VARIABLE FUND D, 497, 1999-05-14

VARIABLE FUND D
497, 1999-05-14

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<PAGE>
VARIABLE FUND D
PROSPECTUS
INDIVIDUAL VARIABLE ANNUITY CONTRACT OF MINNESOTA LIFE'S VARIABLE FUND D
MINNESOTA LIFE INSURANCE COMPANY
("MINNESOTA LIFE")

400 Robert Street North
St. Paul, Minnesota 55101-2098
Telephone: (651)665-3500
http://www.minnesotamutual.com

This Prospectus describes a Flexible Payment Deferred Variable Annuity Contract
and a Single Premium Deferred Variable Annuity Contract offered by Minnesota
Life Insurance Company. These contracts may be used in connection with certain
retirement plans including

- Employer pension or profit-sharing plans qualified under Section 401(a)
or 403(b) of the Internal Revenue Code ("Code")

- H.R. 10 or Keogh plans

- Annuity purchase plans adopted by public school systems and certain tax
exempt organizations pursuant to Section 403(b) of the Code

- Individual retirement annuity plans adopted by individuals under Section
408 of the Code

- State deferred compensation plans described in Section 457 of the Code

Your contract values will be invested in our General Account or Variable Fund D
according to your instructions. Variable Fund D invests in shares of the
Advantus Series Fund, Inc. Purchase payments in the General Account receive
interest and principal guarantees. Purchase payments in Variable Fund D are
invested in one or more Portfolios of Advantus Series Fund, Inc. and do not
receive any principal or interest guarantees.

This Prospectus describes only the variable aspects of the contracts, except
where fixed aspects are specifically mentioned. You may look to your contract
language for descriptions of the fixed portion of the contracts.

This Prospectus includes the information you should know before purchasing a
contract. You should read it and keep it for future reference. A Statement of
Additional Information, bearing the same date, which contains further contract
information, has been filed with the Securities and Exchange Commission ("SEC")
and is incorporated by reference into this Prospectus. A copy of the Statement
of Additional Information may be obtained without charge by calling (651)
665-3500, or by writing to us at our office at 400 Robert Street North, St.
Paul, Minnesota 55101-2098. Its table of contents may be found at the end of
this Prospectus.

THIS PROSPECTUS IS NOT VALID UNLESS ATTACHED TO A CURRENT PROSPECTUS OF THE
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.

The date of this Prospectus and the Statement of Additional Information is: May
3, 1999

F. 30742 Rev. 5-1999
<PAGE>
THIS PROSPECTUS IS NOT AN OFFERING IN ANY JURISDICTION IN WHICH THE OFFERING
WOULD BE UNLAWFUL. WE HAVE NOT AUTHORIZED ANY DEALER, SALESPERSON OR OTHER
PERSON TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATIONS IN CONNECTION WITH
THIS OFFERING OTHER THAN THOSE CONTAINED IN THE PROSPECTUS AND, IF GIVEN OR
MADE, SHOULD NOT BE RELIED UPON.

TABLE OF CONTENTS

SPECIAL TERMS 1

SYNOPSIS 2

EXPENSE TABLE 5

CONDENSED FINANCIAL INFORMATION 20

FINANCIAL STATEMENTS 20

GENERAL DESCRIPTIONS 20

CONTRACT DEDUCTIONS 22
Sales Charges 22
Premium Taxes 23
Investment Management 24
Mortality and Expense Risks 24
Portfolio Charges 25
Expenses 25
Other Expenses 25

DESCRIPTION OF THE CONTRACTS 25

VOTING RIGHTS 27

ANNUITY PERIOD 28

DEATH BENEFIT 31

CREDITING ACCUMULATION UNITS 32

WITHDRAWALS AND SURRENDER 36

DISTRIBUTION 37

FEDERAL TAX STATUS 37

PERFORMANCE DATA 42

YEAR 2000 COMPUTER PROBLEM 43

STATEMENT OF ADDITIONAL INFORMATION 43

APPENDIX A -- CONDENSED FINANCIAL INFORMATION A-1

APPENDIX B -- TYPES OF QUALIFIED PLANS B-1
<PAGE>
SPECIAL TERMS

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 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 Variable Fund D,
namely, Advantus Series Fund, Inc. and its Portfolios.

GENERAL ACCOUNT: all of our assets other than those in 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 OR VALUATION DAYS: 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 Variable Fund D.

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

WE, OUR, US: Minnesota Life Insurance Company (formerly "The Minnesota Mutual
Life Insurance Company").

YOU, YOUR: the Contract Owner.

PAGE 1
<PAGE>
THIS SYNOPSIS CONTAINS A BRIEF SUMMARY OF SOME OF THE IMPORTANT
FEATURES OF THE VARIABLE ANNUITY CONTRACTS DESCRIBED IN THIS
PROSPECTUS.

QUESTIONS AND ANSWERS ABOUT
THE VARIABLE ANNUITY CONTRACT

WHAT IS AN ANNUITY?

An annuity is a series of payments by an insurance company to an "annuitant".
These payments may be made for the life of the annuitant; for life with a
minimum number of payments guaranteed; for the joint lifetime of the annuitant
and another person; or for a specified period of time. An annuity with payments
of a guaranteed amount is a fixed annuity. An annuity with payments which vary
with the investment experience of a separate account is a variable annuity.

WHAT TYPE OF CONTRACT IS OFFERED BY THIS PROSPECTUS?

Two types of variable annuity contracts are offered, a flexible payment deferred
variable annuity contract and a single payment deferred variable annuity. Both
provide for monthly annuity payments which begin either immediately or at a
future date you specify. According to your instructions we allocate your
purchase payments to the General Account, where they receive principal and
interest guarantees, or to Variable Fund D. Variable Fund D invests in one or
more portfolios of Advantus Series Fund, Inc. which do not receive principal or
interest guarantees.

WHAT INVESTMENT OPTIONS ARE AVAILABLE?

Any purchase payments you allocate to Variable Fund D are invested exclusively
in shares of one or more Fund Portfolios. We reserve the right to add, combine
or remove other eligible Funds and Portfolios.

The available Portfolios of Advantus Fund are:

Growth Portfolio
Bond Portfolio
Money Market Portfolio
Asset Allocation Portfolio
Mortgage Securities Portfolio
Index 500 Portfolio
Small Company Growth Portfolio

There is no assurance that any Portfolio will meet its objectives. Detailed
information about the investment objectives and policies of the Portfolios can
be found in the current prospectus for the Fund attached to this Prospectus. You
should carefully read the Fund prospectus before purchasing in the contract.

