the 10 year period (Option E) may be withdrawn only after the death of all of the persons on whose lives the payments are based. o Limitations. A direct or contingent beneficiary who is a natural person may be paid under a Life Income Plan only if the payments depend on that beneficiary's life. A corporation may be paid under a Life Income Plan only if the payments depend on the life of the Insured or, after the death of the Insured, on the life of the Insured's spouse or dependent. Payment Frequency. On request, payments will be made once every 3, 6 or 12 months instead of each month. Transfer Between Payment Plans. A beneficiary who is receiving payment under a plan which includes the right to withdraw may transfer the amount withdrawable to any other plan that is available. Minimum Payment. The Company may limit the election of a payment plan to one that results in payments of at least $50. If payments under a payment plan are or become less than $50, the Company may change the frequency of payments. If the payments are being made once every 12 months and are less than $50, the Company may pay the present value or the balance of the payment plan. 12.3 PAYMENT PLAN RATES Interest Income And Installment Income Plans. Proceeds will earn interest at rates declared each year by the Company. None of these rates will be less than an annual effective rate of 2%. Interest of more than 2% will increase the amount of the payments or, for the Specified Amount Plan (Option D), increase the number of payments. The present value of any unpaid installments will be based on the 2% rate of interest. The Company may offer guaranteed rates of interest higher than 2% with conditions on withdrawal. Life Income Plans. Payments will be based on rates declared by the Company. These rates will provide at least as much income as would the Company's rates, on the date that the payment plan takes effect, for a single premium immediate annuity contract. Payments under these rates will not be less than the amounts that are described in Minimum Payment Rates. 20 Minimum Payment Rates. The minimum payment rates for the Installment Income Plans (Options B and D) and the Life Income Plans (Options C and E) are shown in the Minimum Payment Rate Tables. The Life Income Plan payment rates in those tables depend on the sex and on the adjusted age of each person on whose life the payments are based. The adjusted age is: o the age on the birthday that is nearest to the date on which the payment plan takes effect; plus o the age adjustment shown below for the number of policy years that have elapsed from the Policy Date to the date that the payment plan takes effect. A part of a policy year is counted as a full year. - -------------------------------------------------------------------------------- POLICY POLICY YEARS AGE YEARS AGE ELAPSED ADJUSTMENT ELAPSED ADJUSTMENT - -------------------------------------------------------------------------------- 1 to 8 0 33 to 40 -4 9 to 16 -1 41 to 48 -5 17 to 24 -2 49 or more -6 25 to 32 -3 - -------------------------------------------------------------------------------- 12.4 EFFECTIVE DATE FOR PAYMENT PLAN A payment plan that is elected will take effect on the date of death of the Insured if: o the plan is elected by the Owner; and o the election is received at the Home Office while the Insured is living. In all other cases, a payment plan that is elected will take effect: o on the date the election is received at the Home Office; or o on a later date, if requested. 12.5 PAYMENT PLAN ELECTIONS For Death Proceeds By Owner. The Owner may elect payment plans for death proceeds: o while the Insured is living. o during the first 60 days after the date of death of the Insured, if the Insured was not the Owner immediately prior to the Insured's death. An election made during this 60 days may not be changed. For Death Proceeds By Direct Or Contingent Beneficiary. A direct or contingent beneficiary may elect payment plans for death proceeds payable to that beneficiary, if no payment plan that has been elected is in effect. This right is subject to the Owner's rights during the 60 days after the date of death of the Insured. For Surrender Proceeds. The Owner may elect payment plans for surrender proceeds. The Owner will be the direct beneficiary. 12.6 INCREASE OF MONTHLY INCOME A direct beneficiary who is to receive proceeds under a payment plan may increase the amount of the monthly payment. This is done by the payment of an annuity premium to the Company at the time the payment plan elected under Section 12.5 takes effect. The amount that will be applied under the payment plan will be the net premium. The net premium is the annuity premium less a charge of not more than 2% and less any premium tax. The net premium will be applied under the same payment plan and at the same rates as the proceeds. The Company may limit this net premium to an amount that is equal to the direct beneficiary's share of the proceeds payable under this policy. MINIMUM PAYMENT RATE TABLES Minimum Monthly Income Payments Per $1,000 Proceeds INSTALLMENT INCOME PLANS (OPTIONS B AND D) - -------------------------------------------------------------------------------- PERIOD MONTHLY PERIOD MONTHLY PERIOD MONTHLY (YEARS) PAYMENT (YEARS) PAYMENT (YEARS) PAYMENT - -------------------------------------------------------------------------------- 1 $ 84.65 11 $ 9.09 21 $ 5.56 2 43.05 12 8.46 22 5.39 3 29.19 13 7.94 23 5.24 4 22.27 14 7.49 24 5.09 5 18.12 15 7.10 25 4.96 6 15.35 16 6.76 26 4.84 7 13.38 17 6.47 27 4.73 8 11.90 18 6.20 28 4.63 9 10.75 19 5.97 29 4.53 10 9.83 20 5.75 30 4.45 - -------------------------------------------------------------------------------- 21 PAYMENT RATE TABLES Monthly Income Payments Per $1,000 Benefits Guaranteed Fixed Payment or First Payment Under Variable Payment Plan
LIFE INCOME PLAN (OPTION C) - ------------------------------------------------------------------------------------------- SINGLE LIFE MONTHLY PAYMENTS - ------------------------------------------------------------------------------------------- MALE CHOSEN PERIOD (YEARS) FEMALE CHOSEN PERIOD (YEARS) ADJUSTED --------------------------- ADJUSTED ------------------------- AGE* ZERO 10 20 AGE* ZERO 10 20 - ------------------------------------------------------------------------------------------- 55 $ 4.48 $ 4.43 $ 4.28 55 $ 4.09 $ 4.07 $ 4.00 56 4.56 4.50 4.34 56 4.15 4.13 4.05 57 4.65 4.59 4.40 57 4.22 4.20 4.11 58 4.75 4.68 4.46 58 4.30 4.27 4.17 59 4.85 4.77 4.52 59 4.38 4.34 4.23 60 4.96 4.87 4.59 60 4.46 4.42 4.29 61 5.07 4.97 4.66 61 4.55 4.50 4.36 62 5.20 5.08 4.72 62 4.65 4.59 4.43 63 5.33 5.19 4.79 63 4.75 4.69 4.50 64 5.48 5.32 4.86 64 4.86 4.79 4.57 65 5.63 5.44 4.92 65 4.97 4.89 4.64 66 5.80 5.58 4.99 66 5.10 5.01 4.71 67 5.97 5.72 5.05 67 5.23 5.12 4.79 68 6.16 5.86 5.12 68 5.38 5.25 4.86 69 6.36 6.01 5.18 69 5.53 5.39 4.93 70 6.58 6.17 5.23 70 5.70 5.53 5.01 71 6.81 6.33 5.29 71 5.88 5.68 5.08 72 7.05 6.49 5.34 72 6.08 5.83 5.15 73 7.31 6.66 5.38 73 6.29 6.00 5.21 74 7.59 6.83 5.43 74 6.52 6.17 5.27 75 7.89 7.01 5.46 75 6.77 6.35 5.33 76 8.21 7.19 5.50 76 7.04 6.54 5.38 77 8.56 7.37 5.53 77 7.33 6.73 5.43 78 8.93 7.55 5.56 78 7.65 6.93 5.47 79 9.32 7.72 5.58 79 7.99 7.13 5.51 80 9.75 7.90 5.60 80 8.36 7.34 5.54 81 10.20 8.07 5.62 81 8.76 7.54 5.57 82 10.69 8.23 5.63 82 9.20 7.74 5.59 83 11.21 8.39 5.64 83 9.67 7.93 5.61 84 11.76 8.54 5.65 84 10.18 8.12 5.63 85 and over 12.35 8.68 5.66 85 and over 10.74 8.30 5.64 - -------------------------------------------------------------------------------------------
LIFE INCOME PLAN (OPTION E)
- -------------------------------------------------------------------------------------- JOINT AND SURVIVOR MONTHLY PAYMENTS - -------------------------------------------------------------------------------------- MALE FEMALE ADJUSTED AGE* ADJUSTED -------------------------------------------------------------------- AGE* 55 60 65 70 75 80 85 and over - -------------------------------------------------------------------------------------- 55 $ 3.79 $ 3.93 $ 4.07 $ 4.19 $ 4.29 $ 4.35 $ 4.39 60 3.87 4.07 4.27 4.46 4.61 4.73 4.80 65 3.94 4.18 4.45 4.73 4.98 5.19 5.32 70 3.99 4.27 4.61 4.99 5.37 5.70 5.94 75 4.02 4.34 4.73 5.20 5.72 6.21 6.60 80 4.05 4.38 4.81 5.35 6.00 6.67 7.24 85 and over 4.06 4.40 4.86 5.45 6.18 7.00 7.75 - --------------------------------------------------------------------------------------
* See Section 12.3. 22 AMENDMENT TO SECTION 6 THE SEPARATE ACCOUNT FOR VARIABLE WHOLE LIFE AS OF THE DATE OF ISSUE, THE SECOND PARAGRAPH OF SECTION 6.1 IS AMENDED TO READ AS FOLLOWS: The Separate Account has several Divisions, as shown on page 7. Assets of the Separate Account are invested in shares of corresponding mutual funds or portfolios of mutual funds, both of which are referred to in this policy as Portfolios. Shares of the Portfolios are purchased for the Separate Account at their net asset value. The Company may make available additional Divisions and Portfolios. AS OF THE DATE OF ISSUE, THE FIFTH AND SIXTH PARAGRAPHS OF SECTION 6.1 ARE AMENDED TO READ AS FOLLOWS: The Owner may exchange this policy for a fixed benefit life insurance policy being offered at that time by the Company if the Portfolio changes its investment advisor or has a material change in its investment objectives or restrictions. The Company will notify the Owner if there is any such change. The Owner may exchange this policy within 60 days after the notice or the effective date of the change, whichever is later. If, in the judgment of the Company, a Portfolio no longer suits the purposes of this policy due to a change in its investment objectives or restrictions, the Company may substitute shares of another Portfolio. Any such substitution will be subject to any required approval of the Securities and Exchange Commission (SEC), the Wisconsin Commissioner of Insurance or other regulatory authority. Secretary NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY VCL.FUNDS.(0799) POLICY APPLICATION SUPPLEMENT FOR VARIABLE WHOLE LIFE WITH ADDITIONAL PROTECTION THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY 720 East Wisconsin Avenue Milwaukee, Wisconsin 53202 INSURED: -------------------- POLICY: Variable Whole Life (Minimum Guaranteed Death Benefit) $ ------ with Additional Protection $ ------- Initial Death Benefit $ -------
Other Annual Initial Premium Premium ------- ------- Variable Whole Life Premium $ ------- Additional Protection Premium $ ------- Premiums to Increase Policy Value: Scheduled Additional Premium $ ------- Unscheduled Additional Premium $ ------- Premiums to Purchase Variable Paid-Up Insurance: Scheduled Additional Premium $ ------- Unscheduled Additional Premium $ ------- Waiver of Premium Benefit $ ------- Additional Purchase Benefit $ ------- Amount Each Purchase Date $ -------
ALLOCATION OF NET PREMIUMS USE WHOLE PERCENTAGES ONLY. Up to ten choices can be selected. There must be a minimum of 10% in each Division selected. If dollar cost averaging is used, the Money Market Division is utilized and considered one choice (with nine additional selections available). If dollar cost averaging is desired, allocate 100% to the Money Market Division and complete the monthly dollar cost averaging section. Select Bond Division % Growth & Income Stock Division % ----- ----- International Equity Division % Index 400 Stock Division % ----- ----- Money Market Division % Small Cap Growth Stock Division % ----- ----- Balanced Division % Russell Multi-Style Equity Division % ----- ----- Index 500 Stock Division % Russell Aggressive Equity Division % ----- ----- Aggressive Growth Stock Division % Russell Non-US Division % ----- ----- High Yield Bond Division % Russell Real Estate Securities Division % ----- ----- Growth Stock Division % Russell Core Bond Division % ----- ----- Total 100% ---- ----
Illustration No. ----------- 90-1 VCL.Supp.(0799) Page 1 of 4 MONTHLY DOLLAR COST AVERAGING To elect monthly dollar cost averaging, choose one of the following options and indicate the desired allocation of transfers below: Option One: Transfer funds from the Money Market Division in monthly - -- installments such that by the end of the policy year the balance in the Money Market division will be zero. - -- Option Two: Transfer the following amount from the Money Market Division each month until the balance is zero: $_____________. Use whole percentages only. There must be a minimum of 10% in each Division selected. Select Bond Division % Growth & Income Stock Division % ----- ----- International Equity Division % Index 400 Stock Division % ----- ----- Balanced Division % Small Cap Growth Stock Division % ----- ----- Index 500 Stock Division % Russell Multi-Style Equity Division % ----- ----- Aggressive Growth Stock Division % Russell Aggressive Equity Division % ----- ----- High Yield Bond Division % Russell Non-US Division % ----- ----- Growth Stock Division % Russell Real Estate Securities Division % ----- ----- Russell Core Bond Division % ----- Total 100% ---- ----
ANNUAL DIVIDENDS If Additional Protection is present and there is no Excess Amount, dividends will be used to increase Policy Value. In other situations, until otherwise directed, dividends will: Increase Policy Value - ----- Reduce current premium with excess used to increase Policy Value - ----- Purchase Variable Paid-Up Additional Insurance - ----- Be paid in cash - ----- POLICY LOAN INTEREST RATE OPTION 5% - ----- Variable Rate - ----- OWNER'S ADDRESS Insured's address or: - ----- - ----- ------------------------------------ Street & No. or R.F.D. ------------------------------------ City State Zip Insured: --------------------- Illustration No. ------------- 90-1 VCL.Supp.(0799) Page 2 of 4 The Company is required to make the following inquiries for purposes of determining the suitability of this sale. All responses will be kept confidential. 1. In addition to providing a benefit upon death, what is the purpose for the purchase? To fund a trust ----- To supplement retirement income ----- To supplement education funding ----- Other (specify) ----- -------------------------------------------------- 2. By whom will the purchase be funded? --------------------------------------- Annual income (all sources) of person/trust funding the purchase: $ -------- Net worth of person/trust funding the purchase: $ -------------------------- 3. Applicant's experience with the following: Up to Five or Five More None Years Years Mutual Funds ----- ----- ----- Individual Common Stocks ----- ----- ----- Variable Annuities ----- ----- ----- Variable Life Insurance ----- ----- ----- Insured: --------------------- Illustration No. ------------- 90-1 VCL.Supp.(0799) Page 3 of 4 I believe that a Variable Whole Life with Additional Protection policy is consistent with my investment objectives. I understand that an illustration of benefits, including death benefits and cash values, is available upon request assuming a hypothetical annual investment return of 0% and another rate of my choice not greater than 12%. I UNDERSTAND THAT THE DEATH BENEFIT FOR THE VARIABLE WHOLE LIFE WITH ADDITIONAL PROTECTION POLICY APPLIED FOR MAY INCREASE OR DECREASE TO REFLECT THE INVESTMENT EXPERIENCE OF THE NORTHWESTERN MUTUAL VARIABLE LIFE ACCOUNT. PROVIDED ALL REQUIRED PREMIUMS ARE PAID AS OF THE DUE DATE AND PROVIDED THERE IS NO POLICY DEBT, THE DEATH BENEFIT WILL NOT BE LESS THAN THE SUM OF THE VARIABLE WHOLE LIFE AND ADDITIONAL PROTECTION AMOUNTS IN THE FIRST XX YEARS AND NOT LESS THAN THE VARIABLE WHOLE LIFE AMOUNT THEREAFTER. I UNDERSTAND THAT THE CASH VALUE FOR THE VARIABLE WHOLE LIFE WITH ADDITIONAL PROTECTION POLICY APPLIED FOR MAY INCREASE OR DECREASE TO REFLECT THE INVESTMENT EXPERIENCE OF THE NORTHWESTERN MUTUAL VARIABLE LIFE ACCOUNT. THERE ARE NO GUARANTEED MINIMUM CASH VALUES. I understand that if investment experience and/or dividends are less than illustrated a greater number of premiums may have to be paid in cash than what was shown on any sales document, including illustrations that assume a zero cash outlay in some years. If this policy is issued other than in the [Select] underwriting classification, I will be notified by a letter from Northwestern Mutual Life. Before accepting the policy, I should request and review revised copies of any sales document I relied upon in the decision to purchase. I acknowledge receipt of the prospectus for Variable Whole Life with Additional Protection. dated: ____ /____ /____ MO. DAY YEAR [I direct that this policy be changed to a paid up Variable Whole Life Policy at the first policy anniversary. ____ ____ ] YES NO DATE: ____ /____ /_____ MO. DAY YEAR SIGNATURE OF APPLICANT: ---------------------- Based on the information furnished by the Applicant in this application, I certify that I have reasonable grounds for believing the purchase of the policy applied for is suitable for the Applicant. I further certify that a current prospectus was delivered and that no written sales materials other than those furnished by the Home Office were used. Signature of Licensed Agent: ---------------------------------------------------- (Registered Representative) Based on the information furnished by the Applicant in this application, I certify that I have reasonable grounds for believing the purchase of the policy applied for is suitable for the Applicant. Signature of General Agent: ----------------------------------------------------- For Office Use Only VCL, Illustration No. -------------- ------------------- Dividend Scale Year 1998 QQ Und. Amt. $ ------------------------ Policy Number ---------------------- Page 4 of 4 90-1 VCL.Supp.(0799) HOL03 116607 THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY No.......... MILWAUKEE, WISCONSIN
LIFE INSURANCE APPLICATION |_| Life & Disability Application ============================================================================================================================= 1. INSURED -------------------------------------------------------------------------------- |x| Mr. |_| Mrs. |_| Ms. John J Doe |X| Male |_| Dr. |_| Other ______ -------------------------------------------------------------------------------- |_| Female First Middle Initial Last |_| Companion policies |_| 1035 Exchange STATE OF BIRTH 2A. INSURED'S DATE OF BIRTH 6 / 1 / 60 B. (or FOREIGN COUNTRY): WI -------------- -------- Month Day Year 3. APPLICANT, if other than Insured |_| Mr. |_| Mrs. |_| Ms. ________________________________________________________ Relationship |_| Dr. |_| Other______ First Middle Initial Last to Insured ________________________ If business organization: |_| Corporation |_| Partnership |_| Other type of business __________________________________ 4. RESIDENCE OF INSURED 1234 Main Street ---------------------------------------------------------------------------------------------------- Street & No. or RFD This address will be used for all of the Insured's policies. Milwaukee Milwaukee WI 53200 --------------------------------------------------------------------------------------- City County State Zip Code 5A. PREMIUM PAYER Send premium and other notices regarding this policy 5B. PAYER'S DAYTIME TELEPHONE NUMBER: Insurance Service to: |X| Insured |_| Owner |_| Applicant (222) 222-2222 to: |_| Account (ISA) |_| Other___________________________ -------------------- Payer Full Name Area Code or at: |_| Insured's address in 4 or 5C. PAYER'S TAXPAYER IDENTIFICATION NUMBER ________________________________ (444) 444-4444 Street & No. or RFD -------------------- See TIN Instructions ________________________________ City ________________________________ State Zip Code 6. Has an application or informal inquiry ever been made to Northwestern Mutual Life for annuity, life or disability insurance on the life of the Insured? |_| Yes |X| No If yes, the last policy number is ______________________________ ============================================================================================================================ 7. Complete this question only if exercising an ADDITIONAL PURCHASE BENEFIT OPTION. (Smoking questionnaire may be required.) A. List policy number(s) under which an option is being exercised. 1. _____________ 2. _____________ 3. _____________ B. This application is: |_| Regular Purchase |_| Advance Purchase (Complete item C. below) C. If this is an Advance Purchase, the event is: |_| Marriage |_| Birth of a child |_| Adoption of a child Name of: |_| Spouse ____________________________ Date and place of marriage, birth, or final decree of adoption: |_| Child _____/___/____ ____________________________________________ Month Day Year City State D. Is the amount applied for more than the additional purchase option amount available? |_| Yes |_| No If yes, what is the excess amount to be underwritten? $____________________________ ============================================================================================================================= 8. SPECIAL DATE |_| Short term - Policy Date will coincide with ISA Payment Date. (For Monthly ISA only) Prepaid: |_| Short term to _______/_____/______ |_| Date to save age |_| Backdate to _______/_____/______ Month Day Year Month Day Year Non-prepaid: |_| Specified future date _____/___/____ |_| Date to save age |_| Backdate to _______/_____/______ Month Day Year Month Day Year ============================================================================================================================= POLICY APPLIED FOR (For CompLife plans do not complete A & B. Go to C.) 9A. PLAN and AMOUNT 9B. ADDITIONAL BENEFITS (1) Variable Whole Life with Additional Protection (1)|_| (2)|_| Waiver of Premium - -------------------------------------------------- Plan (1)|_| (2)|_| Accidental Death (1) $________ (2) $________ $ see attached supplement - -------------------------------------------------- (1)|_| (2)|_| Additional Purchase (1) $________ (2) $________ Amount Benefit Amt. per Amt. per (2) (1)|_| (2)|_| Payor Benefit option option - -------------------------------------------------- Plan (1)|_| (2)|_| Index Protection $ - -------------------------------------------------- (1)|_| (2)|_| Other________________ Amount ============================================================================================================================= 90-1 L.I. (1194) (page 1)
==================================================================================================================================== 9C. FLEXIBLE LIFE PLANS (CompLife) |_| Whole Life $______________ with Additional Protection $______________ (Custom CompLife) Amount Amount (1) |_| Additional initial premium $__________ Use to: |_| Reduce term insurance _____% (2) |_| Inflation Protection Option |_| Increase coverage _____% |_| Whole Life $__________ with a premium for Increasing Insurance $____________________ (Increasing CompLife) Amount Level annual premium |_| Additional initial premium $_______________ |_| Executive Whole Life $__________ with Additional Protection $__________ (Executive CompLife) Amount Amount Premium for Increasing Insurance $__________ Use to: |_| Convert term insurance _____% |_| Increase coverage _____% |_| Additional initial premium $__________ Use to: |_| Convert term insurance _____% |_| Increase coverage _____% |_| Whole Life $__________ with Adjustable Term Protection $__________ (Adjustable CompLife) Amount Amount (1) a. |_| Scheduled annual additional $______________________ |_| Reduce term insurance ____% Level annual premium Use to: |_| Increase coverage ____% b. |_| Annual increase in additional premium ____________ $_______________ (Not more than 20 years, or to age 69, if less) No. of years Annual increase (2) |_| Additional initial premium $_______________ Use to: |_| Reduce term insurance ____% |_| Increase coverage ____% (3) Only one may be selected: |_| Inflation Protection Option |_| Scheduled annual increase in term amount ____________ $____________________ (Not more than 20 years. or to age 69. if less) No. of years Annual increase amt. |_| Corporate Whole Life (See attached Supplement) 9D. ADDITIONAL BENEFITS FOR FLEXIBLE LIFE PLANS |_| Waiver of Premium |_| Additional Purchase Benefit $___________________________________ Amount per option |_| Accidental Death $_________________ |_| Other___________________________________________________________ Amount ==================================================================================================================================== 10. If an additional benefit cannot be approved, should the Company issue the policy without the benefit? |_|Yes |_| No 11. Shall the PREMIUM LOAN provision, if available, become operative according to its terms? |X| Yes |_| No 12. ANNUAL DIVIDENDS until otherwise directed will: see attached supplement First policy Second policy |_| |_| Reduce current premium. If flexible plan Additional Protection or Adjustable Term, additions purchased by eligible dividend will be used to: |_| |_| Purchase paid-up additions. |_| Reduce term insurance ___% |_| |_| Accumulate at interest. |_| Increase coverage ___% |_| |_| Be paid in cash. |_| |_| Be used for combination of options above (Complete form 18-1364). 13. POLICY LOAN INTEREST RATE OPTION |_| 8% |_| Variable Rate see attached supplement 14. PREMIUM PAYABLE |X| Annually |_| Semiannually |_| Quarterly |_| Single |_| Monthly (Variable Life Only ==================================================================================================================================== 90-1 L.I. (1194) (page 2)
================================================================================ ------------------------------------------------------------------ INSURED John J Doe ------------------------------------------------------------------ First Middle Initial Last 15A. DIRECT BENEFICIARY Jane M Doe spouse --------------------------------------------------------------- First Middle Initial Last Relationship to Insured --------------------------------------------------------------- First Middle Initial Last Relationship to Insured --------------------------------------------------------------- First Middle Initial Last Relationship to Insured B. CONTINGENT BENEFICIARY --------------------------------------------------------------- First Middle Initial Last Relationship to Insured --------------------------------------------------------------- First Middle Initial Last Relationship to Insured --------------------------------------------------------------- First Middle Initial Last Relationship to Insured Box (1) or (2) may be selected to include all of the children or brothers and sisters without naming them, or to add to the contingent beneficiaries named. Box (3) may be selected to provide for the children of a deceased contingent beneficiary; use only if contingent beneficiaries are named and/or box (1) or (2) is checked, NOTE: The word "children" includes child and any legally adopted child. |_| (1) and all (other) children of the Insured. |_| (2) and all (other) brothers and sisters of the Insured born of the marriage of or legally adopted by ____________ and ____________ before the Insured's death. |_| (3) any amount that would have been paid to a deceased contingent beneficiary, if living, will be paid in one sum and in equal shares to the children of that contingent beneficiary who survive and receive payment. C. FURTHER PAYEES --------------------------------------------------------------- First Middle Initial Last Relationship to Insured --------------------------------------------------------------- First Middle Initial Last Relationship to Insured |_| D. SEE ATTACHED SUPPLEMENT FORM (To be used in place of designations above) ================================================================================ 16. The OWNER will be: (Caution: A minor owner cannot exercise policy rights. If the Insured is under age 15, consider selecting item D, E or F.) Select only one. |X| A. Insured |_| B. Applicant |_| C. Other _____________________________________ First Middle Initial Last _____________________________________ Relationship to Insured |_| D. Applicant. If the Applicant dies before the Insured, the Insured will be the Owner. |_| E. Applicant. If the Applicant dies before the Insured, the Owner will be: _____________________________________________ First Middle Initial Last _____________________________________________ Relationship to Insured If both die before the Insured, the Insured will be the Owner. |_| F. Applicant until the Insured attains the age of ______ years. If the Applicant dies before the Insured, the Owner will be: _____________________________________________ First Middle Initial Last ____________________________until the Insured Relationship to Insured attains such age. Upon the Insured attaining such age, or if both die before the Insured, the Insured will be the Owner. |_| G. SEE ATTACHED SUPPLEMENT FORM. (To be used in place of designations above) ================================================================================ RESIDENCE OF OWNER |X| Insured's address in 4 |_| Premium payer's address in 5A or ___________________________________________________________________________ Street & No. or RFD ___________________________________________________________________________ City State Zip Code OWNERS TAXPAYER IDENTIFICATION NUMBER (See Instructions) ________________________________________________________ ================================================================================ 17. Has the premium for the policy applied for been paid to the agent in exchange for the Conditional Life Insurance Agreement with the same number as this application? |X| Yes |_| No 18A. Will the insurance applied for replace any Northwestern Mutual Life insurance (or annuities) on the Insured's life? If yes, agent should explain and send required papers. |_| Yes |X| No B. Will the insurance applied for replace life insurance (or annuities) on the insured's life from a source other than the Northwestern Mutual Life? If yes, agent should explain and send required papers. |_| Yes |X| No ================================================================================ 90-1 L.I. (1194) (page 3) PERSONAL HISTORY QUESTIONS TO BE ANSWERED BY INSURED |_| Payor Benefit for Applicant (Payor)_________________________________________ First Middle Initial Last Payor's Date of Birth _____/___/____ Policy Number _________ Relationship Month Day Year to Insured _______ 20. Have you ever had life, disability or health insurance declined, rated, modified, issued with an exclusion rider, cancellel, or not renewed? (If yes, explain in REMARKS) ..................................... |_|Yes |X| No 21. When was your last examination or application for life, disability, or accidental death insurance? Month ______________ Year _________ Company ___________________ |X| None 22. Indicate below whether any other life i surance on your life is Individual (Ind) or Group (Grp) and identify In Force (I), Pending (P) or Contemplated (C) or |X| NONE
- ----------------------------------------------------------------------------------------------------- Insurer Ind or Grp Life Insurance Amount Accidental Death Amount I, P, or C - ----------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------- - -----------------------------------------------------------------------------------------------------
23. Marital Status: |_| Single, Widowed or Divorced |X| Married 24. a Citizen of: |X| USA |_| Other If other: Visa Type: ____________________ Visa Number:_____________________ 25. Do you regularly travel outside the U.S.A. or do you have plans to leave the U.S.A. for travel or residence? ............................. |_| Yes |X| No If yes, complete the chart below.
