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June 30, 2007 THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY

Variable Annuity Account

Semi-Annual Reports

Flexible Payment Variable Annuity Account A

Flexible Payment Variable Annuity Account A

(Fee Based)

Flexible Payment Variable Annuity Account B

Flexible Payment Variable Annuity Account B

(Fee Based)

Group Combination Annuity Account C

Flexible Payment Variable Annuity Account C

(Network Edition)

Northwestern Mutual Series Fund, Inc. Fidelity® VIP Mid Cap Portfolio Fidelity® VIP Contrafund® Portfolio

Neuberger Berman Socially Responsive Portfolio

Russell Investment Funds

Russell Investment Funds – LifePoints® Variable Target Portfolio Series

NORTHWESTERN MUTUAL®

14-1558 (0107) (REV 0707)

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How To Get More Information

Northwestern Mutual Express:

1-800-519-4665

For eligible owners, get up-to-date information about your contract at your convenience with your Contract number and your Personal Identification Number (PIN). Call toll-free to review contract values and unit values, transfer among investment options, change the allocation and obtain fund performance information.

Information on the internet:

Northwestern Mutual Financial Network

WWW.NMFN.COM

For information about Northwestern Mutual visit us on our Website. Included is fund performance information (which can be found at nmfn.com > Investment Products > Annuities > Fund Information > Performance History), forms for routine service, and daily unit values for contracts you own with your User ID and password. Eligible owners may also transfer invested assets among funds and change the allocation of future contributions online.

For further information, contact either your Northwestern Mutual Financial Representative or The Northwestern Mutual Life Insurance Company, 720 East Wisconsin Avenue, Milwaukee, Wisconsin 53202; 1-888-455-2232.

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Contents

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Semi-Annual Report June 30, 2007

Northwestern Mutual Series Fund, Inc.

A Series Fund Offering Twenty-Seven Portfolios

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Letter to Contract Owners

June 30, 2007

Stocks managed solid returns during the six months ended June 30, 2007, despite a bumpy ride, while bonds produced modest but positive results. Once again, the riskiest, lowest-rated securities outperformed across virtually all markets. This ready acceptance of risk in pursuit of higher returns appears to us to be at odds with some important investment developments. Volatility is rising — reflecting the high degree of leverage in the system and fluidity of global capital flows — at a time when asset prices stand at lofty levels and the U.S. economy faces the challenge of a swooning housing market.

One way to see these trends at work is to look at the U.S. economy, where the effect of leverage is evident in housing. Home sales, housing starts, and price appreciation all hit records in 2005, and leverage worked to drive up asset prices as long as buyers had ready access to cheap financing. But with rates rising and lenders pulling back hard on credit, capital is no longer as cheap or easy to come by, with a predictable effect — prices of existing homes fell 2%

year-over-year through May, 2007. And with estimates of $500 billion or more in adjustable-rate sub-prime loans to reset next year, we think we have yet to see the full effect of higher rates on home prices and the economy.

With housing weighing on consumer spending and confidence, U.S. economic growth in the first quarter ran at the slowest pace in four years, though it appears to have bounced back in the second quarter. Call it a “mid-cycle slowdown” as the economy takes a breather from its extended recovery that began in 2002.

But even as U.S. growth slowed, the global economy appeared very healthy, so much so that many foreign central banks raised interest rates to keep their economies from overheating. Rapid growth among emerging market countries in particular helped drive positive performance for companies in Energy, Materials, and Industrials, which were three of the four best-performing sectors in the S&P 500^® Index. This U.S. stock benchmark returned 6.29% for the six months and touched a record high.

In addition, equities continued to benefit from a ready supply of investment capital — demand from sources as diverse as foreign central banks, hedge funds and private equity firms, corporate cash, petrodollars, and overseas household savings provided a boost to global asset prices. And while there is no widely available gauge of leverage in the system, our sense is that it is another key factor keeping asset prices across many markets in the neighborhood of all-time highs.

These effects were not limited to U.S. markets — emerging market stocks attracted massive global asset flows, helping them outperform shares in developed economies. For the six months, the MSCI Emerging Market Index returned 16.11%, compared with 10.89% for the MSCI EAFE Index, a measure of performance in developed countries. As a result, many European and emerging market stock indices reached record highs in recent months.

In the U.S. bond market too, volatility and acceptance of risk were dominant themes. In terms of volatility, in May and June alone the yield on the bellwether 10-year Treasury note jumped from around 4.65% to 5.30%, before finishing the period at 5.02%. For the six months, the investment-grade Lehman Aggregate Bond Index returned just 0.98% while a measure of “junk bond” performance returned almost three times that amount, as Lehman’s U.S. Corporate High-Yield Index returned 2.87%.

With prices and leverage in so many markets at lofty levels, it makes sense to be on guard against complacency — in the euphoria of rising markets, it’s easy to forget that asset prices can also go down. This is especially true because with yields rising and bond investors seemingly less receptive to the large debt offerings used to finance headline-grabbing buyouts, the cheap capital that has supported stock performance may be increasingly hard to come by.