PAGE 2
<PAGE>
CAN YOU CHANGE THE PORTFOLIO(S) THAT YOU SELECT?

Yes. You can change your allocation of future purchase payments by giving us
written notice or a telephone call notifying us of the change. Before annuity
payments begin, you may transfer all or a part of your accumulation value
between and among the Portfolios and General Account. After annuity payments
begin, you may instruct us to transfer amounts held as annuity reserves among
the variable annuity sub-accounts, subject to some restrictions. Annuity
reserves may be transferred only from a variable annuity to a fixed annuity
during the annuity period. There is currently no charge for transfers, however
we reserve the right to impose such a charge in the future.

ARE THERE PURCHASE PAYMENT LIMITATIONS?

Yes. The minimum purchase payment for a Single Payment Deferred Variable Annuity
Contract is $5,000 and may not exceed $250,000 without our consent. The minimum
purchase payment for the Flexible Payment Deferred Annuity Contract is $25.00.
We currently waive the minimum for the Flexible Payment Deferred Annuity
Contract.

WHAT CHARGES ARE ASSOCIATED WITH THE CONTRACT?

We deduct a daily charge equal to an annual rate of .795% of the net asset value
of Variable Fund D for our mortality and expense risk guarantees. To the extent
that the charge exceeds .795%, Minnesota Life will make a reimbursement to
Variable Fund D contracts.

Under the Flexible Payment Deferred Variable Annuity Contract a deferred sales
charge of up to 9.0% of purchase payments may apply is you make partial
withdrawals or surrender your contract within 10 or fewer years after your last
purchase payment. Under the Single Payment Deferred Immediate Annuity Contract a
deferred sales charge of up to 6.0% of the purchase payment may apply if you
make partial withdrawals or surrender your contract within 10 or fewer years
after your last purchase payment. A portion of the sales charge may be used to
pay distribution expenses. The principal underwriter may pay an amount not to
exceed 6% of the purchase payments received for the Flexible Payment Deferred
Variable Annuity Contracts; or, 3.75% for the Single Payment Deferred Variable
Annuity Contracts.

Deductions for any applicable premium taxes may also be made (currently such
taxes range from 0.0% to 3.5%) depending upon applicable law.

The Portfolio pays investment advisory and other expenses. Total expenses of the
Portfolios range from .44% to .79% of average daily net assets of the Portfolio
on an annual basis. To the extent the cost of investment advisory services in
the Fund exceeds .265%, Minnesota Life will make a reimbursement to Variable
Fund D contracts.

CAN YOU MAKE PARTIAL WITHDRAWALS FROM THE CONTRACT?

Yes. Subject to limitations imposed by the retirement plan or program, you may
make withdrawals of the accumulation value of your contract before an annuity
begins. Your requests for partial withdrawals must be in writing.

PAGE 3
<PAGE>
Partial withdrawals are generally subject to the deferred sales charge. In
addition, a penalty tax on the amount of the taxable distribution may be
assessed upon withdrawals from the variable annuity contract in certain
circumstances, including distributions made prior to the owner's attainment of
age 59 1/2.

DO YOU HAVE A RIGHT TO CANCEL YOUR CONTRACT?

Yes. You may cancel your contract any time within ten days of receiving it by
returning it to us or your agent. In some states, the free look period may be
longer than ten days. For example, California's free look period is thirty days.
These rights are subject to change and may vary among the states.

WHAT IF THE OWNER OR ANNUITANT DIES?

If the contract owner dies before annuity payments begin, we will pay the death
benefit to the beneficiary named in the contract application. In the case of
joint owners, this amount would be payable at the death of the second owner. The
death benefit payable to the beneficiary upon the death of the contract owner
during the accumulation period is equal to the greater of:

- the amount of the accumulation value payable at death; or

- the total amount of your purchase, less all partial withdrawals.

If the annuitant dies after annuity payments have begin, we will pay whatever
death benefit may be called for by the terms of the annuity option selected. If
the owner of this contract is not a natural person, such as a trust or other
similar 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
commencement of annuity payments.

WHAT ANNUITY OPTIONS ARE AVAILABLE?

The annuity options available are

- a life annuity

- a life annuity with a period certain of either 120 months, 180 months or
240 months

- a joint and last survivor annuity

- a period certain annuity

Each annuity option may be elected as either a variable annuity or fixed annuity
or a combination of the two. Other annuity options may be available from us on
request.

WHAT VOTING RIGHTS DO YOU HAVE?

Contract owners and annuitants will be able to direct us as to how to vote
shares of the Fund held for their contracts where shareholder approval is
required by law in the affairs of the Fund.

PAGE 4
<PAGE>
EXPENSE TABLE

The following contract expense information is intended to illustrate the expense
of 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 6% decreasing uniformly by .05% for
of amount surrendered or withdrawn) each of the first 120 months from the
contract date
</TABLE>

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

<TABLE>
<S> <C>
Investment Management Fee Reimbursement (.235)%
Mortality and Expense Risk Fees .795%
Other Expense Reimbursement (.030)%
--------
Total Sub-Account Annual Expenses .530%
--------
--------
</TABLE>

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

<TABLE>
<S> <C>
Growth Portfolio
Investment Management Fees .500%
Other Expenses .030%
--------
Total Growth Portfolio Annual Expenses .530%
--------
--------
</TABLE>

PAGE 5
<PAGE>
EXAMPLE--For contracts using the Growth Portfolio:

<TABLE>
<CAPTION>
10
1 YEAR 3 YEARS 5 YEARS 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>

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

<TABLE>
<S> <C>
Investment Management Fee Reimbursement (.235)%
Mortality and Expense Risk Fees .795%
--------
Total Sub-Account Annual Expenses .560%
--------
--------
</TABLE>

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

<TABLE>
<S> <C>
Bond Portfolio
Investment Management Fees .500%
Other Expenses .050%
--------
Total Bond Portfolio Annual Expenses .550%
--------
--------
</TABLE>

PAGE 6
<PAGE>
EXAMPLE--For contracts using the Bond Portfolio:

<TABLE>
<CAPTION>
10
1 YEAR 3 YEARS 5 YEARS 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>

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

<TABLE>
<S> <C>
Investment Management Fee Reimbursement (.235)%
Mortality and Expense Risk Fees .795%
--------
Total Sub-Account Annual Expenses .560%
--------
--------
</TABLE>