- ----------------------------------------------------------------------------------------------------- Destination Number of Trips Duration of Departure Date Purpose of Trip (List all Cities and Countries) Per Year Each Trip This Yr. Last Yr. (No. of Days) (Month/Year) - ----------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------- - -----------------------------------------------------------------------------------------------------
26. a. What is your occupation(s)? Lawyer What are your duties? __________________________________________________ b. Employer(s) Name: ABC Corporation Address: 5678 Main Street City, State, ZipCode: Milwaukee, WI 53200 c. How long employed? 5 years (If less than 2 years, explain in REMARKS) 27. (Not required if under age 17) Are you a member of, or do you plan on joining any branch of the Armed Forces or reserve military unit? If yes, complete Military Section 90-5 .............................. |_| Yes |X| No 28. (Not required if under age 16) Except as a passenger on a regularly scheduled flight, have you flown within the past 2 ears, or do you have plans to fly in the future? If yes, complete Aviation Section 90-5 ................................................ |_| Yes |X| No 29. (Not required if under age 10) In the past 2 years have you participated in or do you have plans to participate in: racing (automobile, snowmobile, motorcycle, boat or go-cart), underwater or sky diving, hang gliding, bungee jumping, mountain or rock climbing, or rodeos? If yes, complete Avocation Section 90-6 ................................................ |_| Yes |X| No 30. (Not required if under age 16) a. What is your automobile driver's license number? ABC 123 45678 State WI or, |_| I do not have a driver's license. b.In the past 5 years, have you been in a motor vehicle accident, been charged with a moving violation of any motor vehicle law, or had your license restricted, suspended or revoked? If yes, explain in the chart below ...................................................... |_| Yes |X| No
- --------------------------------------------------------------------------------------------- Type of Details (Speeding. Reckless Driving While Action Accident Date Intoxicated, Etc.) (Citation, Fine, Etc.) (Yes or No) - --------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------
ADDITIONAL REMARKS ================================================================================ 90-1 L.I. (1194) (page 4) The Insured consents to this application and declares that the answers and statements made on this application are correctly recorded, complete and true to the best of the Insured's knowledge and belief. Answers and statements brought to the attention of the agent, medical examiner, or paramedical examiner are not considered information brought to the attention of the Company unless stated in the application. Statements in this application are representations and not warranties. It is agreed that: (1) If the premium is not paid when the application is signed, no insurance will be in effect. The insurance will take effect at the time the policy is delivered and the premium is paid, if: the Insured is living at the time; and the answers and statements in the application are then true to the best of the Insured's knowledge and belief. (2) If the premium is paid when the application is taken, no life insurance will be in effect if Section I. of the Conditional Life Insurance Agreement applies. (3) If the policy is issued in an extra premium class, acceptance of the policy will amend it so that extended term insurance can be in force only if: the Company gives its consent; or the loan value is not large enough to grant a premium loan. If a premium is not paid within the grace period and extended term insurance cannot be in force, paid-up insurance will be selected. (4) No agent is authorized to make or alter contracts or to waive any of the Company's rights or requirements. The owner of the policy applied for herein certifies, under penalties of perjury, (1) that the number shown in Question 16 of this application is his correct Taxpayer Identification Number (or he is waiting for a number to be issued) and (2) he is not subject to backup withholding either because he has not been notified by the Internal Revenue Service (IRS) that he is subject to backup withholding as a result of a failure to report all interest or dividends, or the IRS has notified him that he is no longer subject to backup withholding. (See instructions). INSURED'S AUTHORIZATION TO OBTAIN AND DISCLOSE INFORMATION I authorize Northwestern Mutual Life, its agents, employees, reinsurers, insurance support organizations and their representatives to obtain information about me to evaluate this application and to verify information in this application. This information will include: (a) age; (b) medical history, condition and care; (c) physical and mental health; (d) occupation; (e) income and financial history; (f) foreign travel; (g) avocations; (h) driving record; (i) other personal characteristics; and (j) other insurance. This authorization extends to information on the use of alcohol, drugs and tobacco; the diagnosis or treatment of HIV (AIDS virus) infection and sexually transmitted diseases; and the diagnosis and treatment of mental illness. During the time this authorization is valid it extends to information required to determine eligibility for benefits under any policy issued as a result of this application. I authorize any person, including any physician, health care professional, hospital, clinic, medical facility, government agency including the Veterans and Social Security Administrations, the MIB, Inc., employer, consumer reporting agency, accountant, tax preparer, or other insurance company, to release information about me to Northwestern Mutual Life or its representatives on receipt of this Authorization. Northwestern Mutual Life or its representatives may release this information about me to its reinsurer, to the MIB, Inc., or to another insurance company to whom I have applied or to whom a claim has been made. No other release may be made except as allowed by law or as I further authorize. I have received a copy of the Medical Information Bureau and Fair Credit Reporting Act notices. I authorize Northwestern Mutual Life to obtain an investigative consumer report on me. |_| I request to be interviewed if an investigative consumer report is done. This authorization is valid for 30 months from the date it is signed. A copy of this authorization is as valid as the original and will be provided on request. The signatures below apply to the authorization and to the application. (signed) John J Doe (signed) John J Doe - ---------------------------------------- ------------------------------------ Signature of INSURED (if other than Signature of APPLICANT Applicant and 15 years of age or over) Print name of Insured if under age 15. - ---------------------------------------- ------------------------------------ Signature of PARENT OR GUARDIAN (if other Signature of OWNER (if other than than Applicant and Insured is a minor) Applicant or Insured) Signed at Milwaukee Milwaukee WI (signed) Norm M Western ------------------------------ ------------------------------------ City, County & State Signature of LICENSED AGENT Date June 1, 1995 ------------------------------ ================================================================================ 90-1 L.I. (1194) (page 5) ================================================================================ It is recommended that you ... read your policy. notify your Northwestern Mutual agent or the Company at 720 East Wisconsin Avenue, Milwaukee, WI 53202, of an address change. call your Northwestern Mutual agent for information--particularly on a suggestion to terminate or exchange this policy for another policy or plan. Election of Trustees The members of The Northwestern Mutual Life Insurance Company are its policyholders of insurance policies and deferred annuity contracts. The members exercise control through a Board of Trustees. Elections to the Board are held each year at the annual meeting of members. Members are entitled to vote in person or by proxy. VARIABLE WHOLE LIFE POLICY WITH ADDITIONAL PROTECTION Eligible For Annual Dividends Insurance payable at death of Insured. Fixed premiums payable for period shown on page 3. Benefits reflect investment results. Variable benefits described in Section 1, 3, 6, 7 and 8. THE DEATH BENEFIT MAY INCREASE OR DECREASE DAILY DEPENDING ON INVESTMENT RESULTS. HOWEVER, IF NO PREMIUM IS UNPAID AS OF ITS DUE DATE, THE DEATH BENEFIT WILL NOT BE LESS THAN THE MINIMUM GUARANTEED DEATH BENEFIT SHOWN ON PAGE 3, LESS ANY POLICY DEBT. THE CASH VALUE UNDER THIS POLICY MAY INCREASE OR DECREASE DAILY DEPENDING ON INVESTMENT RESULTS. THERE IS NO GUARANTEED MINIMUM CASH VALUE. NORTHWESTERN MUTUAL LIFE (R) ================================================================================ EX-99.A(5)(B) 3 EXHIBIT 99.A(5)(B) Exhibit A(5)(b) ================================================================================ The Northwestern Mutual Life Insurance Company agrees to pay the benefits provided in this policy, subject to its terms and conditions. Signed at Milwaukee, Wisconsin on the Date of Issue. /s/ James D. Ericson /s/ John M. Bremer PRESIDENT AND C.E.O. SECRETARY VARIABLE WHOLE LIFE POLICY WITH ADDITIONAL PROTECTION Eligible For Annual Dividends Insurance payable at death of Insured. Premiums payable for period shown on page 3. Benefits reflect investment results. Variable benefits described in Sections 1, 3, 6, 7 and 8. THE DEATH BENEFIT MAY INCREASE OR DECREASE DAILY DEPENDING ON INVESTMENT RESULTS. HOWEVER, IF NO PREMIUM IS UNPAID AS OF ITS DUE DATE, THE DEATH BENEFIT WILL NOT BE LESS THAN THE MINIMUM GUARANTEED DEATH BENEFIT SHOWN ON PAGE 3, LESS ANY POLICY DEBT. THE CASH VALUE UNDER THIS POLICY MAY INCREASE OR DECREASE DAILY DEPENDING ON INVESTMENT RESULTS. THERE IS NO GUARANTEED MINIMUM CASH VALUE. Right To Return Policy - Please read this policy carefully. The policy may be returned by the Owner for any reason within (1) ten days after it was received or (2) forty-five days after the application was signed, whichever is later. The policy may be returned to your agent or to the Home Office of the Company at 720 East Wisconsin Avenue, Milwaukee, WI 53202. If returned, the policy will be considered void from the beginning. Any premium paid will then be refunded. NORTHWESTERN MUTUAL LIFE (TM) ================================================================================ Insured John J Doe Age and Sex 35 Male - SN Policy Date June 1, 1995 Policy Number 12 345 678 Plan Variable Whole Life Initial Total With Additional Protection Death Benefit $ 150,530 This policy is a legal contract between the Owner and The Northwestern Mutual Life Insurance Company. Read your policy carefully. GUIDE TO POLICY PROVISIONS BENEFITS AND PREMIUMS SECTION 1. THE CONTRACT Life Insurance Benefit payable on death of Insured. Incontestablity. Suicide. Definition of dates. SECTION 2. OWNERSHIP Rights of the Owner. Assignment as collateral. SECTION 3. ADDITIONAL PROTECTION Description of Additional Protection. Reduction by Company. Owners right to continue existing protection. SECTION 4. PREMIUMS AND REINSTATEMENT Payment of premiums. Grace period of 31 days to pay premium. Amount of premium and premium adjustments. Unscheduled additional premium payments. Premium suspension. How to reinstate the policy. SECTION 5. DIVIDENDS Annual dividends. Use of dividends. Dividend at death. SECTION 6. THE SEPARATE ACCOUNT The Separate Account and the investment divisions. Allocation of net premiums, dividends and deductions. Transfer of assets. SECTION 7. DETERMINATION OF VALUES Policy Value. Cost of insurance charges. Excess amount. Variable paid-up additional insurance. SECTION 8. CASH VALUES AND PAID-UP INSURANCE Cash value. Paid-up insurance if premium is not paid. Surrender. SECTION 9. LOANS AND WITHDRAWALS Policy loans. Interest on loans. Withdrawals. SECTION 10. EXCHANGE OF POLICY SECTION 11. BENEFICIARIES Naming and change of beneficiaries. Marital deduction provision for spouse of Insured. Succession in interest of beneficiaries. SECTION 12. PAYMENT OF POLICY BENEFITS Payment of death or surrender proceeds. Payment plans for policy proceeds. Right to increase income under payment plans. Guaranteed payment tables. ADDITIONAL BENEFITS (if any) APPLICATION BENEFITS AND PREMIUMS DATE OF ISSUE - JUNE 1, 1995 Initial Annual Payable Plan and Additional Benefits Amount Premiums for Variable Whole Life With Additional Protection Minimum Guaranteed Death Benefit $100,000 $1,312.00 Life Additional Protection 50,000* 184.00 Life Premiums To Increase Policy Value Scheduled Additional Premium 1,000.00 Life Excess Amount 530# Initial Totals $150,530# $2,496.00 * This amount of Additional Protection is guaranteed to June 1, 2006 unless the guaranteed period is terminated sooner under section 3.1. To continue this amount of Additional Protection after June 1, 2006, an increased premium may be required under section 3.2. # This amount may increase or decrease daily depending on investment results. A premium is payable June 1, 1995 and every June 1 after that. The first premium is $2,496.00. The initial minimum premium is $1,496.00. This policy is issued on a select basis. Direct Beneficiary Jane M Doe, spouse of the Insured Owner John J Doe, the Insured Insured John J Doe Age and Sex 35 Male - SN Policy Date June 1, 1995 Policy Number 12 345 678 Plan Variable Whole Life Initial Total With Additional Protection Death Benefit $ 150,530 Page 3 POLICY NUMBER 12 345 678 -LIST OF CONTRACTUAL MINIMUMS- The minimum increase in the scheduled additional premium is $100.00. The minimum unscheduled additional premium is $100.00. The minimum withdrawal amount is $250.00. TABLE OF DEDUCTIONS FROM ANNUAL PREMIUMS (see section 4.5) an amount not more than $114.00; plus an amount not more than 8% of the remainder of the premium TABLE OF DEDUCTIONS FROM ADDITIONAL PREMIUMS (see section 4.5) an amount not more than 8% TABLE OF CHARGES UNDER PREMIUM SUSPENSION (see section 7.1) if premiums are suspended as described in section 4.6. an amount of not more than $104.88 per year TABLE OF SURRENDER CHARGES (see section 8.1) Following Payment Policy of Premium Due on Surrender Year June 1, Charge 1 1995 $ 694.80 2 1996 705.60 3 1997 716.40 4 1998 727.20 5 1999 738.00 6 2000 696.00 7 2001 654.00 8 2002 612.00 9 2003 570.00 10 2004 528.00 11 2005 422.40 12 2006 316.80 13 2007 211.20 14 2008 105.60 15 and later 2009 0.00 Page 4 POLICY NUMBER 12 345 678 TABLE OF COST OF INSURANCE RATES Beginning Beginning of Policy of Policy Year June 1, Rate Year June 1, Rate 1 1995 .00164 36 2030 .03174 2 1996 .00173 37 2031 .03551 3 1997 .00183 38 2032 .03889 4 1998 .00196 39 2033 .04337 5 1999 .00210 40 2034 .04839 6 2000 .00225 41 2035 .05384 7 2001 .00243 42 2036 .05965 8 2002 .00260 43 2037 .06577 9 2003 .00281 44 2038 .07213 10 2004 .00301 45 2039 .07892 11 2005 .00326 46 2040 .08640 12 2006 .00351 47 2041 .09477 13 2007 .00378 48 2042 .10426 14 2008 .00409 49 2043 .11502 15 2009 .00441 50 2044 .12680 16 2010 .00476 51 2045 .13945 17 2011 .00518 52 2046 .15261 18 2012 .00565 53 2047 .16638 19 2013 .00619 54 2048 .18045 20 2014 .00681 55 2049 .19503 21 2015 .00748 56 2050 .21029 22 2016 .00821 57 2051 .22651 23 2017 .00900 58 2052 .24413 24 2018 .00984 59 2053 .26404 25 2019 .01075 60 2054 .28936 26 2020 .01180 61 2054 .32489 27 2021 .01296 62 2055 .38097 28 2022 .01430 63 2056 .47769 29 2023 .01586 64 2057 .65738 30 2024 .01762 65 2058 1.00000 31 2025 .01955 32 2026 .02164 33 2027 .02387 34 2028 .02624 35 2029 .02882 Page 5 POLICY NUMBER 12 345 678 TABLE OF MAXIMUM ANNUAL PREMIUMS PER $1,000 OF TERM INSURANCE Beginning Beginning of Policy of Policy Year June 1, Rate Year June 1, Rate 11 2005 $ 3.53 41 2035 $ 56.40 12 2006 3.79 42 2036 62.47 13 2007 4.08 43 2037 68.86 14 2008 4.40 44 2038 75.51 15 2009 4.73 45 2039 82.61 16 2010 5.10 46 2040 90.43 17 2011 5.54 47 2041 99.17 18 2012 6.03 48 2042 109.09 19 2013 6.59 49 2043 120.34 20 2014 7.24 50 2044 132.65 21 2015 7.94 51 2045 145.87 22 2016 8.71 52 2046 159.63 23 2017 9.53 53 2047 174.02 24 2018 10.41 54 2048 188.72 25 2019 11.36 55 2049 203.96 26 2020 12.46 56 2050 219.91 27 2021 13.67 57 2051 236.86 28 2022 15.07 58 2052 255.28 29 2023 16.70 59 2053 276.09 30 2024 18.54 60 2054 302.55 31 2025 20.56 61 2055 339.68 32 2026 22.74 62 2056 398.30 33 2027 25.07 63 2057 499.38 34 2028 27.55 64 2058 687.19 35 2029 30.25 65 2059 1,000.00 36 2030 33.30 37 2031 37.24 38 2032 40.77 39 2033 45.45 40 2034 50.70 The last term premium incerase date is June 1, 2039 Page 6 POLICY NUMBER 12 345 678 SEPARATE ACCOUNT (see section 6.1) Account Divisions Select Bond Division International Equity Division Money Market Division Balanced Division Index 500 Stock Division Aggressive Growth Stock Division High Yield Bond Division Growth Stock Division Growth & Income Stock Division Index 400 Stock Division Small Cap Growth Stock Division Russell Multi-Style Equity Division Russell Aggressive Equity Division Russell Non-US Division Russell Real Estate Securities Division Russell Core Bond Division The maximum number of Divisions for allocation is ten. The initial allocation date as used in section 6.2 is July 1, 1999. The maximum transfer fee is $ 25.00. The maximum withdrawal charge is $ 25.00. See section 9.8. Page 7 POLICY NUMBER 12 345 678 TABLE OF TABULAR VALUES PER $1.00 OF INSURANCE End End of Policy Tabular of Policy Tabular Year June 1, Value Year June 1, Value 1 1996 .00989 36 2031 .54955 2 1997 .02011 37 2032 .56770 3 1998 .03066 38 2033 .58582 4 1999 .04152 39 2034 .60357 5 2000 .05271 40 2035 .62089 6 2001 .06423 41 2036 .63773 7 2002 .07607 42 2037 .65413 8 2003 .08826 43 2038 .67011 9 2004 .10078 44 2039 .68577 10 2005 .11366 45 2040 .70113 11 2006 .12687 46 2041 .71617 12 2007 .14045 47 2042 .73082 13 2008 .15438 48 2043 .74498 14 2009 .16868 49 2044 .75852 15 2010 .18334 50 2045 .77139 16 2011 .19837 51 2046 .78358 17 2012 .21375 52 2047 .79519 18 2013 .22946 53 2048 .80628 19 2014 .24549 54 2049 .81703 20 2015 .26180 55 2050 .82761 21 2016 .27839 56 2051 .83820 22 2017 .29525 57 2052 .84906 23 2018 .31239 58 2053 .86048 24 2019 .32981 59 2054 .87283 25 2020 .34750 60 2055 .88639 26 2021 .36543 61 2056 .90129 27 2022 .38358 62 2057 .91739 28 2023 .40188 63 2058 .93415 29 2024 .42028 64 2059 .95046 30 2025 .43872 65 2060 1.00000 31 2026 .45717 32 2027 .47563 33 2028 .49409 34 2029 .51258 35 2030 .53109 The mortality basis is the Commissioners 1980 Standard Ordinary Mortality Table-B for nonsmokers. The annual effective interest rate used to calculate quantities (a) and (b) of section 4.6 is 6%. All other net single premiums and tabular values are based on an annual effective interest rate of 4%. All values assume that claims are paid at the end of policy years. The nonforfeiture factor is .01107348. Page 8 SECTION 1. THE CONTRACT 1.1 LIFE INSURANCE BENEFIT The Northwestern Mutual Life Insurance Company will pay a benefit on the death of the Insured. Subject to the terms and conditions of the policy: o payment of the death proceeds will be made after proof of the death of the Insured is received at the Home Office; and o payment will be made to the beneficiary or other payee under Sections 11 and 12. The amount of the death proceeds when all premiums due have been paid will be: o the Insurance Amount; plus o the amount of variable paid-up additional insurance under Section 7.4; less o if premiums are not paid on an annual basis, an adjustment for any premiums used to purchase variable paid-up additional insurance that are due later in the policy year; plus o the amount of any dividend at death (Section 5.3); less o the amount of any policy debt (Section 9.3). These amounts will be determined as of the date of death. The Insurance Amount will be the greater of (a) and (b) where: (a) is the sum of: o the Minimum Guaranteed Death Benefit shown on page 3; plus o the amount of Additional Protection then in force under Section 3; plus o the Excess Amount determined under Section 7.3; and (b) is the amount of paid-up insurance which could be purchased by the Policy Value applied as a net single premium using the basis of values shown on page 8. If premiums are not paid on an annual basis, this amount of paid-up insurance will be reduced by an adjustment for any premiums due later in the policy year. The amount of the death proceeds when the Insured dies during the grace period following the due date of an a unpaid premium will be: o the amount determined above assuming the overdue premium had been paid; less o the amount of the unpaid premium. The amount of the death proceeds when the Insured dies while the policy is in force as paid-up insurance will be determined under Section 8. 1.2 ENTIRE CONTRACT; CHANGES This policy with the attached application is the entire contract. Statements in the application are representations and not warranties. A change in the policy is valid only if it is approved in writing by an officer of the Company. The Company may require that the policy be sent to it for endorsement to show a change. No agent has the authority to change the policy or to waive any of its terms. 1.3 INCONTESTABILITY The Company will not contest insurance under this policy after the insurance has been in force during the lifetime of the Insured for two years from the Date of Issue. In issuing the insurance, the Company has relied on the application. While the insurance is contestable, the Company, on the basis of a misstatement in the application, may rescind the insurance or deny a claim. 1.4 SUICIDE If the Insured dies by suicide within one year from the Date of Issue, the amount payable by the Company will be limited to the premiums paid, less the amount of any policy debt and withdrawals and less the cash value of any variable paid-up insurance surrendered. 1.5 POLICY DATE AND DATE OF ISSUE Policy months, years and anniversaries are computed from the Policy Date. The contestable and suicide periods begin with the Date of Issue. These dates are shown on page 3. The Date of Issue for any increase in insurance issued under Additional Premiums Scheduled After Issue (Section 4.2) or any Optional Unscheduled Additional Premium (Section 4.3) will be shown on an amendment to the Schedule of Benefits and Premiums. 1.6 MISSTATEMENT OF AGE If the age or sex of the Insured has been misstated, the amount payable will be the amount which the premiums paid would have purchased at the correct age. 1.7 PAYMENTS BY THE COMPANY All payments by the Company under this policy are payable at its Home Office. 1.8 INSURABILITY REQUIREMENTS To make some changes under this policy, the Insured must meet the Company's insurability requirements. These requirements are as follows: o evidence of insurability must be given that is satisfactory to the Company; and o under the Company's underwriting standards, the Insured is in an underwriting classification that is the same as, or is better than, the one for this policy. 9 SECTION 2. OWNERSHIP 2.1 THE OWNER The Owner is named on page 3. The Owner, his successor or his transferee may exercise policy rights without the consent of any beneficiary. After the death of the Insured, policy rights may be exercised only as provided in Sections 11 and 12. 2.2 TRANSFER OF OWNERSHIP The Owner may transfer the ownership of this policy. Written proof of transfer satisfactory to the Company must be received at its Home Office. The transfer will then take effect as of the date that it was signed. The Company may require that the policy be sent to it for endorsement to show the transfer. 2.3 COLLATERAL ASSIGNMENT The Owner may assign this policy as collateral security. The Company is not responsible for the validity or effect of the collateral assignment. The Company will not be responsible to an assignee for any payment or other action taken by the Company before receipt of the assignment in writing at its Home Office. The interest of any beneficiary will be subject to any collateral assignment made either before or after the beneficiary is named. The collateral assignee is not an Owner. A collateral assignment is not a transfer of ownership. Ownership can be transferred only by complying with Section 2.2. SECTION 3. ADDITIONAL PROTECTION 3.1 ADDITIONAL PROTECTION Additional Protection is insurance guaranteed for the period shown on page 3. The initial amount of and premium for Additional Protection are shown on page 3. Additional Protection will terminate on any policy anniversary on which: o the Owner has directed that dividends be used other than to increase Policy Value; and o the policy does not have Excess Amount. 