MINNESOTA MUTUALS VARIABLE FUND D, 497, 1998-05-05

MINNESOTA MUTUALS VARIABLE FUND D
497, 1998-05-05

Previous: MINNESOTA MUTUALS VARIABLE FUND D, 497, 1998-05-05

Next: MML SERIES INVESTMENT FUND, 497J, 1998-05-05

<PAGE>
VARIABLE FUND D
PROSPECTUS
INDIVIDUAL VARIABLE ANNUITY CONTRACT OF
MINNESOTA MUTUAL'S VARIABLE FUND D

The variable annuity contracts, which are more fully described in this
Prospectus, are designed to provide benefits under certain retirement programs
or plans which qualify for special federal income tax treatment.

The owner of a contract may elect to have contract values accumulated on a
completely variable basis, on a completely fixed basis (as part of Minnesota
Mutual's General Account and in which the safety of principal and interest are
guaranteed) or on a combination fixed and variable basis. To the extent that
contract values are accumulated on a variable basis, they will be a part of the
Variable Fund D. The Variable Fund D invests its assets in shares of Advantus
Series Fund, Inc. (the "Series Fund"). The variable accumulation value of the
contract and the amount of each variable annuity payment will vary in accordance
with the performance of the Portfolio or Portfolios of the Series Fund selected
by the contract owner or participant. The contract owner bears the entire
investment risk for any amounts allocated to the Portfolios of the Series Fund.

This Prospectus sets forth information that a prospective investor should know
before investing in the Variable Fund D, and it should be read and kept for
future reference. A Statement of Additional Information, bearing the same date,
which contains further contract and Variable Fund D information, has been filed
with the Securities and Exchange Commission and is incorporated by reference
into this Prospectus. A copy of the Statement of Additional Information may be
obtained without charge by calling (612) 665-3500, after September 1, 1998,
(651) 665-3500, or by writing the Variable Fund D at its principal office at
Minnesota Mutual Life Center, 400 Robert Street North, St. Paul, Minnesota
55101-2098. A Table of Contents for the Statement of Additional Information
appears in this Prospectus on page 31.

This Prospectus is not valid unless attached to a current
prospectus of Advantus Series Fund, Inc.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

THIS PROSPECTUS SHOULD BE READ CAREFULLY AND RETAINED FOR FUTURE REFERENCE.

[LOGO]

THE MINNESOTA MUTUAL LIFE INSURANCE COMPANY
400 ROBERT STREET NORTH
ST. PAUL, MN 55101-2098
(612) 665-3500
http://www.minnesotamutual.com

The date of this document and the Statement of Additional Information is: May 1,
1998
F. 30742 Rev. 5-1998
<PAGE>
DEFINITIONS

As used in this Prospectus, the following terms have the indicated meanings:

ACCUMULATION UNIT: an accounting device used to determine the value of a
contract before annuity payments begin.

ACCUMULATION VALUE: the sum of the values under a contract in the General
Account and in the Variable Fund D.

ANNUITY: a series of payments for life; for life with a minimum number of
payments guaranteed; for the joint lifetime of the annuitant and another person
and thereafter during the lifetime of the survivor; or for a period certain.

ANNUITY UNIT: an accounting device used to determine the amount of annuity
payments.

CODE: the Internal Revenue Code of 1986, as amended.

CONTRACT OWNER: the owner of the contract, which could be the annuitant, his or
her employer, or a trustee acting on behalf of the employer.

CONTRACT YEAR: a period of one year beginning with the contract date or a
contract anniversary.

FIXED ANNUITY: an annuity providing for payments of guaranteed amounts
throughout the payment period.

FUND: the mutual fund or separate investment portfolio within a series mutual
fund which has been designated as an eligible investment for the Variable Fund
D, namely, Advantus Series Fund, Inc. and its Portfolios.

GENERAL ACCOUNT: all of our assets other than those in the Variable Fund D or
in other separate accounts established by us.

PARTICIPANT: a person for whom an interest is maintained under a group annuity
contract, prior to the time that annuity payments begin.

PLAN: a tax-qualified employer pension, profit-sharing, or annuity purchase
plan under which benefits are to be provided by the variable annuity contracts
described herein.

PURCHASE PAYMENTS: amounts paid to us under a contract.

VALUATION DATE: each date on which a Fund Portfolio is valued.

VARIABLE ANNUITY: an annuity providing for payments varying in amount in
accordance with the investment experience of the Variable Fund D.

VARIABLE FUND D: a separate investment account called the Minnesota Mutual
Variable Fund D, where the investment experience of its assets is kept separate
from our other assets. This separate account has several sub-accounts.

2
<PAGE>
THIS SYNOPSIS CONTAINS A BRIEF SUMMARY OF SOME OF THE IMPORTANT FEATURES OF THE
VARIABLE ANNUITY CONTRACTS DESCRIBED IN THIS PROSPECTUS. THE SUMMARY DOES NOT
PROVIDE A FULL DESCRIPTION OF THE CONTRACTS, WHICH IS PROVIDED ONLY IN THE
PROSPECTUS. YOU MAY FIND IT HELPFUL TO RE-READ THIS SUMMARY AFTER READING THE
PROSPECTUS, WHICH SHOULD BE RETAINED FOR FUTURE REFERENCE. A GLOSSARY OF SPECIAL
TERMS USED IN THIS PROSPECTUS MAY BE FOUND ON THE PRECEDING PAGE.

This Prospectus describes variable annuity contracts which are offered for use
in connection with certain retirement plans or programs entitled to special
federal income tax benefits. These plans or programs include: (a) employer
pension or profit-sharing plans qualified under Section 401(a) or 403(a) of the
Internal Revenue Code (the "Code"); (b) pension plans established by persons
entitled to the benefits of the Self-Employed Individuals Tax Retirement Act of
1962, as amended (H.R. 10 or Keogh plans); (c) annuity purchase plans adopted by
public school systems and certain tax exempt organizations pursuant to Section
403(b) of the Code; (d) individual retirement annuity plans adopted by
individuals pursuant to Section 408 of the Code; and (e) eligible state deferred
compensation plans described in Section 457 of the Code.

Several types of variable annuity contracts are offered by The Minnesota Mutual
Life Insurance Company ("Minnesota Mutual") in connection with Variable Fund D.
The contracts described in this Prospectus are a Flexible Payment Deferred
Variable Annuity and a Single Payment Deferred Variable Annuity, both of which
are subject to a deferred sales charge. The minimum purchase payment under the
Flexible Payment Deferred Variable Annuity contract is $25, a minimum which
Minnesota Mutual is currently waiving, while the minimum purchase payment amount
under the Single Payment Deferred Variable Annuity contract is $5,000. For a
detailed description of each type of contract, see "Description of the
Contracts" on page 19.

There is a right of revocation which exists for ten days after the contract is
received. See "Right of Revocation" on page 19.

The contracts are combined fixed and variable annuity contracts which provide
for monthly annuity payments. These payments may begin immediately or at some
future date. Purchase payments received under a contract are allocated either to
our General Account or to Variable Fund D. In the General Account, purchase
payments receive interest and principal guarantees; in the Variable Fund D, your
purchase payments are invested in one or more Portfolios of Advantus Series
Fund, Inc. and receive no interest or principal guarantees.

To the extent amounts are invested in the Portfolios of the Variable Fund D, the
value of the contract before the date annuity payments begin, and the amount of
monthly variable annuity benefits payable after that date, will increase or
decrease depending on increases or decreases in the market value of the
securities held by the Portfolios of the Series Fund.

This Prospectus describes only the variable aspects of the contracts, except
where fixed aspects are specifically mentioned. Please look to the language of
the contracts for a description of the fixed portion of the contracts. For more
information on the contracts, see the heading "Description of the Contracts" in
this Prospectus.

Currently, purchase payments allocated to the Variable Fund D are invested
exclusively in shares of Advantus Series Fund, Inc. The Series Fund is a mutual
fund of the series type, which means that it has several different portfolios
which it offers for investment. Shares of the Series Fund will be made available
at net asset value to the Variable Fund D to fund the variable annuity
contracts. The Series Fund is also required to redeem its shares at net asset
value at our request. We reserve the right to add, combine or remove other
eligible funds. The investment objectives and certain policies of the Portfolios
of the Series Fund which are available to the contracts offered by this
Prospectus are as follows:

The Growth Portfolio seeks the long-term accumulation of capital. Current
income, while a factor in portfolio selection, is a secondary objective. The
Growth Portfolio will invest primarily in common stocks and other equity
securities. Common stocks are more volatile than debt securities and involve
greater investment risk.

The Bond Portfolio seeks 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 capital. The Bond Portfolio will invest primarily in
long-term, fixed-income, high-quality debt instruments. The value of debt
securities will tend to rise and fall inversely with the rise and fall of
interest rates.

The Money Market Portfolio seeks maximum current income to the extent
consistent with liquidity and the stability of capital. The Money Market
Portfolio will invest in money market instruments and other debt securities
with maturities not exceeding one year. The return produced by these
securities will reflect fluctuation in short-term interest rates.

3
<PAGE>
AN INVESTMENT IN THE MONEY MARKET PORTFOLIO IS NEITHER INSURED NOR
GUARANTEED BY THE U.S. GOVERNMENT AND THERE CAN BE NO ASSURANCE THAT THE
PORTFOLIO WILL BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER
SHARE.

The Asset Allocation Portfolio seeks as high a level of long-term total rate
of return as is consistent with prudent investment risk. The Asset
Allocation Portfolio will invest in common stocks and other equity
securities, bonds and money market instruments. The Asset Allocation
Portfolio involves the risks inherent in stocks and debt securities of
varying maturities and the risk that the Portfolio may invest too much or
too little of its assets in each type of security at any particular time.

The Mortgage Securities Portfolio seeks a high level of current income
consistent with prudent investment risk. In pursuit of this objective the
Mortgage Securities Portfolio will follow a policy of investment primarily
in mortgage-related securities. Prices of mortgage-related securities will
tend to rise and fall inversely with the rise and fall of the general level
of interest rates.

The Index 500 Portfolio seeks investment results that correspond generally
to the price and yield performance of the common stocks included in the
Standard & Poor's Corporation 500 Composite Stock Price Index (the "Index").
It is designed to provide an economical and convenient means of maintaining
a broad position in the equity market as part of an overall investment
strategy. All common stocks, including those in the Index, involve greater
investment risk than debt securities. The fact that a stock has been
included in the Index affords no assurance against declines in the price or
yield performance of that stock.

The Small Company Portfolio seeks long-term accumulation of capital. In
pursuit of this objective, the Small Company Portfolio will follow a policy
of investing primarily in common preferred stocks issued by small companies,
defined in terms of either market capitalization or gross revenues.
Investments in small companies usually involve greater investment risks than
fixed income securities or corporate equity securities generally. Small
companies will typically have a market capitalization of less than $1.5
billion or annual gross revenues of less than $1.5 billion.

There is no assurance that any Portfolio will meet its objectives. Additional
information concerning the investment objectives and policies of the Portfolios
can be found in the current prospectus for the Series Fund, which is attached to
this Prospectus.

Subject to the limitations of the type of retirement program or a specific plan,
the contracts may be surrendered in whole or in part at any time prior to the
time that annuity payments begin for their accumulation value, less a deferred
sales charge, if any. See the discussion on withdrawals and surrender on page
26. A surrender or a withdrawal may result in adverse tax consequences. Once an
annuity option has been selected and payments begin, payments will be made only
in accordance with the terms of that option. These options, along with a
description of the method used to determine the amount of each variable annuity
payment, are found on page 21.

The allocation of future purchase payments may be made by giving Minnesota
Mutual written or telephone notice. And before annuity payments begin, a
contract owner or participant may transfer all or a part of existing
accumulation values between the General Account and the separate account or
among the sub-accounts of Variable Fund D. These transfers may be made by
written request to Minnesota Mutual and, generally, must be in amounts of at
least $250. Currently, Minnesota Mutual is waiving the enforcement of this
provision. For additional information on transfers please see the section on
page 24.

No deduction for a sales charge is made from the purchase payments for these
contracts. However, a deferred sales charge may be made on contract withdrawals
or surrenders during the first ten contract years. For flexible purchase payment
contracts the deferred sales charge is initially 9.0% of the amount withdrawn
with the percentage charge being reduced uniformly by .075% for each of the
first 120 months from the contract date. For single purchase payment contracts,
the deferred sales charge is initially 6.0% of the amount withdrawn with the
percentage charge being reduced by .05% for each of the first 120 months from
the contract date. Notwithstanding the existence of this charge, the contract
owner may withdraw or surrender up to 10% of the contract value at the prior
year-end without the application of such charge. In no event will the sum of any
deferred sales charges exceed 9.0% of the amount of purchase payments made under
the contract.

A deduction at the rate of .795% per year is made from the value of each
sub-account of Variable Fund D. This deduction is for the assumption by
Minnesota Mutual of mortality and expense risks. For additional information on
this deduction, see page 16.

In addition, Advantus Capital Management, Inc., a subsidiary of MIMLIC Asset
Management Company, which is a subsidiary of Minnesota Mutual, acts as the
investment adviser to the Series Fund and deducts from the net asset value of
each Portfolio of the Series Fund a fee for its services which are provided
under an investment advisory agreement. To the

4
<PAGE>
extent that the cost of investment advisory services in the Series Fund exceeds
.265%, Minnesota Mutual will make a reimbursement to Variable Fund D contracts.
For more information on this reimbursement, please see the section in this
Prospectus entitled "Contract Deductions."

Each Portfolio of the Series Fund is subject to certain expenses in addition to
its advisory fee. For funds allocated to the Growth Sub-Account, a portion of
these expenses may be reimbursed. For more information on this, see this
Prospectus under the heading "Contract Deductions." For more information on the
Series Fund, see the prospectus of Advantus Series Fund, Inc. which is attached
to this Prospectus.

Ascend Financial Services, Inc. ("Ascend Financial") acts as the principal
underwriter for the Variable Fund D. This firm is also affiliated with Minnesota
Mutual.

EXPENSE TABLE

The following contract expense information is intended to illustrate the expense
of the Variable Fund D variable annuity contracts. All expenses shown are
rounded to the nearest dollar. The information contained in the tables must be
considered with the narrative information which immediately follows them in this
heading.

INDIVIDUAL SINGLE PAYMENT DEFERRED VARIABLE ANNUITY CONTRACT
CONTRACT OWNER TRANSACTION EXPENSES

<TABLE>
<S> <C>
Deferred Sales Load (as a percentage of amount surrendered or withdrawn)......... 6%
decreasing
uniformly
by .05% for each of
the first 120
months
from the contract
date

SEPARATE ACCOUNT ANNUAL EXPENSES--GROWTH SUB-ACCOUNT
(as a percentage of average daily sub-account net assets)

Investment Management Fee Reimbursement.......................................... (.235%)
Mortality and Expense Risk Fees.................................................. .795%
Other Expense Reimbursement...................................................... (.050%)
------
Total Sub-Account Annual Expenses............................................ .510%
-----
-----

ADVANTUS SERIES FUND, INC. ANNUAL EXPENSES
(as a percentage of Advantus Series Fund average net assets for the Growth Portfolio)

Growth Portfolio

Investment Management Fees....................................................... .500%
Other Expenses................................................................... .050%
-----
Total Growth Portfolio Annual Expenses....................................... .550%
-----
-----

EXAMPLE--For contracts using the Growth Portfolio:
</TABLE>

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
If you surrender your contract at the end of the applicable time
period:
You would pay the following expenses on a $1,000 investment,
assuming 5% annual return on assets......................... $61 $76 $91 $129
If you annuitize at the end of the applicable time period:*
You would pay the following expenses on a $1,000 investment,
assuming 5% annual return on assets......................... $11 $34 $58 $129
If you do NOT surrender your contract:
You would pay the following expenses on a $1,000 investment,
assuming 5% annual return on assets......................... $11 $34 $58 $129
</TABLE>

5
<PAGE>

<TABLE>
<S> <C>
SEPARATE ACCOUNT ANNUAL EXPENSES--BOND SUB-ACCOUNT
(as a percentage of average daily sub-account net assets)

Investment Management Fee Reimbursement.......................................... (.235)%
Mortality and Expense Risk Fees.................................................. .795%
-----
Total Sub-Account Annual Expenses............................................ .560%
-----
-----

ADVANTUS SERIES FUND, INC. ANNUAL EXPENSES
(as a percentage of Advantus Series Fund average net assets for the Bond Portfolio)

Bond Portfolio
Investment Management Fees....................................................... .500%
Other Expenses................................................................... .070%
-----
Total Bond Portfolio Annual Expenses......................................... .570%
-----
-----

EXAMPLE--For contracts using the Bond Portfolio:
</TABLE>

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
If you surrender your contract at the end of the applicable time
period:
You would pay the following expenses on a $1,000 investment,
assuming 5% annual return on assets......................... $62 $78 $95 $137
If you annuitize at the end of the applicable time period:*
You would pay the following expenses on a $1,000 investment,
assuming 5% annual return on assets......................... $12 $36 $62 $137
If you do NOT surrender your contract:
You would pay the following expenses on a $1,000 investment,
assuming 5% annual return on assets......................... $12 $36 $62 $137
</TABLE>

<TABLE>
<S> <C>
SEPARATE ACCOUNT ANNUAL EXPENSES--MONEY MARKET SUB-ACCOUNT
(as a percentage of average daily sub-account net assets)

ADVANTUS SERIES FUND, INC. ANNUAL EXPENSES
(as a percentage of Advantus Series Fund average net assets for the Money Market Portfolio)

Money Market Portfolio
Investment Management Fees....................................................... .500%
Other Expenses................................................................... .090%
-----
Total Money Market Portfolio Annual Expenses................................. .590%
-----
-----

EXAMPLE--For contracts using the Money Market Portfolio:
</TABLE>

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
If you surrender your contract at the end of the applicable time
period:
You would pay the following expenses on a $1,000 investment,
assuming 5% annual return on assets......................... $62 $79 $96 $140
If you annuitize at the end of the applicable time period:*
You would pay the following expenses on a $1,000 investment,
assuming 5% annual return on assets......................... $12 $37 $63 $140
If you do NOT surrender your contract:
You would pay the following expenses on a $1,000 investment,
assuming 5% annual return on assets......................... $12 $37 $63 $140
</TABLE>

6
<PAGE>

<TABLE>
<S> <C>
SEPARATE ACCOUNT ANNUAL EXPENSES--ASSET ALLOCATION SUB-ACCOUNT
(as a percentage of average daily sub-account net assets)

ADVANTUS SERIES FUND, INC. ANNUAL EXPENSES
(as a percentage of Advantus Series Fund average net assets for the Asset Allocation
Portfolio)

Asset Allocation Portfolio
Investment Management Fees....................................................... .500%
Other Expenses................................................................... .050%
-----
Total Asset Allocation Portfolio Annual Expenses............................. .550%
-----
-----

EXAMPLE--For contracts using the Asset Allocation Portfolio:
</TABLE>

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
If you surrender your contract at the end of the applicable time
period:
You would pay the following expenses on a $1,000 investment,
assuming 5% annual return on assets......................... $62 $78 $94 $135
If you annuitize at the end of the applicable time period:*
You would pay the following expenses on a $1,000 investment,
assuming 5% annual return on assets......................... $11 $35 $61 $135
If you do NOT surrender your contract:
You would pay the following expenses on a $1,000 investment,
assuming 5% annual return on assets......................... $11 $35 $61 $135
</TABLE>

<TABLE>
<S> <C>
SEPARATE ACCOUNT ANNUAL EXPENSES--MORTGAGE SECURITIES SUB-ACCOUNT
(as a percentage of average daily sub-account net assets)

ADVANTUS SERIES FUND, INC. ANNUAL EXPENSES
(as a percentage of Advantus Series Fund average net assets for the Mortgage
Securities Portfolio)

Mortgage Securities Portfolio
Investment Management Fees....................................................... .500%
Other Expenses................................................................... .090%
-----
Total Mortgage Securities Portfolio Annual Expenses.......................... .590%
-----
-----

EXAMPLE--For contracts using the Mortgage Securities Portfolio:
</TABLE>

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
If you surrender your contract at the end of the applicable time
period:
You would pay the following expenses on a $1,000 investment,
assuming 5% annual return on assets......................... $62 $79 $96 $140
If you annuitize at the end of the applicable time period:*
You would pay the following expenses on a $1,000 investment,
assuming 5% annual return on assets......................... $12 $37 $63 $140
If you do NOT surrender your contract:
You would pay the following expenses on a $1,000 investment,
assuming 5% annual return on assets......................... $12 $37 $63 $140
</TABLE>

7
<PAGE>

<TABLE>
<S> <C>
SEPARATE ACCOUNT ANNUAL EXPENSES--INDEX 500 SUB-ACCOUNT
(as a percentage of average daily sub-account net assets)

Investment Management Fee Reimbursement.......................................... (.135)%
Mortality and Expense Risk Fees.................................................. .795%
-----
Total Sub-Account Annual Expenses............................................ .660%
-----
-----

ADVANTUS SERIES FUND, INC. ANNUAL EXPENSES
(as a percentage of Advantus Series Fund average net assets for the Index 500
Portfolio)

Index 500 Portfolio
Investment Management Fees....................................................... .400%
Other Expenses................................................................... .050%
-----
Total Index 500 Portfolio Annual Expenses.................................... .450%
-----
-----

EXAMPLE--For contracts using the Index 500 Portfolio:
</TABLE>

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
If you surrender your contract at the end of the applicable time
period:
You would pay the following expenses on a $1,000 investment,
assuming 5% annual return on assets......................... $62 $78 $94 $135
If you annuitize at the end of the applicable time period:*
You would pay the following expenses on a $1,000 investment,
assuming 5% annual return on assets......................... $11 $35 $61 $135
If you do NOT surrender your contract:
You would pay the following expenses on a $1,000 investment,
assuming 5% annual return on assets......................... $11 $35 $61 $135
</TABLE>

<TABLE>
<S> <C>
SEPARATE ACCOUNT ANNUAL EXPENSES--SMALL COMPANY SUB-ACCOUNT
(as a percentage of average daily sub-account net assets)

Investment Management Fee Reimbursement.......................................... (.485%)
Mortality and Expense Risk Fees.................................................. .795%
-----
Total Sub-Account Annual Expenses............................................ .310%
-----
-----

ADVANTUS SERIES FUND, INC. ANNUAL EXPENSES
(as a percentage of Advantus Series Fund average net assets for the Small Company
Portfolio)

Small Company Portfolio
Investment Management Fees....................................................... .750%
Other Expenses................................................................... .070%
-----
Total Small Company Portfolio Annual Expenses................................ .820%
-----
-----

EXAMPLE--For contracts using the Small Company Portfolio:
</TABLE>

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
If you surrender your contract at the end of the applicable time
period:
You would pay the following expenses on a $1,000 investment,
assuming 5% annual return on assets......................... $62 $78 $95 $137
If you annuitize at the end of the applicable time period:*
You would pay the following expenses on a $1,000 investment,
assuming 5% annual return on assets......................... $12 $36 $62 $137
If you do NOT surrender your contract:
You would pay the following expenses on a $1,000 investment,
assuming 5% annual return on assets......................... $12 $36 $62 $137
</TABLE>

8
<PAGE>
INDIVIDUAL FLEXIBLE PAYMENT DEFERRED VARIABLE ANNUITY CONTRACT
CONTRACT OWNER TRANSACTION EXPENSES

<TABLE>
<S> <C>
Deferred Sales Load (as a percentage of amount surrendered or withdrawn)......... 9%
decreasing
uniformly
by .075% for each
of the first 120
months from the
contract date
SEPARATE ACCOUNT ANNUAL EXPENSES--GROWTH SUB-ACCOUNT
(as a percentage of average daily sub-account net assets)

Investment Management Fee Reimbursement.......................................... (.235%)
Mortality and Expense Risk Fees.................................................. .795%
Other Expense Reimbursement...................................................... (.050%)
-----
Total Sub-Account Annual Expenses............................................ .510%
-----
-----
ADVANTUS SERIES FUND, INC. ANNUAL EXPENSES
(as a percentage of Advantus Series Fund average net assets for the Growth Portfolio)

Growth Portfolio
Management Fees.................................................................. .500%
Other Expenses................................................................... .050%
-----
Total Growth Portfolio Annual Expenses....................................... .550%
-----
-----

EXAMPLE--For contracts using the Growth Portfolio:
</TABLE>

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
If you surrender your contract at the end of the applicable time
period:
You would pay the following expenses on a $1,000 investment,
assuming 5% annual return on assets......................... $87 $97 $108 $129
If you annuitize at the end of the applicable time period:*
You would pay the following expenses on a $1,000 investment,
assuming 5% annual return on assets......................... $11 $34 $58 $129
If you do NOT surrender your contract:
You would pay the following expenses on a $1,000 investment,
assuming 5% annual return on assets......................... $11 $34 $58 $129
</TABLE>

<TABLE>
<S> <C>
SEPARATE ACCOUNT ANNUAL EXPENSES--BOND SUB-ACCOUNT
(as a percentage of average daily sub-account net assets)

ADVANTUS SERIES FUND, INC. ANNUAL EXPENSES
(as a percentage of Advantus Series Fund average net assets for the Bond Portfolio)

Bond Portfolio
Management Fees.................................................................. .500%
Other Expenses................................................................... .070%
-----
Total Bond Portfolio Annual Expenses......................................... .570%
-----
-----
</TABLE>

9
<PAGE>
<TABLE>
<S> <C>
EXAMPLE--For contracts using the Bond Portfolio:
</TABLE>