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

<TABLE>
<S> <C>
Money Market Portfolio
Investment Management Fees .500%
Other Expenses .080%
--------
Total Money Market Portfolio Annual Expenses .580%
--------
--------
</TABLE>

PAGE 7
<PAGE>
EXAMPLE--For contracts using the Money Market Portfolio:

<TABLE>
<CAPTION>
10
1 YEAR 3 YEARS 5 YEARS 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 $ 95 $ 139
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 $ 63 $ 139
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 $ 63 $ 139
</TABLE>

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

<TABLE>
<S> <C>
Investment Management Fee Reimbursement (.235)%
Mortality and Expense Risk Fees .795%
--------
Total Sub-Account Annual Expenses .560%
--------
--------
</TABLE>

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

<TABLE>
<S> <C>
Asset Allocation Portfolio
Investment Management Fees .500%
Other Expenses .030%
--------
Total Asset Allocation Portfolio Annual Expenses .530%
--------
--------
</TABLE>

PAGE 8
<PAGE>
EXAMPLE--For contracts using the Asset Allocation Portfolio:

<TABLE>
<CAPTION>
10
1 YEAR 3 YEARS 5 YEARS 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 $ 77 $ 93 $ 133
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 $ 60 $ 133
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 $ 60 $ 133
</TABLE>

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

<TABLE>
<S> <C>
Investment Management Fee Reimbursement (.235)%
Mortality and Expense Risk Fees .795%
--------
Total Sub-Account Annual Expenses .560%
--------
--------
</TABLE>

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

<TABLE>
<S> <C>
Mortgage Securities Portfolio
Investment Management Fees .500%
Other Expenses .070%
--------
Total Mortgage Securities Portfolio Annual Expenses .570%
--------
--------
</TABLE>

PAGE 9
<PAGE>
EXAMPLE--For contracts using the Mortgage Securities Portfolio:

<TABLE>
<CAPTION>
10
1 YEAR 3 YEARS 5 YEARS 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>

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

<TABLE>
<S> <C>
Investment Management Fee Reimbursement (.135)%
Mortality and Expense Risk Fees .795%
--------
Total Sub-Account Annual Expenses .660%
--------
--------
</TABLE>

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

<TABLE>
<S> <C>
Index 500 Portfolio
Investment Management Fees .400%
Other Expenses .040%
--------
Total Index 500 Portfolio Annual Expenses .440%
--------
--------
</TABLE>

PAGE 10
<PAGE>
EXAMPLE--For contracts using the Index 500 Portfolio:

<TABLE>
<CAPTION>
10
1 YEAR 3 YEARS 5 YEARS 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 $ 77 $ 93 $ 134
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 $ 134
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 $ 134
</TABLE>

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

<TABLE>
<S> <C>
Investment Management Fee Reimbursement (.485)%
Mortality and Expense Risk Fees .795%
--------
Total Sub-Account Annual Expenses .310%
--------
--------
</TABLE>

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

<TABLE>
<S> <C>
Small Company Growth Portfolio
Investment Management Fees .750%
Other Expenses .040%
--------
Total Small Company Growth Portfolio Annual Expenses .790%
--------
--------
</TABLE>

PAGE 11
<PAGE>
EXAMPLE--For contracts using the Small Company Growth Portfolio:

<TABLE>
<CAPTION>
10
1 YEAR 3 YEARS 5 YEARS 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 $ 77 $ 93 $ 134
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 $ 134
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 $ 134
</TABLE>

INDIVIDUAL FLEXIBLE PAYMENT DEFERRED VARIABLE ANNUITY CONTRACT

CONTRACT OWNER TRANSACTION EXPENSES

<TABLE>
<S> <C>
Deferred Sales Load (as a percentage 9% decreasing uniformly by .075% for
of amount surrendered or withdrawn) each of the first 120 months from the
contract date
</TABLE>

SEPARATE ACCOUNT ANNUAL EXPENSES--GROWTH 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 Growth
Portfolio)

<TABLE>
<S> <C>
Growth Portfolio
Management Fees .500%
Other Expenses .030%
--------
Total Growth Portfolio Annual Expenses .530%
--------
--------
</TABLE>

PAGE 12
<PAGE>
EXAMPLE--For contracts using the Growth Portfolio:

<TABLE>
<CAPTION>
10
1 YEAR 3 YEARS 5 YEARS 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>

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

<TABLE>
<S> <C>
Investment Management Fee Reimbursement (.235)%
Mortality and Expense Risk Fees .795%
--------
Total Sub-Account Annual Expenses .560%
--------
--------
</TABLE>

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

<TABLE>
<S> <C>
Bond Portfolio
Management Fees .500%
Other Expenses .050%
--------
Total Bond Portfolio Annual Expenses .550%
--------
--------
</TABLE>

PAGE 13
<PAGE>
EXAMPLE--For contracts using the Bond Portfolio:

<TABLE>
<CAPTION>
10
1 YEAR 3 YEARS 5 YEARS 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>

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

<TABLE>
<S> <C>
Investment Management Fee Reimbursement (.235)%
Mortality and Expense Risk Fees .795%
--------
Total Sub-Account Annual Expenses .560%
--------
--------
</TABLE>

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

<TABLE>
<S> <C>
Money Market Portfolio
Management Fees .500%
Other Expenses .080%
--------
Total Money Market Portfolio Annual Expenses .580%
--------
--------
</TABLE>

PAGE 14
<PAGE>
EXAMPLE--For contracts using the Money Market Portfolio:

<TABLE>
<CAPTION>
10
1 YEAR 3 YEARS 5 YEARS 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 $ 139
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 $ 63 $ 139
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 $ 63 $ 139
</TABLE>

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

<TABLE>
<S> <C>
Investment Management Fee Reimbursement (.235)%
Mortality and Expense Risk Fees .795%
--------
Total Sub-Account Annual Expenses .560%
--------
--------
</TABLE>

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

<TABLE>
<S> <C>
Asset Allocation Portfolio
Management Fees .500%
Other Expenses .030%
--------
Total Asset Allocation Portfolio Annual Expenses .530%
--------
--------
</TABLE>

PAGE 15
<PAGE>
EXAMPLE--For contracts using the Asset Allocation Portfolio:

<TABLE>
<CAPTION>
10
1 YEAR 3 YEARS 5 YEARS 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 $ 98 $ 109 $ 133
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 $ 60 $ 133
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 $ 60 $ 133
</TABLE>

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

<TABLE>
<S> <C>
Investment Management Fee Reimbursement (.235)%
Mortality and Expense Risk Fees .795%
--------
Total Sub-Account Annual Expenses .560%
--------
--------
</TABLE>