But of course, there’s no way to know when, or even if, the effects of global capital flows and leverage will reverse themselves. One famous example worth recalling here is former Fed Chairman Alan Greenspan’s “irrational exuberance” speech — more than three years before the market peaked in 2000. In this environment, it makes sense to take a prudent, measured approach that doesn’t leave you overexposed to any single area or segment of the market. Your financial representative can work with you to regularly review your insurance and investment goals and help evaluate your portfolio’s composition and its suitability for your financial objectives.

Mark G. Doll

Senior Vice President

Investments

The Northwestern Mutual Life Insurance Company

(Northwestern Mutual)

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Northwestern Mutual Series Fund, Inc.

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Growth Stock Portfolio

Sector Allocation 6/30/07

Sector Allocation is based on Net Assets.

Sector Allocation is subject to change.

Expense Example

As a shareholder of the Portfolio, you incur two types of costs: (1) transaction costs and (2) ongoing costs, including management fees and other Portfolio expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Portfolio and to compare these costs with the ongoing costs of investing in other mutual funds.

The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (January 1, 2007 to June 30, 2007).

Actual Expenses

The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.

Hypothetical Example for Comparison Purposes

The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Portfolio’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Portfolio’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Portfolio and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs or separate account charges. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs or separate account charges were included, your costs would have been higher.

Growth Stock Portfolio

1

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Growth Stock Portfolio

Northwestern Mutual Series Fund, Inc.

Schedule of Investments

June 30, 2007 (unaudited)

ADR after the name of a security represents — American Depositary Receipt.

The Accompanying Notes are an Integral Part of the Financial Statements.

2

Growth Stock Portfolio

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Growth Stock Portfolio

The Accompanying Notes are an Integral Part of the Financial Statements.

Growth Stock Portfolio

3

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Janus Capital Appreciation Portfolio

Sector Allocation 6/30/07

Sector Allocation is based on Net Assets.

Sector Allocation is subject to change.

Expense Example

As a shareholder of the Portfolio, you incur two types of costs: (1) transaction costs and (2) ongoing costs, including management fees and other Portfolio expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Portfolio and to compare these costs with the ongoing costs of investing in other mutual funds.

The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (January 1, 2007 to June 30, 2007).

Actual Expenses

The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.

Hypothetical Example for Comparison Purposes

The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Portfolio’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Portfolio’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Portfolio and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs or separate account charges. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs or separate account charges were included, your costs would have been higher.

4

Janus Capital Appreciation Portfolio

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Janus Capital Appreciation Portfolio

Northwestern Mutual Series Fund, Inc.

Schedule of Investments

June 30, 2007 (unaudited)

ADR after the name of a security represents — American Depositary Receipt.

The Accompanying Notes are an Integral Part of the Financial Statements.

Janus Capital Appreciation Portfolio

5

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Large Cap Core Stock Portfolio

Sector Allocation 6/30/07

Sector Allocation is based on Net Assets.

Sector Allocation is subject to change.

Expense Example

As a shareholder of the Portfolio, you incur two types of costs: (1) transaction costs and (2) ongoing costs, including management fees and other Portfolio expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Portfolio and to compare these costs with the ongoing costs of investing in other mutual funds.

The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (January 1, 2007 to June 30, 2007).

Actual Expenses

The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.

Hypothetical Example for Comparison Purposes

The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Portfolio’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Portfolio’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Portfolio and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs or separate account charges. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs or separate account charges were included, your costs would have been higher.

6

Large Cap Core Stock Portfolio

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Large Cap Core Stock Portfolio

Northwestern Mutual Series Fund, Inc.

Schedule of Investments

June 30, 2007 (unaudited)

The Accompanying Notes are an Integral Part of the Financial Statements.

Large Cap Core Stock Portfolio

7

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Large Cap Core Stock Portfolio

The Accompanying Notes are an Integral Part of the Financial Statements.

8

Large Cap Core Stock Portfolio

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Capital Guardian Large Cap Blend Portfolio

Sector Allocation 6/30/07

Sector Allocation is based on Net Assets.

Sector Allocation is subject to change.

Expense Example

As a shareholder of the Portfolio, you incur two types of costs: (1) transaction costs and (2) ongoing costs, including management fees and other Portfolio expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Portfolio and to compare these costs with the ongoing costs of investing in other mutual funds.

The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (April 30, 2007 to June 30, 2007).

Actual Expenses

The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.

Hypothetical Example for Comparison Purposes

The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Portfolio’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Portfolio’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Portfolio and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs or separate account charges. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs or separate account charges were included, your costs would have been higher.

Capital Guardian Large Cap Blend Portfolio

9

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Capital Guardian Large Cap Blend Portfolio

Northwestern Mutual Series Fund, Inc.

Schedule of Investments

June 30, 2007 (unaudited)