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
If you surrender your contract at the end of the applicable time
period:
You would pay the following expenses on a $1,000 investment,
assuming 5% annual return on assets......................... $87 $99 $111 $137
If you annuitize at the end of the applicable time period:*
You would pay the following expenses on a $1,000 investment,
assuming 5% annual return on assets......................... $12 $36 $62 $137
If you do NOT surrender your contract:
You would pay the following expenses on a $1,000 investment,
assuming 5% annual return on assets......................... $12 $36 $62 $137
</TABLE>

<TABLE>
<S> <C>
SEPARATE ACCOUNT ANNUAL EXPENSES--MONEY MARKET SUB-ACCOUNT
(as a percentage of average daily sub-account net assets)

ADVANTUS SERIES FUND, INC. ANNUAL EXPENSES
(as a percentage of Advantus Series Fund average net assets for the Money Market
Portfolio)

Money Market Portfolio
Management Fees.................................................................. .500%
Other Expenses................................................................... .090%
-----
Total Money Market Portfolio Annual Expenses................................. .590%
-----
-----

EXAMPLE--For contracts using the Money Market Portfolio:
</TABLE>

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
If you surrender your contract at the end of the applicable time
period:
You would pay the following expenses on a $1,000 investment,
assuming 5% annual return on assets......................... $87 $100 $112 $140
If you annuitize at the end of the applicable time period:*
You would pay the following expenses on a $1,000 investment,
assuming 5% annual return on assets......................... $12 $37 $63 $140
If you do NOT surrender your contract:
You would pay the following expenses on a $1,000 investment,
assuming 5% annual return on assets......................... $12 $37 $63 $140
</TABLE>

<TABLE>
<S> <C>
SEPARATE ACCOUNT ANNUAL EXPENSES--ASSET ALLOCATION SUB-ACCOUNT
(as a percentage of average daily sub-account net assets)

ADVANTUS SERIES FUND, INC. ANNUAL EXPENSES
(as a percentage of Advantus Series Fund average net assets for the Asset Allocation
Portfolio)

Asset Allocation Portfolio
Management Fees.................................................................. .500%
Other Expenses................................................................... .050%
-----
Total Asset Allocation Portfolio Annual Expenses............................. .550%
-----
-----
</TABLE>

10
<PAGE>
<TABLE>
<S> <C>
EXAMPLE--For contracts using the Asset Allocation Portfolio:
</TABLE>

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
If you surrender your contract at the end of the applicable time
period:
You would pay the following expenses on a $1,000 investment,
assuming 5% annual return on assets......................... $87 $99 $110 $135
If you annuitize at the end of the applicable time period:*
You would pay the following expenses on a $1,000 investment,
assuming 5% annual return on assets......................... $11 $35 $61 $135
If you do NOT surrender your contract:
You would pay the following expenses on a $1,000 investment,
assuming 5% annual return on assets......................... $11 $35 $61 $135
</TABLE>

<TABLE>
<S> <C>
SEPARATE ACCOUNT ANNUAL EXPENSES--MORTGAGE SECURITIES SUB-ACCOUNT
(as a percentage of average daily sub-account net assets)

ADVANTUS SERIES FUND, INC. ANNUAL EXPENSES
(as a percentage of Advantus Series Fund average net assets for the Mortgage
Securities Portfolio)

Mortgage Securities Portfolio
Management Fees.................................................................. .500%
Other Expenses................................................................... .090%
-----
Total Mortgage Securities Portfolio Annual Expenses.......................... .590%
-----
-----

EXAMPLE--For contracts using the Mortgage Securities Portfolio:
</TABLE>

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
If you surrender your contract at the end of the applicable time
period:
You would pay the following expenses on a $1,000 investment,
assuming 5% annual return on assets......................... $87 $100 $112 $140
If you annuitize at the end of the applicable time period:*
You would pay the following expenses on a $1,000 investment,
assuming 5% annual return on assets......................... $12 $37 $63 $140
If you do NOT surrender your contract:
You would pay the following expenses on a $1,000 investment,
assuming 5% annual return on assets......................... $12 $37 $63 $140
</TABLE>

<TABLE>
<S> <C>
SEPARATE ACCOUNT ANNUAL EXPENSES--INDEX 500 SUB-ACCOUNT
(as a percentage of average daily sub-account net assets)

ADVANTUS SERIES FUND, INC. ANNUAL EXPENSES
(as a percentage of Advantus Series Fund average net assets for the Index 500
Portfolio)

Index 500 Portfolio
Management Fees.................................................................. .400%
Other Expenses................................................................... .050%
-----
Total Index 500 Portfolio Annual Expenses.................................... .450%
-----
-----
</TABLE>

11
<PAGE>
<TABLE>
<S> <C>
EXAMPLE--For contracts using the Index 500 Portfolio:
</TABLE>

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
If you surrender your contract at the end of the applicable time
period:
You would pay the following expenses on a $1,000 investment,
assuming 5% annual return on assets......................... $87 $99 $110 $135
If you annuitize at the end of the applicable time period:*
You would pay the following expenses on a $1,000 investment,
assuming 5% annual return on assets......................... $11 $35 $61 $135
If you do NOT surrender your contract:
You would pay the following expenses on a $1,000 investment,
assuming 5% annual return on assets......................... $11 $35 $61 $135
</TABLE>

<TABLE>
<S> <C>
SEPARATE ACCOUNT ANNUAL EXPENSES--SMALL COMPANY SUB-ACCOUNT
(as a percentage of average daily sub-account net assets)

ADVANTUS SERIES FUND, INC. ANNUAL EXPENSES
(as a percentage of Advantus Series Fund average net assets for the Small Company
Portfolio)

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
If you surrender your contract at the end of the applicable time
period:
You would pay the following expenses on a $1,000 investment,
assuming 5% annual return on assets......................... $87 $99 $111 $137
If you annuitize at the end of the applicable time period:*
You would pay the following expenses on a $1,000 investment,
assuming 5% annual return on assets......................... $12 $36 $62 $137
If you do NOT surrender your contract:
You would pay the following expenses on a $1,000 investment,
assuming 5% annual return on assets......................... $12 $36 $62 $137
</TABLE>

The tables shown above are to assist a contract owner in understanding the costs
and expenses that a contract will bear directly or indirectly. For more
information on contract costs and expenses, see the Prospectus heading "Contract
Charges" and the information immediately following. The table does not reflect
deductions for any applicable premium taxes which may be made from each purchase
payment depending upon the applicable law. In addition, Variable Fund D amounts
in the Growth Portfolio are shown after the reimbursement (which is made to the
Separate Account Sub-Account for management fees). For additional information on
this reimbursement, see page 16 of this Prospectus.
- ------------------------
*Annuitization for this purpose means the election of an Annuity Option
under which benefits are expected to continue for a period of at least five
years.

Prior to May 3, 1993, several of the Portfolios were known by different
names. The Growth Portfolio was the Stock Portfolio, the Asset Allocation
Portfolio was the Managed Portfolio and the Index 500 Portfolio was the
Index Portfolio.

12
<PAGE>
TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
<S> <C>
Definitions................................................. 2

Synopsis.................................................... 3

Expense Table............................................... 5

Condensed Financial Information............................. 14

Financial Statements........................................ 15

General Descriptions........................................ 15

Contract Deductions......................................... 16
Sales Charges........................................... 16
Premium Taxes........................................... 18
Investment Management................................... 18
Mortality and Expense Risks............................. 18
Expenses................................................ 18
Other Expenses.......................................... 19

Description of the Contracts................................ 19

Voting Rights............................................... 20

Annuity Period.............................................. 21

Death Benefit............................................... 23

Crediting Accumulation Units................................ 23

Withdrawals and Surrender................................... 26

Distribution................................................ 26

Federal Tax Status.......................................... 27

Legal Proceedings........................................... 31

Year 2000 Computer Problem.................................. 31

Statement of Additional Information......................... 31
</TABLE>

13
<PAGE>
CONDENSED FINANCIAL INFORMATION

The financial statements of Minnesota Mutual Variable Fund D and of The
Minnesota Mutual Life Insurance Company may be found in the Statement of
Additional Information.

The table below gives per unit information about the financial history of each
sub-account for the seven years ended December 31, 1997 and the period from
October 26, 1990 to December 31, 1990. This information should be read in
conjunction with the financial statements and related notes of Minnesota Mutual
Variable Fund D included in the Statement of Additional Information.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Growth Sub-Account:
Unit value at beginning of
period................... $13.84 $11.88 $9.60 $9.57 $9.20 $8.80
Unit value at end of
period................... $18.38 $13.84 $11.88 $9.60 $9.57 $9.20
Number of units
outstanding at end of
period................... 4,229,239 4,666,243 4,918,859 5,406,377 5,785,198 5,758,220

Bond Sub-Account:
Unit value at beginning of
period................... $1.60 $1.57 $1.32 $1.39 $1.26 $1.19
Unit value at end of
period................... $1.75 $1.60 $1.57 $1.32 $1.39 $1.26
Number of units
outstanding at end of
period................... 256,628 296,978 321,612 386,750 480,411 177,794

Money Market Sub-Account:
Unit value at beginning of
period................... $1.24 $1.19 $1.13 $1.10 $1.07 $1.05
Unit value at end of
period................... $1.29 $1.24 $1.19 $1.13 $1.10 $1.07
Number of units
outstanding at end of
period................... 309,546 395,596 352,735 457,011 774,078 357,877

Asset Allocation Sub-Account:
Unit value at beginning of
period................... $2.05 $1.83 $1.47 $1.50 $1.42 $1.33
Unit value at end of
period................... $2.42 $2.05 $1.83 $1.47 $1.50 $1.42
Number of units
outstanding at end of
period................... 2,564,823 2,804,901 2,960,127 3,175,751 2,903,712 1,463,845

Mortgage Securities Sub-
Account:
Unit value at beginning of
period................... $1.54 $1.47 $1.26 $1.31 $1.20 $1.14
Unit value at end of
period................... $1.67 $1.54 $1.47 $1.26 $1.31 $1.20
Number of units
outstanding at end of
period................... 130,573 175,022 136,987 160,939 286,125 265,381

Index 500 Sub-Account:
Unit value at beginning of
period................... $2.60 $2.15 $1.58 $1.57 $1.44 $1.35
Unit value at end of
period................... $3.41 $2.60 $2.15 $1.58 $1.57 $1.44
Number of units
outstanding at end of
period................... 1,012,408 923,905 951,303 886,632 684,210 332,893

Small Company Sub-Account:
Unit value at beginning of
period................... $1.62 $1.54 $1.17 $1.11 $1.00
Unit value at end of
period................... 1.74 $1.62 $1.54 $1.17 $1.11***
Number of units
outstanding at end of
period................... 109,961 114,187 124,882 72,272 14,148

<CAPTION>
PERIOD FROM
OCTOBER 26,
1990 TO
DECEMBER 31,
1991 1990*
------------ ------------
<S> <C> <C>
Growth Sub-Account:
Unit value at beginning of
period................... $6.60 $6.06
Unit value at end of
period................... $8.80 $6.60
Number of units
outstanding at end of
period................... 5,842,088 6,024,553
Bond Sub-Account:
Unit value at beginning of
period................... $1.02 $1.00
Unit value at end of
period................... $1.19 $1.02
Number of units
outstanding at end of
period................... 66,385 20,037
Money Market Sub-Account:
Unit value at beginning of
period................... $1.00 -- **
Unit value at end of
period................... $1.05 --
Number of units
outstanding at end of
period................... 171,773 --
Asset Allocation Sub-Account:
Unit value at beginning of
period................... $1.04 $1.00
Unit value at end of
period................... $1.33 $1.04
Number of units
outstanding at end of
period................... 364,314 13,616
Mortgage Securities Sub-
Account:
Unit value at beginning of
period................... $1.00 -- **
Unit value at end of
period................... $1.14 --
Number of units
outstanding at end of
period................... 5,173 --
Index 500 Sub-Account:
Unit value at beginning of
period................... $1.05 $1.00
Unit value at end of
period................... $1.35 $1.05
Number of units
outstanding at end of
period................... 174,242 5,000
Small Company Sub-Account:
Unit value at beginning of
period...................
Unit value at end of
period...................
Number of units
outstanding at end of
period...................
</TABLE>

- --------------------------
* The condensed financial information is presented for the period from
October 26, 1990 to December 31, 1990. October 26, 1990 was the effective
date of the 1933 Act Registration for Minnesota Mutual Variable Fund D
after its reorganization as a unit investment trust.
** As of December 31, 1990, no contract owners had elected to allocate
payments to the Money Market and Mortgage Securities sub-accounts;
accordingly, condensed financial information is not presented for the
period from October 26, 1990 to December 31, 1990.
*** The information for the sub-account is shown for the period May 3, 1993 to
December 31, 1993. May 3, 1993 was the effective date of the 1933 Act
Registration Statement for the sub-account.

14
<PAGE>
FINANCIAL STATEMENTS

The complete financial statements of Minnesota Mutual Variable Fund D and The
Minnesota Mutual Life Insurance Company are included in the Statement of
Additional Information.

GENERAL DESCRIPTIONS

A. THE MINNESOTA MUTUAL LIFE INSURANCE COMPANY

The Minnesota Mutual Life Insurance Company is a mutual life insurance company
organized in 1880 under the laws of Minnesota. Its home office is at 400 Robert
Street North, St. Paul, Minnesota 55101-2098 (612) 665-3500 after September 1,
1998, (651) 665-3500. It is licensed to do a life insurance business in all
states of the United States (except New York, where it is an authorized
reinsurer), the District of Columbia, Canada, Puerto Rico, and Guam.

B. MINNESOTA MUTUAL VARIABLE FUND D

On October 16, 1967, the Board of Trustees of Minnesota Mutual established a
separate account in accordance with certain provisions of Minnesota Insurance
Law. Minnesota Mutual Variable Fund D is the name by which this account is
designated. The Variable Fund D was registered as an open-end diversified
management investment company under the Investment Company Act of 1940, as
amended (the "1940 Act"). The separate account meets the definition of a
separate account under the federal securities laws.

The Minnesota law under which the Variable Fund D was established provides that
the assets of the Variable Fund D shall not be chargeable with liabilities
arising out of any other business which Minnesota Mutual may conduct, but shall
be held and applied exclusively for the benefit of the holders of those variable
annuity contracts for which the Variable Fund D was established. The investment
performance of the Variable Fund D is entirely independent of both the
investment performance of our general account and of any other separate account
which we may have established or may later establish. All obligations under the
contracts are general corporate obligations of Minnesota Mutual.

At a Special Meeting of contract owners and participants of Variable Fund D held
October 23, 1990, the contract owners and participants approved an Agreement and
Plan of Reorganization whereby Variable Fund D (which was a management
investment company investing primarily in a portfolio of equity securities,
mainly common stocks) transferred all of its assets to the Growth Portfolio of
the Advantus Series Fund, Inc. in exchange for shares of that Portfolio.
Variable Fund D was reconstituted and registered as a unit investment trust
under the 1940 Act. As part of that Reorganization it now consists of seven
sub-accounts, each investing its assets solely in the shares of one of seven of
the Series Fund Portfolios. The Series Fund has a number of Portfolios which are
not available to Variable Fund D. Registration with the Securities and Exchange
Commission (the "Commission") does not involve supervision of the management or
investment policies or practices of the Variable Fund D by the Commission.

C. ADVANTUS SERIES FUND, INC.

The Variable Fund D currently invests exclusively in Advantus Series Fund, Inc.
(the "Series Fund"), a mutual fund of the series type. Prior to May 1, 1997, the
name of the Series Fund was "MIMLIC Series Fund, Inc." The Series Fund is
registered with the Securities and Exchange Commission as a diversified,
open-end management investment company, but such registration does not signify
that the Commission supervises the management, or the investment practices or
policies, of the Series Fund. The Series Fund issues its shares, continually and
without sales charge, only to our separate accounts, which currently include the
Variable Annuity Account, the Variable Life Account, Variable Fund D, the Group
Variable Annuity Account, and the Group Universal Life Account. The Series Fund
may be made available to other separate accounts as new products are developed,
and may be used as the underlying investment medium for separate accounts of the
Northstar Life Insurance Company, a wholly-owned subsidiary of ours domiciled in
the State of New York. Shares are sold and redeemed at net asset value. In the
case of a newly issued contract, purchases of shares of the Portfolios of the
Series Fund in connection with the first purchase payment will be based on the
values next determined after issuance of the contract by us. Redemptions of
shares of the Portfolios of the Series Fund are made at the net asset value next
determined from the day we receive a request for transfer, partial withdrawal or
surrender at our home office. In the case of outstanding contracts, purchases of
shares of the Portfolio of the Series Fund for the Variable Fund D are made at
the net asset value of such shares next determined after receipt by us of
contract purchase payments.

The Series Fund's investment adviser is Advantus Capital Management, Inc.
("Advantus Capital"). Advantus Capital is a wholly-owned subsidiary of MIMLIC
Asset Management Company ("MIMLIC Management") which, prior to May 1, 1997,
served as investment adviser to the Series Fund. MIMLIC Management is a
wholly-owned subsidiary of Minnesota Mutual. Advantus Capital acts as an
investment adviser to the Series Fund pursuant to an advisory agreement. MIMLIC
Management is a subsidiary of Minnesota Mutual.

15
<PAGE>
A prospectus for the Series Fund is attached to this Prospectus. A person should
carefully read this Variable Fund D Prospectus and that for the Series Fund
before investing in the contracts.

It is conceivable that in the future it may be disadvantageous for variable life
insurance separate accounts and variable annuity separate accounts to invest in
the Series Fund simultaneously. Although Minnesota Mutual does not currently
foresee any such disadvantages either to variable life insurance policy owners
or to variable annuity contract owners, the Series Fund's Board of Directors
intends to monitor events in order to identify any material conflicts between
such policy owners and contract owners and to determine what action, if any,
should be taken in response thereto. Such action could include the sale of
Series Fund shares by one or more of the separate accounts, which could have
adverse consequences. Material conflicts could result from, for example, (1)
changes in state insurance law, (2) changes in Federal income tax laws, (3)
changes in the investment management of any of the Portfolios of the Series
Fund, or (4) differences in voting instructions between those given by policy
owners and those given by contract owners.

D. ADDITIONS, DELETIONS OR SUBSTITUTIONS

We retain the right, subject to any applicable law, to make substitutions with
respect to the investments of the sub-accounts of the Variable Fund D. If
investment in a fund should no longer be possible or if we determine it becomes
inappropriate for contracts of this class, we may substitute another fund for a
sub-account. Substitution may be with respect to existing accumulation values,
future purchase payments and future annuity payments.

We may also establish additional sub-accounts in the Variable Fund D and we
reserve the right to add, combine or remove any sub-accounts of the Variable
Fund D. Each additional sub-account will purchase shares in a new portfolio or
mutual fund. Such sub-accounts may be established when, in our sole discretion,
marketing, tax, investment or other conditions warrant such action. Similar
considerations will be used by us should there be a determination to eliminate
one or more of the sub-accounts of the Variable Fund D. The addition of any
investment option will be made available to existing contract owners on such
basis as may be determined by us.

We also reserve the right, when permitted by law, to de-register the Variable
Fund D under the Investment Company Act of 1940, to restrict or eliminate any
voting rights of the contract owners, and to combine the Variable Fund D with
one or more of our other separate accounts.

CONTRACT DEDUCTIONS

SALES CHARGES

No sales charge is deducted from the purchase payments for these contracts.
However, a deferred sales charge, when it is applicable, will be used for
expenses relating to the sale of the contracts.

The deferred sales charge is made on contract withdrawals or surrenders during
the first ten contract years, measured from the issue date of the contract. If
annuity payments commence during the first ten contract years, the deferred
sales charge may be assessed against the amount applied to provide the annuity.
The amount of any deferred sales charge applicable to a particular transaction
is deducted from the accumulation value.

Under the Flexible Payment Deferred Variable Annuity Contract the amount of the
deferred sales charge as a percentage of the amount surrendered, withdrawn, or
applied to provide an annuity at the end of each contract year is as shown in
Table 1. The percentages decrease uniformly by .075% for each of the first 120
months from the contract date. Any amounts withdrawn from the contract may also
be reduced by any applicable state premium taxes not previously deducted from
purchase payments. In no event will the sum of the deferred sales charges exceed
9% of the total purchase payments made under this contract.

16
<PAGE>
TABLE 1

<TABLE>
<CAPTION>
BEGINNING OF
CONTRACT YEAR CHARGE
-------------- -------
<S> <C>
1 9.0%
2 8.1
3 7.2
4 6.3
5 5.4
6 4.5
7 3.6
8 2.7
9 1.8
10 0.9
11 0
</TABLE>

Under the Single Payment Deferred Variable Annuity Contract the amount of the
deferred sales charge as a percentage of the amount surrendered, withdrawn, or
applied to provide an annuity at the end of each contract year is as shown in
Table 2. The percentages decrease uniformly by .05% for each of the first 120
months from the contract date. Any amounts withdrawn from the contract may also
be reduced by any applicable state premium taxes not previously deducted from
purchase payments. In no event will the sum of the deferred sales charges exceed
9% of the total purchase payments made under this contract.

TABLE 2

<TABLE>
<CAPTION>
BEGINNING OF
CONTRACT YEAR CHARGE
-------------- -------
<S> <C>
1 6.0%
2 5.4
3 4.8
4 4.2
5 3.6
6 3.0
7 2.4
8 1.8
9 1.2
10 0.6
11 0
</TABLE>

Under both contracts, if a withdrawal is made where the sum of all withdrawals
in that calendar year is equal to or less than 10% of the accumulation value at
the end of the previous calendar year, the deferred sales charge will not apply.
If the sum of the withdrawals exceeds that amount, the deferred sales charge
will apply only to the amount of the excess. Similarly, if the contract is
surrendered, the deferred sales charge will apply only to the extent that the
amount surrendered, when coupled with any withdrawals during the year, exceeds
10% of the accumulation value at the end of the previous calendar year.

Under current practices, Minnesota Mutual under this provision will allow
withdrawals during the first calendar year to be made without the imposition of
a deferred sales charge so long as withdrawals during the balance of the first
calendar year do not exceed 10% of the purchase payments applied to the contract
during that first calendar year.

Deduction of a deferred sales charge will be made on contracts in the contract
years shown except in the event of the death of the annuitant or on an election
of an annuity payment option which provides for benefits which are expected to
continue for a period of at least five years. In addition, Minnesota Mutual will
waive the deferred sales charge on that portion of a contract's accumulation
value which is applied to the purchase of an Adjustable Income Annuity, which is
an immediate variable annuity contract, issued by us. We will also waive the
sales charge on amounts withdrawn because of an excess contribution to a
tax-qualified contract.

17
<PAGE>
To the extent that sales charges are insufficient to recover sales expenses,
Minnesota Mutual will pay sales expenses from its other assets or surplus. These
assets may include proceeds from the mortality and expense risk charges
described below.

PREMIUM TAXES

Deductions for any applicable premium taxes may be made from each purchase
payment (currently such premium taxes range from 0.5% to 3.5%) depending upon
the applicable law.

INVESTMENT MANAGEMENT

Under contracts funded by Variable Fund D, all costs of operating Variable Fund
D as an investment management company originally were covered by an investment
management fee of .265% of contract or account values on an annual basis. As
Variable Fund D is now a unit investment trust rather than a managed investment
company, that investment management fee no longer will be paid. However,
contract values that are allocated to sub-accounts of Variable Fund D will be
invested in Series Fund Portfolios that do pay investment advisory fees (at a
rate of .40% on an annual basis for the Index 500 Portfolio, .75% for the Small
Company Portfolio and .50% for each of the five other available Portfolios) and
do incur other operating expenses. Those other operating expenses have been
voluntarily subsidized by Minnesota Mutual to the extent that the expenses
exceed .15% on an annual basis for any Portfolio. While Minnesota Mutual has no
present intention to alter that practice, it is under no obligation to continue
it.

To ensure that Contract Owners and Participants continue to get at least what
they originally expected under their contracts, Minnesota Mutual has agreed
that, each valuation period, in calculating the net investment factor for the
Growth Sub-Account of Variable Fund D, it will make adjustments that have the
effect of reimbursing the excess of any expenses indirectly incurred as a result
of the investment advisory fee paid and the operating expenses incurred by the
Growth Portfolio of the Series Fund over the former .265% investment management
fee. Accordingly, to the extent that the contract or account values continue to
be allocated to the sub-account that, in effect, continues the Variable Fund D
investment objective when it was operating as a management investment company,
there will be no change in the level of charges for the provision of investment
management services. In calculating the net investment factor for the other sub-
accounts of Variable Fund D, Minnesota Mutual will make adjustments that, in
effect, reimburse the excess of the investment advisory fees incurred through
indirect investment in the Series Fund Portfolios and the former .265%
investment management fee; however, any other Series Fund Portfolio operating
expenses would not be subject to the reimbursement. Accordingly, to the extent
that a Contract Owner or Participant chose to take advantage of the Variable
Fund D sub-accounts other than the Growth Sub-Account, he or she could incur
additional expenses.

MORTALITY AND EXPENSE RISKS

Minnesota Mutual assumes the mortality risk under the contract by its obligation
to continue to make monthly annuity payments, determined in accordance with the
annuity rate tables and other provisions contained in the contracts to each
annuitant regardless of how long he or she lives and regardless of how long all
annuitants as a group live. Thus, neither an annuitant's own longevity nor an
improvement in life expectancy generally will have an adverse effect on the
monthly annuity payments an annuitant will receive under the contract.

Minnesota Mutual assumes an expense risk by assuming the risk that deductions
provided for in the contracts for expenses may be insufficient to cover the
actual expenses incurred.