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

<TABLE>
<S> <C>
Mortgage Securities Portfolio
Management Fees .500%
Other Expenses .070%
--------
Total Mortgage Securities Portfolio Annual Expenses .570%
--------
--------
</TABLE>

PAGE 16
<PAGE>
EXAMPLE--For contracts using the Mortgage Securities Portfolio:

<TABLE>
<CAPTION>
10
1 YEAR 3 YEARS 5 YEARS 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>

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

<TABLE>
<S> <C>
Investment Management Fee Reimbursement (.135)%
Mortality and Expense Risk Fees .795%
--------
Total Sub-Account Annual Expenses .660%
--------
--------
</TABLE>

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

<TABLE>
<S> <C>
Index 500 Portfolio
Management Fees .400%
Other Expenses .040%
--------
Total Index 500 Portfolio Annual Expenses .440%
--------
--------
</TABLE>

PAGE 17
<PAGE>
EXAMPLE--For contracts using the Index 500 Portfolio:

<TABLE>
<CAPTION>
10
1 YEAR 3 YEARS 5 YEARS 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 $ 134
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 $ 134
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 $ 134
</TABLE>

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

<TABLE>
<S> <C>
Investment Management Fee Reimbursement (.485)%
Mortality and Expense Risk Fees .795%
--------
Total Sub-Account Annual Expenses .310%
--------
--------
</TABLE>

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

<TABLE>
<S> <C>
Small Company Growth Portfolio
Investment Management Fees .750%
Other Expenses .040%
--------
Total Small Company Growth Portfolio Annual Expenses .790%
--------
--------
</TABLE>

PAGE 18
<PAGE>
EXAMPLE--For contracts using the Small Company Growth Portfolio:

<TABLE>
<CAPTION>
10
1 YEAR 3 YEARS 5 YEARS 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 $ 134
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 $ 134
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 $ 134
</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 the section captioned Investment Management in this
Prospectus.

These examples should not be considered a representation of past or future
experience. Actual expenses may be greater or lesser than those shown.

* 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.

PAGE 19
<PAGE>
CONDENSED FINANCIAL INFORMATION

The financial history of each sub-account may be found in "Appendix A --
Condensed Financial Information".

FINANCIAL STATEMENTS

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

GENERAL DESCRIPTIONS

A. MINNESOTA LIFE INSURANCE COMPANY

We are Minnesota Life Insurance Company ("Minnesota Life"), a life insurance
company organized under the laws of Minnesota. Minnesota Life was formerly known
as The Minnesota Mutual Life Insurance Company ("Minnesota Mutual"), a mutual
life insurance company organized in 1880 under the laws of Minnesota. On October
1, 1998, a plan of reorganization created a mutual insurance holding company
named Minnesota Mutual Companies, Inc. Minnesota Mutual reorganized as a stock
insurance company subsidiary of the new holding company and took the new name
Minnesota Life. Our home office is at 400 Robert Street North, St. Paul,
Minnesota 55101-2098, telephone: (651) 665-3500. We are licensed to do a life
insurance business in all states of the United States (except New York where we
are an authorized reinsurer), the District of Columbia, Canada, Puerto Rico and
Guam.

B. VARIABLE FUND D

We established Variable Fund D on October 16, 1967 in accordance with Minnesota
Law. 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 assets of Variable Fund D shall not be chargeable with liabilities arising
out of any other business which Minnesota Life may conduct, but shall be held
and applied exclusively for the benefit of the holders of those variable annuity
contracts for which Variable Fund D was established. The investment performance
of 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 our
general corporate obligations.

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

PAGE 20
<PAGE>
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 Variable
Fund D by the Commission.

C. ADVANTUS SERIES FUND, INC.

The Advantus Series Fund, Inc. ("Series Fund") is a mutual fund advised by
Advantus Capital Management, Inc. ("Advantus Capital"). The Series Fund issues
its shares only to us and our separate accounts. It may be offered to separate
accounts of insurance companies affiliated with us in the future. Advantus
Capital is a wholly-owned subsidiary of Minnesota Life.

A prospectus for the Series Fund is attached to this Prospectus. You should
carefully read the prospectuses before investing in the Contract.

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 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 Variable Fund D and we reserve
the right to add, combine or remove any sub-accounts of 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 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 Variable Fund D
under the Investment Company Act of 1940, to restrict or eliminate any voting
rights of the contract owners, and to combine Variable Fund D with one or more
of our other separate accounts.

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 Life 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.

PAGE 21
<PAGE>
CONTRACT DEDUCTIONS

SALES CHARGES

No sales charge is deducted from the purchase payments for these contracts.
However, a deferred sales charge, may apply in certain circumstances.

A 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.

<TABLE>
<CAPTION>
FLEXIBLE PAYMENT DEFERRED VARIABLE
ANNUITY CONTRACT
TABLE 1
- -----------------------------------
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

PAGE 22
<PAGE>
.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.

<TABLE>
<CAPTION>
SINGLE PAYMENT DEFERRED VARIABLE
ANNUITY CONTRACT
TABLE 2
- -----------------------------------
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, we 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.

A deferred sales charge will apply 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, we 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 contracts, issued by us. We will also waive the sales
charge on amounts withdrawn because of an excess contribution to a tax-qualified
contract (including for example individual retirement annuities).

To the extent that sales charges are insufficient to recover sales expenses, we
will pay sales expenses from our 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.

PAGE 23
<PAGE>
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.
Variable Fund D is now a unit investment trust rather than a managed investment
company, and therefore 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 Growth 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 us to the extent that the expenses
exceed .15% on an annual basis for any Portfolio. While we have no present
intention to alter that practice, we are 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, we have agreed that, each
valuation period, in calculating the net investment factor for the Growth
Sub-Account of Variable Fund D, we 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 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, we 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. Therefore, to the extent that a
Contract Owner or Participant chooses to take advantage of Variable Fund D sub-
accounts other than the Growth Sub-Account, you may incur additional expenses.

MORTALITY AND EXPENSE RISKS

We assume the mortality risk under the contract by our obligation to continue to
make monthly annuity payments, to each annuitant regardless of how long you live
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.

We assume 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.

For assuming these risks, we currently make a deduction from Variable Fund D at
an annual rate of .1325% for the mortality risk and .6625% for the expense risk.
These deductions may

PAGE 24
<PAGE>
be increased or decreased by resolution of the Board of Directors of Minnesota
Life, but not more often than annually. 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 us. Conversely, if the deductions provide more than sufficient, any excess
will be profit to us.