3.2 REDUCTION BY COMPANY; OWNER'S RIGHT TO CONTINUE EXISTING PROTECTION For any policy year after the end of the guaranteed period, the Company may reduce the amount of Additional Protection if, at the attained age of the Insured: o the net annual policy premium; plus o the excess, if any, of: o the Policy Value 25 days before the policy anniversary plus any dividend payable on the policy anniversary; over o the tabular value of the Minimum Guaranteed Death Benefit on the policy anniversary; is less than: o the Minimum Guaranteed Death Benefit times the nonforfeiture factor (shown on page 8); plus o that portion of the cost of insurance charge for the Insurance Amount which the Company determines applies to Additional Protection. The amount of Additional Protection will be reduced to equal the amount of term insurance which could be purchased by the premium for Additional Protection plus any dividend payable on the policy anniversary. The premium rates for term insurance will not be more than the rates shown on page 6. The Company will send written notice of the reduction. The Owner may prevent a reduction that would occur on or before the last term insurance premium increase date shown on page 6. This may be done by the payment of an increased minimum premium as determined under Section 4.2. The increased premium will be payable for the remainder of the premium paying period. The premium must be received at the Home Office within 31 days of the date the reduction would take effect. The right of the Owner to continue the amount of Additional Protection will terminate as of the first policy anniversary on which the Owner fails to pay an increased premium when due. SECTION 4. PREMIUMS AND REINSTATEMENT 4.1 PREMIUM PAYMENT Payment. All premiums after the first are payable at the Home Office or to an authorized agent. A receipt signed by an officer of the Company will be furnished on request. A premium must be paid on or before its due date. The date when each premium is due and the number of years for which premiums are payable are described on page 3. No premiums may be paid while this policy is in force as paid-up insurance under Section 8, except as provided in Reinstatement (Section 4.7). Frequency. Premiums are payable annually. Premiums may be paid on any other frequency, with the consent of the Company. Grace Period. A grace period of 31 days will be allowed to pay a premium that is not paid on its due date. The policy will be in full force during this period. If a premium is paid during the grace period, policy values will be the same as if the premium had been paid on the premium due date. If the Insured dies during the grace period, any overdue premium will be paid from the proceeds of the policy. If a premium is not paid within the grace period, and the policy does not qualify for Premium Suspension (Section 4.6), the policy will terminate as of the due date unless it continues as paid-up insurance under Section 8. 10 4.2 AMOUNT OF PREMIUM; ADJUSTMENTS Scheduled and Minimum Premiums. The premium due on this policy is the scheduled premium plus any required unscheduled additional premium due under Section 4.4. The scheduled premium is the sum of the minimum premium, any scheduled additional premium used to purchase variable paid-up additional insurance or to increase Policy Value, and any premium that is due for any additional benefit that is a part of this policy. The minimum premium is the premium for the Minimum Guaranteed Death Benefit and Additional Protection. The premium amounts at issue are shown on page 3. An increase in the minimum premium under Section 3.2 will be determined by adding the premium for the Minimum Guaranteed Death Benefit to the term insurance premium for the amount of Additional Protection at the attained age of the Insured. The premium rates for term insurance will not be more than the rates shown on page 6. The minimum premium will not be increased after the last term insurance premium increase date shown on page 6. Additional Premiums Scheduled At Issue. This policy may have been issued with level additional premiums in excess of the minimum premium. The amount of these additional premiums is shown on page 3. Additional Premiums Scheduled After Issue. The Owner may pay additional premiums by requesting that the level premium payable on the policy be increased. An increase in the level amount may be made at any time before the policy anniversary that is nearest to the 85th birthday of the Insured. The minimum amount of increase is shown on page 4. Additional premiums may be scheduled only if, at the time the increases are applied for: o the insurance in force after applying the scheduled additional premiums will be within the Company's issue limit; and o the Company's insurability requirements are met. Owner's Right To Decrease Scheduled Additional Premiums. The Owner may decrease the amount of additional premium scheduled at issue or after issue. This may be done at any time by written request sent to the Home Office. Later increases in the level amount may be made only as provided in the preceding paragraph. Effective Date. A premium change will take effect on the first premium due date that follows the receipt at the Home Office of the Owner's written request for change. When the Owner increases or decreases premiums, the Company will send an amendment to the Schedule of Benefits and Premiums. Additional Premiums Used To Purchase Paid-Up Additional Insurance Or Increase Policy Value. As directed by the Owner each scheduled additional premium paid will be used to purchase variable paid-up additional insurance or to increase Policy Value as shown on page 3. The Owner may change this direction by written notice sent to the Home Office, subject to evidence of insurability. The purchase or increase will be made as of the policy anniversary. 4.3 OPTIONAL UNSCHEDULED ADDITIONAL PREMIUM Unscheduled additional premiums may be paid to the Company at any time before the policy anniversary that is nearest to the Insured's 85th birthday. An unscheduled additional premium may be paid only if, at the time the premium is paid: o the insurance in force after applying the unscheduled additional premium will be within the Company's issue limits; and o the Company's insurability requirements are met. Each unscheduled additional premium may not be less than the minimum amount shown on page 4. As directed by the Owner, each net unscheduled additional premium will be used, as of the date the premium is received by the Company, to purchase variable paid-up additional insurance or to increase Policy Value. 4.4 REQUIRED UNSCHEDULED ADDITIONAL PREMIUM If a withdrawal has been made, the Company may require an unscheduled additional premium to be paid. The due date of the required unscheduled additional premium is the policy anniversary following written notice by the Company. The net unscheduled additional premium will be used to increase Policy Value. The amount of required unscheduled additional premium due on a policy anniversary will be the lesser of (a) and (b) where: (a) is o the tabular value for the Minimum Guaranteed Death Benefit; minus o the Policy Value, 25 days prior to the anniversary; and (b) is o the accumulation at 4% annual interest of all amounts withdrawn; minus o the accumulation at 4% annual interest of all additional premiums used to increase Policy Value. If either (a) or (b) is zero or less than zero, no unscheduled additional premium will be required. 4.5 NET PREMIUMS Net Annual Policy Premium. The net annual policy premium is: o the annual premium for the Minimum Guaranteed Death Benefit; plus o the annual premium for Additional Protection; plus o the annual scheduled additional premium used to increase Policy Value; less o deductions for expenses; less o deductions for any classified mortality. The deductions for expenses and classified mortality will not be more than the amounts shown in the Table of Deductions from Annual Premiums shown on page 4. 11 Net Scheduled Additional Premium Used to Purchase Variable Paid-up Insurance. A net scheduled additional premium used to purchase variable paid-up insurance is: o the annual scheduled additional premium used to purchase additional insurance; less o deductions for expenses; less o any classified mortality charge. The deductions for expenses and the charge for classified mortality will not be more than the amounts shown in the Table of Deductions from Additional Premiums shown on page 4. Net Unscheduled Additional Premium. A net unscheduled additional premium is: o an optional or required unscheduled additional premium; less o deductions for expenses; less o any classified mortality charge. The deductions for expenses and the charge for classified mortality will not be more than the amounts shown in the Table of Deductions from Additional Premiums shown on page 4. 4.6 PREMIUM SUSPENSION A policy qualifies for premium suspension if at the end of the grace period: o the Excess Amount as of 25 days prior to the previous policy anniversary is greater than or equal to one year's minimum premium plus one year's premium for any additional benefits; o the Company determines that the Policy Value 25 days prior to the previous policy anniversary is greater than the sum of (a) plus (b) where: (a) is the net single premium on that anniversary for the Insurance Amount. This net single premium will be calculated using the basis of values for premium suspension shown on page 8; and (b) is the present value of charges for premium suspension for all future years. The present value will be calculated using: o amounts which the Company is then charging for premium suspension; and o the basis of values for premium suspension shown on page 8; and o no withdrawals have been made after a date 25 days prior to the previous policy anniversary. If a policy qualifies for premium suspension: o the scheduled premium otherwise currently due does not need to be paid; and o the policy will not terminate because of the failure to pay the premium. The Owner may pay unscheduled additional premiums as provided under Section 4.3. While premiums are being suspended, contract charges will be deducted from the Policy Value on each policy anniversary, subject to the maximum charges shown on page 4. If the premium frequency is other than annual, a deduction will be made from Policy Value to pay a premium for the remainder of the policy year and the premium frequency will be changed to annual. The payment of premiums must resume as of a policy anniversary if either: o the Excess Amount as of 25 days prior to a policy anniversary is less than the sum of one year's minimum premium plus one year's premium for any additional benefits; or o the Owner elects to end premium suspension by written request sent to the Home Office. If a withdrawal of Policy Value is made, premiums will no longer be suspended unless the policy requalifies for premium suspension as of the next policy anniversary. 4.7 REINSTATEMENT This policy may be reinstated within three years after the due date of the overdue premium. All unpaid minimum premiums and premiums for any additional benefits that are a part of this policy (and interest as required below) must be received by the Company while the Insured is alive. The policy may not be reinstated if the policy was surrendered. After reinstatement, the policy will have the same Minimum Guaranteed Death Benefit, Additional Protection, Policy Value and variable paid-up additional insurance as if: o all minimum premiums had been paid when due; o investment earnings for all Divisions, less charges against the Separate Account, had been credited at an annual effective interest rate of 4% from the due date of the overdue premium until the date of reinstatement; and o loan interest, less charges by the Company for expenses and taxes, had been credited to Policy Value and to the cash value of variable paid-up additional insurance at an annual effective interest rate of 4%, from the due date of the overdue premium until the date of reinstatement. In addition, for the policy to be reinstated more than 31 days after the end of the grace period, the Company's insurability requirements must be met and an amount must be paid equal to the greater of: o all unpaid minimum premiums and premiums for additional benefits with interest from the due date of each premium at an annual effective rate of 5%; and o 110% of the excess of the cash value of the policy upon reinstatement over the cash value of the policy just before reinstatement, plus all unpaid premiums for additional benefits with interest from the due date of each premium at an annual effective rate of 5%. Any policy debt on the due date of the overdue premium, with interest at an annual effective interest rate of 5% from that date, must be repaid or reinstated. 12 SECTION 5. DIVIDENDS 5.1 ANNUAL DIVIDENDS This policy will share in the divisible surplus of the Company. This surplus is determined each year. This policy's share will be credited as a dividend on the policy anniversary. 5.2 USE OF DIVIDENDS Policy In Force As Variable Whole Life With Additional Protection. If Additional Protection is in force and there is no Excess Amount, dividends will be used to increase Policy Value. If Additional Protection is not in force, or if there is Excess Amount, dividends may be paid in cash or used for one of the following: o Policy Value. Dividends will be used to increase Policy Value. o Paid-Up Additional Insurance. Dividends will purchase variable benefit paid-up additional insurance. o Premium Payment. Dividends will be used to reduce premiums. If the dividend is greater than the premium, the balance will be used to increase Policy Value. Other uses of dividends may be made available by the Company. If no direction is given for the use of dividends, they will be used to increase Policy Value. Policy In Force As Fixed Benefit Paid-Up Insurance. Dividends may be paid in cash or used to purchase fixed benefit paid-up additional insurance. Other uses of dividends may be made available by the Company. If no direction is given for the use of dividends, they will be used to purchase fixed benefit paid-up additional insurance. Policy In Force As Variable Benefit Paid-Up Insurance. Dividends may be paid in cash or used to purchase variable paid-up additional insurance. Other uses of dividends may be made available by the Company. If no direction is given for the use of dividends, they will be used to purchase variable paid-up additional insurance. 5.3 DIVIDEND AT DEATH If a dividend is payable for the period from the beginning of the policy year to the date of the Insured's death, the dividend is payable as part of the policy proceeds. SECTION 6. THE SEPARATE ACCOUNT 6.1 DESCRIPTION The Northwestern Mutual Variable Life Account (the Separate Account) has been established by the Company pursuant to Wisconsin law and is registered as a unit investment trust under the Investment Company Act of 1940. The Separate Account has several Divisions, as shown on page 7. Assets of the Separate Account are invested in shares of Northwestern Mutual Series Fund, Inc. (the Fund). The Fund is registered under the Investment Company Act of 1940 as an open-end, diversified investment company. The Fund has one Portfolio for each Division. Assets of each Division of the Separate Account are invested in shares of the corresponding Portfolio of the Fund. Shares of the Fund are purchased for the Separate Account at their net asset value. The Company may make available additional Divisions and Portfolios. Assets will be allocated to the Separate Account to support the operation of this policy (except when in force as fixed benefit paid-up insurance) and other variable life insurance policies. Assets may also be allocated for other purposes, but not to support the operation of any contracts or policies other than variable life insurance. Income and realized and unrealized gains and losses from assets in the Separate Account are credited to or charged against it without regard to other income, gains or losses of the Company. The assets of the Separate Account will be valued on each valuation day. They are the property of the Company. The portion of these assets equal to policy reserves and liabilities will not be charged with liabilities arising out of any other business the Company may conduct. The Company reserves the right to transfer assets of the Separate Account in excess of these reserves and liabilities to its General Account. The Owner may exchange this policy for a fixed benefit life insurance policy if the Fund changes its investment advisor or if a Portfolio has a material change in its investment objectives or restrictions. The Company will notify the Owner if there is any such change. The Owner may exchange this policy within 60 days after the notice or the effective date of the change, whichever is later. If, in the judgment of the Company, a Portfolio no longer suits the purposes of this policy due to a change in its investment objectives or restrictions, the Company may substitute shares of another Portfolio of the Fund or shares of another mutual fund. Any such substitution will be subject to any required approval of the Securities and Exchange Commission (SEC), the Wisconsin Commissioner of Insurance or other regulatory authority. The Company also may, to the extent permitted by applicable laws and regulations (including any order of the SEC), make changes as follows: o the Separate Account or a Division may be operated as a management company under the Investment Company Act of 1940, or in any other form permitted by law, if deemed by the Company to be in the best interest of the policyowners. o the Separate Account may be deregistered under the Investment Company Act of 1940 in the event registration is no longer required. o the provisions of this and other policies may be modified to comply with any other applicable federal or state laws. 13 In the event of a substitution or change, the Company may make appropriate endorsement of this and other policies having an interest in the Separate Account and take other actions as may be necessary to effect the substitution or change. 6.2 ALLOCATION OF NET PREMIUMS, DIVIDENDS AND DEDUCTIONS The first net annual policy premium and any net scheduled additional premium used to purchase variable paid-up insurance will be allocated to the Money Market Division on the Policy Date. Any net unscheduled additional premium received prior to the Initial Allocation Date will be allocated to the Money Market Division on the later of the Policy Date and the date the Company receives the premium. The Initial Allocation Date is shown on page 7. On the Initial Allocation Date, amounts in the Money Market Division will be allocated in accordance with the application. This allocation will remain in effect for later net premiums unless changed by the Owner by written request. Any change in allocation will be in effect for net premiums credited to the policy following the receipt of the written request at the Home Office. Allocations must be in whole percentages. If a Division is to receive an allocation, the allocation must be at least 10%. An allocation will not be permitted that results in assets invested for this policy being apportioned among more than the maximum number of Divisions for allocation shown on page 7. Any deduction from Policy Value or from the value of variable paid-up additional insurance, other than a decrease due to investment results, will be allocated in proportion to the values in the Divisions. 6.3 TRANSFER OF ASSETS On or after the Initial Allocation Date, the Owner may transfer the assets (other than policy debt) invested for this policy to any of the Divisions, as long as these assets, following the transfer, are allocated among not more than the maximum number of Divisions for allocation shown on page 7. Transfers may be made as often as twelve times in a policy year. The transfer will take effect on the date a written request is received in the Home Office. A fee may be required. The maximum fee is shown on page 7. SECTION 7. DETERMINATION OF VALUES 7.1 POLICY VALUE On the Policy Date, the Policy Value is equal to the net annual policy premium plus any net unscheduled additional premium credited to Policy Value on the Policy Date, less the cost of insurance charge. On any day after that, the Policy Value is equal to what it was on the previous day plus these items: o any increase due to investment results of all amounts invested in all Divisions for the Policy Value; o interest on the Policy Value's share of policy debt at an annual rate equal to the loan interest rate less a charge by the Company for expenses and taxes; o on each policy anniversary, if the premium due is paid within the grace period, the net annual policy premium; o any net unscheduled additional premium used to increase Policy Value credited that day; o any policy dividend payable on that day directed to increase Policy Value; and o any amounts transferred to Policy Value from variable paid-up additional insurance; and minus any of these items applicable on that day: o any decrease due to investment results of all amounts invested in all Divisions for the Policy Value; o a charge against the Separate Account at a rate of not more than 0.0016389% a day (0.60% a year) for mortality and expense risks that the Company assumes; o any amount charged against the Separate Account for taxes; o if the annual premium is suspended under the Premium Suspension provision (Section 4.6), any charges required under that provision; o the cost of insurance charge for the Insurance Amount; o any withdrawals; and o any surrender charges, administrative charges or reduction in policy debt that may result from a withdrawal, a decrease in face amount or a change to variable benefit paid-up insurance In addition, Policy Value will be adjusted for any increase or decrease, other than on a policy anniversary, in the amount of scheduled additional premiums used to increase Policy Value. 7.2 COST OF INSURANCE CHARGES FOR THE INSURANCE AMOUNT A cost of insurance charge is deducted from the Policy Value on each policy anniversary and is used in the determination of the Policy Value on the Policy Date. The cost of insurance charge is the cost of insurance rate times the net amount at risk. The cost of insurance rate is based on the attained age of the Insured. The cost of insurance rates are shown on page 5. The net amount at risk is (a) minus (b) where: (a) is the projected Insurance Amount divided by 1.04. The projected Insurance Amount is what the Insurance Amount would be at the end of the policy year assuming a 4% annual effective interest rate on invested funds; and (b) is the Policy Value. 14 If an unscheduled additional premium paid on a date other than a policy anniversary results in an increase in the net amount at risk, a cost of insurance charge for the portion of the policy year remaining will be deducted from Policy Value on the date the unscheduled additional premium is received by the Company. 7.3 EXCESS AMOUNT The Excess Amount is: o the Policy Value; less o the tabular value of the Minimum Guaranteed Death Benefit; less o the tabular value of the amount of Additional Protection; less o an adjustment, if premiums are not paid on an annual basis, for premiums due later in the policy year. If the amount determined above is less than zero, the Excess Amount will be zero. 7.4 VARIABLE PAID-UP ADDITIONAL INSURANCE Additional premiums and dividends used to purchase variable paid-up additional insurance will immediately increase the death proceeds payable under Section 1.1. These amount are not included in the Additional Protection. The amount of variable paid-up additional insurance is equal to the cash value of variable paid-up additional insurance divided by the net single premium using the basis of values shown on page 8. On the Policy Date, the cash value of variable paid-up additional insurance is equal to any net additional premium used to purchase variable paid-up additional insurance less the cost of insurance charge for the variable paid-up additional insurance. On any day after that, the cash value of variable paid-up additional insurance is equal to what it was on the previous day plus these items: o any increase due to investment results of all amounts invested in all Divisions for the variable paid-up additional insurance; o interest on the variable paid-up additional insurance's share of policy debt at an annual rate equal to the loan interest rate less a charge by the Company for expenses and taxes; o on each policy anniversary, if the premium due is paid within the grace period, the net scheduled additional premium used to purchase variable paid-up additional insurance; o any net unscheduled additional premium used to purchase variable paid-up additional insurance credited that day; and o any policy dividend payable on that day directed to purchase variable paid-up additional insurance; and minus any of these items applicable on that day: o any decrease due to investment results of all amounts invested in all Divisions for the variable paid-up additional insurance; o a charge against the Separate Account at a rate of not more than 0.0016389% a day (0.60% a year) for mortality and expense risks that the Company assumes; o any amount charged against the Separate Account for taxes; o the cost of insurance charge for the variable paid-up additional insurance; o any surrender of variable paid-up additional insurance; and o any amount transferred to Policy Value. In addition, variable paid-up additional insurance will be adjusted for any increase or decrease, other than on a policy anniversary, in the amount of scheduled additional premiums used to purchase variable paid-up additional insurance. Transfer Of Cash Value Of Variable Paid-Up Additional Insurance To Policy Value. The Owner may transfer the cash value of any variable paid-up additional insurance to Policy Value. The transfer will take effect on the date a written request to transfer is received at the Home Office. Policy Value may not be transferred to the cash value of variable paid-up additional insurance. 7.5 COST OF INSURANCE CHARGES FOR VARIABLE PAID UP ADDITIONAL INSURANCE A cost of insurance charge is deducted from the cash value of variable paid-up additional insurance on each policy anniversary and is used in the determination of the cash value of variable paid-up additional insurance on the Policy Date. The cost of insurance charge is the cost of insurance rate times the net amount at risk. The cost of insurance rate is based on the attained age of the Insured. The cost of insurance rates are shown on page 5. On a policy anniversary, the net amount at risk is (a) minus (b) where: (a) is the amount of variable paid-up additional insurance divided by 1.04; and (b) is the cash value of variable paid-up additional insurance on the policy anniversary. If a net unscheduled additional premium is credited to the cash value of variable paid-up additional insurance on a day other than the policy anniversary, there will be a cost of insurance charge for the remainder of the policy year based on the increase in the net amount at risk resulting from the unscheduled additional premium. 