To the extent that sales charges are insufficient to recover sales expenses,
Minnesota Mutual will pay sales expenses from its other assets or surplus. These
assets may include proceeds from the mortality and expense risks charge
described below.

For assuming these risks, Minnesota Mutual currently makes a deduction from the
Variable Fund D at the rate of .1325% per annum for the mortality risk and
.6625% per annum for the expense risk. These deductions may be increased or
decreased by resolution of the Board of Trustees of Minnesota Mutual, but not
more often than annually, and in no event will the combined deductions exceed
the amount of the present deduction of .795% per annum. If the sum of such
deductions is insufficient to cover the risks assumed, the loss will fall on
Minnesota Mutual. Conversely, if the deductions provide more than sufficient,
any excess will be credited to the surplus of Minnesota Mutual.

EXPENSES

The Variable Fund D has no expenses which are not covered by the deductions
listed above. Minnesota Mutual performs all the administrative functions
relative to the contracts and it also bears all expenses associated with the
administration of the contracts. These include such items as salaries, rent,
postage, telephone, travel, office equipment and stationery, and legal,
actuarial and auditing fees.

18
<PAGE>
OTHER EXPENSES

The underlying Portfolios also bear certain expenses. See the Advantus Series
Fund, Inc. prospectus for more information.

DESCRIPTION OF THE CONTRACTS

DESCRIPTION

The following material is intended to provide a general description of contract
terms. In the event that there are questions concerning the contracts which are
not discussed or should you desire additional information, then inquiries may be
addressed to us at: Minnesota Mutual Life Center, 400 Robert Street North, St.
Paul, Minnesota 55101-2098.

1. TYPES OF CONTRACTS

Minnesota Mutual continuously offers two types of variable annuity contracts
pursuant to this Prospectus:

(a) Single Payment Deferred Variable Annuity. This type of contract may be
used in connection with a qualified pension or profit sharing plan under which
plan contributions have been accumulating in a trust fund. It may also be used
in connection with a qualified plan which has previously been funded with
insurance contracts or fixed annuity contracts issued by Minnesota Mutual. The
contract provides for a fixed or variable annuity to begin at some future date
with the purchase payment made either in a lump sum or in a series of payments
in a single contract year. The contract may also be used to provide fixed
annuity or variable annuity payments under the state deferred compensation plans
or individual retirement annuity programs.

(b) Flexible Payment Deferred Variable Annuity. This type of contract may be
used in connection with all types of qualified plans, state deferred
compensation plans or with individual retirement annuities adopted by or on
behalf of individuals. The contract provides for a variable annuity or a fixed
annuity to begin at some future date with the purchase payments for the contract
to be paid prior to the annuity commencement date in a series of payments
flexible in respect to the date and amount of payment.

2. ISSUANCE OF CONTRACTS

The contracts are issued to the contract owner named in the application. The
owner may be the annuitant or someone else; however, once the owner has been
named in the application the ownership of the contract may not be changed.

3. RIGHT OF REVOCATION

The contract owner should read the contract carefully as soon as it is received.
The contract owner may revoke the purchase of a contract within ten days after
its delivery, for any reason, on notice to Minnesota Mutual at 400 Robert Street
North, St. Paul, Minnesota, of an intention to revoke. If the contract is
revoked and returned, Minnesota Mutual will refund to the purchaser the greater
of (a) the accumulation value of the contract or (b) the amount of purchase
payments paid under the contract. Payment of the requested refund will be made
to the purchaser within seven days after we receive notice of cancellation.

In some states, such as California, the free look period may be extended. In
California, the free look period is extended to thirty days' time for contracts
issued or delivered. These rights are subject to change, and may vary among the
states.

The liability of Variable Fund D under the foregoing is limited to the
accumulation value of any contract at the time it is returned for cancellation.
Any additional amounts necessary to make the refund to the owner equal to the
purchase payments will be made by Minnesota Mutual.

4. ANNUITY PAYMENTS

Variable annuity payments are determined on the basis of (a) the mortality table
specified in the contract, which reflects the age of the annuitant, (b) the type
of annuity payment option selected, and (c) the investment performance of the
Variable Fund D. The amount of the variable annuity payments will not be
affected by adverse mortality experience or by an increase in Minnesota Mutual's
expenses in excess of the expense deductions provided for in the contract. The
annuitant will receive the value of a fixed number of annuity units each month.
The value of such units and thus the amounts of the monthly annuity payments
will, however, reflect investment gains and losses and investment income of the
Variable Fund D, and thus the annuity payments will vary with the investment
experience of the assets of the Variable Fund D.

5. MODIFICATION OF THE CONTRACT

The contract may be modified at any time by written agreement between Minnesota
Mutual and the contract owner.

19
<PAGE>
6. ASSIGNMENT

The contract may not be assigned, sold, transferred, discounted or pledged as
collateral for a loan or as security for the performance of an obligation or for
any other purpose, and to the maximum extent permitted by law, benefits payable
under the contract shall be exempt from the claims of creditors.

7. LIMITATIONS ON PURCHASE PAYMENTS

The minimum purchase payment for the Single Payment Deferred Variable Annuity
Contract must be at least $5,000. It may not exceed $250,000 except with the
consent of Minnesota Mutual.

The minimum periodic purchase payment which may be made under a Flexible Payment
Deferred Variable Annuity Contract is $25. Currently, Minnesota Mutual is
waiving the enforcement of this provision.

There may be limits on the maximum contributions to retirement plans that
qualify for special tax treatment.

8. CONTRACT SETTLEMENT

Whenever any payment under a contract is to be made in a single sum, payment
will be made within seven days after the date such payment is called for by the
terms of the contract, except as payment may be subject for postponement for:

(a) any period during which the New York Stock Exchange is closed other than
customary weekend and holiday closings, or during which trading on the New York
Stock Exchange is restricted, as determined by the Securities and Exchange
Commission;

(b) any period during which an emergency exists as determined by the
Commission as a result of which it is not reasonably practical to dispose of
securities in the Variable Fund D or to fairly determine the value of the assets
of the Variable Fund D; or

9. PARTICIPATION IN DIVISIBLE SURPLUS

The contracts participate in the divisible surplus of Minnesota Mutual,
according to the annual determination of its Board of Trustees as to the
portion, if any, of the divisible surplus of Minnesota Mutual which has accrued
on the contracts.

No assurance can be given as to the amount of divisible surplus, if any, that
will be distributable under these contracts in the future. Such amount may arise
if mortality and expense experience is more favorable than assumed. No
distributions of divisible surplus have been declared on these contracts or
other contracts of Variable Fund D except as to certain group contracts sold
under circumstances which reduce sales expenses to Minnesota Mutual. When a
distribution of divisible surplus is made, it may take the form of additional
payments.

VOTING RIGHTS

The Series Fund shares held in the Variable Fund D will be voted by us at the
regular and special meetings of the Series Fund. Shares will be voted by us in
accordance with instructions received from contract owners with voting interests
in each sub-account of the Variable Fund D. In the event no instructions are
received from a contract owner, we will vote such shares of the Series Fund in
the same proportion as shares of the Series Fund for which instructions have
been received from contract owners with voting interests in each sub-account of
the Variable Fund D. In the event no instructions are received from a contract
owner, with respect to shares of a Portfolio held by a sub-account, Minnesota
Mutual will vote such shares of the Portfolio and shares not attributable to
contracts in the same proportion as shares of the Portfolio held by such
sub-account for which instructions have been received. The number of votes which
are available to a contract owner will be calculated separately for each
sub-account of the Variable Fund D. If, however, the Investment Company Act of
1940 or any regulation under that Act should change so that we may be allowed to
vote shares in our own right, then we may elect to do so.

During the accumulation period of each contract, the contract owner holds the
voting interest in each contract. The number of votes will be determined by
dividing the accumulation value of the contract attributable to each sub-account
by the net asset value per share of the underlying Series Fund shares held by
that sub-account.

During the annuity period of each contract, the annuitant holds the voting
interest in each contract. The number of votes will be determined by dividing
the reserve for each contract allocated to each sub-account by the net asset
value per share of the underlying Series Fund shares held by that sub-account.
After an annuity begins, the votes attributable to any particular contract will
decrease as the reserves decrease. In determining any voting interest,
fractional shares will be recognized.

20
<PAGE>
We shall notify each contract owner or annuitant of a Series Fund shareholders'
meeting if the shares held for the contract owner's contract may be voted at
such meeting. We will also send proxy materials and a form of instruction so
that you can instruct us with respect to voting.

ANNUITY PERIOD

1. ELECTING THE RETIREMENT DATE AND FORM OF ANNUITY

The contracts provide for four optional annuity forms, any one of which may be
elected if permitted by law. Each annuity option may be elected on either a
variable annuity or a fixed dollar annuity basis, or a combination thereof.
Other annuity options may be available on request to Minnesota Mutual.

While the contracts require that notice of election to begin variable annuity
payments must be received by Minnesota Mutual at least thirty days prior to the
annuity commencement date, Minnesota Mutual is currently waiving that
requirement for such annuity elections received at least two valuation days
prior to the fifteenth of the month. Minnesota Mutual reserves the right to
enforce the thirty day notice requirement at its option at anytime in the
future.

Annuity payments are always made as of the first day of a month. The contracts
require that notice of election to begin annuity payments must be received by us
at least thirty days prior to the annuity commencement date. However, Minnesota
Mutual currently waives this requirement, and at the same time reserves the
right to enforce the thirty day notice at its option in the future.

Money will be transferred to the General Account for the purpose of electing
fixed annuity payments, or to the appropriate variable sub-accounts for variable
annuity payments, on the valuation date coincident with the first valuation date
following the fourteenth day of the month preceding the date on which the
annuity is to begin.

If a request for a fixed annuity is received between the first valuation date
following the fourteenth day of the month and the second to last valuation date
of the month prior to commencement, the transfer will occur on the valuation
date coincident with or next following the date on which the request is
received. If a fixed annuity request is received after the third to the last
valuation day of the month prior to commencement, it will be treated as a
request received the following month, and the commencement date will be changed
to the first of the month following the requested commencement date. The account
value used to determine fixed annuity payments will be the value as of the last
valuation date of the month preceding the date the fixed annuity is to begin.

If a variable annuity request is received after the third valuation date
preceding the first valuation date following the fourteenth day of the month
prior to the commencement date, it will be treated as a request received the
following month, and the commencement date will be changed to the first of the
month following the requested commencement date. The account value used to
determine the initial variable annuity payment will be the value as of the first
valuation date following the fourteenth day of the month prior to the variable
annuity begin date.

If an election has not been made otherwise, and the plan does not specify to the
contrary, the annuitant's retirement date shall be the first day of the calendar
month next following his or her 65th birthday, the annuity option shall be
Option 2A, a life annuity with a period certain of 120 months. In this event, a
fixed annuity will be provided by any general account accumulation value and a
variable annuity will be provided by any Variable Fund D accumulation value. The
minimum first monthly annuity payment on either a variable or fixed dollar basis
is $20. If such first monthly payment would be less than $20, Minnesota Mutual
may fulfill its obligation by paying in a single sum the value of the contract
which would otherwise have been applied to provide annuity payments.

The contracts permit annuity payments to begin on the first day of any month
after the 50th birthday and before the 75th birthday of the annuitant.

Once annuity payments have commenced, the annuitant cannot surrender his or her
annuity benefit and receive a single sum settlement in lieu thereof.

The mortality and expense risks charge continues to be deducted throughout the
annuity period under each of the available annuity options, including Option 4,
under which there is no mortality risk to Minnesota Mutual.

Benefits under retirement plans that qualify for special tax treatment generally
must commence no later than the April 1 following the year in which the
participant reaches age 70 1/2 and are subject to other conditions and
restrictions.

2. OPTIONAL ANNUITY FORMS

OPTION 1--LIFE ANNUITY

This is an annuity payable monthly during the lifetime of the annuitant and
terminating with the last monthly payment preceding the death of the annuitant.
This option offers the maximum amount of monthly payments since there is no

21
<PAGE>
guarantee of a minimum number of payments or provision for a death benefit for
beneficiaries. It would be possible under this option for the annuitant to
receive only one annuity payment if he or she died prior to the due date of the
second annuity payment, two if he or she died before the due date of the third
annuity payment, etc.

OPTION 2--LIFE ANNUITY WITH A PERIOD CERTAIN OF 120 MONTHS (OPTION 2A), 180
MONTHS (OPTION 2B), OR 240 MONTHS (OPTION 2C)

This is an annuity payable monthly during the lifetime of the annuitant, with
the guarantee that if the annuitant dies before payments have been made for the
period certain elected, payments will continue to the beneficiary during the
remainder of the period certain; or if the beneficiary so elects at any time
during the remainder of the period certain, the present value of the remaining
guaranteed number of payments, based on the then current dollar amount of one
such payment shall be paid in a single sum to the beneficiary.

OPTION 3--JOINT AND LAST SURVIVOR ANNUITY

This is an annuity payable monthly during the joint lifetime of the annuitant
and a designated joint annuitant and continuing thereafter during the remaining
lifetime of the survivor. Under this option there is no guarantee of a minimum
number of payments or provision for a death benefit for beneficiaries.

OPTION 4--PERIOD CERTAIN ANNUITY

This is an annuity payable monthly for a Period Certain of from 3 to 15 years,
as elected. If the annuitant dies before payments have been made for the Period
Certain elected, payments will continue to the beneficiary during the remainder
of such Period Certain. At any time during the payment period, the payee may
elect that (1) the present value of the remaining guaranteed number of payments,
based on the then current dollar amount of one such payment and using the same
interest rate which served as a basis for the annuity, shall be paid in a single
sum, or (2) such commuted amount shall be applied to effect a life annuity under
Option 1 or Option 2.

3. VALUE OF THE ANNUITY UNIT

The value of an annuity unit is determined monthly as of the first day of each
month. The value of the annuity unit on the first day of each month is
determined by multiplying the value on the first day of the preceding month by
the product of (a) .997137, and (b) the ratio of the value of the accumulation
unit for the valuation date next following the fourteenth day of the preceding
month to the value of the accumulation unit for the valuation date next
following the fourteenth day of the second preceding month. (.997137 is a factor
to neutralize the assumed net investment rate, discussed in Section 4 below, of
3.5% per annum built into the annuity rate tables contained in the contract and
which is not applicable because the actual net investment rate is credited
instead.) The value of an annuity unit as of any date other than the first day
of a month is equal to its value as of the first day of the next succeeding
month.

4. DETERMINATION OF AMOUNT OF FIRST MONTHLY ANNUITY PAYMENT

Under the contracts described in this Prospectus, the first monthly annuity
payment is determined by the value of the contract at retirement. In addition, a
number of states do, however, impose a premium tax on the amount used to
purchase annuity benefits, depending on the type of plan involved. These taxes,
where applicable, currently range from 0.5% to 3.5% and are deducted from the
contract value applied to provide annuity payments, though Minnesota Mutual
reserves the right to make such deductions from purchase payments as they are
received.

When annuity payments commence, the value of the contract is determined as the
product of (a) the number of accumulation units credited to the contract, and
(b) the value of an accumulation unit.

The contracts contain tables indicating the dollar amount of the first monthly
payment under each optional annuity form for each $1,000 of value applied. The
amount of the first monthly payment depends on the optional annuity form elected
and the adjusted age of the annuitant. If, when annuity payments are elected, we
are using tables of annuity rates for these contracts which result in larger
annuity payments, we will use those tables instead.

A formula for determining the adjusted age is contained in the contract. The
tables are determined from the Progressive Annuity Table with interest at the
rate of 3.5% per annum, assuming births in the year 1900 and an age setback of
six years. The total first monthly annuity payment is determined by multiplying
the number of thousands of dollars of value applied (less any applicable premium
taxes not previously deducted) by the amount of the first monthly payment per
$1,000 of value from the tables in the contract. The 3.5% interest rate assumed
in the annuity tables would produce level annuity payments if the net investment
rate remained constant at 3.5% per year. Subsequent payments will be less than,
equal to, or greater than the first payment depending upon whether the actual
net investment rate is less than, equal to, or greater than 3.5%. A higher
interest rate would mean a higher initial payment, but a more slowly rising (or
more rapidly falling) series of subsequent payments. A lower assumption would
have the opposite effect.

22
<PAGE>
5. AMOUNT OF SECOND AND SUBSEQUENT MONTHLY ANNUITY PAYMENTS

The amount of the first monthly annuity payment, determined as described above,
is divided by the then current annuity unit value on the date of the first
payment to determine the number of annuity units represented by the first
payment. This number of annuity units remains constant during the period of
annuity payments, and in each subsequent month, the dollar amount of the annuity
payment is determined by multiplying this constant number of annuity units by
the then current value of an annuity unit.

The Statement of Additional Information contains an illustration of the
calculation of annuity unit values and of a variable annuity payment showing the
method used for the calculation of both the initial and subsequent payments.

DEATH BENEFIT

If the owner dies before annuity payments have started, we will pay the
accumulation value of the contract to the named beneficiary. The accumulation
value will be determined as of the valuation date coincident with or next
following the date that Minnesota Mutual receives due proof of death at its home
office. Death proceeds will be paid in a single sum to the beneficiary
designated by the contract owner, unless an annuity option is elected by the
beneficiary. Payment will be made within seven days after we receive due proof
of death and return of the contract. Except as noted below, the entire interest
in the contract must be distributed within five years of the owner's death. If
the annuitant dies after annuity payments have begun, Minnesota Mutual will pay
to the beneficiary any death benefit provided by the annuity option selected.
The person selected by the owner as the beneficiary of any remaining interest
after the death of the annuitant under the annuity option may be a person
different from that person designated as the contract beneficiary prior to the
annuity commencement date.

If the owner dies on or before the date on which annuity payments begin and if
the designated beneficiary is a person other than the owner's spouse, that
beneficiary may elect an annuity option measured by a period not longer than
that beneficiary's life expectancy only so long as annuity payments begin not
later than one year after the owner's death. If there is no designated
beneficiary, then the entire interest in the contract must be distributed within
five years after the owner's death. If the annuitant dies after annuity payments
have begun, any payments received by a non-spouse beneficiary must be
distributed at least as rapidly as under the method elected by the annuitant as
of the date of death.

If any portion of the contract is payable to a designated beneficiary who is the
contract owner's surviving spouse, that spouse shall be treated as the contract
owner for purposes of: (1) when payments must begin, and (2) the time of
distribution in the event of the spouse's death. Payments must be made in
substantially equal installments.

If the owner of this contract is other than a natural person, such as a trust or
other entity, we will pay a death benefit of the accumulation value to the named
beneficiary on the death of the annuitant, if death occurs prior to the date for
annuity payments to begin.

The beneficiary will be the person or persons named in the contract application
unless the owner subsequently changes the beneficiary. In that event, we will
pay the amount payable at death to the beneficiary named in your last change of
beneficiary request. The owner's written request to change the beneficiary will
not be effective until it is recorded in Minnesota Mutual's home office records.
After it has been recorded, it will take effect as of the date the owner signed
the request. However, if the annuitant or the owner dies before the request has
been recorded, the request will not be effective as to those death proceeds we
have paid before the request was recorded in our home office records.

CREDITING ACCUMULATION UNITS

During the accumulation period--the period before the commencement of annuity
payments--the purchase payment (on receipt of a completed application or
subsequently) is credited on the valuation date coincident with or next
following the date such purchase payment is received. If the initial purchase
payment is accompanied by an incomplete application, the purchase payment will
not be credited until the valuation date coincident with or next following the
date a completed application is received. Minnesota Mutual will offer to return
the initial purchase payment accompanying an incomplete application if it
appears that the application cannot be completed within five business days.
Purchase payments will be credited to the contract in the form of accumulation
units. The number of accumulation units credited with respect to each purchase
payment is determined by dividing the portion of the purchase payment allocated
to each sub-account by the then current accumulation unit value for that
sub-account. The total of these separate account accumulation values in the
sub-accounts will be the separate account accumulation value. Interests in the
sub-accounts will be valued separately.

23
<PAGE>
The number of accumulation units so determined shall not be changed by any
subsequent change in the value of an accumulation unit, but the value of an
accumulation unit will vary from valuation date to valuation date to reflect the
investment experience of the Portfolios of the Series Fund.

Minnesota Mutual will determine the value of accumulation units on each day on
which the Portfolios of the Series Fund are valued. The net asset value of the
Series Fund's shares shall be computed once daily, and, in the case of Money
Market Portfolio, after the declaration of the daily dividend, as of the primary
closing time for business on the New York Stock Exchange (as of the date hereof
the primary close of trading is 3:00 p.m. (Central Time), but this time may be
changed) on each day, Monday through Friday, except (i) days on which changes in
the value of such Series Fund's portfolio securities will not materially affect
the current net asset value of such Series Fund's shares, (ii) days during which
no such Series Fund's shares are tendered for redemption and no order to
purchase or sell such Series Fund's shares is received by such Series Fund and
(iii) customary national business holidays on which the New York Stock Exchange
is closed for trading (as of the date hereof, New Year's Day, Martin Luther King
Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving Day and Christmas Day).

Accordingly, the value of accumulation units will be determined daily, and such
determinations will be applicable to all purchase payments received by Minnesota
Mutual at its home office on that day prior to the close of business of the
Exchange. The value of accumulation units applicable to purchase payments
received subsequent to the close of business of the Exchange on that day will be
the value determined as of the close of business on the next day the Exchange is
open for trading.

In determining the value of the Series Fund on a valuation date, each security
traded on a national securities exchange is valued at the last reported sale
price on that date, as of the close of trading on the New York Stock Exchange.
If there has been no sale on such day, then the security is valued at the last
reported bid price on that day. Any security not traded on a securities
exchange, but traded in the over-the-counter market, is valued at the last
quoted bid price. Any securities or other assets for which market quotations are
not readily available are valued at fair market value as determined in good
faith by the Series Fund Board of Directors.

In addition to providing for the allocation of purchase payments to the
sub-accounts of the Variable Fund D, the contracts also provide for allocation
of purchase payments to Minnesota Mutual's General Account for accumulation at a
guaranteed interest rate. Purchase payments received without allocation
instructions will be allocated to the General Account.

TRANSFER OF VALUES

Upon your written request, values under the contract may be transferred between
the General Account and the Variable Fund D or among the sub-accounts of the
Variable Fund D. We will make the transfer on the basis of accumulation unit
values on the valuation date coincident with or next following the day we
receive the request at our home office. No deferred sales charge will be imposed
on such transfers. While the contracts currently provide that transfer amounts
must be of an amount not less than $250, we are waiving this restriction and
allowing transfers of any amount.

The contracts permit us to limit the frequency and amount of transfers from the
General Account to the Variable Fund D sub-accounts. Currently, except as
provided below, we limit the frequency of such transfers to a single such
transfer during any calendar year and the amount of such transfers to any amount
which is no more than 20% of the General Account accumulation value at the time
of the transfer. No transfers will be allowed after annuity payments have begun.

There are three situations which are exceptions to the above restriction. The
first is for new contracts where purchase payments are allocated to the General
Account because of the absence of initial allocation instructions. In that
situation, contract owners may make a single transfer of any amount from the
General Account. The second situation is where the contract owner has
established a systematic transfer arrangement with us. The contract owner may
transfer General Account current interest earnings or a specified amount from
the General Account on a monthly, quarterly, semi-annual or annual basis. For
transfers of a specified amount from the General Account the maximum initial
amount that may be transferred may not exceed 10% of the current General Account
accumulation value at the time of the first transfer. For contracts where the
General Account accumulation value is increased during the year because of
transfers into the General Account or additional purchase payments, made after
the program is established, systematic transfers are allowed to the extent of
the greater of the current transfer amount or 10% of the then current General
Account accumulation value. The third situation is in the case where the General
Account accumulation value is $1,000 or less. In that case, we will allow a
one-time transfer of the entire accumulation value from the General Account to
the Variable Fund D sub-accounts. Even with respect to systematic transfer
plans, we reserve the right to alter the terms of such programs once established
where funds are being transferred out of the General Account. Our alteration of
existing systematic transfer programs will be effective only upon our written
notice to contract owners of changes affecting their election.

24
<PAGE>
Transfer arrangements may be established to begin on the 10th or 20th of any
month and if a transfer cannot be completed it will be made on the next
available transfer date. In the absence of specific instructions, transfers will
be made on a monthly basis and will remain active until the appropriate General
Account accumulation value or sub-account is depleted.

Also, you or persons authorized by you may effect transfers, or a change in the
allocation of future premiums, by means of a telephone call. Transfers and
requests made pursuant to such a call are subject to the same conditions and
procedures as are outlined above for written transfer requests. During periods
of marked economic or market changes, contract owners may experience difficulty
in implementing a telephone transfer due to a heavy volume of telephone calls.
In such a circumstance, contract owners should consider submitting a written
transfer request while continuing to attempt a telephone redemption. We reserve
the right to restrict the frequency of--or otherwise modify, condition,
terminate or impose charges upon--telephone transfer privileges. For more
information on telephone transfers, contact Minnesota Mutual.

While for some contract owners we have used a form to pre-authorize telephone
transactions, we now make this service automatically available to all contract
owners. We will employ reasonable procedures to satisfy ourselves that
instructions received from contract owners are genuine and, to the extent that
we do not, we may be liable for any losses due to unauthorized or fraudulent
instructions. We require contract owners to identify themselves in those
telephone conversations through contract numbers, social security numbers and
such other information as we may deem to be reasonable. We record telephone
transfer instruction conversations and we provide the contract owners with a
written confirmation of the telephone transfer.

The interests of contract owners arising from the allocation of purchase
payments or the transfer of contract values to the general assets of Minnesota
Mutual are not registered under the Securities Act of 1933, and Minnesota Mutual
is not registered as an investment company under the Investment Company Act of
1940. Accordingly, such interests and Minnesota Mutual are not subject to the
provisions of those acts that would apply if registration under such acts were
required.