PORTFOLIO CHARGES

Each of the portfolios pays investment advisory and other expenses. A full
discussion of those charges may be found in the attached prospectus for the
Portfolios.

EXPENSES

Variable Fund D has no expenses which are not covered by the deductions listed
above. We perform all the administrative functions relative to the contracts. We
also bear 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.

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, inquiries may be
addressed to us at: Minnesota Mutual Center, 400 Robert Street North, St. Paul,
Minnesota 55101-2098.

1. Types of Contracts

Minnesota Life 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 us. 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.

PAGE 25
<PAGE>
(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 us at 400 Robert Street North, St.
Paul, Minnesota, of an intention to revoke. If the contract is revoked and
returned, we will refund 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 is extended to thirty
days' time for contracts issued or delivered. These rights are subject to
change, and may vary among other 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 us.

4. Annuity Payments

Variable annuity payments are determined on the basis of:

- the mortality table specified in the contract, which reflects the age of
the annuitant,

- the type of annuity payment option selected, and

- the investment performance of Variable Fund D.

The amount of the variable annuity payments will not be affected by adverse
mortality experience or by an increase in our 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 reflect investment gains and losses
and investment income of Variable Fund D. Thus the annuity payments will vary
with the investment experience of the assets of Variable Fund D.

5. Modification of the Contract

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

PAGE 26
<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 our
prior consent.

The minimum periodic purchase payment which may be made under a Flexible Payment
Deferred Variable Annuity Contract is $25. Currently, we are waiving 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 Variable Fund D or to fairly determine the value of the
assets of Variable Fund D; or

9. Participation

The contract is nonparticipating. Contracts issued prior to October 1, 1998,
were participating.

No assurances can be given as to the amounts, if any, that will be distributed
under participating contracts in the future. When we make any distribution, it
may take the form of additional payments to annuitant or the crediting of
additional accumulation units. We do not anticipate making dividend payments
under these contracts.

VOTING RIGHTS

The Series Fund shares held in Variable Fund D will be voted by us. Shares will
be voted by us in accordance with instructions received from contract owners
with voting interests in each sub-account of 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 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, we will vote such shares of the

PAGE 27
<PAGE>
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 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.

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.

While the contracts require that notice of election to begin variable annuity
payments must be received by us at least thirty days prior to the annuity
commencement date, we are currently waiving that requirement for such annuity
elections received at least two valuation days prior to the fifteenth of the
month. We reserve the right to enforce the thirty day notice requirement at our
option at anytime in the future.

Fixed annuity payments are always made as of the first day of a month. The
contracts require that the notice of election to begin fixed annuity payments
must be received by us at least thirty days prior to the annuity commencement
date. However, we are currently waiving this requirement.

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

PAGE 28
<PAGE>
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, and 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, we may fulfill our
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.

Except for Option 4, 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 us.

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 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.

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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:

- .997137, and

- 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. We reserve the right to make
such deductions from purchase payments as they are received.

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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 subtracting six
years from your age when applying it to the rates. 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.

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 we receive proof of death at our 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 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, we will pay to the beneficiary any death benefit
provided by the annuity option selected. The person selected by the owner as

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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 our 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. We 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.

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The number of accumulation units so determined shall not be changed by any
subsequent change in the value of an accumulation unit. 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.

We 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:

- 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,

- 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

- customary national business holidays on which the New York Stock Exchange
is closed for trading.

Accordingly, the value of accumulation units will be determined daily, and such
determinations will be applicable to all purchase payments received by us at our
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 Variable Fund D, the contracts also provide for allocation of
purchase payments to our 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 Variable Fund D or among the sub-accounts of 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 currently waiving this restriction.

The contracts permit us to limit the frequency and amount of transfers from the
General Account to Variable Fund D sub-accounts. Currently, except as provided
below, we limit the

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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 this 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 General Account accumulation value
at the time of transfer. The third situation is in the case where the
General Account accumulation value is $1000 of less. In that case, we
will allow a one-time transfer of the entire accumulation value from the
General Account to Variable Fund D sub-accounts.

- The third situation is in the case where the General Account accumulation
value is $1000 or less. In that case, we will allow a one-time transfer
of the entire accumulation value from the General Account to 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.

Transfer arrangements may be established to begin on the 10th or 20th of any
month and if a transfer cannot be completed because of a holiday or weekend 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. There is no charge for systematic transfers at this time, however we
reserve the right to impose charges.

As a type of systematic transfer arrangement for certain contracts, we will
offer automatic portfolio rebalancing ("APR") of amounts on a quarterly,
semi-annual and annual basis. Instructions to us must be in whole percentages
totaling 100%. They will be treated as instructions for transfers to and from
the various sub-accounts. Rebalancing instructions will not affect the current
allocation of future contributions; they may differ from those future
allocations and are not limited to any minimum or maximum number of
sub-accounts. There will be no charge for APR transfers and this will be
available August 1, 1999. APR is not available for values in the General
Account.

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You or persons authorized by you may also effect transfers, terminate automatic
premium payments, 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 us.

We 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. 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
Life are not registered under the Securities Act of 1933. Minnesota Life is not
registered as an investment company under the Investment Company Act of 1940.
Accordingly, such interests and Minnesota Life 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 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

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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 us. 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 us. 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 us 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 capital gain distribution by such fund if the "ex-dividend" date occurs
during the current valuation period; divided by (3) the 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. 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

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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 (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 our premium tax liability. In such event, we will pay in addition
to the cash value paid in connection with the surrender or withdrawal, the
lesser of (1) the amount by which our 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 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 Advantus Capital Management, Inc., which in turn is a wholly-owned subsidiary
of Minnesota Life. 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 Life will pay credits
which allow registered representatives (Agents) who are responsible for sales of
the contracts to attend conventions and other meetings sponsored by us or our
affiliates for the purpose of promoting the sale of insurance and/or investment
products offered by us and our affiliates. Such credits may cover the registered
representatives' transportation, hotel accommodations, meals, registration fees
and the like. We may also pay registered representatives additional amounts
based upon their production and the persistency of life insurance and annuity
business placed with us.