7.6 VALUATION DAY AND VALUATION PERIOD A valuation day is any day on which the assets of the Separate Account are valued. A valuation period is a valuation day and any immediately preceding days which are not valuation days. Assets are valued as of the close of trading on the New York Stock Exchange on each day the Exchange is open. Each Division's share of amounts allocated, transferred or added to a Division or of amounts deducted, loaned, transferred or withdrawn from a Division on any day will be determined as of the end of the valuation period that contains that day. 15 SECTION 8. CASH VALUES AND PAID-UP INSURANCE 8.1 CASH VALUE The cash value of this policy on any date when all premiums due have been paid, during the grace period following the due date of an unpaid premium, or when this policy is in force as variable benefit paid-up insurance is equal to: o the Policy Value; plus o the cash value of variable paid-up additional insurance; less o any policy debt; less o the surrender charge for the policy year shown on page 4. There is no surrender charge if the policy is in force as variable benefit paid-up insurance. If premiums are not paid on an annual basis, the cash value will reflect a reduction for any premiums due later in the policy year. 8.2 FIXED BENEFIT PAID-UP INSURANCE If any premium is unpaid on the last day of the grace period and if the cash value is at least $1,000 on the last day of the grace period, this policy will be in force as fixed benefit paid-up insurance. If the cash value is less than $1,000 as of the last day of the grace period, the policy will be treated as surrendered under Section 8.4. When the policy is in force as fixed benefit paid-up insurance, the Minimum Guaranteed Death Benefit, Additional Protection and Policy Value will not be in effect. The amount of fixed benefit paid-up insurance will be determined by using the cash value plus the policy debt, both as of the last day of the grace period, as a net single premium at the attained age of the Insured. However, if a portion of the cash value is attributable to variable paid-up additional insurance, that portion will be applied to purchase fixed benefit paid-up additions. The variable paid-up additional insurance will no longer be in force. The cash value of fixed benefit paid-up insurance or fixed benefit paid-up additions will be the net single premium for that insurance at the attained age of the Insured less any policy debt. If fixed benefit paid-up insurance is surrendered within 31 days after a policy anniversary, the cash value will not be less than the cash value on that anniversary reduced by any later surrender of paid-up additions and adjusted for any later change in policy debt. The amount of the death proceeds when this policy is in force as fixed benefit paid-up insurance will be: o the amount of fixed benefit paid-up insurance determined above; plus o the amount of any fixed benefit paid-up additions then in force; plus o the amount of any dividend at death; less o the amount of any policy debt. These amounts will be determined as of the date of death. Any policy debt will continue on fixed benefit paid-up insurance. Fixed benefit paid-up insurance will share in divisible surplus. 8.3 VARIABLE BENEFIT PAID-UP INSURANCE Variable benefit paid-up insurance may be selected in place of fixed benefit paid-up insurance provided the cash value of the policy is at least $5,000 on the last day of the grace period. A written request must be received at the Home Office no later than the last day of the grace period. When the policy is in force as variable benefit paid-up insurance, the Minimum Guaranteed Death Benefit and Additional Protection will not be in effect. On the due date of the unpaid premium, the Policy Value is set equal to the cash value plus the policy debt. The cash value of variable paid-up additional insurance is set at zero. The amount of the death proceeds when this policy is in force as variable benefit paid-up insurance will be: o the Policy Value of variable benefit paid-up insurance divided by the net single premium using the basis of values on page 8; plus o the amount of any in force variable paid-up additional insurance purchased by dividends; plus o the amount of any dividend at death; less o the amount of any policy debt. These amounts will be determined as of the date of death. Any policy debt will continue on variable benefit paid-up insurance. Variable benefit paid-up insurance will share in divisible surplus. 8.4 SURRENDER The Owner may surrender this policy for its cash value. A written surrender of all claims, satisfactory to the Company, will be required. The date of surrender will be the date of receipt at the Home Office of the written surrender. The policy will terminate, and the cash value will be determined, as of the end of the valuation period which includes the date of surrender, or, in the case of fixed benefit paid-up insurance, as of the date of surrender. The Company may require that the policy be sent to it. 16 8.5 DEFERRAL OF PAYMENTS Variable Insurance. During any period when: o the sale of securities or the determination of investment results is not reasonably practicable because (i) the New York Stock Exchange is closed; or (ii) conditions are such that, under rules and regulations adopted by the SEC, trading is deemed to be restricted or an emergency is deemed to exist; or o the SEC, by order, permits deferral for the protection of the Company's policy owners; the Company reserves the right: o to defer determination of cash value and payment of the cash value; o to defer payment of a loan or withdrawal; o to defer determination of a change in the amount of variable insurance or other variable amounts payable on death, and, if such determination has been deferred, to defer payment of any portion of the death benefit based on a variable amount; and o if payment of all or part of the death benefit is deferred, to defer application of the death proceeds to a payment plan under Section 12. Fixed Benefit Insurance. The Company may defer paying the cash value of the fixed benefit paid-up insurance for up to six months from the date of surrender. If payment is deferred for 30 days or more, interest will be paid on the cash value at an annual effective rate of 4% from the date of surrender to the date of payment. The Company may defer making a loan for up to six months. 8.6 TABULAR VALUES The tabular value of the Minimum Guaranteed Death Benefit is equal to the Minimum Guaranteed Death Benefit times the tabular value per $1 of insurance. The tabular value of Additional Protection is equal to the amount of Additional Protection times the tabular value per $1 of insurance. Tabular values per $1 of insurance are shown on page 8 for each policy anniversary. Tabular values during a policy year will reflect the time elapsed in that year. Tabular values are the net level premium reserves for a whole life policy calculated using the basis of values shown on page 8. Calculations assume annual premiums are paid at the beginning of the policy year and claims are paid at the end of the policy year. Tabular values are used to determine: o whether the amount of Additional Protection may be reduced under Section 3.2; o to determine the amount of any required unscheduled additional premium under Section 4.4; o whether the policy qualifies for premium suspension under Section 4.6; and o the Excess Amount under Section 7.3. SECTION 9. LOANS AND WITHDRAWALS 9.1 POLICY LOANS The Owner may obtain a loan from the Company in an amount that, when added to existing policy debt, is not more than the loan value. A loan may be obtained on written request or to pay an overdue premium if the premium loan provision is in effect on this policy and premiums are not suspended under Section 4.6. If the loan value is not large enough to pay the overdue premium, a premium will be paid for any other frequency permitted by the Company for which the loan value is large enough. The Owner may elect or revoke the premium loan provision by written request received at the Home Office. 9.2 LOAN VALUE The loan value is 90% of the sum of the cash value and any existing policy debt on the date of the loan. 9.3 POLICY DEBT Policy debt consists of all outstanding loans and accrued interest. It may be paid to the Company at any time. Any policy debt will be deducted from the policy proceeds. If the cash value decreases to zero, this policy will terminate unless a sufficient portion of the policy debt is repaid. Termination occurs 31 days after a notice has been mailed to the Owner and to any assignee on record at the Home Office. The notice will state the amount that must be repaid to keep the policy in force. 9.4 ALLOCATION OF LOANS Except when this policy is in force as fixed benefit paid-up insurance, a loan will be allocated between Policy Value and variable paid-up additional insurance in proportion to the amount of cash value attributable to Policy Value and the cash value of variable paid-up additional insurance. On the date a loan is made, or on the date unpaid interest is added to the loan, the amounts invested for this policy in each Division will be reduced in proportion to the amounts in each Division. On the date a loan repayment is made, the amounts invested for this policy in each Division will be increased in proportion to the amounts in each Division. 17 9.5 LOAN INTEREST Interest accrues and is payable on a daily basis from the date of the loan on loans requested by the Owner and from the premium due date on loans to pay premiums. Unpaid interest is added to the loan. The Specified Rate loan interest option or the Variable Rate loan interest option is elected on the application. The Owner may change this election at any time, but the change will not take effect until the January 1st following receipt of a written request at the Company's Home Office. 9.6 SPECIFIED RATE LOAN INTEREST OPTION Interest is payable at an annual effective rate of 5%. 9.7 VARIABLE RATE LOAN INTEREST OPTION Interest is payable at an annual effective rate that is set by the Company annually and applied to new or outstanding policy debt during the year beginning each January 1. The highest loan interest rate that may be set by the Company is the greater of: o a rate 1% higher than the rate shown on page 8 used to calculate tabular values; and o a rate based on the Corporate Bond Yield Averages -- Monthly Average Corporates for the immediately preceding October. This Average is published by Moody's Investors Service, Inc. If it is no longer published, the highest loan interest rate will be based on some other similar average established by the insurance supervisory official of the state in which this policy is delivered. The loan interest rate set by the Company will not exceed the maximum rate permitted by the laws of the state in which this policy is delivered. The loan interest rate will not be changed unless the change in the annual effective rate is at least 1/2%. The Company will give notice: o of the initial loan interest rate in effect at the time a policy loan is made. o of an increase in loan interest rate on outstanding policy debt no later than 30 days before the January 1st on which the increase takes effect. This policy will not terminate during a policy year as the sole result of an increase in the loan interest rate during that policy year. 9.8 WITHDRAWALS The Owner may make a withdrawal of Policy Value. A fee may be charged subject to the maximum shown on page 7. However, the Owner may not: o withdraw more than the Excess Amount less the surrender charge shown on page 4; o withdraw an amount which would reduce the loan value to less than the policy debt; o withdraw less than the minimum withdrawal amount shown on page 4; or o make more than four withdrawals in a policy year. Any withdrawal from Policy Value will be allocated between the Divisions in proportion to the amount attributable to each Division. SECTION 10. EXCHANGE OF POLICY Within 24 months after the Date of Issue shown on page 3, provided premiums are duly paid, the Owner may exchange this policy without evidence of insurability for a fixed benefit life insurance policy on the life of the Insured. The new policy will be on a form determined by the Company to be similar to this policy. To effect the change the Owner must send this policy, a completed application for change, and any required payment to the Home Office of the Company. The change will be effective on the later of the date of the application or the date the required items are received at the Home Office. The new policy will have the same initial guaranteed death benefit, policy date and issue age as this one, and the premiums and cash values will be the same as those for whole life policies issued on the Date of Issue of this policy. Any additional benefit included in this policy will be included with the new policy only to the extent that such provisions were being offered with the new policy on the Date of Issue of this policy. 18 SECTION 11. BENEFICIARIES 11.1 DEFINITION OF BENEFICIARIES The term "beneficiaries" as used in this policy includes direct beneficiaries, contingent beneficiaries and further payees. 11.2 NAMING AND CHANGE OF BENEFICIARIES By Owner. The Owner may name and change the beneficiaries of death proceeds: o while the Insured is living. o during the first 60 days after the date of death of the Insured, if the Insured was not the Owner immediately prior to the Insured's death. A change made during this 60 days may not be revoked. By Direct Beneficiary. A direct beneficiary may name and change the contingent beneficiaries and further payees of the direct beneficiary's share of the proceeds: o if the direct beneficiary is the Owner; o if, at any time after the death of the Insured, no contingent beneficiary or further payee of that share is living; or o if, after the death of the Insured, the direct beneficiary elects a payment plan. The interest of any other beneficiary in the share of that direct beneficiary will end. These direct beneficiary rights are subject to the Owner's rights during the 60 days after the date of death of the Insured. By Spouse (Marital Deduction Provision). o Power To Appoint. The spouse of the Insured will have the power alone and in all events to appoint all amounts payable to the spouse under the policy if: a. immediately before the Insured's death, the Insured was the Owner; and b. the spouse is a direct beneficiary; and c. the spouse survives the Insured. o To Whom Spouse Can Appoint. Under this power, the spouse can appoint: a. to the estate of the spouse; or b. to any other persons as contingent beneficiaries and further payees. o Effect Of Exercise. As to the amounts appointed, the exercise of this power will: a. revoke any other designation of beneficiaries; b. revoke any election of payment plan as it applies to them; and c. cause any provision to the contrary in Section 11 or 12 of this policy to be of no effect. Effective Date. A naming or change of a beneficiary will be made on receipt at the Home Office of a written request that is acceptable to the Company. The request will then take effect as of the date that it was signed. The Company is not responsible for any payment or other action that is taken by it before the receipt of the request. The Company may require that the policy be sent to it to be endorsed to show the naming or change. 11.3 SUCCESSION IN INTEREST OF BENEFICIARIES Direct Beneficiaries. The proceeds of this policy will be payable in equal shares to the direct beneficiaries who survive and receive payment. If a direct beneficiary dies before receiving all or part of the direct beneficiary's full share, the unpaid portion will be payable in equal shares to the other direct beneficiaries who survive and receive payment. Contingent Beneficiaries. At the death of all of the direct beneficiaries, the proceeds, or the present value of any unpaid payments under a payment plan, will be payable in equal shares to the contingent beneficiaries who survive and receive payment. If a contingent beneficiary dies before receiving all or part of the contingent beneficiary's full share, the unpaid portion will be payable in equal shares to the other contingent beneficiaries who survive and receive payment. Further Payees. At the death of all of the direct and contingent beneficiaries, the proceeds, or the present value of any unpaid payments under a payment plan, will be paid in one sum: o in equal shares to the further payees who survive and receive payment; or o if no further payees survive and receive payment, to the estate of the last to die of all of the direct and contingent beneficiaries who survive the Insured. Owner Or The Owner's Estate. If no beneficiaries are alive when the Insured dies, the proceeds will be paid to the Owner or to the Owner's estate. 11.4 GENERAL Transfer Of Ownership. A transfer of ownership of itself will not change the interest of a beneficiary. Claims Of Creditors. So far as allowed by law, no amount payable under this policy will be subject to the claims of creditors of a beneficiary. Succession Under Payment Plans. A direct or contingent beneficiary who succeeds to an interest in a payment plan will continue under the terms of the plan. 19 SECTION 12. PAYMENT OF POLICY BENEFITS 12.1 PAYMENT OF PROCEEDS Death proceeds will be paid under the payment plan that takes effect on the date of death of the Insured. The Interest Income Plan (Option A) will be in effect if no patient plan has been elected. Interest will accumulate from the date of death until a payment plan is elected or the proceeds are withdrawn in cash. Surrender proceeds will be paid in cash or under a payment plan that is elected. 12.2 PAYMENT PLANS Interest Income Plan (Option A). The proceeds will earn interest which may be received each month or accumulated. The first payment is due one month after the date on which the plan takes effect. Interest that has accumulated may be withdrawn at any time. Part or all of the proceeds may be withdrawn at any time. Installment Income Plans. Payments will be made each month on the terms of the plan that is elected. The first payment is due on the date that the plan takes effect. o Specified Period (Option B). The proceeds with interest will be paid over a period of from one to 30 years. The present value of any unpaid installments may be withdrawn at any time. o Specified Amount (Option D). Payments of not less than $10 per $1,000 of proceeds will be made until all of the proceeds with interest have been paid. The balance may be withdrawn at any time. Life Income Plans. Payments will be made each month on the terms of the plan that is elected. The first payment is due on the date that the plan takes effect. Proof of the date of birth, acceptable to the Company, must be furnished for each person on whose life the payments are based. o Single Life Income (Option C). Payments will be made for a chosen period and, after that, for the life of the person on whose life the payments are based. The choices for the period are: a. zero years; b. 10 years; c. 20 years; or d. a refund period which continues until the sum of the payments that have been made is equal to the proceeds that were placed under the plan. o Joint And Survivor Life Income (Option E). Payments are based on the lives of two persons. Level payments will be made for a period of 10 years and, after that, for as long as one or both of the persons are living. o Other Selections. The Company may offer other selections under the Life Income Plans. o Withdrawal. The present value of any unpaid payments that are to be made for the chosen period (Option C) or the 10 year period (Option E) may be withdrawn only after the death of all of the persons on whose lives the payments are based. o Limitations. A direct or contingent beneficiary who is a natural person may be paid under a Life Income Plan only if the payments depend on that beneficiary's life. A corporation may be paid under a Life Income Plan only if the payments depend on the life of the Insured or, after the death of the Insured, on the life of the Insured's spouse or dependent. Payment Frequency. On request, payments will be made once every 3, 6 or 12 months instead of each month. Transfer Between Payment Plans. A beneficiary who is receiving payment under a plan which includes the right to withdraw may transfer the amount withdrawable to any other plan that is available. Minimum Payment. The Company may limit the election of a payment plan to one that results in payments of at least $50. If payments under a payment plan are or become less than $50, the Company may change the frequency of payments. If the payments are being made once every 12 months and are less than $50, the Company may pay the present value or the balance of the payment plan. 12.3 PAYMENT PLAN RATES Interest Income And Installment Income Plans. Proceeds will earn interest at rates declared each year by the Company. None of these rates will be less than an annual effective rate of 2%. Interest of more than 2% will increase the amount of the payments or, for the Specified Amount Plan (Option D), increase the number of payments. The present value of any unpaid installments will be based on the 2% rate of interest. The Company may offer guaranteed rates of interest higher than 2% with conditions on withdrawal. Life Income Plans. Payments will be based on rates declared by the Company. These rates will provide at least as much income as would the Company's rates, on the date that the payment plan takes effect, for a single premium immediate annuity contract. Payments under these rates will not be less than the amounts that are described in Minimum Payment Rates. 20 Minimum Payment Rates. The minimum payment rates for the Installment Income Plans (Options B and D) and the Life Income Plans (Options C and E) are shown in the Minimum Payment Rate Tables. The Life Income Plan payment rates in those tables depend on the adjusted age of each person on whose life the payments are based. The adjusted age is: o the age on the birthday that is nearest to the date on which the payment plan takes effect; plus o the age adjustment shown below for the number of policy years that have elapsed from the Policy Date to the date that the payment plan takes effect. A part of a policy year is counted as a full year. - -------------------------------------------------------------------------------- POLICY POLICY YEARS AGE YEARS AGE ELAPSED ADJUSTMENT ELAPSED ADJUSTMENT - -------------------------------------------------------------------------------- 1 to 8 0 33 to 40 -4 9 to 16 -1 41 to 48 -5 17 to 24 -2 49 or more -6 25 to 32 -3 - -------------------------------------------------------------------------------- 12.4 EFFECTIVE DATE FOR PAYMENT PLAN A payment plan that is elected will take effect on the date of death of the Insured if: o the plan is elected by the Owner; and o the election is received at the Home Office while the Insured is living. In all other cases, a payment plan that is elected will take effect: o on the date the election is received at the Home Office; or o on a later date, if requested. 12.5 PAYMENT PLAN ELECTIONS For Death Proceeds By Owner. The Owner may elect payment plans for death proceeds: o while the Insured is living. o during the first 60 days after the date of death of the Insured, if the Insured was not the Owner immediately prior to the Insured's death. An election made during this 60 days may not be changed. For Death Proceeds By Direct Or Contingent Beneficiary. A direct or contingent beneficiary may elect payment plans for death proceeds payable to that beneficiary, if no payment plan that has been elected is in effect. This right is subject to the Owner's rights during the 60 days after the date of death of the Insured. For Surrender Proceeds. The Owner may elect payment plans for surrender proceeds. The Owner will be the direct beneficiary. 