VALUE OF THE CONTRACT

The value of the contract at any time prior to the commencement of annuity
payments can be determined by multiplying the total number of accumulation units
credited to the contract by the current value of an accumulation unit. There is
no assurance that such value will equal or exceed the purchase payments made.
The contract owner and, where applicable, each participant will be advised
periodically of the number of accumulation units credited to the contract or to
the participant's individual account, the current value of an accumulation unit,
and the total value of the contract or the individual account.

ACCUMULATION UNIT VALUE

The value of an accumulation unit was set at $1.000000 on the first valuation
date of the Variable Fund D. The value of an accumulation unit on any subsequent
valuation date is determined by multiplying the value of an accumulation unit on
the immediately preceding valuation date by the net investment factor (described
below) for the valuation period just ended. The value of an accumulation unit as
of any date other than a valuation date is equal to its value on the next
succeeding valuation date.

NET INVESTMENT FACTOR

The separate account net investment factor describes the investment performance
of a sub-account of Variable Fund D. It is for the period from one valuation
period to the next. For any such sub-account, the net investment factor for a
valuation period is the gross investment rate for such sub-account for the
valuation period less a deduction for the mortality and expense risk charge at
the rate of .795%. The net investment factor for each sub-account other than the
sub-account holding shares of the Growth Portfolio of the Series Fund, shall be
increased by Minnesota Mutual. It will be increased to the extent that on an
annual basis the investment advisory fee accrued by the Portfolio in which the
sub-account invests, as a percentage of the value of the average net assets of
such Portfolio, exceeds .265% per annum. The net investment factor for the
sub-account holding shares of the Growth Portfolio of the Series Fund shall also
be adjusted by Minnesota Mutual. It will be adjusted so that on an annual basis
the expenses, including the investment advisory fee, of that Portfolio, as a
percentage of the average net assets of such Portfolio, exceed .265% per annum.
For purposes of this computation, "expenses" shall be determined on the basis of
generally accepted accounting principles applicable to registered investment
companies. However, they shall exclude any expenses of the Growth Portfolio
which are reimbursed by Minnesota Mutual or any other person, any interest
expense or amortization of debt discount or any income tax expense.

The gross investment rate is equal to: (1) the net asset value per share of a
fund share held in a sub-account of the separate account determined at the end
of the current valuation period; plus (2) the per share amount of any dividend
or

25
<PAGE>
capital gain distribution by such fund if the "ex-dividend" date occurs during
the current valuation period; divided by (3) net asset value per share of that
fund share determined at the end of the preceding valuation period. The gross
investment rate may be positive or negative.

WITHDRAWALS AND SURRENDER

Under both contracts, partial withdrawals may be made by the contract owner from
the contract for cash amounts of at least $250. In this event, the accumulation
value will be reduced by the amount of the withdrawal and the applicable
deferred sales charge. For more information on the application of that charge,
see "Sales Charges" on pages 16-17. In the absence of instruction to the
contrary, withdrawals will be first made from the general account accumulation
value and then from the separate account accumulation value. Any amounts
withdrawn from the contract may also be reduced by any applicable state premium
taxes not previously deducted from purchase payments. We will waive the
applicable dollar amount limitation on withdrawals where a systematic withdrawal
program is in place and such a smaller amount satisfies the minimum distribution
requirements of the Code. We will also waive the applicable dollar amount
limitation on withdrawals due to excess contributions, to a qualified contract.

The contracts provide that prior to the commencement of annuity payments, the
contract owner may elect to surrender the contract and receive in a single cash
sum the accumulation value computed as of the valuation date coincident with or
next following the date of surrender. The deferred sales charge will apply if
the surrender takes place in the first ten contract years. The sales charge will
be applied to the extent that amounts payable on surrender exceed 10% of the
accumulation value at the end of the previous calendar year, less any partial
withdrawals during the current calendar year.

Under any contract, once annuity payments have commenced for an annuitant under
Options 1, 2 or 3 of the optional annuity forms, the annuitant cannot surrender
his or her annuity benefit and receive a single sum settlement in lieu thereof.
For a discussion of commutation rights of payees and beneficiaries subsequent to
the annuity commencement date, see heading "Optional Annuity Forms."

Contract owners may also submit their signed written withdrawal or surrender
requests to us by facsimile (FAX) transmission. Our FAX number is (612)
665-7942, after September 1, 1998, (651) 665-7942, ATTN: U of M Plan Services.
Transfer instructions or changes as to future allocations of premium payments
may be communicated to us by the same means.

The surrender of a contract or a partial withdrawal thereunder may result in a
credit against Minnesota Mutual's premium tax liability. In such event,
Minnesota Mutual will pay in addition to the cash value paid in connection with
the surrender or withdrawal, the lesser of (1) the amount by which Minnesota
Mutual's premium tax liability is reduced, or (2) the amount previously deducted
from purchase payments for premium taxes. No representation can be made that
upon any such surrender or withdrawal any such payment will be made, since
applicable tax laws at the time of surrender or withdrawal would be
determinative.

DISTRIBUTION

The contracts will be sold by Minnesota Mutual life insurance agents who are
also registered representatives of Ascend Financial Services, Inc. or other
broker-dealers who have entered into selling agreements with Ascend Financial
Services, Inc. Ascend Financial Services, Inc. acts as the principal underwriter
of the contracts. Ascend Financial Services, Inc. is a wholly-owned subsidiary
of MIMLIC Asset Management Company, which in turn is a wholly-owned subsidiary
of Minnesota Mutual. MIMLIC Asset Management Company is also the sole owner of
the shares of Advantus Capital Management, Inc., the investment adviser for the
Series Fund. Ascend Financial Services, Inc. is registered as a broker-dealer
under the Securities Exchange Act of 1934 and is a member of the National
Association of Securities Dealers, Inc.

Commissions to dealers, paid in connection with the sale of the contracts, may
not exceed an amount which is equal to 6% of the purchase payments received for
the Flexible Payment Deferred Variable Annuity Contracts and 3.75% for the
Single Payment Deferred Variable Annuity Contracts.

In addition, Ascend Financial Services, Inc. or Minnesota Mutual will pay
credits which allow registered representatives (Agents) who are responsible for
sales of the contracts to attend conventions and other meetings sponsored by
Minnesota Mutual or its affiliates for the purpose of promoting the sale of
insurance and/or investment products offered by Minnesota Mutual and its
affiliates. Such credits may cover the registered representatives'
transportation, hotel accommodations, meals, registration fees and the like.
Minnesota Mutual may also pay registered representatives additional amounts
based upon their production and the persistency of life insurance and annuity
business placed with Minnesota Mutual.

26
<PAGE>
FEDERAL TAX STATUS

INTRODUCTION

The discussion contained herein is general in nature and is not intended as tax
advice. Each person concerned should consult a competent tax adviser. No attempt
is made to consider any applicable state or other tax laws. In addition, this
discussion is based on our understanding of federal income tax laws as they are
currently interpreted. No representation is made regarding the likelihood of
continuation of current income tax laws or the current interpretations of the
Internal Revenue Service. The Contract may be purchased on a non-tax qualified
basis ("Non-Qualified Contract") or purchased and used in connection with
certain retirement arrangements entitled to special income tax treatment under
section 401(a), 403(b), 408 or 457 of the Code ("Qualified Contracts"). The
ultimate effect of federal income taxes on the amounts held under a Contract, on
Annuity Payments, and on the economic benefit to the Contract Owner, the
Annuitant, or the Beneficiary may depend on the tax status of the individual
concerned.

Minnesota Mutual is taxed as a "life insurance company" under the Internal
Revenue Code. The operations of the Variable Fund D form a part of, and are
taxed with, our other business activities. Currently, no federal income tax is
payable by us on income dividends received by the Variable Fund D or on capital
gains arising from the Variable Fund D's investment activities. However, if
changes in the federal tax laws or interpretations thereof result in Minnesota
Mutual being taxed on income or gains attributable to Variable Fund D, then we
may impose a charge against Variable Fund D (with respect to some or all
Contracts) in order to set aside provisions to pay such taxes.

TAXATION OF ANNUITY CONTRACTS IN GENERAL

Section 72 of the Internal Revenue Code governs taxation of nonqualified
annuities in general and some aspects of tax qualified programs. No taxes are
imposed on increases in the value of a contract until distribution occurs,
either in the form of a payment in a single sum or as annuity payments under the
annuity option elected. As a general rule, deferred annuity contracts held by a
corporation, trust or other similar entity, as opposed to a natural person, are
not treated as annuity contracts for federal tax purposes. The investment income
on such contracts is taxed as ordinary income that is received or accrued by the
owner of the contract during the taxable year.

For payments made in the event of a full surrender of an annuity, the taxable
portion is generally the amount in excess of the cost basis (i.e., purchase
payments) of the contract. Amounts withdrawn from the variable annuity contracts
not part of a qualified program are treated first as taxable income to the
extent of the excess of the contract value over the purchase payments made under
the contract. Such taxable portion is taxed at ordinary income tax rates.

In the case of a withdrawal under an annuity that is part of a qualified
program, a portion of the amount received is taxable based on the ratio of the
"investment in the contract" to the individual's balance in the retirement plan,
generally the value of the annuity. The "investment in the contract" generally
equals the portion of any deposits made by or on behalf of an individual under
an annuity which was not excluded from the gross income of the individual. For
annuities issued in connection with qualified plans, the "investment in the
contract" can be zero.

For annuity payments, the taxable portion is generally determined by a formula
that establishes the ratio that the cost basis of the contract bears to the
expected return under the contract. Such taxable part is taxed at ordinary
income rates.

If a taxable distribution is made under the variable annuity contracts, a
penalty tax of 10% of the amount of the taxable distribution may apply. This
additional tax does not apply where the taxpayer is 59 1/2 or older, where
payment is made on account of the taxpayer's disability, or where payment is
made by reason of the death of the owner, and in certain other circumstances.

The Code also provides an exception to the penalty tax for distributions in
periodic payments, of substantially equal installments, be made for the life (or
life expectancy) of the taxpayer or the joint lives (or joint life expectancies)
of the taxpayer and beneficiary.

For some types of qualified plans, other tax penalties may apply to certain
distributions.

A transfer of ownership of a contract, the designation of an annuitant or other
payee who is not also the contract owner, or the assignment of a contract may
result in certain income or gift tax consequences to the contract owner that are
beyond the scope of this discussion. A contract owner who is contemplating any
such transfer, designation or assignment should consult a competent tax adviser
with respect to the potential tax effects of that transaction.

For purposes of determining a contract owner's gross income, the Code provides
that all non-qualified deferred annuity contracts issued by the same company (or
its affiliates) to the same contract owner during any calendar year shall be
treated as one annuity contract. Additional rules may be promulgated under this
provision to prevent avoidance of its effect through serial purchases of
contracts or otherwise. For further information on these rules, see your tax
adviser.

27
<PAGE>
DIVERSIFICATION REQUIREMENTS

Section 817(h) of the Code authorizes the Treasury to set standards by
regulation or otherwise for the investments of the Variable Fund D to be
"adequately diversified" in order for the contract to be treated as an annuity
contract for Federal tax purposes. Variable Fund D, through the Series Fund,
intends to comply with the diversification requirements prescribed in
Regulations Section 1.817-5, which affect how the Series Fund's assets may be
invested. Although the investment adviser is an affiliate of Minnesota Mutual,
Minnesota Mutual does not have control over the Series Fund or its investments.
Nonetheless, Minnesota Mutual believes that each Portfolio of the Series Fund in
which the Variable Fund D owns shares will be operated in compliance with the
requirements prescribed by the Treasury.

In certain circumstances, owners of variable annuity contracts may be considered
the owners, for federal income tax purposes, of the assets of the separate
account used to support their contracts. In those circumstances, income and
gains from the separate account assets would be includable in the variable
annuity contract owner's gross income. The IRS has stated in published rulings
that a variable contract owner will be considered the owner of separate account
assets if the contract owner possesses incidents of ownership in those assets,
such as the ability to exercise investment control over the assets. The Treasury
Department has also announced, in connection with the issuance of regulations
concerning investment diversification, that those regulations "do not provide
guidance concerning the circumstances in which investor control of the
investments of a segregated asset account may cause the investor (i.e., the
contract owner), rather than the insurance company, to be treated as the owner
of the assets in the account." This announcement also states that guidance would
be issued by way of regulations or rulings on the "extent to which policyholders
may direct their investments to particular subaccounts without being treated as
owners of the underlying assets." As of the date of this Prospectus, no such
guidance has been issued.

The ownership rights under the contract are similar to, but different in certain
respects from, those described by the IRS in rulings in which it was determined
that contract owners were not owners of separate account assets. For example,
the owner of a contract has the choice of several sub-accounts in which to
allocate net purchase payments and contract values, and may be able to transfer
among sub-accounts more frequently than in such rulings. These differences could
result in a contract owner being treated as the owner of the assets of Variable
Fund D. In addition, Minnesota Mutual does not know what standards will be set
forth, if any, in the regulations or rulings which the Treasury Department has
stated it expects to issue. Minnesota Mutual therefore reserves the right to
modify the contract as necessary to attempt to prevent a contract owner from
being considered the owner of a pro rata share of the assets of Variable Fund D.

REQUIRED DISTRIBUTIONS

In order to be treated as an annuity contract for Federal income tax purposes,
Section 72(s) of the Code requires any nonqualified contract issued after
January 18, 1985 to provide that (a) if an owner dies on or after the annuity
starting date but prior to the time the entire interest in the contract has been
distributed, the remaining portion of such interest will be distributed at least
as rapidly as under the method of distribution being used as of the date of that
owner's death; and (b) if an owner dies prior to the annuity starting date, the
entire interest in the contract must be distributed within five years after the
date of the owner's death. These requirements shall be considered satisfied if
any portion of the owner's interest which is payable to or for the benefit of a
"designated beneficiary" is distributed over the life of such beneficiary or
over a period not extending beyond the life expectancy of that beneficiary and
such distributions begin within one year of that owner's death. The owner's
"designated beneficiary" is the person designated by such owner as a beneficiary
and to whom ownership of the contract passes by reason of death and must be a
natural person. However, if the owner's "designated beneficiary" is the
surviving spouse of the owner, the contract may be continued with the surviving
spouse as the new owner.

Nonqualified contracts issued after January 18, 1985 contain provisions which
are intended to comply with the requirements of Section 72(s) of the Code,
although no regulations interpreting these requirements have yet been issued.
Minnesota Mutual intends to review such provisions and modify them if necessary
to assure that they comply with the requirements of Code Section 72(s) when
clarified by regulation or otherwise.

Other rules may apply to qualified contracts.

TAXATION OF DEATH BENEFIT PROCEEDS

Amounts may be distributed from a contract because of the death of the owner.
Generally, such amounts are includable in the income of the recipient as
follows: (1) if distributed in a lump sum, they are taxed in the same manner as
a full surrender of the contract, as described above, or (2) if distributed
under an annuity option, they are taxed in the same manner as annuity payments,
as described above.

28
<PAGE>
POSSIBLE CHANGES IN TAXATION

Legislation has been proposed in 1998 that, if enacted, would adversely modify
the federal taxation of certain insurance and annuity contracts. For example,
one proposal would tax transfers among investment options and tax exchanges
involving variable contracts. A second proposal would reduce the "investment in
the contract" under cash value life insurance and certain annuity contracts by
certain amounts, thereby increasing the amount of income for purposes of
computing gain. Although the likelihood of there being any change is uncertain,
there is always the possibility that the tax treatment of the Contracts could
change by legislation or other means. Moreover, it is also possible that any
change could be retroactive (that is, effective prior to the date of the
change). You should consult a tax adviser with respect to legislative
developments and their effect on the Contract.

TAX QUALIFIED PROGRAMS

The annuity is designed for use with several types of retirement plans that
qualify for special tax treatment. The tax rules applicable to participants and
beneficiaries in retirement plans vary according to the type of plan and the
terms and conditions of the plan. Special favorable tax treatment may be
available for certain types of contributions and distributions. Adverse tax
consequences may result from contributions in excess of specified limits;
distributions prior to age 59 1/2 (subject to certain exceptions); distributions
that do not conform to specified minimum distribution rules; aggregate
distributions in excess of a specified annual amount; and in other specified
circumstances.

We make no attempt to provide more than general information about use of
annuities with the various types of retirement plans. Owners and participants
under retirement plans as well as annuitants and beneficiaries are cautioned
that the rights of any person to any benefits under annuities purchased in
connection with these plans may be subject to the terms and conditions of the
plans themselves, regardless of the terms and conditions of the annuity issued
in connection with such a plan. Some retirement plans are subject to transfer
restrictions, distribution and other requirements that are not incorporated into
the annuity or our annuity administration procedures. Owners, participants and
beneficiaries are responsible for determining that contributions, distributions
and other transactions with respect to the annuities comply with applicable law.
Purchasers of annuities for use with any retirement plan should consult their
legal counsel and tax adviser regarding the suitability of the contract.
Purchasers of annuities for use with any retirement plan should consult their
legal counsel and tax adviser regarding the suitability of the contract.

For qualified plans under Section 401(a), 403(b), and 457, the Code requires
that distributions generally must commence no later than the later of April 1 of
the calendar year following the calendar year in which the Owner (or plan
participant) (i) reaches age 70 1/2 or (ii) retires, and must be made in a
specified form or manner. If the plan participant is a "5 percent owner" (as
defined by the Code), distributions generally must begin no later than April 1
of the calendar year following the calendar year in which the Owner (or plan
participant) reaches age 70 1/2. For IRAs described in Section 408,
distributions generally must commence no later than the later of April 1 of the
calendar year following the calendar year in which the Owner (or plan
participant) reaches age 70 1/2. Roth IRAs under Section 408A do not require
distributions at any time prior to the Owner's death.

PUBLIC SCHOOL SYSTEMS AND CERTAIN TAX EXEMPT ORGANIZATIONS

Under Code Section 403(b), payments made by public school systems and certain
tax exempt organizations to purchase annuity contracts for their employees are
excludable from the gross income of the employee, subject to certain
limitations. However, these payments may be subject to FICA (Social Security)
taxes.

Code Section 403(b)(11) restricts the distribution under Code Section 403(b)
annuity contracts of: (1) elective contributions made in years beginning after
December 31, 1988; (2) earnings on those contributions; and (3) earnings in such
years on amounts held as of the last year beginning before January 1, 1989.
Distribution of those amounts may only occur upon death of the employee,
attainment of age 59 1/2, separation from service, disability, or financial
hardship. In addition, income attributable to elective contributions may not be
distributed in the case of hardship.

INDIVIDUAL RETIREMENT ANNUITIES

Section 408 of the Code permits eligible individuals to contribute to an
Individual Retirement Annuity, hereinafter referred to as an "IRA". Also,
distributions from certain other types of qualified plans may be "rolled over"
on a tax-deferred basis into an IRA. The sale of a Contract for use with an IRA
may be subject to special disclosure requirements of the Internal Revenue
Service. Purchasers of a Contract for use with IRAs will be provided with
supplemental information required by the Internal Revenue Services or other
appropriate agency. Such purchasers will have the right to revoke their purchase
within seven days of the earlier of the establishment of the IRA or their
purchase. A Qualified Contract issued in connection with an IRA will be amended
as necessary to conform to the requirements of the Code. Purchasers should seek
competent advice as to the suitability of the Contract for use with IRAs.

29
<PAGE>
Earnings in an IRA are not taxed until distribution. IRA contributions are
limited each year to the lesser of $2,000 or 100% of the Owner's adjusted gross
income and may be deductible in whole or in part depending on the individual's
income. The limit on the amount contributed to an IRA does not apply to
distributions from certain other types of qualified plans that are "rolled over"
on a tax-deferred basis into an IRA. Amounts in the IRA (other than
nondeductible contributions) are taxed when distributed from the IRA.
Distributions prior to age 59 1/2 (unless certain exceptions apply) are subject
to a 10% penalty tax.

SIMPLIFIED EMPLOYEE PENSION (SEP) IRAS

Employers may establish Simplified Employee Pension (SEP) IRAs under Code
section 408(k) to provide IRA contributions on behalf of their employees. In
addition to all of the general Code rules governing IRAs, such plans are subject
to certain Code requirements regarding participation and amounts of
contributions.

CORPORATE PENSION AND PROFIT-SHARING PLANS AND H.R. 10 PLANS

Code Section 401(a) permits employers to establish various types of retirement
plans for employees, and permits self-employed individuals to establish
retirement plans for themselves and their employees. These retirement plans may
permit the purchase of annuities to provide retirement savings under the plans.
Adverse tax or other legal consequences to the plan, to the participant or to
both may result if this annuity is assigned or transferred to any individual as
a means to provide benefit payments, unless the plan complies with all legal
requirements applicable to such benefits prior to transfer of the annuity.

DEFERRED COMPENSATION PLANS

Code Section 457 provides for certain deferred compensation plans. These plans
may be offered with respect to service for state governments, local governments,
political subdivisions, agencies, instrumentalities and certain affiliates of
such entities, and tax exempt organizations. The plans may permit participants
to specify the form of investment for their deferred compensation account. With
respect to non-governmental Section 457 plans, all investments are owned by the
sponsoring employer and are subject to the claims of the general creditors of
the employer and depending on the terms of the particular plan, the employer may
be entitled to draw on deferred amounts for purposes unrelated to its Section
457 plan obligations. In general, all amounts received under a Section 457 plan
are taxable and are subject to federal income tax withholding as wages.

WITHHOLDING

In general, distributions from annuities are subject to federal income tax
withholding unless the recipient elects not to have tax withheld. Different
rules may apply to payments delivered outside the United States. Some states
have enacted similar rules.

Recent changes to the Code allow the rollover of most distributions from
tax-qualified plans and Section 403(b) annuities directly to other tax-qualified
plans that will accept such distributions and to individual retirement accounts
and individual retirement annuities. Distributions which may not be rolled over
are those which are: (1) one of a series of substantially equal annual (or more
frequent) payments made (a) over the life or life expectancy of the employee,
(b) the joint lives or joint expectancies of the employee and the employee's
designated beneficiary, or (c) for a specified period of ten years or more; (2)
a required minimum distribution; or (3) the non-taxable portion of a
distribution.

Any distribution eligible for rollover, which may include payment to an
employee, an employee's surviving spouse or an ex-spouse who is an alternate
payee, will be subject to federal tax withholding at a 20% rate unless the
distribution is made as a direct rollover to a tax-qualified plan or to an
individual retirement account or annuity. It may be noted that amounts received
by individuals which are eligible for rollover may still be placed in another
tax-qualified plan or individual retirement account or individual retirement
annuity if the transaction is completed within sixty days after the distribution
has been received. Such a taxpayer must replace withheld amounts with other
funds to avoid taxation on the amount previously withheld.

SEE YOUR OWN TAX ADVISER

It should be understood that the foregoing description of the federal income tax
consequences under these contracts is not exhaustive and that special rules are
provided with respect to situations not discussed herein. It should also be
understood that should a plan lose its qualified status, employees will lose
some of the tax benefits described. Statutory changes in the Internal Revenue
Code with varying effective dates, and regulations adopted thereunder may also
alter the tax consequences of specific factual situations. Due to the complexity
of the applicable laws, tax advice may be needed by a person contemplating the
purchase of a variable annuity contract or exercising elections under such a
contract. For further information a qualified tax adviser should be consulted.

30
<PAGE>
LEGAL PROCEEDINGS

There are no pending legal proceedings in which the Variable Fund D is a party.
There are no material pending legal proceedings, other than ordinary routine
litigation incidental to their business, in which Minnesota Mutual, MIMLIC
Management, Advantus Capital or Ascend Financial is a party.

YEAR 2000 COMPUTER PROBLEM

The services provided by Minnesota Mutual to the Separate Account and its
contract owners depend on the smooth functioning of its computer systems. Many
computer software systems in use today cannot distinguish the year 2000 from the
year 1900 because of the way that dates are encoded, stored and calculated. That
failure could have a negative impact on the ability of Minnesota Mutual to
provide services to contract owners. Minnesota Mutual has been actively working
on necessary changes to its computer systems to deal with the year 2000.
Although there can be no assurance of complete success, Minnesota Mutual
believes that it will be able to resolve these issues on a timely basis and that
there will be no material adverse impact on its ability to provide services to
the Separate Account.

In addition, Minnesota Mutual's operations could be impacted by its service
providers' or suppliers' year 2000 efforts. Minnesota Mutual has undertaken an
initiative to assess the efforts of organizations where there is a significant
business relationship; however there is no assurance that Minnesota Mutual will
not be affected by year 2000 problems of other organizations.

STATEMENT OF ADDITIONAL INFORMATION

A Statement of Additional Information, which contains additional contract and
Variable Fund D information including financial statements, is available from
the offices of the Variable Fund D at your request. The Table of Contents for
that Statement of Additional Information is as follows:

Variable Fund D
Trustees and Principal Management Officers of Minnesota Mutual
Other Contracts
Distribution of Contracts
Annuity Payments
Auditors
Financial Statements
Appendix A--Calculation of Unit Values

31
<PAGE>
MINNESOTA MUTUAL VARIABLE FUND D

Statement of Additional Information

The date of this document and the Prospectus is: May 1, 1998

This Statement of Additional Information is not a prospectus. Much of the
information contained in this Statement of Additional Information expands
upon subjects discussed in the Prospectus. Therefore, this Statement should
be read in conjunction with the Variable Fund D's current Prospectus, bearing
the same date, which may be obtained by calling the Variable Fund D at (612)
665-3500, after September 1, 1998, (651) 665-3500, or writing the Variable
Fund D at Minnesota Mutual Life Center, 400 Robert Street North, St. Paul,
Minnesota 55101-2098.