FEDERAL TAX STATUS

INTRODUCTION

Our tax discussion in this Prospectus is general in nature and is not intended
as tax advice. You should consult a competent tax adviser. We make no attempt to
consider any applicable state or

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other tax laws. In addition, this discussion is based on our understanding of
federal income tax laws as they are currently interpreted. We make no
representation regarding the likelihood of continuation of current income tax
laws or the current interpretations of the Internal Revenue Service ("IRS"). The
contract may be purchased on a non-tax qualified basis or purchased and used in
connection with certain retirement arrangements entitled to special income tax
treatment under section 401(a), 403(b), 408(b), 408A or 457 of the Code. The
ultimate effect of federal income taxes on the amount held under a contract, on
annuity payments, and on the economic benefit to the contract owner, the
annuitant, or the beneficiary(s) may depend on the tax status of the individual
concerned.

We are 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, we pay no federal income tax on income dividends
received by the Variable Fund D or on capital gains arising from the Variable
Fund D's activities. The Variable Fund D is not taxed as a "regulated investment
company" under the Code and we do not anticipate any change in that tax status.

TAXATION OF ANNUITY CONTRACTS IN GENERAL

Section 72 of the Code governs taxation of nonqualified annuities in general and
some aspects of qualified programs. No taxes are generally 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. As a general rule, deferred
annuity contracts held by an entity (such as a corporation or trust) that is not
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.

The taxable portion of payments made in the event of a full surrender of an
annuity is generally the amount in excess of the purchase payments for the
contract. Amounts withdrawn upon a partial surrender 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 all taxable amount received under an annuity contract are
subject to tax at ordinary rather than capital gain tax rates.

In the case of a withdrawal under an annuity that is part of a tax-qualified
retirement plan, 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.

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

The Code imposes a 10% penalty tax on the taxable portion of certain
distributions from annuity contracts. This additional tax does not apply:

- where the taxpayer is 59 1/2 or older

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- where payment is made on account of the taxpayer's disability

- where payment is made by reason of the death of the owner

- in certain other circumstances

The Code also provides an exception to the penalty tax for distributions, in
periodic payments, of substantially equal installments, where they are 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, a pledge or any interest in a contract as
security for a loan, the designation of an annuitant or other payee who is not
also the contract owner, or the assignment of the contract may result in certain
income or gift tax consequences to the contract owner that are beyond the scope
of this discussion. If you are contemplating such a transfer, pledge,
designation or assignment, you should consult a competent tax adviser about its
potential tax effects.

For purposes of determining a contract owner's gross income, the Code provides
that all nonqualified 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 contracts or
otherwise.

DIVERSIFICATION REQUIREMENTS

Section 817(h) of the Code authorizes the Treasury Department to set standards
by regulation or otherwise for the investments of 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 Fund Portfolios,
intends to comply with the diversification requirements prescribed in
Regulations Section 1.817-5, which affect how the Portfolio's assets may be
invested. Although the investment adviser of Advantus Fund is an affiliate of
ours, we do not control Advantus Fund or the investments of its Portfolios.
Nonetheless, we believe that each Portfolio of Advantus Fund in which the
Variable Fund D owns shares will be operated in compliance with the requirements
prescribed by the Treasury.

Prior to the enactment of Section 817(h), the IRS published several rulings
under which owners of certain variable annuity contracts were treated as owners,
for federal income tax purposes, of the assets held in a 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. However, the continued effectiveness of the pre-Section
817(h) published rulings is somewhat uncertain. In connection with its issuance
of proposed regulations under Section 817(h) in 1986, the Treasury Department
announced that those regulations did 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".
While the Treasury's 1986 announcement stated that guidance would be issued on
the "extent to which the policyholders may direct their investments to
particular sub-accounts without being treated as owners of the underlying
assets", no such guidance has been forthcoming.

PAGE 39
<PAGE>
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. Minnesota Life does not
believe that the ownership rights or a contract owner under the Contract would
result in any contract owner being treated as the owner of the assets of
Variable Fund D. However, Minnesota Life does not know what standards would be
applied if the Treasury Department should proceed to issue regulations or
rulings on this issue. Minnesota Life 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:

- 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

- 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 will 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 that 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", who
must be a natural person is the person designated by the owner as a beneficiary
and to whom ownership of the contract passes by reason of death. If the owner's
"designated beneficiary" is the surviving spouse of the owner, however, 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. We
intend 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

Death benefits paid upon the death of a contract owner, generally, 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,
or (2) if distributed under an annuity option, they are taxed in the same manner
as annuity payments, as described above.

PAGE 40
<PAGE>
POSSIBLE CHANGES IN TAXATION

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 contract 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

- other specified circumstances

We make no attempt to provide more than general information about the use of
annuities with the various types of retirement plans. The rights of any person
to any benefits under annuity contracts 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 our annuity administration
procedures. Owners, participants and beneficiaries are responsible for
determining that contributions, distributions and other transactions with
respect to the contracts comply with applicable law. If you intend to purchase a
contract for use with any retirement plan you should consult your 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)reaches age
70 1/2 or retires and must be made in a specified form or manner. If the plan
participant is a "5 percent owner" (as defined in 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.

WITHHOLDING

In general, distributions from annuity contracts 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.

PAGE 41
<PAGE>
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:

- one of a series of substantially equal annual (or more frequent) payments
made:

- over the life or life expectancy of the employee,

- over the joint lives or joint expectancies of the employee and the
employee's designated beneficiary, or

- for a specified period of ten years or more;

- a required minimum distribution; or

- 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 60 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

The foregoing summary of the federal income tax consequences under these
contracts is not exhaustive. Special rules are provided with respect to
situations not discussed herein. Should a plan lose its qualified status,
employees will lose some of the tax benefits described. Statutory changes in the
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 you should consult a qualified tax adviser.

PERFORMANCE DATA

From time to time Variable Fund D may publish advertisements containing
performance data relating to its sub-accounts. In the case of the Money Market
Sub-Account, Variable Fund D will publish yield or effective yield quotations
for a seven-day or other specified period. In the case of the other
sub-accounts, performance data will consist of average annual total return
quotations for one year, five year and ten year periods and for the period since
the inception of the underlying Portfolios. Such performance data may be
accompanied by cumulative total return quotations for the comparable periods.
For periods prior to the date of this Prospectus the quotations will be based on
the assumption that the contracts described herein were issued when the
underlying Portfolios first became available to Variable Fund D under other
contracts issued by us. The Money Market Sub-Account may also quote such average
annual and cumulative total return figures. Performance figures used by Variable
Fund D are based on

PAGE 42
<PAGE>
historical information of the sub-accounts for specified periods, and the
figures are not intended to suggest that such performance will continue in the
future. Performance figures of Variable Fund D will reflect charges made
pursuant to the terms of the contracts offered by this Prospectus and charges of
the underlying fund. More detailed information on the computations is set forth
in the Statement of Additional Information.