12.6 INCREASE OF MONTHLY INCOME A direct beneficiary who is to receive proceeds under a payment plan may increase the amount of the monthly payment. This is done by the payment of an annuity premium to the Company at the time the payment plan elected under Section 12.5 takes effect. The amount that will be applied under the payment plan will be the net premium. The net premium is the annuity premium less a charge of not more than 2% and less any premium tax. The net premium will be applied under the same payment plan and at the same rates as the proceeds. The Company may limit this net premium to an amount that is equal to the direct beneficiary's share of the proceeds payable under this policy. MINIMUM PAYMENT RATE TABLES Minimum Monthly Income Payments Per $1,000 Proceeds INSTALLMENT INCOME PLANS (OPTIONS B AND D) - -------------------------------------------------------------------------------- PERIOD MONTHLY PERIOD MONTHLY PERIOD MONTHLY (YEARS) PAYMENT (YEARS) PAYMENT (YEARS) PAYMENT - -------------------------------------------------------------------------------- 1 $ 84.65 11 $ 9.09 21 $ 5.56 2 43.05 12 8.46 22 5.39 3 29.19 13 7.94 23 5.24 4 22.27 14 7.49 24 5.09 5 18.12 15 7.10 25 4.96 6 15.35 16 6.76 26 4.84 7 13.38 17 6.47 27 4.73 8 11.90 18 6.20 28 4.63 9 10.75 19 5.97 29 4.53 10 9.83 20 5.75 30 4.45 - -------------------------------------------------------------------------------- 21 MINIMUM PAYMENT RATE TABLES Minimum Monthly Income Payments Per $1,000 Proceeds LIFE INCOME PLAN (OPTION C) ---------------------------------------------------------- SINGLE LIFE MONTHLY PAYMENTS ---------------------------------------------------------- CHOSEN PERIOD (YEARS) ADJUSTED ------------------------------------------ AGE* ZERO 10 20 REFUND ---------------------------------------------------------- 55 $ 4.17 $ 4.14 $ 4.06 $ 4.05 56 4.23 4.20 4.11 4.11 57 4.31 4.28 4.17 4.17 58 4.39 4.35 4.23 4.24 59 4.47 4.43 4.29 4.31 60 4.56 4.51 4.35 4.37 61 4.65 4.59 4.42 4.45 62 4.76 4.69 4.49 4.54 63 4.87 4.79 4.56 4.62 64 4.98 4.90 4.63 4.70 65 5.10 5.00 4.70 4.80 66 5.24 5.12 4.77 4.90 67 5.38 5.24 4.84 5.00 68 5.54 5.37 4.91 5.12 69 5.70 5.51 4.98 5.24 70 5.88 5.66 5.05 5.36 71 6.07 5.81 5.12 5.50 72 6.27 5.96 5.19 5.64 73 6.49 6.13 5.24 5.79 74 6.73 6.30 5.30 5.95 75 6.99 6.48 5.36 6.11 76 7.27 6.67 5.40 6.29 77 7.58 6.86 5.45 6.48 78 7.91 7.05 5.49 6.68 79 8.26 7.25 5.52 6.89 80 8.64 7.45 5.55 7.12 81 9.05 7.65 5.58 7.35 82 9.50 7.84 5.60 7.60 83 9.98 8.02 5.62 7.85 84 10.50 8.20 5.63 8.13 85 and over 11.06 8.38 5.64 8.43 ---------------------------------------------------------- LIFE INCOME PLAN (OPTION E) - -------------------------------------------------------------------------------- JOINT AND SURVIVOR MONTHLY PAYMENTS - -------------------------------------------------------------------------------- OLDER LIFE YOUNGER LIFE ADJUSTED AGE* ADJUSTED AGE* 55 60 65 70 75 80 85 and over - -------------------------------------------------------------------------------- 55 $ 3.79 60 3.87 $ 4.07 65 3.94 4.18 $ 4.45 70 3.99 4.27 4.61 $ 4.99 75 4.02 4.34 4.73 5.20 $ 5.72 80 4.05 4.38 4.81 5.35 6.00 $ 6.67 85 and over 4.06 4.40 4.86 5.45 6.18 7.00 $ 7.75 - -------------------------------------------------------------------------------- * See Section 12.3 22 AMENDMENT TO VARIABLE WHOLE LIFE WITH ADDITIONAL PROTECTION As of the Date of Issue, the policy is amended by adding Section 3.3 as follows: 3.3 CHANGE IN AMOUNT OF ADDITIONAL PROTECTION Increases. The amount of Additional Protection will increase on each policy anniversary, in accordance with the terms of the [Name of employee insurance plan] subject to the following limitations: o increases may be made [time period] but in no event will increases be made after the last term insurance premium increase date shown on page 6; o an increase will not be made to the extent it would cause the sum of the Insurance Amount and the amount of variable paid-up additional insurance to exceed the sum of Policy Value and the cash value of variable paid-up additional insurance by more than [$ Amount], determined as of the policy anniversary; o the amount of the annual increase may not be more than [$ amount]; and o no further increases will be made if the Owner has decreased the amount of Additional Protection. Increases in Additional Protection will not change the guaranteed period shown on page 3. Decrease. The Owner may, on a single occasion, decrease the amount of Additional Protection. The decrease will take effect on the policy anniversary following the receipt at the Home Office of the Owner's written request. No further increases in the amount of Additional Protection will be made. Premium. When the amount of Additional Protection is changed under this section, the minimum premium will be determined by adding the premium for the Minimum Guaranteed Death Benefit to the premium for the amount of Additional Protection. During the guaranteed period, the premium for Additional Protection will be [$ rate] per $1,000 of coverage. After the guaranteed period, the premium rates for Additional Protection will be based on the attained age of the Insured. These premium rates are shown on page 6. Premium Suspension. Premiums will not be suspended under Section 4.6 during any policy year in which the Additional Protection is increased. /s/ John M. Bremer SECRETARY THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY AMENDMENT TO SECTION 6 THE SEPARATE ACCOUNT FOR VARIABLE WHOLE LIFE AS OF THE DATE OF ISSUE, THE SECOND PARAGRAPH OF SECTION 6.1 IS AMENDED TO READ AS FOLLOWS: The Separate Account has several Divisions, as shown on page 7. Assets of the Separate Account are invested in shares of corresponding mutual funds or portfolios of mutual funds, both of which are referred to in this policy as Portfolios. Shares of the Portfolios are purchased for the Separate Account at their net asset value. The Company may make available additional Divisions and Portfolios. AS OF THE DATE OF ISSUE, THE FIFTH AND SIXTH PARAGRAPHS OF SECTION 6.1 ARE AMENDED TO READ AS FOLLOWS: The Owner may exchange this policy for a fixed benefit life insurance policy being offered at that time by the Company if the Portfolio changes its investment advisor or has a material change in its investment objectives or restrictions. The Company will notify the Owner if there is any such change. The Owner may exchange this policy within 60 days after the notice or the effective date of the change, whichever is later. If, in the judgment of the Company, a Portfolio no longer suits the purposes of this policy due to a change in its investment objectives or restrictions, the Company may substitute shares of another Portfolio. Any such substitution will be subject to any required approval of the Securities and Exchange Commission (SEC), the Wisconsin Commissioner of Insurance or other regulatory authority. Secretary NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY VCL.FUNDS.(0799) POLICY APPLICATION SUPPLEMENT FOR VARIABLE WHOLE LIFE WITH ADDITIONAL PROTECTION THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY 720 East Wisconsin Avenue Milwaukee, Wisconsin 53202 INSURED: -------------------- POLICY: Variable Whole Life (Minimum Guaranteed Death Benefit) $ ------ with Additional Protection $ ------- Initial Death Benefit $ -------
Other Annual Initial Premium Premium ------- ------- Variable Whole Life Premium $ ------- Additional Protection Premium $ ------- Premiums to Increase Policy Value: Scheduled Additional Premium $ ------- Unscheduled Additional Premium $ ------- Premiums to Purchase Variable Paid-Up Insurance: Scheduled Additional Premium $ ------- Unscheduled Additional Premium $ ------- Waiver of Premium Benefit $ ------- Additional Purchase Benefit $ ------- Amount Each Purchase Date $ -------
ALLOCATION OF NET PREMIUMS USE WHOLE PERCENTAGES ONLY. Up to ten choices can be selected. There must be a minimum of 10% in each Division selected. If dollar cost averaging is used, the Money Market Division is utilized and considered one choice (with nine additional selections available). If dollar cost averaging is desired, allocate 100% to the Money Market Division and complete the monthly dollar cost averaging section. Select Bond Division % Growth & Income Stock Division % ----- ----- International Equity Division % Index 400 Stock Division % ----- ----- Money Market Division % Small Cap Growth Stock Division % ----- ----- Balanced Division % Russell Multi-Style Equity Division % ----- ----- Index 500 Stock Division % Russell Aggressive Equity Division % ----- ----- Aggressive Growth Stock Division % Russell Non-US Division % ----- ----- High Yield Bond Division % Russell Real Estate Securities Division % ----- ----- Growth Stock Division % Russell Core Bond Division % ----- ----- Total 100% ---- ----
Illustration No. ----------- 90-1 VCL.Supp.(0799) Page 1 of 4 MONTHLY DOLLAR COST AVERAGING To elect monthly dollar cost averaging, choose one of the following options and indicate the desired allocation of transfers below: Option One: Transfer funds from the Money Market Division in monthly - -- installments such that by the end of the policy year the balance in the Money Market division will be zero. - -- Option Two: Transfer the following amount from the Money Market Division each month until the balance is zero: $_____________. Use whole percentages only. There must be a minimum of 10% in each Division selected. Select Bond Division % Growth & Income Stock Division % ----- ----- International Equity Division % Index 400 Stock Division % ----- ----- Balanced Division % Small Cap Growth Stock Division % ----- ----- Index 500 Stock Division % Russell Multi-Style Equity Division % ----- ----- Aggressive Growth Stock Division % Russell Aggressive Equity Division % ----- ----- High Yield Bond Division % Russell Non-US Division % ----- ----- Growth Stock Division % Russell Real Estate Securities Division % ----- ----- Russell Core Bond Division % ----- Total 100% ---- ----
ANNUAL DIVIDENDS If Additional Protection is present and there is no Excess Amount, dividends will be used to increase Policy Value. In other situations, until otherwise directed, dividends will: Increase Policy Value - ----- Reduce current premium with excess used to increase Policy Value - ----- Purchase Variable Paid-Up Additional Insurance - ----- Be paid in cash - ----- POLICY LOAN INTEREST RATE OPTION 5% - ----- Variable Rate - ----- OWNER'S ADDRESS Insured's address or: - ----- - ----- ------------------------------------ Street & No. or R.F.D. ------------------------------------ City State Zip Insured: --------------------- Illustration No. ------------- 90-1 VCL.Supp.(0799) Page 2 of 4 The Company is required to make the following inquiries for purposes of determining the suitability of this sale. All responses will be kept confidential. 1. In addition to providing a benefit upon death, what is the purpose for the purchase? To fund a trust ----- To supplement retirement income ----- To supplement education funding ----- Other (specify) ----- -------------------------------------------------- 2. By whom will the purchase be funded? --------------------------------------- Annual income (all sources) of person/trust funding the purchase: $ ------ Net worth of person/trust funding the purchase: $ ----------------------- 3. Applicant's experience with the following: Up to Five or Five More None Years Years Mutual Funds ----- ----- ----- Individual Common Stocks ----- ----- ----- Variable Annuities ----- ----- ----- Variable Life Insurance ----- ----- ----- Insured: --------------------- Illustration No. ------------- 90-1 VCL.Supp.(0799) Page 3 of 4 I believe that a Variable Whole Life with Additional Protection policy is consistent with my investment objectives. I understand that an illustration of benefits, including death benefits and cash values, is available upon request assuming a hypothetical annual investment return of 0% and another rate of my choice not greater than 12%. I UNDERSTAND THAT THE DEATH BENEFIT FOR THE VARIABLE WHOLE LIFE WITH ADDITIONAL PROTECTION POLICY APPLIED FOR MAY INCREASE OR DECREASE TO REFLECT THE INVESTMENT EXPERIENCE OF THE NORTHWESTERN MUTUAL VARIABLE LIFE ACCOUNT. PROVIDED ALL REQUIRED PREMIUMS ARE PAID AS OF THE DUE DATE AND PROVIDED THERE IS NO POLICY DEBT, THE DEATH BENEFIT WILL NOT BE LESS THAN THE SUM OF THE VARIABLE WHOLE LIFE AND ADDITIONAL PROTECTION AMOUNTS IN THE FIRST XX YEARS AND NOT LESS THAN THE VARIABLE WHOLE LIFE AMOUNT THEREAFTER. I UNDERSTAND THAT THE CASH VALUE FOR THE VARIABLE WHOLE LIFE WITH ADDITIONAL PROTECTION POLICY APPLIED FOR MAY INCREASE OR DECREASE TO REFLECT THE INVESTMENT EXPERIENCE OF THE NORTHWESTERN MUTUAL VARIABLE LIFE ACCOUNT. THERE ARE NO GUARANTEED MINIMUM CASH VALUES. I understand that if investment experience and/or dividends are less than illustrated a greater number of premiums may have to be paid in cash than what was shown on any sales document, including illustrations that assume a zero cash outlay in some years. If this policy is issued other than in the [Select] underwriting classification, I will be notified by a letter from Northwestern Mutual Life. Before accepting the policy, I should request and review revised copies of any sales document I relied upon in the decision to purchase. I acknowledge receipt of the prospectus for Variable Whole Life with Additional Protection. dated: ____ /____ /____ MO. DAY YEAR [I direct that this policy be changed to a paid up Variable Whole Life Policy at the first policy anniversary. ____ ____ ] YES NO DATE: ____ /____ /_____ MO. DAY YEAR SIGNATURE OF APPLICANT: ------------------------- Based on the information furnished by the Applicant in this application, I certify that I have reasonable grounds for believing the purchase of the policy applied for is suitable for the Applicant. I further certify that a current prospectus was delivered and that no written sales materials other than those furnished by the Home Office were used. Signature of Licensed Agent: --------------------------------------------------- (Registered Representative) Based on the information furnished by the Applicant in this application, I certify that I have reasonable grounds for believing the purchase of the policy applied for is suitable for the Applicant. Signature of General Agent: ----------------------------------------------------- For Office Use Only VCL, Illustration No. ------------- ------------------- Dividend Scale Year 1998 QQ Und. Amt. $ ------------------------ Policy Number ---------------------- Page 4 of 4 90-1 VCL.Supp.(0799) HOL03 116607 THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY No.......... MILWAUKEE, WISCONSIN
LIFE INSURANCE APPLICATION |_| Life & Disability Application ============================================================================================================================= 1. INSURED -------------------------------------------------------------------------------- |x| Mr. |_| Mrs. |_| Ms. John J Doe |X| Male |_| Dr. |_| Other ______ -------------------------------------------------------------------------------- |_| Female First Middle Initial Last |_| Companion policies |_| 1035 Exchange STATE OF BIRTH 2A. INSURED'S DATE OF BIRTH 6 / 1 / 60 B. (or FOREIGN COUNTRY): WI -------------- -------- Month Day Year 3. APPLICANT, if other than Insured |_| Mr. |_| Mrs. |_| Ms. ________________________________________________________ Relationship |_| Dr. |_| Other______ First Middle Initial Last to Insured ________________________ If business organization: |_| Corporation |_| Partnership |_| Other type of business __________________________________ 4. RESIDENCE OF INSURED 1234 Main Street ---------------------------------------------------------------------------------------------------- Street & No. or RFD This address will be used for all of the Insured's policies. Milwaukee Milwaukee WI 53200 --------------------------------------------------------------------------------------- City County State Zip Code 5A. PREMIUM PAYER Send premium and other notices regarding this policy 5B. PAYER'S DAYTIME TELEPHONE NUMBER: Insurance Service to: |X| Insured |_| Owner |_| Applicant (222) 222-2222 to: |_| Account (ISA) |_| Other___________________________ -------------------- Payer Full Name Area Code or at: |_| Insured's address in 4 or 5C. PAYER'S TAXPAYER IDENTIFICATION NUMBER ________________________________ (444) 444-4444 Street & No. or RFD -------------------- See TIN Instructions ________________________________ City ________________________________ State Zip Code 6. Has an application or informal inquiry ever been made to Northwestern Mutual Life for annuity, life or disability insurance on the life of the Insured? |_| Yes |X| No If yes, the last policy number is ______________________________ ============================================================================================================================ 7. Complete this question only if exercising an ADDITIONAL PURCHASE BENEFIT OPTION. (Smoking questionnaire may be required.) A. List policy number(s) under which an option is being exercised. 1. _____________ 2. _____________ 3. _____________ B. This application is: |_| Regular Purchase |_| Advance Purchase (Complete item C. below) C. If this is an Advance Purchase, the event is: |_| Marriage |_| Birth of a child |_| Adoption of a child Name of: |_| Spouse ____________________________ Date and place of marriage, birth, or final decree of adoption: |_| Child _____/___/____ ____________________________________________ Month Day Year City State D. Is the amount applied for more than the additional purchase option amount available? |_| Yes |_| No If yes, what is the excess amount to be underwritten? $____________________________ ============================================================================================================================= 8. SPECIAL DATE |_| Short term - Policy Date will coincide with ISA Payment Date. (For Monthly ISA only) Prepaid: |_| Short term to _______/_____/______ |_| Date to save age |_| Backdate to _______/_____/______ Month Day Year Month Day Year Non-prepaid: |_| Specified future date _____/___/____ |_| Date to save age |_| Backdate to _______/_____/______ Month Day Year Month Day Year ============================================================================================================================= POLICY APPLIED FOR (For CompLife plans do not complete A & B. Go to C.) 9A. PLAN and AMOUNT 9B. ADDITIONAL BENEFITS (1) Variable Whole Life with Additional Protection (1)|_| (2)|_| Waiver of Premium - -------------------------------------------------- Plan (1)|_| (2)|_| Accidental Death (1) $________ (2) $________ $ see attached supplement - -------------------------------------------------- (1)|_| (2)|_| Additional Purchase (1) $________ (2) $________ Amount Benefit Amt. per Amt. per (2) (1)|_| (2)|_| Payor Benefit option option - -------------------------------------------------- Plan (1)|_| (2)|_| Index Protection $ - -------------------------------------------------- (1)|_| (2)|_| Other________________ Amount ============================================================================================================================= 90-1 L.I. (1194) (page 1)
==================================================================================================================================== 9C. FLEXIBLE LIFE PLANS (CompLife) |_| Whole Life $______________ with Additional Protection $______________ (Custom CompLife) Amount Amount (1) |_| Additional initial premium $__________ Use to: |_| Reduce term insurance _____% (2) |_| Inflation Protection Option |_| Increase coverage _____% |_| Whole Life $__________ with a premium for Increasing Insurance $____________________ (Increasing CompLife) Amount Level annual premium |_| Additional initial premium $_______________ |_| Executive Whole Life $__________ with Additional Protection $__________ (Executive CompLife) Amount Amount Premium for Increasing Insurance $__________ Use to: |_| Convert term insurance _____% |_| Increase coverage _____% |_| Additional initial premium $__________ Use to: |_| Convert term insurance _____% |_| Increase coverage _____% |_| Whole Life $__________ with Adjustable Term Protection $__________ (Adjustable CompLife) Amount Amount (1) a. |_| Scheduled annual additional $______________________ |_| Reduce term insurance ____% Level annual premium Use to: |_| Increase coverage ____% b. |_| Annual increase in additional premium ____________ $_______________ (Not more than 20 years, or to age 69, if less) No. of years Annual increase (2) |_| Additional initial premium $_______________ Use to: |_| Reduce term insurance ____% |_| Increase coverage ____% (3) Only one may be selected: |_| Inflation Protection Option |_| Scheduled annual increase in term amount ____________ $____________________ (Not more than 20 years. or to age 69. if less) No. of years Annual increase amt. |_| Corporate Whole Life (See attached Supplement) 9D. ADDITIONAL BENEFITS FOR FLEXIBLE LIFE PLANS |_| Waiver of Premium |_| Additional Purchase Benefit $___________________________________ Amount per option |_| Accidental Death $_________________ |_| Other___________________________________________________________ Amount ==================================================================================================================================== 10. If an additional benefit cannot be approved, should the Company issue the policy without the benefit? |_|Yes |_| No 11. Shall the PREMIUM LOAN provision, if available, become operative according to its terms? |X| Yes |_| No 12. ANNUAL DIVIDENDS until otherwise directed will: see attached supplement First policy Second policy |_| |_| Reduce current premium. If flexible plan Additional Protection or Adjustable Term, additions purchased by eligible dividend will be used to: |_| |_| Purchase paid-up additions. |_| Reduce term insurance ___% |_| |_| Accumulate at interest. |_| Increase coverage ___% |_| |_| Be paid in cash. |_| |_| Be used for combination of options above (Complete form 18-1364). 13. POLICY LOAN INTEREST RATE OPTION |_| 8% |_| Variable Rate see attached supplement 14. PREMIUM PAYABLE |X| Annually |_| Semiannually |_| Quarterly |_| Single |_| Monthly (Variable Life Only ==================================================================================================================================== 90-1 L.I. (1194) (page 2)
================================================================================ ------------------------------------------------------------------ INSURED John J Doe ------------------------------------------------------------------ First Middle Initial Last 15A. DIRECT BENEFICIARY Jane M Doe spouse --------------------------------------------------------------- First Middle Initial Last Relationship to Insured --------------------------------------------------------------- First Middle Initial Last Relationship to Insured --------------------------------------------------------------- First Middle Initial Last Relationship to Insured B. CONTINGENT BENEFICIARY --------------------------------------------------------------- First Middle Initial Last Relationship to Insured --------------------------------------------------------------- First Middle Initial Last Relationship to Insured --------------------------------------------------------------- First Middle Initial Last Relationship to Insured Box (1) or (2) may be selected to include all of the children or brothers and sisters without naming them, or to add to the contingent beneficiaries named. Box (3) may be selected to provide for the children of a deceased contingent beneficiary; use only if contingent beneficiaries are named and/or box (1) or (2) is checked, NOTE: The word "children" includes child and any legally adopted child. |_| (1) and all (other) children of the Insured. |_| (2) and all (other) brothers and sisters of the Insured born of the marriage of or legally adopted by ____________ and ____________ before the Insured's death. |_| (3) any amount that would have been paid to a deceased contingent beneficiary, if living, will be paid in one sum and in equal shares to the children of that contingent beneficiary who survive and receive payment. C. FURTHER PAYEES --------------------------------------------------------------- First Middle Initial Last Relationship to Insured --------------------------------------------------------------- First Middle Initial Last Relationship to Insured |_| D. SEE ATTACHED SUPPLEMENT FORM (To be used in place of designations above) ================================================================================ 16. The OWNER will be: (Caution: A minor owner cannot exercise policy rights. If the Insured is under age 15, consider selecting item D, E or F.) Select only one. |X| A. Insured |_| B. Applicant |_| C. Other _____________________________________ First Middle Initial Last _____________________________________ Relationship to Insured |_| D. Applicant. If the Applicant dies before the Insured, the Insured will be the Owner. |_| E. Applicant. If the Applicant dies before the Insured, the Owner will be: _____________________________________________ First Middle Initial Last _____________________________________________ Relationship to Insured If both die before the Insured, the Insured will be the Owner. |_| F. Applicant until the Insured attains the age of ______ years. If the Applicant dies before the Insured, the Owner will be: _____________________________________________ First Middle Initial Last ____________________________until the Insured Relationship to Insured attains such age. Upon the Insured attaining such age, or if both die before the Insured, the Insured will be the Owner. |_| G. SEE ATTACHED SUPPLEMENT FORM. (To be used in place of designations above) ================================================================================ RESIDENCE OF OWNER |X| Insured's address in 4 |_| Premium payer's address in 5A or ___________________________________________________________________________ Street & No. or RFD ___________________________________________________________________________ City State Zip Code OWNERS TAXPAYER IDENTIFICATION NUMBER (See Instructions) ________________________________________________________ ================================================================================ 17. Has the premium for the policy applied for been paid to the agent in exchange for the Conditional Life Insurance Agreement with the same number as this application? |X| Yes |_| No 18A. Will the insurance applied for replace any Northwestern Mutual Life insurance (or annuities) on the Insured's life? If yes, agent should explain and send required papers. |_| Yes |X| No B. Will the insurance applied for replace life insurance (or annuities) on the insured's life from a source other than the Northwestern Mutual Life? If yes, agent should explain and send required papers. |_| Yes |X| No ================================================================================ 90-1 L.I. (1194) (page 3) PERSONAL HISTORY QUESTIONS TO BE ANSWERED BY INSURED |_| Payor Benefit for Applicant (Payor)_________________________________________ First Middle Initial Last Payor's Date of Birth _____/___/____ Policy Number _________ Relationship Month Day Year to Insured _______ 20. Have you ever had life, disability or health insurance declined, rated, modified, issued with an exclusion rider, cancellel, or not renewed? (If yes, explain in REMARKS) ..................................... |_|Yes |X| No 21. When was your last examination or application for life, disability, or accidental death insurance? Month ______________ Year _________ Company ___________________ |X| None 22. Indicate below whether any other life i surance on your life is Individual (Ind) or Group (Grp) and identify In Force (I), Pending (P) or Contemplated (C) or |X| NONE
- ----------------------------------------------------------------------------------------------------- Insurer Ind or Grp Life Insurance Amount Accidental Death Amount I, P, or C - ----------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------- - -----------------------------------------------------------------------------------------------------
23. Marital Status: |_| Single, Widowed or Divorced |X| Married 24. a Citizen of: |X| USA |_| Other If other: Visa Type: ____________________ Visa Number:_____________________ 25. Do you regularly travel outside the U.S.A. or do you have plans to leave the U.S.A. for travel or residence? ............................. |_| Yes |X| No If yes, complete the chart below.