TABLE OF CONTENTS

Variable Fund D

Trustees and Principal Management Officers of Minnesota Mutual

Other Contracts

Distribution of Contracts

Annuity Payments

Auditors

Financial Statements

Appendix A - Calculation of Unit Values

-1-
<PAGE>
VARIABLE FUND D

Minnesota Mutual Variable Fund D ("Variable Fund D") is a separate account of
The Minnesota Mutual Life Insurance Company ("Minnesota Mutual"). The Variable
Fund D is registered as a unit investment trust. Prior to the Reorganization
of the Fund in October of 1990 and the establishment of its several
sub-accounts, the Fund was an open-end, diversified, management investment
company investing in a diversified portfolio of equity securities, mainly
common stocks.

TRUSTEES AND PRINCIPAL MANAGEMENT OFFICERS OF MINNESOTA MUTUAL

Trustees Principal Occupation

Giulio Agostini Senior Vice President, Finance and Administrative
Services, Minnesota Mining and Manufacturing
Company, Maplewood, Minnesota

Anthony L. Andersen Chair-Board of Directors, H.B. Fuller Company,
St. Paul, Minnesota, since June 1995, prior
thereto for more than five years President and
Chief Executive Officer, H. B. Fuller Company
(Adhesive Products)

Leslie S. Biller President and Chief Operating Officer, Norwest
Corporation, Minneapolis Minnesota (Banking)

John F. Grundhofer President and Chief Executive Officer, U.S Bancorp,
Minneapolis, Minnesota (Banking)

Harold V. Haverty Retired since May 1995, prior thereto, for more
than five years Chairman of the Board, President
and Chief Executive Officer, Deluxe Corporation,
Shoreview, Minnesota (Check Printing)

David S. Kidwell, Ph.D. Dean and Professor of Finance, The Curtis L.
Carlson School of Management, University of
Minnesota

Reatha C. King, Ph.D. President and Executive Director, General Mills
Foundation, Minneapolis, Minnesota

Thomas E. Rohricht Member, Doherty, Rumble & Butler Professional
Association, St. Paul, Minnesota (Attorneys)

Terry Tinson Saario, Ph.D. Prior to March 1996, and for more than five years,
President, Northwest Area Foundation, St. Paul,
Minnesota (Private Regional Foundation)

Robert L. Senkler Chairman of the Board, President and Chief
Executive Officer, The Minnesota Mutual Life
Insurance Company, since August 1995; prior
thereto for more than five years Vice President
and Actuary, The Minnesota Mutual Life Insurance
Company

-2-

<PAGE>

Michael E. Shannon Chairman, Chief Financial and Administrative
Officer, Ecolab, Inc., St. Paul, Minnesota.
(Develops and Markets Cleaning and Sanitizing
Products)

Frederick T. Weyerhaeuser Chairman, Clearwater Investment Trust since May
1996, prior thereto for more than five years,
Chairman, Clearwater Management Comapany, St. Paul,
Minnesota (Financial Management)

Principal Officers (other than Trustees)

Name Position

John F. Bruder Senior Vice President

Keith M. Campbell Senior Vice President

Frederick P. Feuerherm Vice President

Robert E. Hunstad Executive Vice President

James E. Johnson Senior Vice President and Actuary

Michael T. Kellett Vice President

Richard D. Lee Vice President

Robert M. Olafson Vice President

Dennis E. Prohofsky Senior Vice President, General Counsel and
Secretary

Gregory S. Strong Senior Vice President and Chief Financial
Officer

Terrence M. Sullivan Senior Vice President

Randy F. Wallake Senior Vice President

William N. Westhoff Senior Vice President and Treasurer

All Trustees who are not also officers of Minnesota Mutual have had the
principal occupation (or employers) shown for at least five years. All
officers of Minnesota Mutual have been employed by Minnesota Mutual for at
least five years with the exception of Mr. Westhoff. Mr. Westhoff has been
employed by Minnesota Mutual since April 1998. Prior thereto, Mr. Westhoff
was employed by American Express Financial Corporation, Minneapolis,
Minnesota, from August 1994 to October 1997 as Senior Vice President,
Global Investments and from November 1989 to July 1994 as Senior Vice
President, Fixed Income Management.

OTHER CONTRACTS

In addition to the contracts described in the Prospectus, Minnesota Mutual
continually offers three types of Variable Fund D variable annuity contracts,
all incorporating a front-end loading of sales charges. These contracts are the
Individual Accumulation Annuity Contract, Group Accumulation Annuity Contract
and Group Deposit Administration Variable Annuity Contracts.

-3-
<PAGE>
DISTRIBUTION OF CONTRACTS

The contracts will be continuously sold by Minnesota Mutual life insurance
agents who are also registered representatives of Ascend Financial Services,
Inc. or other broker-dealers who have entered into selling agreements with
Ascend Financial. Ascend Financial acts as the principal underwriter of the
contracts. Ascend Financial Services, Inc. a wholly-owned subsidiary of
MIMLIC Asset Management Company, which is a wholly-owned subsidiary of
Minnesota Mutual. MIMLIC Asset Management Company is also the sole owner of
the shares of Advantus Capital Management Inc., the investment adviser for the
Variable Fund D. Ascend Financial is registered as a broker-dealer under the
Securities Exchange Act of 1934 and is a member of the National Association of
Securities Dealers, Inc.

Amounts paid by Minnesota Mutual for payment to the underwriter for 1997 was
$125,659.42. These include payments made by Minnesota Mutual on behalf of the
underwriter. Agents of Minnesota Mutual who are also registered representatives
of Ascend Financial are compensated directly by Minnesota Mutual.

ANNUITY PAYMENTS

Please see Appendix A to this Statement of Additional Information for an
illustration of the calculation of annuity unit values and of a variable annuity
payment, showing the method used for the calculation of both the initial and
subsequent payments.

AUDITORS

The financial statements of Minnesota Mutual Variable Fund D and the
Consolidated Financial Statements of The Minnesota Mutual Life Insurance
Company included in this Statement of Additional Information have been
audited by KPMG Peat Marwick LLP, 4200 Norwest Center, 90 South Seventh
Street, Minneapolis, Minnesota 55402, independent auditors, as indicated in
their reports in this Statement of Additional Information, and are included
herein in reliance upon such reports and upon the authority of such firm as
experts in accounting and auditing.

-4-
<PAGE>

INDEPENDENT AUDITORS' REPORT

The Board of Trustees of The Minnesota Mutual Life Insurance Company
and Contract Owners of Minnesota Mutual Variable Fund D:

We have audited the accompanying statements of assets and liabilities of the
Growth, Bond, Money Market, Asset Allocation, Mortgage Securities, Index 500 and
Small Company Segregated Sub-Accounts of Minnesota Mutual Variable Fund D (the
Account) as of December 31, 1997 and the related statements of operations for
the year then ended, the statements of changes in net assets for each of the
years in the two-year period then ended and the financial highlights for periods
presented in footnote (7). These financial statements and the financial
highlights are the responsibility of the Account's management. Our
responsibility is to express an opinion on these financial statements and the
financial highlights 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 and the financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Investments owned at December 31, 1997 were verified by examination
of the underlying portfolios of Advantus Series Fund, Inc. (formerly MIMLIC
Series Fund, Inc.). An audit also includes assessing the accounting principles
used and significant estimates made by management as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Growth, Bond, Money Market,
Asset Allocation, Mortgage Securities, Index 500 and Small Company Segregated
Sub-Accounts of Minnesota Mutual Variable Fund D at December 31, 1997 and the
results of their operations, changes in their net assets and the financial
highlights for the periods stated in the first paragraph above, in conformity
with generally accepted accounting principles.

KPMG Peat Marwick LLP

Minneapolis, Minnesota
February 20, 1998

<PAGE>

MINNESOTA MUTUAL VARIABLE FUND D
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1997

<TABLE>
<CAPTION>
Segregated Sub-Accounts
-----------------------------------------------------
Money
ASSETS Growth Bond Market
------ ------------ ------------ ------------
<S> <C> <C> <C>
Investments in shares of Advantus Series Fund, Inc.:
Growth Portfolio, 32,904,255 shares at net asset
value of $2.40 per share (cost $55,564,474). . . . . . . . . $ 78,963,786 - -

Bond Portfolio, 337,553 shares at net asset value
of $1.33 per share (cost $428,512) . . . . . . . . . . . . . - 447,451 -

Money Market Portfolio, 400,564 shares at net
asset value of $1.00 per share (cost $400,564) . . . . . . . - - 400,564

Asset Allocation Portfolio, 3,064,235 shares at
net asset value of $2.03 per share (cost $4,948,041) . . . . - - -

Mortgage Securities Portfolio, 180,488 shares at
net asset value of $1.21 per share (cost $214,162) . . . . . - - -

Index 500 Portfolio, 1,114,870 shares at net asset
value of $3.10 per share (cost $2,258,745) . . . . . . . . . - - -

Small Company Portfolio, 115,871 shares at net
asset value of $1.65 per share (cost $198,532) . . . . . . . - - -
------------ ------------ ------------
78,963,786 447,451 400,564

Receivable from Advantus Series Fund, Inc.
for investments sold . . . . . . . . . . . . . . . . . . . . . 19,153 10 9
Receivable from Minnesota Mutual for contract
purchase payments. . . . . . . . . . . . . . . . . . . . . . . 28,271 79 -
------------ ------------ ------------

Total assets. . . . . . . . . . . . . . . . . . . . . . 79,011,210 447,540 400,573
------------ ------------ ------------

LIABILITIES

Payable to Advantus Series Fund, Inc. for
investments purchased. . . . . . . . . . . . . . . . . . . . . 28,271 79 -
Payable to Minnesota Mutual for contract terminations
and mortality and expense charges. . . . . . . . . . . . . . . 19,153 10 9
------------ ------------ ------------

Total liabilities . . . . . . . . . . . . . . . . . . . 47,424 89 9
------------ ------------ ------------

Net assets applicable to annuity contract owners. . . . $ 78,963,786 447,451 400,564
------------ ------------ ------------
------------ ------------ ------------

CONTRACT OWNERS' EQUITY

Contracts in accumulation period, accumulation units
outstanding of 4,229,239 for Growth; 256,628 for Bond;
309,546 for Money Market; 2,564,823 for Asset Allocation;
130,573 for Mortgage Securities; 1,012,408 for Index 500
and 109,961 for Small Company. . . . . . . . . . . . . . . . . $ 77,709,480 447,451 400,564
Contracts in annuity payment period (note 2). . . . . . . . . . . 1,254,306 - -
------------ ------------ ------------

Total contract owners' equity. . . . . . . . . . . . . . . . $ 78,963,786 447,451 400,564
------------ ------------ ------------
------------ ------------ ------------

NET ASSET VALUE PER ACCUMULATION UNIT . . . . . . . . . . . . . . $ 18.38 1.75 1.29
------------ ------------ ------------
------------ ------------ ------------

-------------------------------------------------------------
Asset Mortgage Index Small
ASSETS Allocation Securities 500 Company
------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Investments in shares of Advantus Series Fund, Inc.:
Growth Portfolio, 32,904,255 shares at net asset
value of $2.40 per share (cost $55,564,474). . . . . . . . . - - - -

Bond Portfolio, 337,553 shares at net asset value
of $1.33 per share (cost $428,512) . . . . . . . . . . . . . - - - -

Money Market Portfolio, 400,564 shares at net
asset value of $1.00 per share (cost $400,564) . . . . . . . - - - -

Asset Allocation Portfolio, 3,064,235 shares at
net asset value of $2.03 per share (cost $4,948,041) . . . . 6,215,713 - - -

Mortgage Securities Portfolio, 180,488 shares at
net asset value of $1.21 per share (cost $214,162) . . . . . - 218,595 - -

Index 500 Portfolio, 1,114,870 shares at net asset
value of $3.10 per share (cost $2,258,745) . . . . . . . . . - - 3,460,208 -

Small Company Portfolio, 115,871 shares at net
asset value of $1.65 per share (cost $198,532) . . . . . . . - - - 191,714
------------ ------------ ------------ ------------
6,215,713 218,595 3,460,208 191,714

Receivable from Advantus Series Fund, Inc.
for investments sold . . . . . . . . . . . . . . . . . . . . . 2,669 5 90 2
Receivable from Minnesota Mutual for contract
purchase payments. . . . . . . . . . . . . . . . . . . . . . . 3,270 - 726 40
------------ ------------ ------------ ------------

Total assets. . . . . . . . . . . . . . . . . . . . . . 6,221,652 218,600 3,461,024 191,756
------------ ------------ ------------ ------------

LIABILITIES

Payable to Advantus Series Fund, Inc. for
investments purchased. . . . . . . . . . . . . . . . . . . . . 3,270 - 726 40
Payable to Minnesota Mutual for contract terminations
and mortality and expense charges. . . . . . . . . . . . . . . 2,669 5 90 2
------------ ------------ ------------ ------------

Total liabilities . . . . . . . . . . . . . . . . . . . 5,939 5 816 42
------------ ------------ ------------ ------------

Net assets applicable to annuity contract owners. . . . 6,215,713 218,595 3,460,208 191,714
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------

CONTRACT OWNERS' EQUITY

Contracts in accumulation period, accumulation units
outstanding of 4,229,239 for Growth; 256,628 for Bond;
309,546 for Money Market; 2,564,823 for Asset Allocation;
130,573 for Mortgage Securities; 1,012,408 for Index 500
and 109,961 for Small Company. . . . . . . . . . . . . . . . . 6,215,713 218,595 3,460,208 191,714
Contracts in annuity payment period (note 2). . . . . . . . . . . - - - -
------------ ------------ ------------ ------------

Total contract owners' equity. . . . . . . . . . . . . . . . 6,215,713 218,595 3,460,208 191,714
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------

NET ASSET VALUE PER ACCUMULATION UNIT . . . . . . . . . . . . . . 2.42 1.67 3.41 1.74
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>

See accompanying notes to financial statements.

<PAGE>

MINNESOTA MUTUAL VARIABLE FUND D
STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997

<TABLE>
<CAPTION>
Segregated Sub-Accounts
----------------------------------------------------
Money
Growth Bond Market
------------ ------------ ------------
<S> <C> <C> <C>
Investment income (loss):
Investment income distributions from underlying
mutual fund (note 5) . . . . . . . . . . . . . . . . . . . . $ 590,552 26,950 25,536
Reimbursement from Minnesota Mutual for excess expense
charges (note 4) . . . . . . . . . . . . . . . . . . . . . . 219,516 1,104 1,202
Mortality and expense charges (note 3) . . . . . . . . . . . . (572,680) (3,734) (3,388)
------------ ------------ ------------
Investment income (loss) - net . . . . . . . . . . . . . . . 237,388 24,320 23,350
------------ ------------ ------------

Realized and unrealized gains on investments - net:

Realized gain distributions from underlying
mutual fund (note 5) . . . . . . . . . . . . . . . . . . . . 15,259,571 - -
------------ ------------ ------------

Realized gains on sales of investments:
Proceeds from sales. . . . . . . . . . . . . . . . . . . . . 9,065,830 135,639 373,663
Cost of investments sold . . . . . . . . . . . . . . . . . . (6,739,336) (135,441) (373,663)
------------ ------------ ------------
2,326,494 198 -
------------ ------------ ------------

Net realized gains on investments. . . . . . . . . . . . . . 17,586,065 198 -
------------ ------------ ------------

Net change in unrealized appreciation or depreciation
of investments. . . . . . . . . . . . . . . . . . . . . 2,620,465 14,043 -
------------ ------------ ------------

Net gains on investments . . . . . . . . . . . . . . . . . . 20,206,530 14,241 -
------------ ------------ ------------

Net increase in net assets resulting from operations. . . . . . . $ 20,443,918 38,561 23,350
------------ ------------ ------------
------------ ------------ ------------

-------------------------------------------------------------
Asset Mortgage Index Small
Allocation Securities 500 Company
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Investment income (loss):
Investment income distributions from underlying
mutual fund (note 5) . . . . . . . . . . . . . . . . . . . . 155,655 21,816 31,816 1
Reimbursement from Minnesota Mutual for excess expense
charges (note 4) . . . . . . . . . . . . . . . . . . . . . . 14,106 662 3,899 562
Mortality and expense charges (note 3) . . . . . . . . . . . . (47,723) (2,239) (22,959) (1,217)
------------ ------------ ------------ ------------
Investment income (loss) - net . . . . . . . . . . . . . . . 122,038 20,239 12,756 (654)
------------ ------------ ------------ ------------

Realized and unrealized gains on investments - net:

Realized gain distributions from underlying
mutual fund (note 5) . . . . . . . . . . . . . . . . . . . . 323,153 - 40,196 -
------------ ------------ ------------ ------------

Realized gains on sales of investments:
Proceeds from sales. . . . . . . . . . . . . . . . . . . . . 845,006 1,101,390 499,822 1,185,057
Cost of investments sold . . . . . . . . . . . . . . . . . . (709,025) (1,096,807) (334,042) (1,175,583)
------------ ------------ ------------ ------------
135,981 4,583 165,780 9,474
------------ ------------ ------------ ------------

Net realized gains on investments. . . . . . . . . . . . . . 459,134 4,583 205,976 9,474
------------ ------------ ------------ ------------

Net change in unrealized appreciation or depreciation
of investments. . . . . . . . . . . . . . . . . . . . . 421,677 (2,806) 557,625 2,096
------------ ------------ ------------ ------------

Net gains on investments . . . . . . . . . . . . . . . . . . 880,811 1,777 763,601 11,570
------------ ------------ ------------ ------------

Net increase in net assets resulting from operations. . . . . . . 1,002,849 22,016 776,357 10,916
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>

See accompanying notes to financial statements.

<PAGE>

MINNESOTA MUTUAL VARIABLE FUND D
STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
Segregated Sub-Accounts
----------------------------------------------------
Money
Growth Bond Market
------------ ------------ ------------
<S> <C> <C> <C>
Operations:
Investment income (loss) - net . . . . . . . . . . . . . . . . $ 237,388 24,320 23,350
Net realized gains on investments. . . . . . . . . . . . . . . 17,586,065 198 -
Net change in unrealized appreciation or depreciation
of investments . . . . . . . . . . . . . . . . . . . . . . . 2,620,465 14,043 -
------------ ------------ ------------

Net increase in net assets resulting from operations. . . . . . . 20,443,918 38,561 23,350
------------ ------------ ------------

Contract transactions (notes 2, 3, 5 and 6):
Contract purchase payments . . . . . . . . . . . . . . . . . . 1,815,383 65,412 259,039
Contract terminations and withdrawal payments. . . . . . . . . (8,614,392) (133,008) (371,477)
Actuarial adjustments for mortality experience on annuities
in payment period. . . . . . . . . . . . . . . . . . . . . . 53,059 - -
Annuity benefit payments . . . . . . . . . . . . . . . . . . . (151,332) - -
------------ ------------ ------------

Increase (decrease) in net assets from contract transactions. . . (6,897,282) (67,596) (112,438)
------------ ------------ ------------

Increase (decrease) in net assets . . . . . . . . . . . . . . . . 13,546,636 (29,035) (89,088)

Net assets at the beginning of year . . . . . . . . . . . . . . . 65,417,150 476,486 489,652
------------ ------------ ------------

Net assets at the end of year . . . . . . . . . . . . . . . . . . $ 78,963,786 447,451 400,564
------------ ------------ ------------
------------ ------------ ------------

------------------------------------------------------------
Asset Mortgage Index Small
Allocation Securities 500 Company
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Operations:
Investment income (loss) - net . . . . . . . . . . . . . . . . 122,038 20,239 12,756 (654)
Net realized gains on investments. . . . . . . . . . . . . . . 459,134 4,583 205,976 9,474
Net change in unrealized appreciation or depreciation
of investments . . . . . . . . . . . . . . . . . . . . . . . 421,677 (2,806) 557,625 2,096
------------ ------------ ------------ ------------

Net increase in net assets resulting from operations. . . . . . . 1,002,849 22,016 776,357 10,916
------------ ------------ ------------ ------------

Contract transactions (notes 2, 3, 5 and 6):
Contract purchase payments . . . . . . . . . . . . . . . . . . 278,770 1,026,507 765,938 1,179,678
Contract terminations and withdrawal payments. . . . . . . . . (811,388) (1,099,813) (480,761) (1,184,401)
Actuarial adjustments for mortality experience on annuities
in payment period. . . . . . . . . . . . . . . . . . . . . . - - - -
Annuity benefit payments . . . . . . . . . . . . . . . . . . . - - - -
------------ ------------ ------------ ------------

Increase (decrease) in net assets from contract transactions. . . (532,618) (73,306) 285,177 (4,723)
------------ ------------ ------------ ------------

Increase (decrease) in net assets . . . . . . . . . . . . . . . . 470,231 (51,290) 1,061,534 6,193

Net assets at the beginning of year . . . . . . . . . . . . . . . 5,745,482 269,885 2,398,674 185,521
------------ ------------ ------------ ------------

Net assets at the end of year . . . . . . . . . . . . . . . . . . 6,215,713 218,595 3,460,208 191,714
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>

See accompanying notes to financial statements.

<PAGE>

MINNESOTA MUTUAL VARIABLE FUND D
STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
Segregated Sub-Accounts
----------------------------------------------------
Money
Growth Bond Market
------------ ------------ ------------
<S> <C> <C> <C>
Operations:
Investment income (loss) - net . . . . . . . . . . . . . . . . $ 224,375 22,942 20,019
Net realized gains on investments. . . . . . . . . . . . . . . 7,089,946 9,739 -
Net change in unrealized appreciation or depreciation
of investments . . . . . . . . . . . . . . . . . . . . . . . 2,291,349 (22,377) -
------------ ------------ ------------

Net increase in net assets resulting from operations. . . . . . . 9,605,670 10,304 20,019
------------ ------------ ------------
Contract transactions (notes 2, 3, 5 and 6):
Contract purchase payments . . . . . . . . . . . . . . . . . . 2,830,496 242,861 798,453
Contract terminations and withdrawal payments. . . . . . . . . (6,150,876) (280,453) (747,256)
Actuarial adjustments for mortality experience on annuities
in payment period. . . . . . . . . . . . . . . . . . . . . . 18,500 - -
Annuity benefit payments . . . . . . . . . . . . . . . . . . . (122,548) - -
------------ ------------ ------------

Increase (decrease) in net assets from contract transactions. . . (3,424,428) (37,592) 51,197
------------ ------------ ------------

Increase (decrease) in net assets . . . . . . . . . . . . . . . . 6,181,242 (27,288) 71,216

Net assets at the beginning of year . . . . . . . . . . . . . . . 59,235,908 503,774 418,436
------------ ------------ ------------

Net assets at the end of year . . . . . . . . . . . . . . . . . . $ 65,417,150 476,486 489,652
------------ ------------ ------------
------------ ------------ ------------

------------------------------------------------------------
Asset Mortgage Index Small
Allocation Securities 500 Company
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Operations:
Investment income (loss) - net . . . . . . . . . . . . . . . . 150,755 11,144 16,434 (588)
Net realized gains on investments. . . . . . . . . . . . . . . 454,317 616 202,187 33,734
Net change in unrealized appreciation or depreciation
of investments . . . . . . . . . . . . . . . . . . . . . . . 36,511 (383) 204,033 (25,097)
------------ ------------ ------------ ------------

Net increase in net assets resulting from operations. . . . . . . 641,583 11,377 422,654 8,049
------------ ------------ ------------ ------------
Contract transactions (notes 2, 3, 5 and 6):
Contract purchase payments . . . . . . . . . . . . . . . . . . 746,516 969,611 774,721 900,039
Contract terminations and withdrawal payments. . . . . . . . . (1,062,569) (912,988) (842,439) (914,359)
Actuarial adjustments for mortality experience on annuities
in payment period. . . . . . . . . . . . . . . . . . . . . . - - - -
Annuity benefit payments . . . . . . . . . . . . . . . . . . . - - - -
------------ ------------ ------------ ------------

Increase (decrease) in net assets from contract transactions. . . (316,053) 56,623 (67,718) (14,320)
------------ ------------ ------------ ------------

Increase (decrease) in net assets . . . . . . . . . . . . . . . . 325,530 68,000 354,936 (6,271)

Net assets at the beginning of year . . . . . . . . . . . . . . . 5,419,952 201,885 2,043,738 191,792
------------ ------------ ------------ ------------

Net assets at the end of year . . . . . . . . . . . . . . . . . . 5,745,482 269,885 2,398,674 185,521
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>

See accompanying notes to financial statements.

<PAGE>

MINNESOTA MUTUAL VARIABLE FUND D

NOTES TO FINANCIAL STATEMENTS

(1) ORGANIZATION

Minnesota Mutual Variable Fund D (the Account) is organized as a segregated
asset account of The Minnesota Mutual Life Insurance Company (Minnesota
Mutual) under Minnesota law and is registered as a unit investment trust
under the Investment Company Act of 1940 (as amended).

The assets of each segregated sub-account are held for the exclusive
benefit of the variable annuity contract owners and are not chargeable with
liabilities arising out of the business conducted by any other account or
by Minnesota Mutual. Contract owners allocate their variable annuity
payments to one or more of the seven segregated sub-accounts. Such
payments are then invested in shares of Advantus Series Fund, Inc.,
formerly MIMLIC Series Fund, Inc., (the Fund) organized by Minnesota Mutual
as the investment vehicle for its variable annuity contracts and variable
life policies. The Fund is registered under the Investment Company Act of
1940 (as amended) as a diversified, open-end management investment company.
Payments allocated to the Growth, Bond, Money Market, Asset Allocation,
Mortgage Securities, Index 500 and Small Company segregated sub-accounts
are invested in shares of the Growth, Bond, Money Market, Asset Allocation,
Mortgage Securities, Index 500 and Small Company Portfolios of the Fund,
respectively.