YEAR 2000 COMPUTER PROBLEM

The services we provide to Variable Fund D and contract owners depend on the
smooth functioning of our 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 our ability to provide services to contract owners. We have
been actively working on necessary changes to our computer systems to deal with
the year 2000. Although there can be no assurance of complete success, we
believe that we will be able to resolve these issues on a timely basis and that
there will be no material adverse impact on our ability to provide services to
Variable Fund D.

In addition, our operations could be impacted by our service providers' or
suppliers' year 2000 efforts. We have undertaken an initiative to assess the
efforts of organizations where there is a significant business relationship.
There is no assurance, however, that we will not be affected by year 2000
problems of other organizations.

STATEMENT OF ADDITIONAL INFORMATION

A Statement of Additional Information, which contains additional information
including financial statements, is available from us at your request. The table
of contents for that Statement of Additional Information is as follows:
Variable Fund D
Directors and Principal Management Officers of Minnesota Life
Other Contracts
Distribution of Contracts
Annuity Payments
Auditors
Financial Statements
Appendix A - Calculation of Unit Values

PAGE 43
<PAGE>
APPENDIX A - CONDENSED FINANCIAL INFORMATION

The financial statements of Variable Fund D and of Minnesota 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 eight years ended December 31, 1998 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 Variable Fund D
included in the Statement of Additional Information.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1998 1997 1996 1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Growth Sub-Account:
Unit value at beginning
of period.............. $18.38 $13.84 $11.88 $9.60 $9.57 $9.20 $8.80 $6.60
Unit value at end of
period................. $24.63 $18.38 $13.84 $11.88 $9.60 $9.57 $9.20 $8.80
Number of units
outstanding at end of
period................. 3,881,390 4,229,239 4,666,243 4,918,859 5,406,377 5,785,198 5,758,220 5,842,088
Bond Sub-Account:
Unit value at beginning
of period.............. $1.75 $1.60 $1.57 $1.32 $1.39 $1.26 $1.19 $1.02
Unit value at end of
period................. $1.84 $1.75 $1.60 $1.57 $1.32 $1.39 $1.26 $1.19
Number of units
outstanding at end of
period................. 222,720 256,628 296,978 321,612 386,750 480,411 177,794 66,385
Money Market Sub-Account:
Unit value at beginning
of period.............. $1.29 $1.24 $1.19 $1.13 $1.10 $1.07 $1.05 $1.00
Unit value at end of
period................. $1.35 $1.29 $1.24 $1.19 $1.13 $1.10 $1.07 $1.05
Number of units
outstanding at end of
period................. 279,497 309,546 395,596 352,735 457,011 774,078 357,877 171,773
Asset Allocation
Sub-Account:
Unit value at beginning
of period.............. $2.42 $2.05 $1.83 $1.47 $1.50 $1.42 $1.33 $1.04
Unit value at end of
period................. $2.98 $2.42 $2.05 $1.83 $1.47 $1.50 $1.42 $1.33
Number of units
outstanding at end of
period................. 2,377,329 2,564,823 2,804,901 2,960,127 3,175,751 2,903,712 1,463,845 364,314
Mortgage Securities
Sub-Account:
Unit value at beginning
of period.............. $1.67 $1.54 $1.47 $1.26 $1.31 $1.20 $1.14 $1.00
Unit value at end of
period................. $1.77 $1.67 $1.54 $1.47 $1.26 $1.31 $1.20 $1.14
Number of units
outstanding at end of
period................. 89,045 130,573 175,022 136,987 160,939 286,125 265,381 5,173
Index 500 Sub-Account:
Unit value at beginning
of period.............. $3.41 $2.60 $2.15 $1.58 $1.57 $1.44 $1.35 $1.05
Unit value at end of
period................. $4.34 $3.41 $2.60 $2.15 $1.58 $1.57 $1.44 $1.35
Number of units
outstanding at end of
period................. 946,618 1,012,408 923,905 951,303 886,632 684,210 332,893 174,242
Small Company Growth
Sub-Account:
Unit value at beginning
of period.............. $1.74 $1.62 $1.54 $1.17 $1.11 $1.00
Unit value at end of
period................. $1.76 1.74 $1.62 $1.54 $1.17 $1.11***
Number of units
outstanding at end of
period................. 177,501 109,961 114,187 124,882 72,272 14,148

<CAPTION>
PERIOD FROM
OCTOBER 26,
1990 TO
DECEMBER 31,
1990*
-------------
<S> <C>
Growth Sub-Account:
Unit value at beginning
of period.............. $6.06
Unit value at end of
period................. $6.60
Number of units
outstanding at end of
period................. 6,024,553
Bond Sub-Account:
Unit value at beginning
of period.............. $1.00
Unit value at end of
period................. $1.02
Number of units
outstanding at end of
period................. 20,037
Money Market Sub-Account:
Unit value at beginning
of period.............. --**
Unit value at end of
period................. --
Number of units
outstanding at end of
period................. --
Asset Allocation
Sub-Account:
Unit value at beginning
of period.............. $1.00
Unit value at end of
period................. $1.04
Number of units
outstanding at end of
period................. 13,616
Mortgage Securities
Sub-Account:
Unit value at beginning
of period.............. --**
Unit value at end of
period................. --
Number of units
outstanding at end of
period................. --
Index 500 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................. 5,000
Small Company Growth
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.

PAGE A-1
<PAGE>
APPENDIX B - TYPES OF QUALIFIED PLANS

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:

- elective contributions made in years beginning after December 31, 1988;

- earnings on those contributions; and

- 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.

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.

PAGE B-1
<PAGE>
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 the contracts to accumulate 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.

PAGE B-2
<PAGE>

VARIABLE FUND D

Statement of Additional Information

The date of this document and the Prospectus is: May 3, 1999

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 Variable Fund D's current Prospectus, bearing the same date,
which may be obtained by calling Variable Fund D at (651) 665-3500, or writing
Variable Fund D at Minnesota Mutual Center, 400 Robert Street North, St. Paul,
Minnesota 55101-2098.

TABLE OF CONTENTS

Variable Fund D

Directors and Principal Management Officers of Minnesota Life

Other Contracts

Distribution of Contracts

Annuity Payments

Auditors

Financial Statements

Appendix A - Calculation of Unit Values

<PAGE>

VARIABLE FUND D

Variable Fund D ("Variable Fund D") is a separate account of Minnesota Life
Insurance Company ("Minnesota Life"). 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.