- ----------------------------------------------------------------------------------------------------- Destination Number of Trips Duration of Departure Date Purpose of Trip (List all Cities and Countries) Per Year Each Trip This Yr. Last Yr. (No. of Days) (Month/Year) - ----------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------- - -----------------------------------------------------------------------------------------------------
26. a. What is your occupation(s)? Lawyer What are your duties? __________________________________________________ b. Employer(s) Name: ABC Corporation Address: 5678 Main Street City, State, ZipCode: Milwaukee, WI 53200 c. How long employed? 5 years (If less than 2 years, explain in REMARKS) 27. (Not required if under age 17) Are you a member of, or do you plan on joining any branch of the Armed Forces or reserve military unit? If yes, complete Military Section 90-5 .............................. |_| Yes |X| No 28. (Not required if under age 16) Except as a passenger on a regularly scheduled flight, have you flown within the past 2 ears, or do you have plans to fly in the future? If yes, complete Aviation Section 90-5 ................................................ |_| Yes |X| No 29. (Not required if under age 10) In the past 2 years have you participated in or do you have plans to participate in: racing (automobile, snowmobile, motorcycle, boat or go-cart), underwater or sky diving, hang gliding, bungee jumping, mountain or rock climbing, or rodeos? If yes, complete Avocation Section 90-6 ................................................ |_| Yes |X| No 30. (Not required if under age 16) a. What is your automobile driver's license number? ABC 123 45678 State WI or, |_| I do not have a driver's license. b.In the past 5 years, have you been in a motor vehicle accident, been charged with a moving violation of any motor vehicle law, or had your license restricted, suspended or revoked? If yes, explain in the chart below ...................................................... |_| Yes |X| No
- --------------------------------------------------------------------------------------------- Type of Details (Speeding. Reckless Driving While Action Accident Date Intoxicated, Etc.) (Citation, Fine, Etc.) (Yes or No) - --------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------
ADDITIONAL REMARKS ================================================================================ 90-1 L.I. (1194) (page 4) The Insured consents to this application and declares that the answers and statements made on this application are correctly recorded, complete and true to the best of the Insured's knowledge and belief. Answers and statements brought to the attention of the agent, medical examiner, or paramedical examiner are not considered information brought to the attention of the Company unless stated in the application. Statements in this application are representations and not warranties. It is agreed that: (1) If the premium is not paid when the application is signed, no insurance will be in effect. The insurance will take effect at the time the policy is delivered and the premium is paid, if: the Insured is living at the time; and the answers and statements in the application are then true to the best of the Insured's knowledge and belief. (2) If the premium is paid when the application is taken, no life insurance will be in effect if Section I. of the Conditional Life Insurance Agreement applies. (3) If the policy is issued in an extra premium class, acceptance of the policy will amend it so that extended term insurance can be in force only if: the Company gives its consent; or the loan value is not large enough to grant a premium loan. If a premium is not paid within the grace period and extended term insurance cannot be in force, paid-up insurance will be selected. (4) No agent is authorized to make or alter contracts or to waive any of the Company's rights or requirements. The owner of the policy applied for herein certifies, under penalties of perjury, (1) that the number shown in Question 16 of this application is his correct Taxpayer Identification Number (or he is waiting for a number to be issued) and (2) he is not subject to backup withholding either because he has not been notified by the Internal Revenue Service (IRS) that he is subject to backup withholding as a result of a failure to report all interest or dividends, or the IRS has notified him that he is no longer subject to backup withholding. (See instructions). INSURED'S AUTHORIZATION TO OBTAIN AND DISCLOSE INFORMATION I authorize Northwestern Mutual Life, its agents, employees, reinsurers, insurance support organizations and their representatives to obtain information about me to evaluate this application and to verify information in this application. This information will include: (a) age; (b) medical history, condition and care; (c) physical and mental health; (d) occupation; (e) income and financial history; (f) foreign travel; (g) avocations; (h) driving record; (i) other personal characteristics; and (j) other insurance. This authorization extends to information on the use of alcohol, drugs and tobacco; the diagnosis or treatment of HIV (AIDS virus) infection and sexually transmitted diseases; and the diagnosis and treatment of mental illness. During the time this authorization is valid it extends to information required to determine eligibility for benefits under any policy issued as a result of this application. I authorize any person, including any physician, health care professional, hospital, clinic, medical facility, government agency including the Veterans and Social Security Administrations, the MIB, Inc., employer, consumer reporting agency, accountant, tax preparer, or other insurance company, to release information about me to Northwestern Mutual Life or its representatives on receipt of this Authorization. Northwestern Mutual Life or its representatives may release this information about me to its reinsurer, to the MIB, Inc., or to another insurance company to whom I have applied or to whom a claim has been made. No other release may be made except as allowed by law or as I further authorize. I have received a copy of the Medical Information Bureau and Fair Credit Reporting Act notices. I authorize Northwestern Mutual Life to obtain an investigative consumer report on me. |_| I request to be interviewed if an investigative consumer report is done. This authorization is valid for 30 months from the date it is signed. A copy of this authorization is as valid as the original and will be provided on request. The signatures below apply to the authorization and to the application. (signed) John J Doe (signed) John J Doe - ---------------------------------------- ------------------------------------ Signature of INSURED (if other than Signature of APPLICANT Applicant and 15 years of age or over) Print name of Insured if under age 15. - ---------------------------------------- ------------------------------------ Signature of PARENT OR GUARDIAN (if other Signature of OWNER (if other than than Applicant and Insured is a minor) Applicant or Insured) Signed at Milwaukee Milwaukee WI (signed) Norm M Western ------------------------------ ------------------------------------ City, County & State Signature of LICENSED AGENT Date June 1, 1995 ------------------------------ ================================================================================ 90-1 L.I. (1194) (page 5) ================================================================================ It is recommended that you ... read your policy. notify your Northwestern Mutual agent or the Company at 720 East Wisconsin Avenue, Milwaukee, WI 53202, of an address change. call your Northwestern Mutual agent for information--particularly on a suggestion to terminate or exchange this policy for another policy or plan. Election of Trustees The members of The Northwestern Mutual Life Insurance Company are its policyholders of insurance policies and deferred annuity contracts. The members exercise control through a Board of Trustees. Elections to the Board are held each year at the annual meeting of members. Members are entitled to vote in person or by proxy. VARIABLE WHOLE LIFE POLICY WITH ADDITIONAL PROTECTION Eligible For Annual Dividends Insurance payable at death of Insured. Fixed premiums payable for period shown on page 3. Benefits reflect investment results. Variable benefits described in Section 1, 3, 6, 7 and 8. THE DEATH BENEFIT MAY INCREASE OR DECREASE DAILY DEPENDING ON INVESTMENT RESULTS. HOWEVER, IF NO PREMIUM IS UNPAID AS OF ITS DUE DATE, THE DEATH BENEFIT WILL NOT BE LESS THAN THE MINIMUM GUARANTEED DEATH BENEFIT SHOWN ON PAGE 3, LESS ANY POLICY DEBT. THE CASH VALUE UNDER THIS POLICY MAY INCREASE OR DECREASE DAILY DEPENDING ON INVESTMENT RESULTS. THERE IS NO GUARANTEED MINIMUM CASH VALUE. NORTHWESTERN MUTUAL LIFE (R) ================================================================================ EX-99.A(5)(C) 4 EXHIBIT 99.A(5)(C) Exhibit A(5)(c) ADDITIONAL PURCHASE BENEFIT 1. THE BENEFIT The Company will issue additional permanent life insurance policies on the Insured, with no evidence of insurability, subject to the terms and conditions below. The term "new policy" means each additional policy issued under this Benefit. The premium for this Benefit is shown on page 3. 2. PURCHASE DATES The Owner may purchase a new policy as of each Purchase Date. There is a Purchase Date on each policy anniversary that is nearest the 22nd, 25th, 28th, 31st, 34th, 37th, and 40th birthdays of the Insured. The Company must receive an application and the first premium for each new policy: o while the Insured is living; and o not more than 60 days before, nor more than 30 days after, a Purchase Date. The Owner of the new policy must have an insurable interest in the life of the Insured. 3. ADVANCE PURCHASE A new policy may be purchased before a Purchase Date each time one of these events occurs: o the marriage of the Insured. o the birth of a child of the Insured. o the completion, by the Insured, of the legal adoption of a child. The event must occur while this policy is in force. To make an advance purchase of a new policy, there must be a future Purchase Date that has not been used. An advance purchase of a new policy cancels the next unused Purchase Date. The Company must receive an application and the first premium for each new policy: o while the Insured is living; and o not more than 90 days after the marriage, birth or adoption. The Company may require proof of the marriage, birth or adoption. The Owner of the new policy must have an insurable interest in the life of the Insured. 4. AUTOMATIC TERM INSURANCE The Company will provide term insurance on the life of the Insured during each 90 day period in which the Owner may purchase a new policy. The amount of the term insurance will be the largest amount of insurance which could have been purchased as a new policy under this Benefit. The proceeds of the term insurance are payable on the death of the Insured only if: o a new policy was not purchased within that period; or o a new policy purchased within that period is surrendered to the Company for a refund of premiums. The proceeds of the term insurance will be payable to the beneficiary and subject to the terms of this policy. 5. TERMS OF NEW POLICY Plan. Each new policy will be on a level premium permanent life insurance plan being issued by the Company on the date of purchase of the new policy. An additional benefit that is made a part of the new policy will contain the provisions of that benefit as it is being issued by the Company on the date of issue of the new policy. Amount. The minimum amount of each new policy on the Whole Life Paid Up at 90 plan will be $20,000. The amount of each new policy on any other plan must be at least the Company's minimum for policies being issued on that plan at that time. The maximum amount of each policy will be the Amount of the Additional Purchase Benefit shown on page 3. However, in the event of a multiple birth, the maximum amount which may be purchased as an advance purchase will be the Amount of this Benefit multiplied by the number of children of the birth. Waiver Of Premium Benefit. If the Waiver of Premium Benefit is in force on this policy at the time that the Owner has the right to purchase a new policy: o a new policy on a plan with a level death benefit on which premiums are payable to age 90 or later may be issued with the Waiver of Premium Benefit. If premiums are waived for this policy at the time the new policy is purchased, premiums will also be waive for the new policy for as long as they are waived for this policy. o a new policy on a plan with a nonlevel death benefit or a plan on which all premiums are payable before age 90 may be issued with the Waiver of Premium Benefit only if premiums are not then being waived for this policy. If the Waiver of Premium Benefit is a part of the new policy, it will apply only to a disability that starts after the new policy takes effect. NN 1 Life APB Accidental Death Benefit. Each new policy may be issued with the Accidental Death Benefit, provided that: o the Accidental Death Benefit is a part of this policy when the new policy is issued; and o the Accidental Death Benefit amount is not more than the amount of the new policy. However, the total amount of Accidental Death Benefit in force with the Company on the life of the Insured may not be more than the Company's published limits. Provisions. The Suicide and Incontestability provisions in each new policy will be in effect from the Date of Issue of this policy. Each new policy will contain any exclusion provision which is a part of this policy. Premiums. The premium for each new policy, including any additional benefits, will be determined as of its date of issue based on: o the Company's premium rates then in effect; o the plan and amount of the new policy and any additional benefits; and o the Insured's age on the policy date of the new policy. If the Insured was age 18 or more on the Policy Date of this policy, the premium for the new policy will be based on the classification of risk of this policy. If the Insured was age 17 or less on the Policy Date of this policy, the premium for the new policy will be based on the classification of risk of this policy adjusted to reflect the Insured's cigarette smoking habits. Effective Date. Each new policy will take effect on the later of: o the date the Company receives the application; or o the date the Company receives the first premium. 6. TERMINATION OF BENEFIT This Benefit will terminate on the policy anniversary that is nearest the 40th birthday of the Insured. It will terminate earlier: o when this policy terminates. o when this policy becomes extended term or paid-up insurance. o on the use of the final Purchase Date by an advance purchase. o when the Owner's written request is received at the Home Office. /s/ John M. Bremer Secretary THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY NN1 Life APB EX-99.A(5)(D) 5 EXHIBIT 99.A(5)(D) Exhibit A(5)(d) NORTHWESTERN MUTUAL LIFE 720 EAST WISCONSIN AVENUE MILWAUKEE, WISCONSIN 53202 JOHN G GIANGREGORIO DECEMBER 28. 1994 8 CHURCH ST BOSTON MA 02116 RE: VL13 194 787 JOHN G GIANGREGORIO VARIABLE WHOLE LIFE WITH ADDITIONAL PROTECTION NOTICE OF CANCELLATION RIGHT In order to comply with the laws administered by the Securities and Exchange Commission, we are sending you this notice. Please read it carefully. You have recently purchased a variable life insurance policy from Northwestern Mutual Life. The benefits of this policy depend on the investment experience of Northwestern Mutual Variable Life Account. The prospectus that was given to you at the time of sale describes the account and gives an illustration reflecting various investment performances You have the right to examine and cancel this policy. Upon its return, you are entitled to a full refund of all premiums paid. The cancellation deadline is the latter of: 1. 10 days after you have received the policy. 2. 45 days from DECEMBER 28, 1994, the date you completed part 1 of the application. 3. 10 days after receipt of this notice. In determining whether or not to exercise your right, you should consider, along with other factors, the projected cost and your ability to make the scheduled premium payments as stated in your policy. Please consult and review the prospectus you have received. The prospectus describes the deductions from premiums before amounts are allocated to the Account mentioned above. These are: Annual administrative charges of $84 plus 12 cents per $1,000 of Minimum Guaranteed Death Benefit and Additional Protection. An annual risk charge of 12 cents per $1,000 of Minimum Guaranteed Death Benefit. A deduction for sales load of 4.5% of premium. A deduction for taxes attributable to premiums of 3.5% of premium. If you decide to cancel your policy, complete the form on the reverse side and return it along with your policy. The postmark of the returned policy must be on or before the deadline described above. VARIABLE LIFE INSURANCE CANCELLATION INSTRUCTIONS PLEASE READ CAREFULLY If after reading the Notice of Cancellation Right on the reverse side you decide to return your policy for cancellation you must: 1. Sign and date the bottom of this form. 2. Mail this notice together with your policy to either YOUR AGENT: OR THE HOME OFFICE: JAMES KATTANY, CLU NORTHWESTERN MUTUAL LIFE 2000 W PARK DR NEW BUSINESS DEPARTMENT WESTBOROUGH MA 01581 720 EAST WISCONSIN AVENUE MILWAUKEE, WI 53202 3. The postmark of the envelope must be on or before the latest date permitted for cancellation as described on the reverse side. 4. Please check the box at the bottom if you have not yet received your policy when mailing this form. ________________________________________________________________________________ TO BE FILLED OUT BY OWNER IF CANCELLATION IS DESIRED TO: Northwestern Mutual Life New Business Department Eastern Region Pursuant to the terms of the Notice of Cancellation Right printed on the reverse side of these instructions, I hereby return the policy numbered below for cancellation and request full refund of the premium paid. I release Northwestern Mutual Life from any claims in connection with the sale or issuance of this policy, and acknowledge that Northwestern Mutual Life's only liability is the refund of the premium paid for the policy. - ------------------------------- -------------------------- Date of Signature Signature of Policy Owner - ------------------------------- VL13 194 787 Date of Receipt of ------------- Your Policy And This Policy Number Notice of Cancellation Right -------------------------- Name of Insured (if other than the Owner) |_| I have not yet received the policy. Should it be received, I will return it to Northwestern Mutual Life. -------------------------- Signature of Agent -------------------------- EX-99.A(9)(A) 6 EXHIBIT 99.A(9)(A) EXHIBIT A(9)(a) PARTICIPATION AGREEMENT AMONG RUSSELL INSURANCE FUNDS, RUSSELL FUND DISTRIBUTORS, INC. AND THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY THIS AGREEMENT is made and entered into as of this ____ day of ______________,by and among THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY a Wisconsin life insurance company (hereinafter the "Company"), on its own behalf and on behalf of each segregated asset account of the Company set forth on Schedule A hereto as such schedule may be amended from time to time (each such account hereinafter referred to as the "Account" and collectively as the "Accounts"), and RUSSELL INSURANCE FUNDS, a Massachusetts Business Trust (hereinafter the "Investment Company"), and RUSSELL FUND DISTRIBUTORS, INC. a Washington corporation (hereinafter the "Underwriter"). WHEREAS, Investment Company engages in business as a diversified open-end management investment company and is available to act as the investment vehicle for separate accounts established for variable life insurance policies and variable annuity contracts (collectively, the "Variable Insurance Products"); and WHEREAS, the beneficial interest in the Investment Company is divided into several series of shares, referred to individually as "Funds" and representing the interest in a particular managed portfolio of securities and other assets; and WHEREAS, Investment Company is registered as an open-end management investment company under the 1940 Act, and its shares are registered under the Securities Act of 1933, as amended (hereinafter the "1933 Act"); and WHEREAS, Frank Russell Investment Management Company (the "Adviser") is registered as an investment adviser under the federal Investment Advisers Act of 1940 and any applicable state securities law; and WHEREAS, the Company has registered or will register certain variable life or annuity contracts or both under the 1933 Act, and offers or will offer for sale certain variable life or annuity contracts or both which are or will be exempt from registration; and WHEREAS, each Account is a duly organized, validly existing, segregated asset account, established by resolution of the Board of Trustees of the Company, on the date shown for such Account on Schedule A hereto, to set aside and invest assets attributable to one or more variable life or annuity contracts; and WHEREAS, the Company has registered or will register some of the Accounts as unit investment trusts under the 1940 Act and other Accounts are exempt from registration; and 1 WHEREAS, Investment Company has received "mixed and shared funding" exemptive relief from the Securities and Exchange Commission permitting it to offer its shares to life insurers in connection with variable annuity contracts and variable life insurance policies offered by such insurers which may or may not be affiliated with each other (SEC Release IC-16160, Dec. 7, 1987); and WHEREAS, the Underwriter is registered as a broker/dealer with the SEC under the Securities Exchange Act of 1934, as amended (hereinafter the "1934 Act") and is a member in good standing of the National Association of Securities Dealers, Inc. (hereinafter the "NASD"); and WHEREAS, to the extent permitted by applicable insurance laws and regulations, the Company intends to purchase shares in the Funds on behalf of each Account to fund certain of the aforesaid variable life or annuity contracts or both, and the Underwriter is authorized to sell such shares to unit investment trusts such as each Account at net asset value. NOW THEREFORE, in consideration of the premises and of the mutual covenants herein contained and other good and valuable consideration the receipt of which is hereby acknowledged, the parties hereto, intending to be legally bound hereby, agree as follows: ARTICLE 1. SALE OF INVESTMENT COMPANY SHARES 1.1 The Underwriter agrees to sell to the Company those shares of Investment Company which each Account orders, executing such orders on a daily basis at the net asset value next computed after receipt by the Investment Company or its designee of the order for the shares of the Investment Company. For purposes of this Section 1.1, the Company shall be the designee of the Investment Company for receipt of such orders from each Account and receipt by such designee shall constitute receipt by the Investment Company; provided that the Investment Company receives notice of such order by 8:00 a.m. Pacific time on the next following Business Day. "Business Day" shall mean any day on which the New York Stock Exchange is open for trading and on which Investment Company calculated its net asset value pursuant to the rules of the Securities and Exchange Commission. 1.2 The Investment Company agrees to make its shares available indefinitely for purchase at the applicable net asset value per share by the Company and its Accounts on those days on which the Investment Company calculates its net asset value pursuant to rules of the Securities and Exchange Commission, and the Investment Company shall use reasonable efforts to calculate such net asset value on each day on which the New York Stock Exchange is open for trading. Notwithstanding the foregoing, the Board of Directors of the Investment Company (hereinafter the "Board") may refuse to sell shares of any Fund, or suspend or terminate the offering of shares of any Fund if such action is required by law or by regulatory authorities having jurisdiction or is, in the sole discretion of the Board acting in good faith and in light of their fiduciary duties under federal and any applicable state laws, necessary in the best interests of the shareholders of such Fund. 1.3 The Investment Company and the Underwriter agree that no shares of any Fund will be sold to the general public. 2 1.4 The Investment Company agrees to redeem for cash, on the Company's request, any full or fractional shares of the Investment Company held by the Company, executing such requests on a daily basis at the net asset value next computed after receipt by the Investment Company or its designee of the request for redemption. For purposes of this Section 1.4, the Company shall be the designee of the Investment Company for receipt of requests for redemption from each Account, and receipt by such designee shall constitute receipt by the Investment Company; provided that the Investment Company receives notice of such request for redemption by 8:00 a.m. Pacific time on the next following Business Day. 1.5 The Company agrees to purchase and redeem the shares of selected Funds offered by the then-current prospectus of the Investment Company and in accordance with the provisions of such prospectus. The parties agree that all net amounts available under the variable life and annuity contracts with the form number(s) which are listed on Schedule B attached hereto and incorporated herein by this reference, as such Schedule B may be amended from time to time hereafter by mutual written agreement of all the parties hereto (the "Contracts"), may be invested in the Investment Company, in other separate accounts of the Company, in other investment companies, in the Company's general account, or in other funding vehicles. 1.6 The Company shall pay for Investment Company shares on the next Business Day after an order to purchase Investment Company shares is made in accordance with the provisions of Section 1.1 hereof. Payment shall be in federal funds transmitted by wire. 1.7 Issuance and transfer of the Investment Company's shares will be by book entry only. Stock certificates will not be issued to the Company or any Account. Shares ordered from the Investment Company will be recorded in an appropriate title for each Account. 1.8 The Investment Company shall furnish same day notice (by wire or telephone, followed by written confirmation) to the Company of any income dividends or capital gain distributions payable on the Investment Company's shares. The Company hereby elects to receive all such income dividends and capital gain distributions as are payable on the Fund shares in additional shares of that Fund. The Company reserves the right to revoke this election and to receive all such income dividends and capital gain distributions in cash. Investment Company shall furnish same day notice to the Company of the number of shares so issued as payment of such dividends and distributions. 