Ascend Financial Services, Inc., formerly MIMLIC Sales Corporation, acts as
the underwriter for the Account. Advantus Capital Management, Inc. acts as
the investment adviser for the Fund. Ascend Financial Services, Inc. and
Advantus Capital Management, Inc. are wholly-owned subsidiaries of MIMLIC
Asset Management Company. MIMLIC Asset Management Company is a
wholly-owned subsidiary of Minnesota Mutual.

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

USE OF ESTIMATES

The preparation of 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 increases and decreases in
net assets resulting from operations during the period. Actual results
could differ from those estimates.

INVESTMENTS IN ADVANTUS SERIES FUND, INC.

Investments in shares of the Fund portfolios are stated at market value
which is the net asset value per share as determined daily by the Fund.
Investment transactions are accounted for on the date the shares are
purchased or sold. The cost of investments sold is determined on the
average cost method. All dividend distributions received from the Fund are
reinvested in additional shares of the Fund and are recorded by the
sub-accounts on the ex-dividend date.

FEDERAL INCOME TAXES

The Account is treated as part of Minnesota Mutual for federal income tax
purposes. Under current interpretations of existing federal income tax
law, no income taxes are payable on investment income or capital gain
distributions received by the Account from the Fund.

CONTRACTS IN ANNUITY PAYMENT PERIOD

Annuity reserves are computed for contracts currently payable using the
Progressive Annuity Mortality Table and an assumed interest rate of 3.5
percent. Charges to annuity reserves for mortality and risk expense are
reimbursed to Minnesota Mutual if the reserves required are less than
originally estimated. If additional reserves are required, Minnesota
Mutual reimburses the Account.

<PAGE>

MINNESOTA MUTUAL VARIABLE FUND D

(3) MORTALITY AND EXPENSE AND SALES AND ADMINISTRATIVE SERVICE CHARGES

The mortality and expense charge paid to Minnesota Mutual is computed daily
and is equal, on an annual basis, to .795 percent of the average daily net
assets of the Account.

Sales and administrative service charges, depending upon the type of
contract, may be deducted from the contract owner's contract purchase
payment or contract withdrawal. Total sales and administrative charges
deducted from contract purchase payments or contract withdrawal proceeds
for the years ended December 31, 1997 and 1996 amounted to $3,936 and
$3,111, respectively.

(4) REIMBURSEMENT FROM MINNESOTA MUTUAL FOR EXCESS EXPENSES

Effective October 26, 1990, the contract owners of the Account voted to
reorganize as a unit investment trust under the Investment Company Act of
1940 (as amended). Prior to the reorganization, the Account invested
directly in a diversified portfolio of equity securities. The Account has
seven segregated sub-accounts to which contract owners may allocate their
payments.

Under the Plan of Reorganization, Minnesota Mutual agreed to reimburse the
Account for any increase in expenses paid by the Account as a result of the
reorganization. Prior to the reorganization, the Account was charged an
investment advisory fee equal, on an annual basis, to .265 percent of the
average daily net assets. After the reorganization, the Account no longer
pays an investment advisory fee since it no longer invests directly in a
portfolio of securities. However, contract values that are allocated to
the segregated sub-accounts after the reorganization are invested in Fund
portfolios that pay investment advisory fees as well as other operating
expenses. Investment advisory fees are based on the average daily net
assets of the Fund portfolios at the annual rate of .50 percent for the
Growth, Bond, Money Market, Asset Allocation and Mortgage Securities
Portfolios, .40 percent for the Index 500 Portfolio and .75 percent for the
Small Company Portfolio.

In calculating the accumulation unit value for the Growth segregated
sub-account, Minnesota Mutual has agreed to make an adjustment that will
have the effect of reimbursing the excess of any expenses indirectly
incurred as a result of the investment advisory fee and the operating
expenses incurred by the Growth Portfolio over the .265 percent investment
advisory paid prior to the reorganization. In calculating the accumulation
unit value for the segregated sub-accounts other than Growth, Minnesota
Mutual will make adjustments that, in effect, reimburse the excess of the
investment advisory fees incurred through indirect investment in the Fund
over the .265 percent investment management fee paid prior to the
reorganization. No adjustment will be made for the additional operating
expenses charged to those portfolios. However, in the past nine years
Minnesota Mutual has voluntarily absorbed other operating expenses that
exceed .15 percent on an annual basis for each Fund portfolio.

(5) INVESTMENT TRANSACTIONS

The Account's purchases of Fund shares, including reinvestment of dividend
distributions, were as follows during the year ended December 31, 1997:

Growth Portfolio . . . . . . . . . . . . . . . . . . . . $17,665,507
Bond Portfolio . . . . . . . . . . . . . . . . . . . . . 92,363
Money Market Portfolio . . . . . . . . . . . . . . . . . 284,575
Asset Allocation Portfolio . . . . . . . . . . . . . . . 757,579
Mortgage Securities Portfolio. . . . . . . . . . . . . . 1,048,323
Index 500 Portfolio. . . . . . . . . . . . . . . . . . . 837,951
Small Company Portfolio. . . . . . . . . . . . . . . . . 1,179,680

<PAGE>

MINNESOTA MUTUAL VARIABLE FUND D

(6) UNIT ACTIVITY FROM CONTRACT TRANSACTIONS

Transactions in units for each segregated sub-account for the years ended
December 31, 1997 and 1996 were as follows:

<TABLE>
<CAPTION>
SEGREGATED SUB-ACCOUNTS
---------------------------------------
MONEY
GROWTH BOND MARKET
--------- --------- ---------
<S> <C> <C> <C>
Units outstanding at December 31, 1995 . . . . . . . . 4,918,859 321,612 352,735
Contract purchase payments. . . . . . . . . . . . . 220,706 157,141 658,856
Deductions for contract terminations and
withdrawal payments . . . . . . . . . . . . . . . (473,322) (181,775) (615,995)
--------- --------- ---------

Units outstanding at December 31, 1996 . . . . . . . . 4,666,243 296,978 395,596
Contract purchase payments. . . . . . . . . . . . . 95,686 40,473 205,629
Deductions for contract terminations and
withdrawal payments . . . . . . . . . . . . . . . (532,690) (80,823) (291,679)
--------- --------- ---------

Units outstanding at December 31, 1997 . . . . . . . . 4,229,239 256,628 309,546
--------- --------- ---------
--------- --------- ---------
</TABLE>

<TABLE>
<CAPTION>
SEGREGATED SUB-ACCOUNTS
-------------------------------------------------------
ASSET MORTGAGE INDEX SMALL
ALLOCATION SECURITIES 500 COMPANY
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Units outstanding at December 31, 1995 . . . . . . . 2,960,127 136,987 951,303 124,882
Contract purchase payments. . . . . . . . . . . . 394,756 658,136 333,682 556,186
Deductions for contract terminations and
withdrawal payments . . . . . . . . . . . . . . (549,982) (620,101) (361,080) (566,881)
--------- --------- --------- ---------

Units outstanding at December 31, 1996 . . . . . . . 2,804,901 175,022 923,905 114,187
Contract purchase payments. . . . . . . . . . . . 125,134 640,313 246,454 695,847
Deductions for contract terminations and
withdrawal payments . . . . . . . . . . . . . . (365,212) (684,762) (157,951) (700,073)
--------- --------- --------- ---------

Units outstanding at December 31, 1997 . . . . . . . 2,564,823 130,573 1,012,408 109,961
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>

<PAGE>

MINNESOTA MUTUAL VARIABLE FUND D

(7) FINANCIAL HIGHLIGHTS

The following tables for each segregated sub-account show certain data for
an accumulation unit outstanding during the periods indicated:

GROWTH

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Unit value, beginning of year. . . . . . . . $ 13.84 11.88 9.60 9.57 9.20
-------- -------- -------- -------- --------
Income from investment operations:

Net investment income. . . . . . . . . . . . .05 .05 .05 .05 .08
Net gains or losses on securities
(both realized and unrealized). . . . . . 4.49 1.91 2.23 (.02) .29
-------- -------- -------- -------- --------

Total from investment operations . . . . . . 4.54 1.96 2.28 .03 .37
-------- -------- -------- -------- --------

Unit value, end of year. . . . . . . . . . . $ 18.38 13.84 11.88 9.60 9.57
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
</TABLE>

<PAGE>

MINNESOTA MUTUAL VARIABLE FUND D

(7) FINANCIAL HIGHLIGHTS - CONTINUED

BOND

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Unit value, beginning of year. . . . . . . . $ 1.60 1.57 1.32 1.39 1.26
-------- -------- -------- -------- --------
Income (loss) from investment operations:

Net investment income. . . . . . . . . . . . .09 .07 .04 .05 .03
Net gains or losses on securities
(both realized and unrealized). . . . . . .06 (.04) .21 (.12) .10
-------- -------- -------- -------- --------

Total from investment operations. . . . .15 .03 .25 (.07) .13
-------- -------- -------- -------- --------

Unit value, end of year. . . . . . . . . . . $ 1.75 1.60 1.57 1.32 1.39
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
</TABLE>

<PAGE>

MINNESOTA MUTUAL VARIABLE FUND D

(7) FINANCIAL HIGHLIGHTS - CONTINUED

MONEY MARKET

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Unit value, beginning of year. . . . . . . . $ 1.24 1.19 1.13 1.10 1.07
-------- -------- -------- -------- --------

Income from investment operations:

Net investment income . . . . . . . . . . .05 .05 .06 .03 .03
-------- -------- -------- -------- --------

Total from investment operations. . . . .05 .05 .06 .03 .03
-------- -------- -------- -------- --------

Unit value, end of year. . . . . . . . . . . $ 1.29 1.24 1.19 1.13 1.10
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
</TABLE>

<PAGE>

MINNESOTA MUTUAL VARIABLE FUND D

(7) FINANCIAL HIGHLIGHTS - CONTINUED

ASSET ALLOCATION

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Unit value, beginning of year. . . . . . . . $ 2.05 1.83 1.47 1.50 1.42
-------- -------- -------- -------- --------
Income (loss) from investment operations:

Net investment income . . . . . . . . . . .04 .05 .04 .02 .02
Net gains or losses on securities
(both realized and unrealized). . . . . .33 .17 .32 (.05) .06
-------- -------- -------- -------- --------

Total from investment operations. . . . .37 .22 .36 (.03) .08
-------- -------- -------- -------- --------

Unit value, end of year. . . . . . . . . . . $ 2.42 2.05 1.83 1.47 1.50
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
</TABLE>

<PAGE>

MINNESOTA MUTUAL VARIABLE FUND D

(7) FINANCIAL HIGHLIGHTS - CONTINUED

MORTGAGE SECURITIES

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Unit value, beginning of year. . . . . . . . $ 1.54 1.47 1.26 1.31 1.20
-------- -------- -------- -------- --------

Income (loss) from investment operations:

Net investment income. . . . . . . . . . . . .12 .06 .10 .06 .04
Net gains or losses on securities
(both realized and unrealized). . . . . .01 .01 .11 (.11) .07
-------- -------- -------- -------- --------

Total from investment operations. . . . .13 .07 .21 (.05) .11
-------- -------- -------- -------- --------

Unit value, end of year. . . . . . . . . . . $ 1.67 1.54 1.47 1.26 1.31
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
</TABLE>

<PAGE>

MINNESOTA MUTUAL VARIABLE FUND D

(7) FINANCIAL HIGHLIGHTS - CONTINUED

INDEX 500

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Unit value, beginning of year. . . . . . . . $ 2.60 2.15 1.58 1.57 1.44
-------- -------- -------- -------- --------

Income from investment operations:

Net investment income . . . . . . . . . . .01 .02 .02 .01 .01
Net gains or losses on securities
(both realized and unrealized). . . . . .80 .43 .55 - .12
-------- -------- -------- -------- --------

Total from investment operations. . . . .81 .45 .57 .01 .13
-------- -------- -------- -------- --------

Unit value, end of year. . . . . . . . . . . $ 3.41 2.60 2.15 1.58 1.57
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
</TABLE>

<PAGE>

MINNESOTA MUTUAL VARIABLE FUND D

(7) FINANCIAL HIGHLIGHTS - CONTINUED

SMALL COMPANY

<TABLE>
<CAPTION>
PERIOD FROM
YEAR ENDED DECEMBER 31, MAY 3, 1993*
-------------------------------------------------------- TO DECEMBER
1997 1996 1995 1994 31, 1993
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Unit value, beginning of period. . . . . . . $ 1.62 1.54 1.17 1.11 1.00
-------- -------- -------- -------- --------
Income from investment operations:

Net investment loss . . . . . . . . . . . (.01) (.01) (.01) - -
Net gains on securities (both
realized and unrealized). . . . . . . . .13 .09 .38 .06 .11
-------- -------- -------- -------- --------

Total from investment operations. . . . .12 .08 .37 .06 .11
-------- -------- -------- -------- --------

Unit value, end of period. . . . . . . . . . $ 1.74 1.62 1.54 1.17 1.11
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
</TABLE>

* Commencement of the segregated sub-account's operations.
<PAGE>

APPENDIX A

CALCULATION OF ACCUMULATION UNIT VALUES

Calculation of the net investment factor and the accumulation unit value may be
illustrated by the following hypothetical example. Assume the accumulation unit
value of the Variable Fund D Growth Sub-Account on the immediately preceding
valuation period was $6.499041. Assume the following about the Series Fund
Growth Portfolio: (a) the net asset value per share of the Growth Portfolio was
$1.394438 at the end of the current valuation period; (2) the Growth Portfolio
declared a per share dividend and capital gain distribution in the amount of
$.037162 during the current valuation period; and (3) the net asset value per
share of the Growth Portfolio was $1.426879 at the end of the preceding
valuation period.

The gross investment rate for the valuation period would be equal to 1.0033086
(1.394438 plus .037162 divided by 1.426879). The net investment rate for the
valuation period is determined by deducting the total Growth Sub-Account
expenses from the gross investment rate. Total Growth Sub-Account expenses of
.0000162 is equal to .0000315 for mortality and risk expense (the daily
equivalent of .795% assuming 252 valuation dates per year) less .0000093 for the
investment management fee reimbursement (the daily equivalent of .235% assuming
252 valuation dates per year) less .0000060 for the other expense reimbursement
(the daily equivalent of .150% assuming 252 valuation dates per year). The net
investment rate equals 1.0032924 (1.0033086 minus .0000162).

The accumulation unit value at the end of the valuation period would be equal to
the value on the immediately preceding valuation date ($6.499041) multiplied by
the net investment factor for the current valuation period (1.003294), which
produces $6.520438.

CALCULATION OF ANNUITY UNIT VALUES AND VARIABLE ANNUITY PAYMENT

The determination of the annuity unit value and the annuity payment may be
illustrated by the following hypothetical example. Assume that the contract has
been in force for more than ten years so that no deferred sales charge will
apply and that there is no deduction for annuity premium taxes. Assume further
that at the date of his or her retirement, the annuitant has credited to his or
her account 30,000 accumulation units, and that the value of an accumulation
unit on the valuation date next following the fourteenth day of the preceding
month was $1.150000, producing a total value of $34,500. Assume also that the
annuitant elects an option for which the table in the contract indicates the
first monthly payment is $6.57 per $1,000 of value applied; the annuitant's
first monthly payment would thus be 34.500 multiplied by $6.57, or $226.67.

Assume that the annuity unit value on the due date of the first payment was
$1.100000. When this is divided into the first monthly payment, the number of
annuity units represented by that payment is determined to be 206.064. The
value of this same number of annuity units will be paid in each subsequent
month.

Assume further that the accumulation unit value on the valuation date next
following the fourteenth day of the succeeding month is $1.160000. This is
divided by the accumulation unit

A-1
<PAGE>

value on the preceding monthly valuation date ($1.150000) to produce a ratio of
1.008696. Multiplying this ratio by .997137 to neutralize the assumed
investment rate of 3.5% per annum already taken into account in determining
annuity units as described above, produces a result of 1.005808. This is then
multiplied by the preceding annuity unit value ($1.100000) to produce a current
annuity value of $1.106390.

The second monthly payment is then determined by multiplying the fixed number of
annuity units (206.064) by the current annuity unit value ($1.106390), which
produces a second monthly annuity payment of $227.99.

A-2

<PAGE>

INDEPENDENT AUDITORS' REPORT
The Board of Trustees
The Minnesota Mutual Life Insurance Company

We have audited the accompanying consolidated balance sheets of The Minnesota
Mutual Life Insurance Company and subsidiaries as of December 31, 1997 and
1996, and the related consolidated statements of operations and policyowners'
surplus and cash flows for each of the years in the three-year period ended
December 31, 1997. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of The
Minnesota Mutual Life Insurance Company and subsidiaries as of December 31,
1997 and 1996, and the results of their operations and their cash flows for
each of the years in the three-year period ending December 31, 1997 in
conformity with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplementary information included
in the accompanying schedules is presented for purpose of additional analysis
and is not a required part of the basic financial statements. Such information
has been subjected to the auditing procedures applied in the audits of the
basic financial statements and, in our opinion, is fairly stated in all
material respects in relation to the basic financial statements taken as a
whole.

KPMG Peat Marwick LLP

Minneapolis, Minnesota
February 9, 1998

60
<PAGE>

THE MINNESOTA MUTUAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

DECEMBER 31, 1997 AND 1996

ASSETS

<TABLE>
<CAPTION>
1997 1996
----------- -----------
(IN THOUSANDS)
<S> <C> <C>
Fixed maturity securities:
Available-for-sale, at fair value (amortized cost
$4,518,807 and $4,558,975) $ 4,719,801 $ 4,674,082
Held-to-maturity, at amortized cost (fair value
$1,158,227 and $1,179,112) 1,088,312 1,125,638
Equity securities, at fair value (cost $537,441 and
$429,509) 686,638 549,797
Mortgage loans, net 661,337 608,808
Real estate, net 39,964 43,082
Policy loans 213,488 204,178
Short-term investments 112,352 126,372
Other invested assets 216,838 94,647
----------- -----------
Total investments 7,738,730 7,426,604
Cash 96,179 57,140
Finance receivables, net 211,794 259,192
Deferred policy acquisition costs 576,030 589,517
Accrued investment income 83,439 90,996
Premiums receivable 68,030 77,140
Property and equipment, net 58,123 55,050
Reinsurance recoverables 150,126 126,629
Other assets 52,852 54,798
Separate account assets 5,366,810 3,706,256
----------- -----------
Total assets $14,402,113 $12,443,322
=========== ===========

LIABILITIES AND POLICYOWNERS' SURPLUS

Liabilities:
Policy and contract account balances $ 4,275,221 $ 4,310,015
Future policy and contract benefits 1,687,529 1,638,720
Pending policy and contract claims 64,356 70,577
Other policyowner funds 416,752 396,848
Policyowner dividends payable 55,321 49,899
Unearned premiums and fees 202,070 207,111
Federal income tax liability:
Current 45,300 25,643
Deferred 166,057 149,665
Other liabilities 334,305 286,042
Notes payable 298,000 319,000
Separate account liabilities 5,320,517 3,691,374
----------- -----------
Total liabilities $12,865,428 $11,144,894
=========== ===========
Policyowners' surplus:
Unassigned surplus 1,380,012 1,190,116
Net unrealized investment gains 156,673 108,312
----------- -----------
Total policyowners' surplus 1,536,685 1,298,428
----------- -----------
Total liabilities and policyowners' surplus $14,402,113 $12,443,322
=========== ===========
</TABLE>

See accompanying notes to consolidated financial statements.

61
<PAGE>

THE MINNESOTA MUTUAL LIFE INSURANCE COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND POLICYOWNERS' SURPLUS

YEARS ENDED DECEMBER 31, 1997, 1996, AND 1995

STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
1997 1996 1995
---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
Revenues:
Premiums $ 615,253 $ 612,359 $ 603,770
Policy and contract fees 272,037 245,966 214,203
Net investment income 553,773 530,987 515,047
Net realized investment gains 114,367 55,574 62,292
Finance charge income 43,650 46,932 39,937
Other income 71,707 51,630 40,250
---------- ---------- ----------
Total revenues 1,670,787 1,543,448 1,475,499
---------- ---------- ----------
Benefits and expenses:
Policyowner benefits 515,873 541,520 517,771
Interest credited to policies and con-
tracts 298,033 288,967 297,145
General operating expenses 369,961 302,618 273,425
Commissions 114,404 103,370 93,465
Administrative and sponsorship fees 81,750 79,360 76,223
Dividends to policyowners 26,776 24,804 27,282
Interest on notes payable 24,192 22,798 11,128
Increase in deferred policy acquisi-
tion costs (26,878) (19,284) (34,173)
---------- ---------- ----------
Total benefits and expenses 1,404,111 1,344,153 1,262,266
---------- ---------- ----------
Income from operations before taxes 266,676 199,295 213,233
Federal income tax expense (benefit):
Current 84,612 68,033 71,379
Deferred (7,832) 744 11,995
---------- ---------- ----------
Total federal income tax expense 76,780 68,777 83,374
Net income $ 189,896 $ 130,518 $ 129,859
========== ========== ==========

STATEMENTS OF POLICYOWNERS' SURPLUS

Policyowners' surplus, beginning of year $1,298,428 $1,212,850 $ 874,577
Net income 189,896 130,518 129,859
Change in net unrealized investment
gains and losses 48,361 (44,940) 208,414
---------- ---------- ----------
Policyowners' surplus, end of year $1,536,685 $1,298,428 $1,212,850
========== ========== ==========
</TABLE>

See accompanying notes to consolidated financial statements.

62
<PAGE>

THE MINNESOTA MUTUAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS

YEARS ENDED DECEMBER 31, 1997, 1996, AND 1995

<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 189,896 $ 130,518 $ 129,859
Adjustments to reconcile net income to
net cash provided by operating activi-
ties:
Interest credited to annuity and in-
surance contracts 276,719 275,968 288,218
Fees deducted from policy and con-
tract balances (214,803) (206,780) (201,575)
Change in future policy benefits 76,358 84,389 100,025
Change in other policyowner liabili-
ties 7,597 16,099 (4,762)
Change in deferred policy acquisition
costs (19,430) (15,312) (29,822)
Change in premiums due and other re-
ceivables (9,280) (26,142) (18,039)
Change in federal income tax liabili-
ties 5,277 (12,055) 18,376
Net realized investment gains (123,016) (59,546) (66,643)
Other, net 8,760 29,987 36,561
----------- ----------- -----------
Net cash provided by operating ac-
tivities 198,078 217,126 252,198
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sales of:
Fixed maturity securities, available-
for-sale 1,099,114 877,682 1,349,348
Equity securities 601,936 352,901 203,493
Mortgage loans -- 15,567 4,315
Real estate 9,279 11,678 15,948
Other invested assets 26,877 12,280 10,775
Proceeds from maturities and repayments
of:
Fixed maturity securities, available-
for-sale 403,829 329,550 253,576
Fixed maturity securities, held-to-
maturity 139,394 114,222 127,617
Mortgage loans 109,246 94,703 104,730
Purchases of:
Fixed maturity securities, available-
for-sale (1,498,048) (1,228,048) (1,975,130)
Fixed maturity securities, held-to-
maturity (82,835) (60,612) (140,763)
Equity securities (585,349) (446,599) (212,142)
Mortgage loans (157,247) (108,691) (209,399)
Real estate (3,908) (3,786) (16,554)
Other invested assets (55,988) (29,271) (20,517)
Finance receivable originations or pur-
chases (115,248) (175,876) (167,298)
Finance receivable principal payments 133,762 142,723 123,515
Other, net (88,626) (40,062) (19,292)
----------- ----------- -----------
Net cash used for investing activi-
ties (63,812) (141,639) (567,778)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Deposits credited to annuity and insur-
ance contracts 928,696 657,405 710,525
Withdrawals from annuity and insurance
contracts (1,013,588) (702,681) (563,569)
Proceeds from issuance of surplus notes -- -- 124,967
Proceeds from issuance of debt by sub-
sidiary -- 60,000 50,000
Payments on debt by subsidiary (21,000) (21,000) (10,000)
Other, net (3,355) (6,898) (3,801)
----------- ----------- -----------
Net cash provided by (used for) fi-
nancing activities (109,247) (13,174) 308,122
----------- ----------- -----------
Net increase (decrease) in cash and
short-term investments 25,019 62,313 (7,458)
Cash and short-term investments, begin-
ning of year 183,512 121,199 128,657
----------- ----------- -----------
Cash and short-term investments, end of
year $ 208,531 $ 183,512 $ 121,199
=========== =========== ===========
</TABLE>

See accompanying notes to consolidated financial statements.

63
<PAGE>

THE MINNESOTA MUTUAL LIFE INSURANCE COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) NATURE OF OPERATIONS

The Minnesota Mutual Life Insurance Company (the Company), both directly and
through its subsidiaries, provides a diversified array of insurance and
financial products and services designed principally to protect and enhance the
long-term financial well-being of individuals and families.
The Company's strategy is to be successful in carefully selected niche
markets, primarily in the United States, while focusing on the retention of
existing business and the maintenance of profitability. To achieve this
objective, the Company has divided its businesses into four strategic business
units which focus on various markets: Individual, Financial Services, Group,
and Pension. Revenues in 1997 for these business units were $854,192,000,
$284,222,000, $232,619,000 and $114,324,000, respectively. Additional revenues
of $185,430,000, were reported by the Company's subsidiaries.
At December 31, 1997, the Company was one of the 12 largest mutual life
insurance company groups in the United States, as measured by total assets. The
Company serves nearly seven million people through more than 4,000 associates
located at its St. Paul headquarters and in 81 general agencies and 43 regional
offices throughout the United States.