1.9 The Investment Company shall make the net asset value per share for each Fund available to the Company on a daily basis as soon as reasonably practical after the net asset value per share is calculated. ARTICLE II. REPRESENTATIONS AND WARRANTIES 2.1 The Company represents and warrants that the Contracts are registered under the 1933 Act or are exempt from registration thereunder; that the Contracts will be issued and sold in compliance in all material respects with all applicable Federal and State laws and that the sale of the Contracts shall comply in all material respects with state insurance suitability requirements. The Company further represents and warrants that it is an insurance company duly organized and in good standing under applicable law and that it has legally and validly established each 3 Account prior to any issuance or sale of Contracts funded thereby as a segregated asset account under applicable state insurance law and that each Account is or will be registered as a unit investment trust in accordance with the provisions of the 1940 Act to serve as a segregated investment account for the Contracts or is exempt from registration thereunder. 2.2 The Investment Company represents and warrants that Investment Company shares sold pursuant to this Agreement shall be registered under the 1933 and 1940 Acts, duly authorized for issuance and sold in compliance with the laws of the State of Washington and all applicable federal and state securities laws and that the Investment Company is and shall remain registered under the 1940 Act. The Investment Company shall amend the Registration Statement for its shares under the 1933 and the 1940 Acts from time to time as required in order to effect the continuous offering of its shares. The Investment Company shall register and qualify the shares for sale in accordance with the laws of the various states only if and to the extent deemed advisable by the Investment Company or the Underwriter. 2.3 The Investment Company represents that it is currently qualified as a Regulated Investment Company under Subchapter M of the Internal Revenue Code of 1986, as amended, (the "Code") and that it will make every effort to maintain such qualification (under Subchapter M or any successor or similar provision) and that it will notify the Company immediately upon having a reasonable basis for believing that it has ceased to so qualify or that it might not so qualify in the future. 2.4 The Company represents that the Contracts are currently treated as endowment, annuity or life insurance contracts, under applicable provisions of the Code and that it will make every effort to maintain such treatment and that it will notify the Investment Company and the Underwriter immediately upon having a reasonable basis for believing that the Contracts have ceased to be so treated or that they might not be so treated in the future. 2.5 The Investment Company currently does not intend to make any payments to finance distribution expenses pursuant to Rule l2b-1 under the 1940 Act or otherwise, although it may make such payments in the future. To the extent that it decides to finance distribution expenses pursuant to Rule 12b-1, the Investment Company undertakes to have its board of trustees, a majority of whom are not interested persons of the Investment Company, formulate and approve any plan under Rule l2b-1 to finance distribution expenses. 2.6 The Investment Company makes no representation as to whether any aspect of its operations (including, but not limited to, fees and expenses and investment policies) complies with the insurance laws or regulations of the various states. 2.7 The Underwriter represents and warrants that it is a member in good standing of the NASD and is registered as a broker-dealer with the SEC. The Underwriter further represents that it will sell and distribute the Investment Company shares in accordance with any applicable state laws and federal securities laws, including without limitation the 1933 Act, the 1934 Act, and the 1940 Act. 2.8 The Investment Company represents that it is lawfully organized and validly existing under the laws of the Commonwealth of Massachusetts and that it does and will comply in all material respects with the 1940 Act. 4 2.9 The Underwriter represents and warrants that the Adviser is and shall remain duly registered in all material respects under all applicable federal and state securities laws and that the Adviser shall perform its obligations for the Investment Company in compliance in all material respects any applicable state laws and federal securities laws. 2.10 The Investment Company and Underwriter represent and warrant that all of their directors, officers, employees, investment advisers, and other individuals/entities dealing with the money or securities of the Investment Company are and shall continue to be at all times covered by a blanket fidelity bond or similar coverage for the benefit of the Investment Company in an amount not less than the minimal coverage as required currently by Rule 17g-(1) of the 1940 Act or related provisions as may be promulgated from time to time. The aforesaid Bond shall include coverage for larceny and embezzlement and shall be issued by a reputable bonding company. 2.11 The Company represents and warrants that all of its directors, officers, employees, investment advisers, and other entities dealing with the money or securities of the Investment Company are and shall continue to be at all times covered by a blanket fidelity bond or similar coverage for the benefit of the Investment Company in an amount not less than five million dollars ($5 million). The aforesaid Bond shall include coverage for larceny and embezzlement and shall be issued by a reputable bonding company. ARTICLE III. PROSPECTUSES AND PROXY STATEMENTS: VOTING 3.1 The Underwriter shall provide the Company with as many printed copies of the Investment Company's current prospectus and Statement of Additional Information as the Company may reasonably request. If requested by the Company in lieu thereof, the Investment Company shall provide camera-ready film or computer diskettes containing the Investment Company's prospectus and Statement of Additional Information and such other assistance as is reasonably necessary in order for the Company once each year (or more frequently if the prospectus and/or Statement of Additional Information for the Investment Company is amended during the year) to have the prospectus for the Contracts and the Investment Company's prospectus printed together in one document, and to have the Statement of Additional Information for the Investment Company and the Statement of Additional Information for the Contracts printed together in one document. Alternatively, the Company may print the Investment Company's prospectus and/or its Statement of Additional Information in combination with other fund companies' prospectuses and statements of additional information. Except as provided in the following three sentences, all expenses of printing and distributing Investment Company prospectuses and Statements of Additional Information distributed by the Company shall be the expense of the Company. For Prospectuses and Statement of Additional Information provided by the Company to its existing owners of Contracts in order to update disclosure as required by the 1933 Act and/or the 1940 Act, the cost of printing shall be borne by the Investment Company. If the Company chooses to receive camera-ready film or computer diskettes in lieu of receiving printed copies of the Investment Company's prospectus, the Investment Company will reimburse the Company in an amount equal to the product of A and B where A is the number of such prospectuses distributed to owners of the Contracts, and B is the Investment Company's per unit cost of typesetting and printing the Invstment Company's 5 prospectus. The same procedures shall be followed with respect to the Investment Company's Statement of Additional Information. The Company agrees to provide the Investment Company or its designee with such information as may be reasonably requested by the Investment Company to assure that the Investment Company's expenses do not include the cost of printing any prospectuses or Statements of Additional Information other than those actually distributed to existing owners of the Contracts. 3.2 The Investment Company's prospectus shall state that the Statement of Additional Information for the Investment Company is available from the Underwriter or the Company (or in the Fund's discretion, the Prospectus shall state that such Statement is available from the Investment Company). 3.3 The Investment Company, at its expense, shall provide the Company with copies of its proxy statements, reports to shareholders, and other required communications (except for prospectuses and Statement of Additional Information, which are covered in Section 3.1) to shareholders in such quantity as the Company shall reasonably require for distributing to Contract owners. 3.4 The Company will provide pass-through voting privileges to all Contract owners to the extent that and so long as the SEC continues to interpret the Investment Company Act of 1940 as requiring pass-through voting privileges for Contract owners. Accordingly, the Company, where applicable, will vote shares of the Fund held in its Separate Accounts in a manner consistent with voting instructions timely received from its Contract owners. The Company will be responsible for assuring that each of its separate accounts that participates in the Investment Company calculates voting privileges in a manner consistent with other participating insurance companies. The Company will vote shares for which it has not received timely voting instructions, as well as shares it owns, in the same proportion as it votes those shares for which it has received voting instructions. 3.5 If and to the extent Rule 6e-2 and Rule 6e-3(T) are amended, or if Rule 6e-3 is adopted, to provide exemptive relief from any provision of the Investment Company Act of 1940 or the rules thereunder with respect to mixed and shared funding on terms and conditions materially different from any exemptions granted in the Investment Company's mixed and shared funding exemptive order, then the Investment Company, and/or the Company, as appropriate, shall take such steps as may be necessary to comply with Rule 6e-2 and Rule 6e-3(T), as amended, and Rule 6e-3, as adopted, to the extent such Rules are applicable. 3.6 The Investment Company will comply with all provisions of the 1940 Act requiring voting by shareholders, and in particular the Investment Company will either provide for annual or special meetings or comply with the requirements of Section 16(c) of the 1940 Act (although the Investment Company is not one of the trusts described in Section 16(c) of that Act) as well as with Sections 16(a) and, if and when applicable, 16(b). Further, the Investment Company will act in accordance with the SEC's interpretation of the requirements of Section 16(a) with respect to periodic elections of directors and with whatever rules the SEC may promulgate with respect thereto. 6 ARTICLE IV. SALES MATERIAL AND INFORMATION 4.1 The Company shall furnish, or shall cause to be furnished, to the Investment Company or its designee, each piece of sales literature or other promotional material, or component thereof, in which the Investment Company, the Adviser, or the Underwriter is named, at least fifteen Business Days prior to its use. No such material shall be used if the Investment Company or its designee object to such use within fifteen Business Days after receipt of such material. Once any such material has been so furnished to the Investment Company or its designee and fifteen Business days have elapsed, such materials need not again be so furnished absent any subsequent changes to such material that affect the materials' discussion or presentation relating to the Investment Company, its advisor, the Underwriter, or any of their affiliates (other than the Company or persons that are deemed affiliates only by virtue of being controlled by the Company). In particular, materials that have been changed merely to update performance or financial information need not be so furnished. 4.2 The Company shall not give any information or make any representations or statements on behalf of the Investment Company or concerning the Investment Company in connection with the sale of the Contracts other than the information or representations contained in the registration statement or prospectus for the Investment Company shares, as such registration statement and prospectus may be amended or supplemented from time to time, or in reports or proxy statements for the Investment Company, or in sales literature or other promotional material approved by the Investment Company or its designee or by the Underwriter, except with the permission of the Investment Company or the Underwriter or the designee of either. 4.3 The Investment Company, the Underwriter, or their designees shall furnish, or shall cause to be furnished, to the Company or its designee, each piece of sales literature or other promotional material, or component thereof, in which the Company or its separate Accounts are named at least fifteen Business Days prior to its use. No such material shall be used if the Company or its designee objects to such use within fifteen Business Days after receipt of such material. 4.4 The Investment Company and the Underwriter shall not give any information or make any representations on behalf of the Company or concerning the Company, each Account, or the Contracts other than the information or representations contained in a registration statement, prospectus or offering materials for the Contracts, as such may be amended or supplemented from time to time, or in published reports for each Account which are in the public domain or approved by the Company for distribution to Contract owners, or in sales literature or other promotional material approved by the Company or its designee, except with the permission of the Company. 4.5 The Investment Company will provide to the Company at least one complete copy of all registration statements, prospectuses, Statements of Additional Information, reports, proxy statements, sales literature and other promotional materials, applications for exemptions, requests for no-action letters, and all amendments to any of the above, that relate to the Investment Company or its shares, contemporaneously with the filing of such document with the Securities and Exchange Commission or other regulatory authorities. 7 4.6 The Company will provide to the Investment Company at least one complete copy of all registration statements, prospectuses, Statements of Additional Information, reports, solicitations for voting instructions, sales literature and other promotional materials, applications for exemptions, requests for no-action letters, and all amendments to any of the above, that relate to the Contracts or each Account, contemporaneously with the filing of such document with the SEC or other regulatory authorities. In the case of unregistered Contracts, in lieu of providing prospectuses and Statements of Additional Information, the Company shall provide the Investment Company with one complete copy of the offering materials for the Contracts. 4.7 For purposes of this Article IV, the phrase "sales literature or other promotional material" includes, but is not limited to, advertisements (such as material published, or designed for use in, a newspaper, magazine, or other periodical, radio, television, telephone or tape recording, videotape display, signs or billboards, motion pictures, electronic media, or other public media), sales literature (i.e., any written communication distributed or made generally available to customers or the public, including brochures, circulars, research reports, market letters, form letters, seminar texts, reprints or excerpts of any other advertisement, sales literature, or published article), educational or training materials or other communications distributed or made generally available to some or all agents or employees, and registration statements, prospectuses, Statements of Additional Information, shareholder reports, and proxy materials. ARTICLE V. POTENTIAL CONFLICTS 5.1 The parties acknowledge that Investment Company has received a "mixed and shared funding "exemptive order from the SEC granting relief from various provisions of the Investment Company Act of 1940 and the rules thereunder to the extent necessary to permit Investment Company shares to be sold to and held by Variable Insurance Products separate accounts of both affiliated and unaffiliated participating insurance companies. The exemptive order requires the Investment Company and each participating insurance company to comply with conditions and undertakings substantially as provided in this Article V. The Investment Company will not enter into a participation agreement with any other participating insurance company unless it imposes the same conditions and undertakings as are imposed on the Company. 5.2 The Investment Company's Board of Trustees ("Board") will monitor the Investment Company for the existence of any material irreconcilable conflict between the interests of Contract owners of all separate accounts investing in the Investment Company. An irreconcilable material conflict may arise for a variety of reasons, which may include: (a) an action by any state insurance regulatory authority; (b) a change in applicable federal or state insurance, tax, or securities laws or regulations, or a public ruling, private letter ruling or any similar action by insurance, tax or securities regulatory authorities; (c) an administrative or judicial decision in any relevant proceeding; (d) the manner in which the investments of the Investment Company are being managed; (e) a difference in voting instructions given by Contract owners; and (f) a decision by a participating insurance company to disregard the voting instructions of Contract owners. 5.3 The Company will report any potential or existing conflicts to the Investment Company's Board. The Company will be responsible for assisting the Board in carrying out its duties in this regard by providing the Board with all information reasonably necessary for the Board to 8 consider any issues raised. The responsibility includes, but is not limited to, an obligation by the Company to inform the Board whenever it has determined to disregard Contract owner voting instructions. These responsibilities of the Company will be carried out with a view only to the interests of the Contract owners. 5.4 If a majority of the Board or majority of its disinterested Trustees, determines that a material irreconcilable conflict exists affecting the Company, then the Company, at its expense and to the extent reasonably practicable (as determined by a majority of the Board's disinterested Trustees), will take any steps necessary to remedy or eliminate the irreconcilable material conflict, including: (a) withdrawing the assets allocable to some or all of the separate accounts from the Investment Company or any Fund thereof and reinvesting those assets in a different investment medium, which may include another Fund of the Investment Company, or another investment company; (b) submitting the question as to whether such segregation should be implemented to a vote of all affected Contract owners and as appropriate, segregating the assets of any appropriate group (i.e., variable annuity or variable life insurance contract owners of one or more participating insurance companies) that votes in favor of such segregation, or offering to the affected Contract owners the option of making such a change; and (c) establishing a new registered management investment company (or series thereof) or managed separate account. If a material irreconcilable conflict arises because of the Company's decision to disregard Contract owner voting instructions, and that decision represents a minority position or would preclude a majority vote, the Company may be required at the election of the Investment Company, to withdraw its separate accounts' investment in the Investment Company, and no charge or penalty will be imposed as a result of such withdrawal. The responsibility to take such remedial action shall be carried out with a view only to the interests of the Contract owners. For the purposes of this Section 5.4, a majority of the disinterested members of the Board shall determine whether or not any proposed action adequately remedies any irreconcilable material conflict but in no event will the Investment Company or any investment adviser of the Investment Company be required to establish a new funding medium for any Contract. Further, the Company shall not be required by this Section 5.4 to establish a new funding medium for any Contract if any offer to do so has been declined by a vote of a majority of Contract owners materially and adversely affected by the irreconcilable material conflict. 5.5 The Board's determination of the existence of an irreconcilable material conflict and its implications shall be made known promptly and in writing to the Company. 5.6 No less than annually, the Company shall submit to the Board such reports, materials or data as the Board may reasonably request so that the Board may fully carry out its obligations. Such reports, materials, and data shall be submitted more frequently if deemed appropriate by the Board. ARTICLE VI. FEES AND EXPENSES 6.1 The Investment Company and the Underwriter shall pay no fee or other compensation to the Company under this Agreement, except that if the Investment Company or any Fund adopts and implements a plan pursuant to Rule l2b-1 to finance distribution expenses, then the Underwriter may make payments to the Company or to the underwriter for the Contracts if and in amounts agreed to by the Underwriter in writing and such payments will be made out of 9 existing fees otherwise payable to the Underwriter, past profits of the Underwriter, or other resources available to the Underwriter. No such payments shall be made directly by the Investment Company. Currently, no such payments are contemplated. 6.2 All expenses incident to performance by the Investment Company under this Agreement shall be paid by the Investment Company. The Investment Company shall ensure that all its shares are registered and authorized for issuance in accordance with applicable federal law and, if and to the extent deemed advisable by the Investment Company, in accordance with applicable state laws prior to their sale. The Investment Company shall bear the expenses for the cost of registration and qualification of the Investment Company's shares, preparation and filing of the Investment Company's prospectus and registration statement, proxy materials and reports, setting the prospectus in type, setting in type and printing the proxy materials and reports to shareholders (including the costs of printing a prospectus that constitutes an annual report), the preparation of all statements and notices required by any federal or state law, and all taxes and fees on the issuance or transfer of the Investment Company's shares. 6.3 The Company shall bear the expenses of distributing the Investment Company's prospectus, proxy materials, and reports to owners of Contracts issued by the Company. ARTICLE VII. DIVERSIFICATION 7.1 The Investment Company will at all times invest money from the Contracts in such a manner as to ensure that the Contracts will be treated as variable contracts under the Internal Revenue Code and the regulations issued thereunder. Without limiting the scope of the foregoing, the Investment Company will at all times comply with Section 817(h) of the Code and Treasury Regulation 1.817-5, relating to the diversification requirements for variable annuity, endowment, or life insurance contracts and any amendments or other modifications to such Section or Regulations. ARTICLE VIII. INDEMNIFICATION 8.1 INDEMNIFICATION BY THE COMPANY 8.1(a). The Company agrees to indemnify and hold harmless the Investment Company and each member of the Board and officers and each person, if any, who controls the Investment Company within the meaning of Section 15 of the 1933 Act (collectively, the "Indemnified Parties" for purposes of this Section 8.1) against any and all losses, claims, damages, liabilities (including amounts paid in settlement with the written consent of the Company) or litigation (including legal and other expenses), to which the Indemnified Parties may become subject under any statute, regulation, at common law or otherwise, insofar as such losses, claims, damages, liabilities or expenses (or action in respect thereof) or settlements are related to the Company's sale or acquisition of the Investment Company's shares or the Contracts and: (i) arise out of or are based upon any untrue statements or alleged untrue statements of any material fact contained in any Registration Statement, prospectus or other offering materials for the Contracts or contained in the Contracts or sales literature for the Contracts (or any amendment or supplement to any of the foregoing), or arise out of or are based upon the omission or the alleged omission to state therein a material fact required to be stated therein or 10 necessary to make the statements therein not misleading, provided that this agreement to indemnify shall not apply as to any Indemnified Party if such statement or omission or such alleged statement or omission was made in reliance upon and in conformity with information furnished to the Company by or on behalf of the Investment Company for use in any Registration Statement or prospectus for the Contracts or in the Contracts or sales literature (or any amendment or supplement) or otherwise for use in connection with the sale of the Contracts or Investment Company's shares; or (ii) arise out of or as a result of statements or representations (other than statements or representations contained in the Registration Statement, prospectus or sales literature of the Investment Company not supplied by the Company, or persons under its control) or wrongful conduct of the Company or persons under its control, with respect to the sale or distribution of the Contracts or Investment Company shares; or (iii) arise out of any untrue statement or alleged untrue statement of a material fact contained in a Registration Statement, prospectus, or sales literature of the Investment Company or any amendment thereof or supplement thereto or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading if such a statement or omission was made in reliance upon information furnished to the Investment Company by or on behalf of the Company; or (iv) arise as a result of any failure by the Company to provide the services and furnish the materials under the terms of this Agreement; or (v) arise out of a result from any material breach of any representation or warranty made by the Company in this Agreement or arise out of or result from any other material breach of this Agreement by the Company, as limited by and in accordance with the provisions of Sections 8.1(b) and 8.1(c) hereof. 8.1(b). The Company shall not be liable under this indemnification provision with respect to any losses, claims, damages, liabilities or litigation incurred or assessed against an Indemnified Party as such may arise from such Indemnified Party's willful misfeasance, bad faith, or gross negligence in the performance of such Indemnified Party's duties or by reason of such Indemnified Party's reckless disregard of obligations or duties under this Agreement or to the Investment Company, whichever is applicable. 8.1(c). The Company shall not be liable under this indemnification provision with respect to any claim made against an Indemnified Party unless such Indemnified Party shall have notified the Company in writing within a reasonable time after the summons or other first legal process giving information of the nature of the claim shall have been served upon such Indemnified Party (or after such Indemnified Party shall have received notice of such service on any designated agent), but failure to notify the Company of any such claim shall not relieve the Company from any liability which it may have to the Indemnified Party against whom such action is brought otherwise than on account of this indemnification provision. In case any such action is brought against the Indemnified Parties, the Company shall be entitled to participate, at its own expense, in the defense of such action. The Company also shall be entitled to assume the defense thereof, with counsel satisfactory to the party named in the action. After notice from the Company to such party of the Company's election to assume the defense thereof, the Indemnified Party shall 11 bear the fees and expenses of any additional counsel retained by it, and the Company will not be liable to such party under this Agreement for any legal or other expenses subsequently incurred by such party independently in connection with the defense thereof other than reasonable costs of investigation. 8.1(d). The Indemnified Parties will promptly notify the Company of the commencement of any litigation or proceedings against them in connection with the issuance or sale of the Investment Company shares or the Contracts or the operation of the Investment Company. 8.2 INDEMNIFICATION BY THE UNDERWRITER 8.2(a). The Underwriter agrees to indemnify and hold harmless the Company and each of its directors and officers and each person, if any, who controls or is controlled by the Company within the meaning of Section 15 of the 1933 Act (collectively, the "Indemnified Parties" for purposes of this Section 8.2) against any and all losses, claims, damages, liabilities (including amounts paid in settlement with the written consent of the Underwriter) or litigation expenses (including legal and other expenses) to which the Indemnified Parties may become subject under any statute, at common law or otherwise, insofar as such losses, claims, damages, liabilities or expenses (or actions in respect thereof) or settlements are related to the sale or acquisition of the Investment Company's shares or the Contracts and; (i) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in the Registration Statement or prospectus or sales literature of the Investment Company (or any amendment or supplement to any of the foregoing), or arise out of or are based upon the omission or the alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, provided that this agreement to indemnify shall not apply as to any Indemnified Party if such statement or omission or such alleged statement or omission was made in reliance upon and in conformity with information furnished to the Underwriter or Investment Company by or on behalf of the Company for use in the Registration Statement or prospectus for the Investment Company or in the sales literature (or any amendment or supplement) or otherwise for use in connection with the sale of the Contracts or Investment Company shares; or (ii) arise out of or as a result of statements or representations (other than statements or representations contained in any Registration Statement, prospectus, other offering materials or sales literature for the Contracts not supplied by the Underwriter or persons under its control) or wrongful conduct of the Investment Company, Adviser, or Underwriter or persons under their control, with respect to the sale or distribution of the Contracts or Investment Company shares; or (iii) arise out of any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement, prospectus, other offering materials or sales literature covering the Contracts, or any amendment thereof or supplement thereto, or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statement or statements therein not misleading, if such statement or omission was made in reliance upon information furnished to the Company by or on behalf of the Investment Company; or 12 (iv) arise as a result of any failure by the Investment Company to provide the services and furnish the materials under the terms of this Agreement (including a failure, whether unintentional or in good faith or otherwise, to comply with the diversification requirements specified in Article VII of this Agreement); or (v) arise out of or result from any material breach of any representation or warranty made by the Underwriter in this Agreement or arise out of or result from any other material breach of this Agreement by the Underwriter; as limited by and in accordance with the provisions of Sections 8.2(b) and 8.2(c) hereof. 8.2(b). The Underwriter shall not be liable under this indemnification provision with respect to any losses, claims, damages, liabilities or litigation to which an Indemnified Party would otherwise be subject by reason of such Indemnified Party's willful misfeasance, bad faith, or gross negligence in the performance of such Indemnified Party's duties or by reason of such Indemnified Party's reckless disregard of obligations and duties under this Agreement or to the Company or each Account, whichever is applicable. 8.2(c). The Underwriter shall not be liable under this indemnification provision with respect to any claim made against an Indemnified Party unless such Indemnified Party shall have notified the Underwriter in writing within a reasonable time after the summons or other first legal process giving information of the nature of the claim shall have been served upon such Indemnified Party (or after such Indemnified Party shall have received notice of such service on any designated agent), but failure to notify the Underwriter of any such claim shall not relieve the Underwriter from any liability which it may have to the Indemnified Party against whom such action is brought otherwise than on account of this indemnification provision. In case any such action is brought against the Indemnified Parties, the Underwriter will be entitled to participate, at its own expense, in the defense thereof. The Underwriter also shall be entitled to assume the defense thereof, with counsel satisfactory to the party named in the action. After notice from the Underwriter to such party of the Underwriter's election to assume the defense thereof, the Indemnified Party shall bear the fees and expenses of any additional counsel retained by it, and the Underwriter will not be liable to such party under this Agreement for any legal or other expenses subsequently incurred by such party independently in connection with the defense thereof other than reasonable costs of investigation. 8.2(d). The Company agrees promptly to notify the Underwriter of the commencement of any litigation or proceedings against it or any of its officers or directors in connection with the issuance or sale of the Contracts or the operation of any Account. 8.3 INDEMNIFICATION BY THE INVESTMENT COMPANY 8.3(a). The Investment Company agrees to indemnify and hold harmless the Company and each of its directors and officers and each person, if any, who controls or is controlled by the Company within the meaning of Section 15 of the 1933 Act (collectively, the "Indemnified Parties" for purposes of this Section 8.3) against any and all losses, claims, damages, liabilities (including amounts paid in settlement with the written consent of the Investment Company) or litigation expenses (including legal and other expenses) to which the Indemnified Parties may become subject under any statute, at common law or otherwise, insofar as such losses, claims, 13 damages, liabilities or expenses (or actions in respect thereof) or settlements result from the gross negligence, bad faith or willful misconduct of the Board or any member thereof, are related to the operations of the Investment Company and: (i) arise as a result of any failure by the Investment Company to provide the services and furnish the materials under the terms of this Agreement (including a failure to comply with the diversification requirements specified in Article VII of this Agreement); or (ii) arise out of or result from any material breach of any representation or warranty made by the Investment Company in this Agreement or arise out of or result from any other material breach of this Agreement by the Investment Company, as limited by and in accordance with the provisions of Sections 8.3(b) and 8.3(c) hereof. 8.3(b). The Investment Company shall not be liable under this indemnification provision with respect to any losses, claims, damages, liabilities or litigation incurred or assessed against an Indemnified Party as such may arise from such Indemnified Party's will misfeasance, bad faith, or gross negligence in the performance of such Indemnified Party's duties or by reason of such Indemnified Party's reckless disregard of obligations and duties under this Agreement or to the Company, the Investment Company, the Underwriter or any Account, which ever is applicable. 8.3(c). The Investment Company shall not be liable under this indemnification provision with respect to any claim made against an Indemnified Party unless such Indemnified Party shall have notified the Investment Company in writing within a reasonable time after the summons or other first legal process giving information of the nature of the claim shall have been served upon such Indemnified Party (or after such Indemnified Party shall have received notice of such service on any designated agent), but failure to notify the Investment Company of any such claim shall not relieve the Investment Company from any liability which it may have to the Indemnified Party against whom such action is brought otherwise than on account of this indemnification provision. In case any such action is brought against the Indemnified Parties, the Investment Company will be entitled to participate, at its own expense, in the defense thereof. The Investment Company also shall be entitled to assume the defense thereof, with counsel satisfactory to the party named in the action. After notice from the Investment Company to such party of the Investment Company's election to assume the defense thereof, the Indemnified Party shall bear the fees and expenses of any additional counsel retained by it, and the Investment Company will not be liable to such party under this Agreement for any legal or other expenses subsequently incurred by such party independently in connection with the defense thereof other than reasonable costs of investigation. 8.3(d). The Company and the Underwriter agree promptly to notify the Investment Company of the commencement of any litigation or proceeding against it or any of its respective officers or directors in connection with this Agreement, the issuance or sale of the Contracts, with respect to the operation of any Account, or the sale or acquisition of shares of the Investment Company. 14 ARTICLE IX. APPLICABLE LAW 9.1 This Agreement shall be construed and the provisions hereof interpreted under and in accordance with the laws of the State of Washington. 9.2 To the extent they are applicable, this Agreement shall be subject to the provisions of the 1933, 1934 and 1940 acts, and the rules and regulations and rulings thereunder, including such exemptions from those statutes, rules and regulations as the Securities and Exchange Commission may grant and the terms hereof shall be interpreted and construed in accordance therewith. ARTICLE X. TERMINATION OF AGREEMENT 10.1 This Agreement shall continue in full force and effect until the first to occur of: (a) termination by any party for any reason by sixty (60) days advance written notice delivered to the other parties; or (b) termination by the Company by written notice to the Investment Company and the Underwriter with respect to any fund based upon the Company's determination that shares of such Fund are not reasonably available to meet the requirements of the Contracts; or (c) termination by the Company by written notice to the Investment Company and the Underwriter with respect to any Fund in the event any of the Fund's shares are not registered, issued, or sold materially in accordance with applicable state or federal law or such law precludes the use of such shares as the underlying investment media of the Contracts issued or to be issued by the Company; or (d) Termination by the Company by written notice to the Investment Company and the Underwriter with respect to any Fund in the event that such Fund ceases to qualify as a Regulated Investment Company under Subchapter M of the Code or under any successor or similar provision, or if the Company reasonably believes that the Investment Company may fail to so qualify; or (e) termination by the Company by written notice to the Investment Company and the Underwriter with respect to any Fund in the event that such Fund fails to meet the diversification requirements specified in Article VII hereof; or (f) termination by either the Investment Company or the Underwriter by written notice to the Company, if either one or both of the Investment Company or the Underwriter respectively, shall determine, in their sole judgment exercised in good faith, that the Company or its affiliated companies has suffered a material adverse change in its business, operations, financial condition, or prospects since the date of this Agreement or is the subject of material adverse publicity; or (g) termination by the Company by written notice to the Investment Company and the Underwriter, if the Company shall determine, in its sole judgment exercised in good faith, that either the Investment Company or the Underwriter has suffered a material adverse change in its 15 business, operations, financial condition, or prospects since the date of this Agreement or is the subject of material adverse publicity. 10.2 Notwithstanding any termination of this Agreement, the Investment Company and the Underwriter shall at the option of the Company, continue to make available additional shares of the Investment Company pursuant to the terms and conditions of this Agreement, for all Contracts in effect on the effective date of termination of this Agreement (hereinafter referred to as "Existing Contracts"). Specifically, without limitation, the owners of the Existing Contracts shall be permitted to reallocate investment in the Investment Company, redeem investments in the Investment Company, or invest in the Investment Company upon the making of additional purchase payments under the Existing Contracts. 10.3 The Company shall not redeem Investment Company shares attributable to the Contracts (as opposed to Investment Company shares attributable to the Company's assets held in any of the Accounts) except (i) as necessary to implement Contract Owner initiated transactions, or (ii) as required by state or federal laws or regulations or judicial or other legal precedent of general application (hereinafter referred to as a "Legally Required Redemption"). Upon request, the Company will promptly furnish to the Investment Company and the Underwriter the opinion of counsel for the Company (which counsel shall be reasonably satisfactory to the Investment Company and the Underwriter) to the effect that any redemption pursuant to clause (ii) above is a Legally Required Redemption. Furthermore, except in cases where permitted under the terms of the Contracts, the Company shall not prevent Existing Contract Owners from allocating payments to a Fund that was otherwise available under the Contracts without first giving the Investment Company or the Underwriter sixty (60) days notice of its intention to do so. ARTICLE XI. NOTICES Any notice shall be sufficiently given when sent by registered or certified mail to the other party at the address of such party set forth below or at such other address as such party may from time to time specify in writing to the other party. If to the Investment Company: 909 A. Street Tacoma, Washington 98402 Attention: Karl J. Ege, Esq. If to the Company: 720 East Wisconsin Avenue Milwaukee, Wisconsin 53202-4797 Attention: _________________________ If to the Underwriter: 909 A. Street Tacoma, Washington 98402 Attention: Karl J. Ege, Esq. 16 ARTICLE XII. MISCELLANEOUS 12.1 All persons dealing with the Investment Company must look solely to the property of the Investment Company for the enforcement of any claims against the investment Company as neither the Board, officers, agents or shareholders assume any personal liability for obligations entered into on behalf of the Investment Company. 12.2 Subject to the requirements of legal process and regulatory authority, each party hereto shall treat as confidential the names and addresses of the owners of the Contracts and all information reasonably identified as confidential in writing by any other party hereto and, except as permitted by this Agreement, shall not disclose, disseminate or utilize such names and addresses and other confidential information until such time as it may come into the public domain without the express written consent of the affected party. 12.3 The captions in this Agreement are included for convenience of reference only and in no way define or delineate any of the provisions hereof or otherwise affect their construction or effect. 12.4 This Agreement may be executed simultaneously in two or more counterparts, each of which taken together shall constitute one and the same instrument. 12.5 If any provisions of this Agreement shall be held or made invalid by a court decision, statute, rule or otherwise, the remainder of the Agreement shall not be affected thereby. 12.6 Each party hereto shall cooperate with each other party and all appropriate governmental authorities (including without limitation the SEC, the NASD and state insurance regulators) and shall permit such authorities reasonable access to its books and records in connection with any investigation or inquiry relating to this Agreement or the transactions contemplated hereby. Notwithstanding the generality of the foregoing, each party hereto further agrees to furnish the California Insurance Commissioner with any information or reports in connection with services provided under this Agreement which such Commissioner may request in order to ascertain whether the variable life insurance operations of the Company are being conducted in a manner consistent with the California Variable Life Insurance Regulations and any other applicable law or regulations. 12.7 The rights, remedies and obligations contained in this Agreement are cumulative and are in addition to any and all rights, remedies and obligations, at law or in equity, which the parties hereto are entitled to under state and federal laws. 12.8 This Agreement or any of the rights and obligations hereunder may not be assigned by any party without the prior written consent of all parties hereto; provided, however, that the Underwriter may assign this Agreement or any rights or obligations hereunder to any affiliate of or company under common control with the Underwriter, if such assignee is duly licensed and registered to perform the obligations of the Underwriter under this Agreement. 17 12.9 The Company shall furnish, or shall cause to be furnished, to the Investment Company or its designee copies of the following reports: (a) the Company's annual statement prepared under statutory accounting principles, as soon as practical and in any event within 90 days after the end of each fiscal year; (b) the Company's quarterly statement (statutory), as soon as practical and in any event within 45 days after the end of each quarterly period; and (c) any financial statement, proxy statement, notice or report of the Company sent to stockholders or policyholders, as soon as practical after the delivery thereof; and 12.10 The Master Trust Agreement dated 11 July 1996, as amended from time to time, establishing the Investment Company, which is hereby referred to and a copy of which is on file with the Secretary of The Commonwealth of Massachusetts, provides that the name Russell Insurance Funds means the Trustees from time to time serving (as Trustees but not personally) under said Master Trust Agreement. It is expressly acknowledged and agreed that the obligations of the Investment Company hereunder shall not be binding upon any of the shareholders, Trustees, officers, employees or agents of the Investment Company, personally, but shall bind only the trust property of the Investment Company as provided in its Master Trust Agreement. The execution and delivery of this Agreement have been authorized by the Trustees of the Investment Company and signed by the President of the Investment Company, acting as such, and neither such authorization by such Trustees nor such execution and delivery by such officer shall be deemed to have been made by any of them individually or to impose any liability on any of them personally, but shall bind only the trust property of the Investment Company as provided in its Master Trust Agreement. IN WITNESS WHEREOF, each of the parties hereto have caused this Agreement to be executed in its name and on behalf by its duly authorized representative and its seal to be hereunder affixed hereto as of the date first written above. THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY ATTEST: BY: ____________________________________ ______________________________________ Secretary Title: RUSSELL INSURANCE FUNDS ATTEST: BY: ____________________________________ ______________________________________ Secretary President RUSSELL FUND DISTRIBUTORS, INC. 18 ATTEST: BY: ____________________________________ ______________________________________ Secretary President 19 SCHEDULE A ACCOUNTS Name of Account Date of Resolution of Company's Board that established the Account NML Variable Annuity Account A February 14, 1968 NML Variable Annuity Account B February 14, 1968 NML Variable Annuity Account C July 22, 1970 Northwestern Mutual Variable Life Account November 23, 1983 20 SCHEDULE B CONTRACTS 1. Contract Form Numbers: Variable Life: RR.VJL.(1298) RR Series Variable Joint Life RR.VEL.(0398) RR Series Variable Executive Life QQ.VCL QQ Series Variable CompLife MM 15 MM Series Variable Whole Life MM 16 MM Series Variable Single Premium Life MM 17 MM Series Variable Extraordinary Life Individual Variable Annuity: QQV.ACCT.A QQV.ACCT.B QQ Series VAs MM V 1A MM V 1B MM V 1 MM Series VAs LL V 1A LL V 1B LL V 1 LL Series VAs KK V 1A KK V 1B KK V 1 KK Series VAs JJ V 1A JJ V 1B JJ Series VAs Group Variable Annuity NPV.1C NN Series GPA MP V 1C MM Series GPA LL V 1C LL Series GPA KK V 1C KK Series GPA JJ V 1C JJ Series GPA 2. Funds currently available to act as investment vehicles for the above-listed contracts: Russell Insurance Funds: Multi-Style Equity Fund Aggressive Equity Fund Non-U.S. Fund Core Bond Fund Russell Real Estate Securities Fund 21 EX-99.A(9)(B) 7 EXHIBIT 99.A(9)(B) Exhibit A(9)(b) February __, 1999 The Northwestern Mutual Life Insurance Company 720 East Wisconsin Avenue Milwaukee, WI 53202 Re: Administrative Service Fee Gentlemen: The purpose of this letter is to confirm certain financial arrangements between Frank Russell Investment Management Company ("FRIMCo"), the investment adviser to Russell Insurance Funds, a registered investment company (the "Trust"), and The Northwestern Mutual Life Insurance Company ("NML") in connection with NML's investment in the Trust. FRIMCo or its affiliates will pay an administrative services fee to NML equal, on an annualized basis, to 0.10% of the aggregate net assets of the Trust attributable to NML (other than assets attributable to NML employee and agent qualified plans). Such fee shall be paid quarterly (on a calendar year basis) in arrears for as long as NML owns shares in the Trust. Sincerely, FRANK RUSSELL INVESTMENT MANAGEMENT COMPANY By: --------------------------- Lynn L. Andersen Chief Executive Officer Agreed to and accepted: THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY By: -------------------------------- Mark G. Doll Senior Vice President EX-99.C(1) 8 EXHIBIT 99.C(1) Exhibit C(1) CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the use in the Prospectus constituting part of this Post-Effective Amendment No. 4 to the Registration Statement on Form S-6 (the "Registration Statement") of our report dated January 25, 1999, relating to the financial statements of The Northwestern Mutual Life Insurance Company, and of our report dated January 25, 1999, relating to the financial statements of Northwestern Mutual Variable Life Account, which appear in such Prospectus. We also consent to the reference to us under the heading "Experts" in such Prospectus. PricewaterhouseCoopers LLP Milwaukee, Wisconsin February 25, 1999 EX-99.C(6) 9 EXHIBIT 99.C(6) Exhibit C(6) February 25, 1999 The Northwestern Mutual Life Insurance Company 720 East Wisconsin Milwaukee, WI 53202 Gentlemen: This opinion is furnished in connection with Post-Effective Amendment No. 4 to the Registration Statement on Form S-6, Registration No. 33-89188, of Northwestern Mutual Variable Life Account. The prospectus included in Post-Effective Amendment No. 4 ("Prospectus") describes the Variable CompLife insurance policies to be issued in connection with the Account ("Policies"). The Policy form was prepared under my direction, and I am familiar with the Registration Statement and Exhibits thereto. In my opinion: 1. The illustrations of cash values and death benefits included on pages 43 through 46 of the Prospectus, in the Appendix thereto, based on the assumptions stated in the illustrations, are consistent with the provisions of the Policies and current dividend scale and experience. The rate structure of the Policies has not been designed so as to make the relationship between premiums and benefits, as shown in the illustrations, appear more favorable to a prospective purchaser of a Policy for male age 35, than to prospective purchasers of Policies for a male at other ages or for a female. 2. With respect to the charge of 1.25% of premiums for federal income taxes measured by premiums, described on page 11 of the Prospectus, (a) the charge is reasonable in relation to the issuer's increased federal tax burden under Section 848 of the Internal Revenue Code of 1986; (b) the targeted rate of return (11%) used in calculating the charge is reasonable; and (c) the factors taken into account in determining such targeted rate of return are appropriate. I hereby consent to the use of this opinion as an exhibit to the Registration Statement and to the reference to my name under the heading "Experts" in the Prospectus. Sincerely, WILLIAM C. KOENIG William C. Koenig Senior Vice President and Chief Actuary EX-27 10 EXHIBIT 27
6 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM NORTHWESTERN MUTUAL VARIABLE LIFE ACCOUNT DECEMBER 31, 1998 FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 YEAR DEC-31-1998 JAN-01-1998 DEC-31-1998 587,479 749,935 423 0 0 750,358 328 0 95 423 749,935 0 0 0 0 0 0 0 0 749,935 24,922 0 0 3,933 20,989 4,332 68,780 94,101 0 0 0 0 0 0 0 0 0 0 0 0 0 0 3,933 0 0 0 0 0 0 0 0 0 0 0
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