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation
The accompanying consolidated financial statements have been prepared in
accordance with generally accepted accounting principles (GAAP), which vary in
certain respects from accounting practices prescribed or permitted by state
insurance regulatory authorities. The consolidated financial statements include
the accounts of The Minnesota Mutual Life Insurance Company and its
subsidiaries (collectively, "the Company"). All material intercompany
transactions and balances have been eliminated.
The preparation of financial statements in conformity with GAAP requires
management to make certain estimates and assumptions that affect reported
assets and liabilities, including reporting or disclosure of contingent assets
and liabilities as of the balance sheet date and the reported amounts of
revenues and expenses during the reporting period. Future events, including
changes in mortality, morbidity, interest rates, and asset valuations, could
cause actual results to differ from the estimates used in the financial
statements.

Insurance Revenues and Expenses
Premiums on traditional life products, which include individual whole life and
term insurance and immediate annuities, are credited to revenue when due. For
accident and health and group life products, premiums are credited to revenue
over the contract period as earned. Benefits and expenses are recognized in
relation to premiums over the contract period via a provision for future policy
benefits and the amortization of deferred policy acquisition costs.
Nontraditional life products include individual adjustable and variable life
insurance and group universal and variable life insurance. Revenue from
nontraditional life products and deferred annuities is comprised of policy and
contract fees charged for the cost of insurance, policy administration and
surrenders. Expenses include the portion of claims not covered by and interest
credited to the related policy and contract account balances. Policy
acquisition costs are amortized relative to estimated gross profits or margins.

Deferred Policy Acquisition Costs
The costs of acquiring new and renewal business, which vary with and are
primarily related to the production of new and renewal business, are generally
deferred to the extent recoverable from future premiums or expected gross
profits. Deferrable costs include commissions, underwriting expenses and
certain other selling and issue costs.
For traditional life, accident and health and group life products, deferred
acquisition costs are amortized over the premium paying period in proportion to
the ratio of annual premium revenues to ultimate anticipated

64
<PAGE>

THE MINNESOTA MUTUAL LIFE INSURANCE COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

premium revenues. The ultimate premium revenues are estimated based upon the
same assumptions used to calculate the future policy benefits.
For nontraditional life products and deferred annuities, deferred acquisition
costs are amortized over the estimated lives of the contracts in relation to
the present value of estimated gross profits from surrender charges and
investment, mortality and expense margins.
Deferred acquisition costs amortized were $128,176,000, $125,978,000 and
$104,940,000 for the years ended December 31, 1997, 1996 and 1995,
respectively.

Finance Charge Income and Receivables
Finance charge income represents fees and interest charged on consumer loans.
The Company uses the interest (actuarial) method of accounting for finance
charges and interest on finance receivables. Accrual of finance charges and
interest on the smaller balance homogeneous finance receivables is suspended
when a loan is contractually delinquent for more than 60 days and is
subsequently recognized when received. Accrual is resumed when the loan is
contractually less than 60 days past due. Finance charges and interest is
suspended when a loan is considered by management to be impaired. Loan
impairment is measured based on the present value of expected future cash flows
discounted at the loan's effective interest rate, or as a practical expedient,
at the observable market price of the loan or the fair value of the collateral
if the loan is collateral dependent. When a loan is identified as impaired,
interest previously accrued in the current year is reversed. Interest payments
received on impaired loans are generally applied to principal unless the
remaining principal balance has been determined to be fully collectible. An
allowance for uncollectible amounts is maintained by direct charges to
operations at an amount which management believes, based upon historical losses
and economic conditions, is adequate to absorb probable losses on existing
receivables that may become uncollectible. The reported receivables are net of
this allowance.

Valuation of Investments
Fixed maturity securities (bonds) which the Company has the positive intent and
ability to hold to maturity are classified as held-to-maturity and are carried
at amortized cost, net of write-downs for other than temporary declines in
value. Premiums and discounts are amortized or accreted over the estimated
lives of the securities based on the interest yield method. Fixed maturity
securities which may be sold prior to maturity are classified as available-for-
sale and are carried at fair value.
Equity securities (common stocks and preferred stocks) are carried at fair
value. Equity securities also include initial contributions to affiliated
registered investment funds that are managed by a subsidiary of the Company.
These contributions are carried at the market value of the underlying net
assets of the funds.
Mortgage loans are carried at amortized cost less an allowance for
uncollectible amounts. Premiums and discounts are amortized or accreted over
the terms of the mortgage loans based on the interest yield method. A mortgage
loan is considered impaired if it is probable that contractual amounts due will
not be collected. Impaired mortgage loans are valued at the fair value of the
underlying collateral. Interest income on impaired mortgage loans is recorded
on an accrual basis. However, when the likelihood of collection is doubtful,
interest income is recognized when received.
Fair values of fixed maturity securities and equity securities are based on
quoted market prices, where available. If quoted market prices are not
available, fair values are estimated using values obtained from independent
pricing services which specialize in matrix pricing and modeling techniques for
estimating fair values. Fair values of mortgage loans are based upon discounted
cash flows, quoted market prices and matrix pricing.
Real estate is carried at cost less accumulated depreciation and an allowance
for estimated losses. Accumulated depreciation on real estate at December 31,
1997 and 1996, was $6,269,000 and $5,968,000, respectively.
Policy loans are carried at the unpaid principal balance.

65
<PAGE>

THE MINNESOTA MUTUAL LIFE INSURANCE COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Derivative Financial Instruments
The Company entered into equity swaps in 1996 as part of an overall risk
management strategy. The swaps were used to hedge exposure to market risk on
$400,000,000 of the Company's common stock portfolio. The swaps were based upon
certain stock indices. If, at the time of settlement for a particular swap, the
designated stock index had fallen below a specified level, the counterparty
would pay the Company an amount based upon the decline in the index and the
stock portfolio value protected by the swap. If, at the time of settlement, the
designated stock index had risen, the Company would pay the counterparty an
amount based upon the increase in the index and 25% of the stock portfolio
value protected by the swap. The equity swaps were settled with the
counterparties in August of 1997.
The swaps were carried at fair value, which were based upon dealer quotes.
Changes in fair value were recorded directly in policyowners' surplus. Upon
settlement of the swaps, gains or losses were recognized in income. The Company
realized a loss of approximately $31 million in 1997, upon settlement of these
equity swaps.
The Company began investing in international bonds denominated in foreign
currencies in 1997. The Company uses forward foreign exchange currency
contracts as part of its risk management strategy for international
investments. The forward foreign exchange currency contracts are used to reduce
market risks from changes in foreign exchange rates. These forward foreign
exchange currency contracts are agreements to purchase a specified amount of
one currency in exchange for a specified amount of another currency at a future
point in time at a foreign exchange currency rate agreed upon on the contract
open date. No cash is exchanged at the outset of the contract and no payments
are made by either party until the contract close date. On the contract close
date the contracted amount of the purchased currency is received from the
counterparty and the contracted amount of the sold currency is sent to the
counterparty. These contracts are generally short-term in nature and there is
no material exposure to the Company at December 31, 1997.

Capital Gains and Losses
Realized and unrealized capital gains and losses are determined on the specific
identification method. Write-downs of held-to-maturity securities and the
provision for credit losses on mortgage loans and real estate are recorded as
realized losses.
Changes in the fair value of fixed maturity securities available-for-sale and
equity securities are recorded as a separate component of policyowners'
surplus, net of taxes and related adjustments to deferred policy acquisition
costs and unearned policy and contract fees.

Property and Equipment
Property and equipment are carried at cost, net of accumulated depreciation of
$90,926,000 and $81,962,000 at December 31, 1997 and 1996, respectively.
Buildings are depreciated over 40 years and equipment is generally depreciated
over 5 to 10 years. Depreciation expenses for the years ended December 31,
1997, 1996 and 1995, were $8,965,000, $6,454,000 and $5,941,000, respectively.

Separate Accounts
Separate account assets and liabilities represent segregated funds administered
and invested by the Company for the exclusive benefit of pension, variable
annuity and variable life insurance policyowners and contractholders. Assets
consist principally of marketable securities and both assets and liabilities
are reported at fair value, based upon the market value of the investments held
in the segregated funds. The Company receives administrative and investment
advisory fees for services rendered on behalf of these accounts.
The Company periodically invests money in its separate accounts. The market
value of such investments is included with separate account assets and amounted
to $46,293,000 and $14,882,000 as of December 31, 1997 and 1996, respectively.

66
<PAGE>

THE MINNESOTA MUTUAL LIFE INSURANCE COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Policyowner Liabilities
Policy and contract account balances represent the net accumulation of funds
associated with nontraditional life products and deferred annuities. Additions
to the account balances include premiums, deposits and interest credited by the
Company. Decreases in the account balances include surrenders, withdrawals,
benefit payments, and charges assessed for the cost of insurance, policy
administration and surrenders.
Future policy and contract benefits are comprised of reserves for traditional
life, group life, and accident and health products. The reserves were
calculated using the net level premium method based upon assumptions regarding
investment yield, mortality, morbidity, and withdrawal rates determined at the
date of issue, commensurate with the Company's experience. Provision has been
made in certain cases for adverse deviations from these assumptions.
Other policyowner funds are comprised of dividend accumulations, premium
deposit funds and supplementary contracts without life contingencies.

Participating Business
Substantially all of the Company's premium revenues are derived from
participating policies. Dividends and other discretionary payments are declared
by the Board of Trustees based upon actuarial determinations, which take into
consideration current mortality, interest earnings, expense factors, and
federal income taxes. Dividends are recognized as expenses consistent with the
recognition of premiums.

Income Taxes
Current income taxes are charged to operations based upon amounts estimated to
be payable as a result of taxable operations for the current year. Deferred
income tax assets and liabilities are recognized for the future tax
consequences attributable to the differences between financial statement
carrying amounts and income tax bases of assets and liabilities.

Reinsurance Recoverables
Insurance liabilities are reported before the effects of ceded reinsurance.
Reinsurance recoverables represent amounts due from reinsurers for paid and
unpaid benefits, expense reimbursements, prepaid premiums and future policy
benefits.

Reclassifications
Certain 1996 and 1995 financial statement balances have been reclassified to
conform with the 1997 presentation.

(3) INVESTMENTS

Net investment income for the years ended December 31 was as follows:

<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Fixed maturity securities $457,391 $433,985 $426,114
Equity securities 16,182 14,275 8,883
Mortgage loans 55,929 63,865 58,943
Real estate (407) (475) 497
Policy loans 15,231 13,828 12,821
Short-term investments 6,995 6,535 6,716
Other invested assets 3,871 4,901 5,168
-------- -------- --------
Gross investment income 555,192 536,914 519,142
Investment expenses (1,419) (5,927) (4,095)
-------- -------- --------
Total $553,773 $530,987 $515,047
======== ======== ========
</TABLE>

67
<PAGE>

THE MINNESOTA MUTUAL LIFE INSURANCE COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(3) INVESTMENTS (CONTINUED)

Net realized capital gains (losses) for the years ended December 31 were as
follows:

<TABLE>
<CAPTION>
1997 1996 1995
-------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Fixed maturity securities $ 3,711 $(6,536) $24,025
Equity securities 92,765 57,770 36,374
Mortgage loans 2,011 (721) (207)
Real estate 1,598 7,088 2,436
Other invested assets 14,282 (2,027) (336)
-------- ------- -------
Total $114,367 $55,574 $62,292
======== ======= =======
</TABLE>

Gross realized gains (losses) on the sales of fixed maturity securities and
equity securities for the years ended December 31 were as follows:
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Fixed maturity securities, available-for-sale:
Gross realized gains $ 18,804 $ 19,750 $ 34,898
Gross realized losses (15,093) (26,286) (10,873)
Equity securities:
Gross realized gains 151,200 79,982 52,670
Gross realized losses (27,672) (22,212) (16,296)
</TABLE>

Net unrealized gains (losses) included in policyowners' surplus at December
31 were as follows:

<TABLE>
<CAPTION>
1997 1996
--------- --------
(IN THOUSANDS)
<S> <C> <C>
Gross unrealized gains $ 472,671 $314,576
Gross unrealized losses (118,863) (77,337)
Adjustment to deferred acquisition costs (100,299) (65,260)
Adjustment to unearned policy and contract fees (13,087) (8,192)
Deferred federal income taxes (83,749) (55,475)
--------- --------
Net unrealized gains $ 156,673 $108,312
========= ========
</TABLE>

68
<PAGE>

THE MINNESOTA MUTUAL LIFE INSURANCE COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(3) INVESTMENTS (CONTINUED)

The amortized cost and fair value of investments in marketable securities by
type of investment were as follows:
<TABLE>
<CAPTION>
GROSS UNREALIZED
AMORTIZED ----------------- FAIR
COST GAINS LOSSES VALUE
---------- -------- -------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
DECEMBER 31, 1997
Available-for-sale:
United States government and gov-
ernment agencies and authorities $ 239,613 $ 18,627 $ -- $ 258,240
Foreign governments 1,044 -- 29 1,015
Corporate securities 2,273,474 216,056 70,484 2,419,046
International bond securities 150,157 2,565 23,530 129,192
Mortgage-backed securities 1,854,519 66,934 9,145 1,912,308
---------- -------- -------- ----------
Total fixed maturities 4,518,807 304,182 103,188 4,719,801
Equity securities--unaffiliated 421,672 134,558 14,575 541,655
Equity securities--affiliated 115,769 29,214 -- 144,983
---------- -------- -------- ----------
Total equity securities 537,441 163,772 14,575 686,638
---------- -------- -------- ----------
Total available-for-sale 5,056,248 467,954 117,763 5,406,439
Held-to maturity:
Corporate securities 893,407 59,850 752 952,505
Mortgage-backed securities 194,905 10,817 -- 205,722
---------- -------- -------- ----------
Total held-to-maturity 1,088,312 70,667 752 1,158,227
---------- -------- -------- ----------
Total $6,144,560 $538,621 $118,515 $6,564,666
========== ======== ======== ==========
DECEMBER 31, 1996
Available-for-sale:
United States government and gov-
ernment agencies and authorities $ 302,820 $ 2,397 $ 6,756 $ 298,461
State, municipalities, and polit-
ical subdivisions 11,296 759 -- 12,055
Foreign governments 1,926 -- 54 1,872
Corporate securities 2,450,126 115,846 19,554 2,546,418
Mortgage-backed securities 1,792,807 64,834 42,365 1,815,276
---------- -------- -------- ----------
Total fixed maturities 4,558,975 183,836 68,729 4,674,082
Equity securities--unaffiliated 353,983 107,172 5,168 455,987
Equity securities--affiliated 75,526 18,284 -- 93,810
---------- -------- -------- ----------
Total equity securities 429,509 125,456 5,168 549,797
---------- -------- -------- ----------
Total available-for-sale 4,988,484 309,292 73,897 5,223,879
Held-to maturity:
Corporate securities 904,994 50,187 3,130 952,051
Mortgage-backed securities 220,644 7,833 1,416 227,061
---------- -------- -------- ----------
Total held-to-maturity 1,125,638 58,020 4,546 1,179,112
---------- -------- -------- ----------
Total $6,114,122 $367,312 $ 78,443 $6,402,991
========== ======== ======== ==========
</TABLE>

69
<PAGE>

THE MINNESOTA MUTUAL LIFE INSURANCE COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(3)INVESTMENTS (CONTINUED)

The amortized cost and estimated fair value of fixed maturity securities at
December 31, 1997 by contractual maturity, are shown below. Expected maturities
will differ from contractual maturities because borrowers may have the right to
call or prepay obligations with or without call or prepayment penalties.

<TABLE>
<CAPTION>
AVAILABLE-FOR-SALE HELD-TO-MATURITY
--------------------- ---------------------
AMORTIZED FAIR AMORTIZED FAIR
COST VALUE COST VALUE
---------- ---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Due in one year or less $ 47,387 $ 44,198 $ 2,982 $ 3,004
Due after one year through five
years 335,383 354,936 120,846 124,461
Due after five years through ten
years 1,355,665 1,416,149 317,689 337,322
Due after ten years 925,853 992,210 451,890 487,718
---------- ---------- ---------- ----------
2,664,288 2,807,493 893,407 952,505
Mortgage-backed securities 1,854,519 1,912,308 194,905 205,722
---------- ---------- ---------- ----------
Total $4,518,807 $4,719,801 $1,088,312 $1,158,227
========== ========== ========== ==========
</TABLE>

At December 31, 1997 and 1996, bonds and certificates of deposit with a
carrying value of $8,000,000 and $12,934,000, respectively, were on deposit
with various regulatory authorities as required by law.
Allowances for credit losses on investment are reflected on the consolidated
balance sheets as a reduction of the related assets and were as follows:

<TABLE>
<CAPTION>
1997 1996
------- -------
(IN THOUSANDS)
<S> <C> <C>
Mortgage loans $ 1,500 $ 1,895
Foreclosed real estate -- 535
Investment real estate 2,248 2,529
------- -------
Total $ 3,748 $ 4,959
======= =======
</TABLE>

At December 31, 1997, the recorded investment in mortgage loans that were
considered to be impaired was $18,400 before allowance for credit losses. These
impaired loans, due to adequate fair market value of underlying collateral, do
not have an allowance for credit losses.
At December 31, 1996, the recorded investment in mortgage loans that were
considered to be impaired was $6,518,000 before allowance for credit losses.
Included in this amount is $2,225,000 of impaired loans, for which the related
allowance for credit losses is $395,000 and $4,293,000 of impaired loans that,
as a result of adequate fair market value of underlying collateral, do not have
an allowance for credit losses.
In addition to the allowance for credit losses on impaired mortgage loans, a
general allowance for credit losses was established for potential impairments
in the remainder of the mortgage loan portfolio. The general allowance was
$1,500,000 at December 31, 1997 and 1996.
Changes in the allowance for credit losses on mortgage loans were as follows:

<TABLE>
<CAPTION>
1997 1996 1995
------ ------ ------
(IN THOUSANDS)
<S> <C> <C> <C>
Balance at beginning of year $1,895 $1,711 $2,449
Provision for credit losses -- 381 127
Charge-offs (395) (197) (865)
------ ------ ------
Balance at end of year $1,500 $1,895 $1,711
====== ====== ======
</TABLE>

70
<PAGE>

THE MINNESOTA MUTUAL LIFE INSURANCE COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(3)INVESTMENTS (CONTINUED)

Below is a summary of interest income on impaired mortgage loans.

<TABLE>
<CAPTION>
1997 1996 1995
------ ------ -------
(IN THOUSANDS)
<S> <C> <C> <C>
Average impaired mortgage loans $3,268 $9,375 $15,845
Interest income on impaired mortgage loans--contractual 556 1,796 1,590
Interest income on impaired mortgage loans--collected 554 1,742 1,515
</TABLE>

(4) NOTES RECEIVABLE

In connection with the Company's planned construction of an additional home
office facility in St. Paul, the Company entered into a loan contingency
agreement with the Housing and Redevelopment Authority of the City of Saint
Paul, Minnesota (HRA) in November, 1997. A maximum of $15 million in funds is
available under this loan for condemnation and demolition of the Company's
proposed building site. The note bears interest at a rate of 8.625%, with
principal payments commencing February 2004 and a maturity date of August 2025.
Interest payments are accrued and are payable February and August of each year
commencing February 2001. All principal and interest payments are due only to
the extent of available tax increments. As of December 31, 1997 HRA has drawn
$286,775 on this loan contingency agreement and accrued interest of $1,374.

(5) NET FINANCE RECEIVABLES

Finance receivables as of December 31 were as follows:

<TABLE>
<CAPTION>
1997 1996
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Direct installment loans $183,424 $204,038
Retail installment notes 20,373 30,843
Retail revolving credit 25,426 24,863
Credit card receivables -- 3,541
Accrued interest 3,116 3,404
-------- --------
Gross receivables $232,339 $266,689
Allowance for uncollectible amounts (20,545) (7,497)
-------- --------
Finance receivables, net $211,794 $259,192
======== ========
</TABLE>

Direct installment loans at December 31, 1997 consisted of $83,836,000 of
discount basis loans (net of unearned finance charges) and $99,588,00 of
interest-bearing loans. As of December 31, 1996, discount basis loans amounted
to $93,127,000 and interest-bearing loans amounted to $110,911,000. Direct
installment loans generally have a maximum term of 84 months. Retail
installment notes are principally discount basis, arise from the sale of
household appliances, furniture, and sundry services, and generally have a
maximum term of 48 months. Direct installment loans included approximately $65
million and $69 million of real estate secured loans at December 31, 1997 and
1996, respectively. Revolving credit loans included approximately $24 million
and $23 million of real estate secured loans at December 31, 1997 and 1996,
respectively. Experience has shown that a substantial portion of finance
receivables will be renewed, converted or paid in full prior to maturity.
Principal cash collections of direct installment loans amounted to
$90,940,000, $92,438,000 and $75,865,000 and the percentage of these cash
collections to the average net balances were 47%, 48%, and 47% for the years
ended December 31, 1997, 1996 and 1995, respectively.

71
<PAGE>

THE MINNESOTA MUTUAL LIFE INSURANCE COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(5) NET FINANCE RECEIVABLES (CONTINUED)

Changes in the allowance for uncollectible amounts for the years ended
December 31 were as follows:

<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Balance at beginning of year $ 7,497 $ 6,377 $ 5,360
Provision for credit losses 28,206 10,086 6,140
Charge-offs (17,869) (11,036) (6,585)
Recoveries 2,711 2,070 1,462
-------- -------- -------
Balance at end of year $ 20,545 $ 7,497 $ 6,377
======== ======== =======
</TABLE>

At December 31, 1997, the recorded investment in certain direct installment
loans and direct revolving credit loans were considered to be impaired. The
balances of such loans at December 31, 1997 and the related allowance for
credit losses was as follows:

<TABLE>
<CAPTION>
INSTALLMENT REVOLVING
LOANS CREDIT TOTAL
----------- --------- ------
(IN THOUSANDS)
<S> <C> <C> <C>
Balances at December 31, 1997 $7,723 14,492 22,215
Related allowance for credit losses $4,200 7,772 11,972
</TABLE>

All loans deemed to be impaired are placed on a non-accrual status. No
accrued or unpaid interest was recognized on impaired loans during 1997. The
average balances of impaired loans during the year ended December 31, 1997 was
$7,397,000 and $12,793,000, respectively, for installment basis and revolving
credit direct loans.
There were no material commitments to lend additional funds to customers
whose loans were classified as non-accrual at December 31, 1997.

(6) INCOME TAXES

Income tax expense varies from the amount computed by applying the federal
income tax rate of 35% to income from operations before taxes. The significant
components of this difference were as follows:

<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Computed tax expense $93,337 $69,753 $74,631
Difference between computed and actual tax ex-
pense:
Dividends received deduction (5,573) (2,534) (1,710)
Special tax on mutual life insurance companies 3,341 2,760 10,134
MF&C sale (4,408) -- --
Foundation gain (4,042) (1,260) (540)
Tax credits (3,600) (3,475) (1,840)
Expense adjustments and other (2,275) 3,533 2,699
------- ------- -------
Total tax expense $76,780 $68,777 $83,374
======= ======= =======
</TABLE>

72
<PAGE>

THE MINNESOTA MUTUAL LIFE INSURANCE COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(6) INCOME TAXES (CONTINUED)

The tax effects of temporary differences that give rise to the Company's net
deferred federal tax liability were as follows:

<TABLE>
<CAPTION>
1997 1996
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Deferred tax assets:
Policyowner liabilities $ 14,374 $ 15,854
Unearned fee income 49,274 43,232
Pension and post-retirement benefits 23,434 21,815
Tax deferred policy acquisition costs 73,134 58,732
Net realized capital losses 9,609 8,275
Other 20,524 19,229
-------- --------
Gross deferred tax assets 190,349 167,137
Deferred tax liabilities:
Deferred policy acquisition costs 201,611 206,331
Real estate and property and equipment depreciation 11,165 10,089
Basis difference on investments 11,061 8,605
Net unrealized capital gains 122,876 81,339
Other 9,693 10,438
-------- --------
Gross deferred tax liabilities 356,406 316,802
-------- --------
Net deferred tax liability $166,057 $149,665
======== ========
</TABLE>

A valuation allowance for deferred tax assets was not considered necessary as
of December 31, 1997 and 1996, because the Company believes that it is more
likely than not that the deferred tax assets will be realized through future
reversals of existing taxable temporary differences and future taxable income.
Income taxes paid for the years ended December 31, 1997, 1996 and 1995, were
$97,721,000, $79,026,000 and $64,390,000, respectively.

73
<PAGE>

THE MINNESOTA MUTUAL LIFE INSURANCE COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(7) LIABILITY FOR UNPAID ACCIDENT AND HEALTH CLAIMS AND CLAIM ADJUSTMENT
EXPENSES

Activity in the liability for unpaid accident and health claims and claim
adjustment expenses is summarized as follows:
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Balance at January 1 $416,910 $377,302 $349,311
Less: reinsurance recoverable 102,161 80,333 61,624
-------- -------- --------
Net balance at January 1 314,749 296,969 287,687
-------- -------- --------
Incurred related to:
Current year 121,153 134,727 129,896
Prior years 7,809 4,821 (4,014)
-------- -------- --------
Total incurred 128,962 139,548 125,882
-------- -------- --------
Paid related to:
Current year 51,275 51,695 47,620
Prior years 57,475 70,073 68,980
-------- -------- --------
Total paid 108,750 121,768 116,600
-------- -------- --------
Net balance at December 31 334,961 314,749 296,969
Plus: reinsurance recoverable 104,716 102,161 80,333
-------- -------- --------
Balance at December 31 $439,677 $416,910 $377,302
======== ======== ========
</TABLE>

The liability for unpaid accident and health claims and claim adjustment
expenses is included in future policy and contract benefits and pending policy
and contract claims on the consolidated balance sheets.
As a result of changes in estimates of claims incurred in prior years, the
accident and health claims and claim adjustment expenses incurred increased
(decreased) by $7,809, $4,821 and ($4,014) in 1997, 1996 and 1995,
respectively. These amounts are the result of normal reserve development
inherent in the uncertainty of establishing the liability for unpaid accident
and health claims and claim adjustment expenses.

(8) EMPLOYEE BENEFIT PLANS

Pension Plans
The Company has noncontributory defined benefit retirement plans covering
substantially all employees and certain agents. Benefits are based upon years
of participation and the employee's average monthly compensation or the agent's
adjusted annual compensation. Plan assets are comprised of mostly stocks and
bonds, which are held in the general and separate accounts of the Company and
administered under group annuity contracts issued by the Company. The Company's
funding policy is to contribute annually the minimum amount required by
applicable regulations. The Company also has an unfunded noncontributory
defined benefit retirement plan, which provides certain employees with benefits
in excess of limits for qualified retirement plans.
Net periodic pension cost for the years ended December 31 included the
following components:

<TABLE>
<CAPTION>
1997 1996 1995
------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Service cost-benefits earned during the period $ 6,462 $ 6,019 $ 5,294
Interest accrued on projected benefit obligation 9,640 8,541 7,935
Actual return on plan assets (9,575) (12,619) (18,061)
Net amortization and deferral 656 4,698 11,811
------- -------- --------
Net periodic pension cost $ 7,183 $ 6,639 $ 6,979
======= ======== ========
</TABLE>

74
<PAGE>

THE MINNESOTA MUTUAL LIFE INSURANCE COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(8) EMPLOYEE BENEFIT PLANS (CONTINUED)

The funded status for the Company's plans as of December 31 was calculated as
follows:

<TABLE>
<CAPTION>
FUNDED PLANS UNFUNDED PLANS
------------------ ----------------
1997 1996 1997 1996
-------- -------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Actuarial present value of benefit ob-
ligations:
Vested benefit obligation $ 70,638 $ 61,328 $ -- $ --
Non-vested benefit obligation 21,252 19,119 8,017 5,912
-------- -------- ------- -------
Accumulated benefit obligation $ 91,890 $ 80,447 $ 8,017 $ 5,912
======== ======== ======= =======
Pension liability included in other li-
abilities:
Projected benefit obligation $130,144 $117,836 $15,744 $12,576
Plan assets at fair value 128,970 115,107 -- --
-------- -------- ------- -------
Plan assets less then projected bene-
fit obligation 1,174 2,729 15,744 12,576
Unrecognized net gain (loss) 6,061 3,633 (4,229) (2,332)
Unrecognized prior service cost (334) (364) -- --
Unamortized transition asset (obliga-
tion) 2,202 2,422 (7,682) (8,451)
Additional minimum liability -- -- 4,184 4,119
-------- -------- ------- -------
Net pension liability $ 9,103 $ 8,420 $ 8,017 $ 5,912
======== ======== ======= =======
</TABLE>

A weighted average discount rate of 7.5% and a weighted average rate of
increase in future compensation levels of 5.3% were used in determining the
actuarial present value of the projected benefit obligation at December 31,
1997 and 1996. The assumed long-term rate of return on plan assets was either
8.5% or 7.5%, depending on the plan.

Profit Sharing Plans
The Company also has profit sharing plans covering substantially all employees
and agents. The Company's contribution rate to the employee plan is determined
annually by the trustees of the Company and is applied to each participant's
prior year earnings. The Company's contribution to the agent plan is made as a
certain percentage, based upon years of service, applied to each agent's total
annual compensation. The Company recognized contributions to the plans during
1997, 1996 and 1995 of $7,173,000, $6,092,000 and $6,595,000, respectively.
Participants may elect to receive a portion of their contributions in cash.

Postretirement Benefits Other than Pensions
The Company also has unfunded postretirement plans that provide certain health
care and life insurance benefits to substantially all retired employees and
agents. Eligibility is determined by age at retirement and years of service
after age 30. Health care premiums are shared with retirees, and other cost-
sharing features include deductibles and co-payments.

Components of net periodic postretirement benefit cost for the years ended
December 31 were as follows:

<TABLE>
<CAPTION>
1997 1996 1995
------ ------ ------
(IN THOUSANDS)
<S> <C> <C> <C>
Service cost-benefits earned during the period $1,008 $1,011 $1,276
Interest accrued on projected benefit obligation 1,826 2,041 2,452
Amortization of prior service cost (526) (513) (513)
Amortization of net gain (480) (177) --
------ ------ ------
Net periodic postretirement benefit cost $1,828 $2,362 $3,215
====== ====== ======
</TABLE>

75
<PAGE>

THE MINNESOTA MUTUAL LIFE INSURANCE COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(8) EMPLOYEE BENEFIT PLANS (CONTINUED)

The accumulated postretirement benefit obligation and the accrued
postretirement benefit liability for the years ended December 31 were as
follows:

<TABLE>
<CAPTION>
1997 1996
------- -------
(IN THOUSANDS)
<S> <C> <C>
Accumulated postretirement benefit obligation
Retirees $ 9,333 $10,238
Other fully eligible plan participants 4,861 4,594
Other active plan participants 9,738 9,514
------- -------
Total accumulated postretirement benefit obligation 23,932 24,346
Unrecognized prior service cost 3,680 4,107
Unrecognized net gain 11,290 9,880
------- -------
Accrued postretirement benefit liability $38,902 $38,333
======= =======
</TABLE>

The discount rate used in determining the accumulated postretirement benefit
obligation for 1997 and 1996 was 7.5%. The 1997 net health care cost trend rate
was 8.5%, graded to 5.5% over 6 years, and the 1996 rate was 9.0%, graded to
5.5% over 7 years.
The assumptions presented herein are based on pertinent information available
to management as of December 31, 1997 and 1996. Actual results could differ
from those estimates and assumptions. For example, increasing the assumed
health care cost trend rates by one percentage point in each year would
increase the postretirement benefit obligation as of December 31,1997 by
$4,323,000 and the estimated eligibility cost and interest cost components of
net periodic postretirement benefit costs for 1997 by $588,000.

(9) SALE OF SUBSIDIARY

On October 1, 1997, the Company sold Minnesota Fire and Casualty Company (MFC),
a wholly owned subsidiary to Harleysville Group, Inc. The Company received net
cash proceeds of approximately $33.5 million from the sale, and realized a gain
of approximately $14.5 million. HomePlus Insurance Company (HomePlus), a
previously wholly owned subsidiary of MFC, was excluded from the sale of
assets. In accordance with the agreement, prior to September 30,1997, MFC made
a distribution of private placement bonds to the Company with an amortized cost
of approximately $4.3 million and transferred all issued and outstanding shares
of HomePlus to the Company. The carrying value of the transferred shares was
approximately $5.8 million. Under an administrative services agreement with
MFC, the Company has retained MFC to provide financial and other services for
HomePlus.

(10) REINSURANCE

In the normal course of business, the Company seeks to limit its exposure to
loss on any single insured and to recover a portion of benefits paid by ceding
reinsurance to other insurance companies. To the extent that a reinsurer is
unable to meet its obligation under the reinsurance agreement, the Company
remains liable. The Company evaluates the financial condition of its reinsurers
and monitors concentrations of credit risk to minimize its exposure to
significant losses from reinsurer insolvencies. Allowances are established for
amounts deemed to be uncollectible.
Reinsurance is accounted for over the life of the underlying reinsured
policies using assumptions consistent with those used to account for the
underlying policies.

76
<PAGE>

THE MINNESOTA MUTUAL LIFE INSURANCE COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(10) REINSURANCE (CONTINUED)

The effect of reinsurance on premiums for the years ended December 31 was as
follows:

<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Direct premiums $595,686 $615,098 $600,841
Reinsurance assumed 78,097 64,489 64,792
Reinsurance ceded (58,530) (67,228) (61,863)
-------- -------- --------
Net premiums $615,253 $612,359 $603,770
======== ======== ========
</TABLE>

Reinsurance recoveries on ceded reinsurance contracts were $58,072,000,
$72,330,000 and $58,338,000 during 1997, 1996 and 1995 respectively.

(11) FAIR VALUE OF FINANCIAL INSTRUMENTS

The estimated fair value of the Company's financial instruments has been
determined using available market information as of December 31, 1997 and 1996.
Although management is not aware of any factors that would significantly affect
the estimated fair value, such amounts have not been comprehensively revalued
since those dates. Therefore, estimates of fair value subsequent to the
valuation dates may differ significantly from the amounts presented herein.
Considerable judgement is required to interpret market data to develop the
estimates of fair value. The use of different market assumptions and/or
estimation methodologies may have a material effect on the estimated fair value
amounts.
Please refer to Note 2 for additional fair value disclosures concerning fixed
maturity securities, equity securities, mortgages and derivatives. The carrying
amounts for policy loans, cash, short term investments, and finance receivables
approximate the assets' fair values.
The interest rates on the finance receivables outstanding as of December 31,
1997 and 1996, are consistent with the rates at which loans would currently be
made to borrowers of similar credit quality and for the same maturity; as such,
the carrying value of the finance receivables outstanding as of December 31,
1997 and 1996, approximate the fair value for those respective dates.
The fair values of deferred annuities, annuity certain contracts, and other
fund deposits, which have guaranteed interest rates and surrender charges are
estimated to be the amount payable on demand as of December 31, 1997 and 1996
as those investments contracts have no defined maturity and are similar to a
deposit liability. The amount payable on demand equates to the account balance
less applicable surrender charges. Contracts without guaranteed interest rates
and surrender charges have fair values equal to their accumulation values plus
applicable market value adjustments. The fair values of guaranteed investment
contracts and supplementary contracts without life contingencies are calculated
using discounted cash flows, based on interest rates currently offered for
similar products with maturities consistent with those remaining for the
contracts being valued.
Rates currently available to the Company for debt with similar terms and
remaining maturities are used to estimate the fair value of notes payable.

77
<PAGE>

THE MINNESOTA MUTUAL LIFE INSURANCE COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(11) FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)

The carrying amounts and fair values of the Company's financial instruments,
which were classified as assets as of December 31, were as follows:

<TABLE>
<CAPTION>
1997 1996
--------------------- ---------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
---------- ---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Fixed maturity securities:
Available-for-sale $4,719,801 $4,719,801 $4,674,082 $4,674,082
Held-to-maturity 1,088,312 1,158,227 1,125,638 1,179,112
Equity securities 686,638 686,638 549,797 549,797
Mortgage loans:
Commercial 506,860 527,994 432,198 445,976
Residential 154,477 158,334 176,610 180,736
Policy loans 213,488 213,488 204,178 204,178
Short-term investments 112,352 112,352 126,372 126,372
Cash 96,179 96,179 57,140 57,140
Finance receivables, net 211,794 211,794 259,192 259,192
Derivatives 1,457 1,457 1,197 1,197
---------- ---------- ---------- ----------
Total financial assets $7,791,358 $7,886,264 $7,606,404 $7,677,782
========== ========== ========== ==========
</TABLE>

The carrying amounts and fair values of the Company's financial instruments,
which were classified as liabilities as of December 31, were as follows:

<TABLE>
<CAPTION>
1997 1996
--------------------- ---------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
---------- ---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Deferred annuities $2,131,806 $2,112,301 $2,178,355 $2,152,636
Annuity certain contracts 55,431 57,017 52,636 53,962
Other fund deposits 754,960 753,905 808,592 805,709
Guaranteed investment contracts 8,188 8,187 18,770 18,866
Supplementary contracts without
life contingencies 46,700 45,223 47,966 47,536
Notes payable 298,000 302,000 319,000 325,974
---------- ---------- ---------- ----------
Total financial liabilities $3,295,085 $3,278,633 $3,425,319 $3,404,683
========== ========== ========== ==========
</TABLE>

(12) NOTES PAYABLE

In September 1995, the Company issued surplus notes with a face value of
$125,000,000, at 8.25%, due in 2025. The surplus notes are subordinate to all
current and future policyowners' interests, including claims, and indebtedness
of the Company. All payments of interest and principal on the notes are subject
to the approval of the Department of Commerce of the State of Minnesota. The
approved accrued interest was $3,008,000 as of December 31, 1997 and 1996. The
issuance costs of $1,357,000 are deferred and amortized over 30 years on
straight-line basis.

78
<PAGE>

THE MINNESOTA MUTUAL LIFE INSURANCE COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(12) NOTES PAYABLE (CONTINUED)

Notes payable as of December 31 were as follows:

<TABLE>
<CAPTION>
1997 1996
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Corporate-surplus notes, 8.25%, 2025 $125,000 $125,000
Consumer finance subsidiary-senior, 6.53%-8.77%, through
2003 173,000 194,000
-------- --------
Total notes payable $298,000 $319,000
======== ========
</TABLE>

At December 31, 1997, the aggregate minimum annual notes payable maturities
for the next five years were as follows: 1998, $31,000,000; 1999 $49,000,000;
2000 $33,000,000; 2001 $26,000,000; 2002 $22,000,000.
Long-term borrowing agreements involving the consumer finance subsidiary
include provisions with respect to borrowing limitations, payment of cash
dividends on or purchases of common stock, and maintenance of liquid net worth
of $41,354,000. The consumer finance subsidiary was in compliance with all such
provisions at December 31, 1997.
Interest paid on debt for the years ended December 31, 1997, 1996 and 1995,
was $18,197,000, $21,849,000 and $6,504,000, respectively.

(13) COMMITMENTS AND CONTINGENCIES

The Company is involved in various pending or threatened legal proceedings
arising out of the normal course of business. In the opinion of management, the
ultimate resolution of such litigation will not have a material adverse effect
on operations or the financial position of the Company.
In the normal course of business, the Company seeks to limit its exposure to
loss on any single insured and to recover a portion of benefits paid by ceding
reinsurance to other insurance companies. To the extent that a reinsurer is
unable to meet its obligations under the reinsurance agreement, the Company
remains liable. The Company evaluates the financial condition of its reinsurers
and monitors concentrations of credit risk to minimize its exposure to
significant losses from reinsurer insolvencies. Allowances are established for
amounts deemed uncollectible.
The Company has issued certain participating group annuity and group life
insurance contracts jointly with another life insurance company. The joint
contract issuer has liabilities related to these contracts of $279,978,000 as
of December 31, 1997. To the extent the joint contract issuer is unable to meet
its obligation under the agreement, the Company remains liable.
The Company has long-term commitments to fund venture capital and real estate
investments totaling $139,774,000 as of December 31, 1997. The Company
estimates that $51,300,000 of these commitments will be invested in 1998, with
the remaining $88,474,000 invested over the next four years.
As of December 31, 1997, the Company had committed to purchase bonds and
mortgage loans totaling $109,362,000 but had not completed the purchase
transactions.
At December 31, 1997, the Company had guaranteed the payment of $73,100,000
in policyowner dividends and discretionary amounts payable in 1998. The Company
has pledged bonds, valued at $75,774,000 to secure this guarantee.
The Company is contingently liable under state regulatory requirements for
possible assessments pertaining to future insolvencies and impairments of
unaffiliated insurance companies. The Company records a liability for future
guaranty fund assessments based upon known insolvencies, according to data
received from the National Organization of Life and Health Insurance Guaranty
Association. An asset is recorded for the amount of guaranty fund assessments
paid which can be recovered through future premium tax credits.

79
<PAGE>

THE MINNESOTA MUTUAL LIFE INSURANCE COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(14) STATUTORY FINANCIAL DATA

The Company also prepares financial statements according to statutory
accounting practices prescribed or permitted by the Department of Commerce for
purposes of filing with the Department of Commerce, the National Association of
Insurance Commissioners and states in which the Company is licensed to do
business. Statutory accounting practices focus primarily on solvency and
surplus adequacy. Therefore, fundamental differences exist between statutory
and GAAP accounting, and their effects on income and policyowners' surplus are
illustrated below:

<TABLE>
<CAPTION>
POLICYOWNERS' SURPLUS NET INCOME
---------------------- ----------------------------
1997 1996 1997 1996 1995
---------- ---------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Statutory basis $ 870,688 $ 682,886 $167,078 $115,797 $ 88,706
Adjustments:
Deferred policy acquisi-
tion costs 576,030 589,517 19,430 15,312 29,822
Net unrealized invest-
ment gains 199,637 111,575 -- -- --
Statutory asset valua-
tion reserve 242,100 240,474 -- -- --
Statutory interest main-
tenance reserve 24,169 24,707 (538) (8,192) 12,976
Premiums and fees de-
ferred or receivable (74,025) (75,716) 2,175 1,587 497
Change in reserve basis 108,105 98,406 9,699 20,114 12,382
Separate accounts (51,172) (40,755) (6,272) (6,304) (854)
Unearned policy and con-
tract fees (126,477) (121,843) (12,825) (2,530) (4,410)
Surplus notes (125,000) (125,000) -- -- --
Net deferred taxes (166,057) (149,665) 7,832 (744) (11,995)
Nonadmitted assets 32,611 31,531 -- -- --
Policyowner dividends 60,036 57,765 2,708 502 4,660
Other (33,960) (25,454) 609 (5,024) (1,925)
---------- ---------- -------- -------- --------
As reported in the
accompanying
consolidated
financial statements $1,536,685 $1,298,428 $189,896 $130,518 $129,859
========== ========== ======== ======== ========
</TABLE>

80
<PAGE>

THE MINNESOTA MUTUAL LIFE INSURANCE COMPANY AND SUBSIDIARIES

SCHEDULE I

SUMMARY OF INVESTMENTS--OTHER THAN INVESTMENTS IN RELATED PARTIES

DECEMBER 31, 1997

<TABLE>
<CAPTION>
AS SHOWN
MARKET ON THE BALANCE
TYPE OF INVESTMENT COST(3) VALUE SHEET(1)
- ------------------ ---------- ---------- --------------
(IN THOUSANDS)
<S> <C> <C> <C>
Bonds:
United States government and government
agencies and authorities $ 239,613 $ 258,240 $ 258,240
Foreign governments 1,044 1,015 1,015
Public utilities 385,228 406,920 398,887
Mortgage-backed securities 2,049,424 2,118,030 2,107,213
All other corporate bonds 2,931,810 3,093,823 3,042,758
---------- ---------- ----------
Total bonds 5,607,119 5,878,028 5,808,113
---------- ---------- ----------
Equity securities:
Common stocks:
Public utilities 7,732 10,090 10,090
Banks, trusts and insurance companies 37,217 47,120 47,120
Industrial, miscellaneous and all
other 354,317 460,170 460,170
Nonredeemable preferred stocks 22,406 24,275 24,275
---------- ---------- ----------
Total equity securities 421,672 541,655 541,655
---------- ---------- ----------
Mortgage loans on real estate 661,337 xxxxxx 661,337
Real estate(2) 39,964 xxxxxx 39,964
Policy loans 213,488 xxxxxx 213,488
Other long-term investments 216,838 xxxxxx 216,838
Short-term investments 112,352 xxxxxx 112,352
---------- ---------- ----------
Total 1,243,979 -- $1,243,979
---------- ---------- ----------
Total investments $7,272,770 $6,419,683 $7,593,747
========== ========== ==========
</TABLE>
- -------
(1) Amortized cost for bonds classified as held-to-maturity and fair value for
common stocks and bonds classified as available-for-sale.
(2) The carrying value of real estate acquired in satisfaction of indebtedness
is $-0-.
(3) Original cost for equity securities and original cost reduced by repayments
and adjusted for amortization of premiums or accrual of discounts for bonds
and other investments.

81
<PAGE>

THE MINNESOTA MUTUAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
SCHEDULE III
SUPPLEMENTARY INSURANCE INFORMATION
(IN THOUSANDS)
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
----------------------------------------------------
FUTURE POLICY
DEFERRED BENEFITS OTHER POLICY
POLICY LOSSES, CLAIMS CLAIMS AND
ACQUISITION AND SETTLEMENT UNEARNED BENEFITS
SEGMENT COSTS EXPENSES(1) PREMIUMS(2) PAYABLE
- ------- ----------- -------------- ----------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
1997:
Life insurance $434,012 $2,229,396 $166,704 $42,627
Accident and
health insurance 70,593 466,109 34,250 17,153
Annuity 71,425 3,266,965 -- 4,576
Property and
liability
insurance -- 280 1,116 --
-------- ---------- -------- -------
$576,030 $5,962,750 $202,070 $64,356
======== ========== ======== =======
1996:
Life insurance $456,461 $2,123,148 $149,152 $51,772
Accident and
health insurance 62,407 437,118 33,770 18,774
Annuity 70,649 3,360,614 -- 31
Property and
liability
insurance -- 27,855 24,189 --
-------- ---------- -------- -------
$589,517 $5,948,735 $207,111 $70,577
======== ========== ======== =======
1995:
Life insurance $430,829 $2,009,154 $151,864 $41,212
Accident and
health insurance 55,888 400,950 34,847 14,567
Annuity 53,015 3,401,760 -- 33
Property and
liability
insurance -- 30,117 23,783 --
-------- ---------- -------- -------
$539,732 $5,841,981 $210,494 $55,812
======== ========== ======== =======
</TABLE>
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
----------------------------------------------------------------------
AMORTIZATION
BENEFITS, OF DEFERRED
NET CLAIMS, LOSSES POLICY OTHER
PREMIUM INVESTMENT AND SETTLEMENT ACQUISITION OPERATING PREMIUMS
SEGMENT REVENUE(3) INCOME EXPENSES COSTS EXPENSES WRITTEN(4)
- ------- ---------- ---------- -------------- ------------ --------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
1997:
Life insurance $576,468 $247,267 $476,747 $102,473 $345,938
Accident and
health insurance 205,869 40,343 87,424 9,451 101,960
Annuity 64,637 261,768 242,738 16,252 129,263
Property and
liability
insurance 40,316 4,395 33,773 -- 13,146 43,376
-------- -------- -------- -------- -------- -------
$887,290 $553,773 $840,682 $128,176 $590,307 $43,376
======== ======== ======== ======== ======== =======
1996:
Life insurance $568,874 $223,762 $478,228 $ 97,386 $290,525
Accident and
health insurance 160,097 34,202 96,743 14,017 87,222
Annuity 79,245 267,473 243,387 14,575 111,366
Property and
liability
insurance 50,109 5,550 36,933 -- 19,033 50,515
-------- -------- -------- -------- -------- -------
$858,325 $530,987 $855,291 $125,978 $508,146 $50,515
======== ======== ======== ======== ======== =======
1995:
Life insurance $540,353 $203,487 $454,299 $ 80,896 $266,090
Accident and
health insurance 153,505 33,358 93,482 11,448 83,345
Annuity 74,899 272,499 260,854 12,596 86,716
Property and
liability
insurance 49,216 5,703 33,563 -- 18,090 51,133
-------- -------- -------- -------- -------- -------
$817,973 $515,047 $842,198 $104,940 $454,241 $51,133
======== ======== ======== ======== ======== =======
</TABLE>
- -----
(1) Includes policy and contract account balances
(2) Includes unearned policy and contract fees
(3) Includes policy and contract fees
(4) Applies only to property and liability insurance

82
<PAGE>

THE MINNESOTA MUTUAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
SCHEDULE IV

REINSURANCE

FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995

<TABLE>
<CAPTION>
PERCENTAGE
CEDED TO ASSUMED OF AMOUNT
OTHER FROM OTHER NET ASSUMED TO
GROSS AMOUNT COMPANIES COMPANIES AMOUNT NET
------------ ----------- ----------- ------------ ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
1997:
Life insurance in force $118,345,796 $14,813,351 $29,341,332 $132,873,777 22.1%
============ =========== =========== ============
Premiums:
Life insurance $ 340,984 $ 30,547 $ 63,815 $ 374,252 17.1%
Accident and health
insurance 175,647 16,332 1,310 160,625 0.8%
Annuity 40,060 -- -- 40,060 --
Property and liability
insurance 38,995 11,651 12,972 40,316 32.2%
------------ ----------- ----------- ------------
Total premiums $ 595,686 $ 58,530 $ 78,097 $ 615,253 12.7%
============ =========== =========== ============
1996:
Life insurance in force $116,445,975 $15,164,764 $22,957,287 $124,238,498 18.5%
============ =========== =========== ============
Premiums:
Life insurance $ 347,056 $ 45,988 $ 63,044 $ 364,112 17.3%
Accident and health
insurance 174,219 15,511 1,389 160,097 0.9%
Annuity 38,041 -- -- 38,041 --
Property and liability
insurance 55,782 5,729 56 50,109 0.1%
------------ ----------- ----------- ------------
Total premiums $ 615,098 $ 67,228 $ 64,489 $ 612,359 10.5%
============ =========== =========== ============
1995:
Life insurance in force $106,228,277 $15,620,303 $24,289,241 $114,897,215 21.1%
============ =========== =========== ============
Premiums:
Life insurance $ 342,433 $ 44,778 $ 62,169 $ 359,824 17.3%
Accident and health
insurance 163,412 12,296 2,389 153,505 1.6%
Annuity 41,225 -- -- 41,225 --
Property and liability
insurance 53,771 4,789 234 49,216 0.5%
------------ ----------- ----------- ------------
Total premiums $ 600,841 $ 61,863 $ 64,792 $ 603,770 10.7%
============ =========== =========== ============
</TABLE>