DIRECTORS AND PRINCIPAL MANAGEMENT OFFICERS OF MINNESOTA LIFE

DIRECTORS PRINCIPAL OCCUPATION
--------- --------------------
<S> <C>
Giulio Agostini Senior Vice President, Finance and Administrative
Services, 3M, St. Paul, 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 Vice Chairman and Chief Operating Officer, Wells
Fargo & Company, San Francisco, California
(Banking)

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

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

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

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

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

-2-
<PAGE>

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

Frederick T. Weyerhaeuser Retired since April 1998, prior thereto Chairman
and Treasurer, Clearwater Investment Trust since
May 1996, prior thereto for more than five years,
Chairman, Clearwater Management Company, St. Paul,
Minnesota (Financial Management)
</TABLE>

Principal Officers (other than Directors)

<TABLE>
<CAPTION>
Name Position
<S> <C>
John F. Bruder Senior Vice President

Keith M. Campbell Senior Vice President

Robert E. Hunstad Executive Vice President

James E. Johnson Senior Vice President and Actuary

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
</TABLE>

All Directors who are not also officers of Minnesota Life have had the principal
occupation (or employers) shown for at least five years. All officers of
Minnesota Life have been employed by Minnesota Life for at least five years with
the exception of Mr. Westhoff. Mr. Westhoff has been employed by Minnesota Life
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 Life
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 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. is a wholly-owned subsidiary of Advantus Capital
Management, Inc., which is a wholly-owned subsidiary of Minnesota Life. Advantus
Capital Management, Inc., is the investment adviser for Variable Fund D and also
a wholly-owned subsidiary of Minnesota Life. 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 Life for payment to the underwriter for 1998 was
$126,677, for 1997 the amount was $125,659, and for 1996 the amount was
$109,175. These include payments made by Minnesota Life on behalf of the
underwriter. Agents of Minnesota Life who are also registered
representatives of Ascend Financial are compensated directly by Minnesota
Life.

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 Variable Fund D and the Consolidated Financial
Statements of Minnesota 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 Directors
Minnesota Life Insurance Company

We have audited the accompanying consolidated balance sheets of the Minnesota
Life Insurance Company and subsidiaries as of December 31, 1998 and 1997, and
the related consolidated statements of operations and comprehensive income,
changes in stockholder's equity and cash flows for each of the years in the
three-year period ended December 31, 1998. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of the
Minnesota Life Insurance Company and subsidiaries as of December 31, 1998 and
1997, and the results of their operations and their cash flows for each of the
years in the three-year period ended December 31, 1998, in conformity with
generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
consolidated 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 consolidated
financial statements. Such information has been subjected to the auditing
procedures applied in the audits of the basic consolidated financial statements
and, in our opinion, is fairly stated in all material respects in relation to
the basic consolidated financial statements taken as a whole.

Minneapolis, Minnesota
February 8, 1999

66
<PAGE>

Minnesota Life Insurance Company and Subsidiaries
Consolidated Balance Sheets

December 31, 1998 and 1997

Assets
<TABLE>
<CAPTION>
1998 1997
----------- -----------
(In thousands)
<S> <C> <C>
Fixed maturity securities:
Available-for-sale, at fair value (amortized cost
$4,667,688 and $4,518,807) $ 4,914,012 $ 4,719,801
Held-to-maturity, at amortized cost (fair value
$1,161,784 and $1,158,227) 1,086,548 1,088,312
Equity securities, at fair value (cost $579,546 and
$537,441) 749,800 686,638
Mortgage loans, net 681,219 661,337
Real estate, net 38,530 39,964
Policy loans 226,409 213,488
Short-term investments 136,435 112,352
Other invested assets 261,625 216,838
----------- -----------
Total investments 8,094,578 7,738,730
Cash 175,660 96,179
Finance receivables, net 163,411 211,794
Deferred policy acquisition costs 564,382 576,030
Accrued investment income 86,974 83,439
Premiums receivable, net 62,609 68,030
Property and equipment, net 67,448 58,123
Reinsurance recoverables 162,553 150,126
Other assets 61,183 52,852
Separate account assets 6,994,752 5,366,810
----------- -----------
Total assets $16,433,550 $14,402,113
=========== ===========

Liabilities and Stockholder's Equity

Liabilities:
Policy and contract account balances $ 4,242,802 $ 4,275,221
Future policy and contract benefits 1,744,245 1,687,529
Pending policy and contract claims 70,564 64,356
Other policyholders' funds 438,595 416,752
Policyholders' dividends payable 53,957 55,321
Stockholder dividend payable 24,700 --
Unearned premiums and fees 180,191 202,070
Federal income tax liability:
Current 53,039 45,300
Deferred 173,907 166,057
Other liabilities 514,468 334,305
Notes payable 267,000 298,000
Separate account liabilities 6,947,806 5,320,517
----------- -----------
Total liabilities 14,711,274 12,865,428
----------- -----------
Stockholder's equity:
Common stock, $1 par value, 5,000,000 shares
authorized, issued and outstanding 5,000 --
Retained earnings 1,513,661 1,380,012
Accumulated other comprehensive income 203,615 156,673
----------- -----------
Total stockholder's equity 1,722,276 1,536,685
----------- -----------
Total liabilities and stockholder's equity $16,433,550 $14,402,113
=========== ===========
</TABLE>

See accompanying notes to consolidated financial statements.

67
<PAGE>

Minnesota Life Insurance Company and Subsidiaries

Consolidated Statements of Operations and Comprehensive Income

Years ended December 31, 1998, 1997, and 1996

Statements of Operations

<TABLE>
<CAPTION>
1998 1997 1996
---------- ---------- ----------
(In thousands)
<S> <C> <C> <C>
Revenues:
Premiums $ 577,693 $ 615,253 $ 612,359
Policy and contract fees 300,361 272,037 245,966
Net investment income 531,081 553,773 530,987
Net realized investment gains 114,652 114,367 55,574
Finance charge income 35,880 43,650 46,932
Other income 73,498 71,707 51,630
---------- ---------- ----------
Total revenues 1,633,165 1,670,787 1,543,448
---------- ---------- ----------
Benefits and expenses:
Policyholders' benefits 519,926 515,873 541,520
Interest credited to policies and con-
tracts 290,870 298,033 288,967
General operating expenses 360,916 369,961 302,618
Commissions 110,211 114,404 103,370
Administrative and sponsorship fees 80,183 81,750 79,360
Dividends to policyholders 25,159 26,776 24,804
Interest on notes payable 22,360 24,192 22,798
Increase in deferred policy acquisition
costs (18,042) (26,878) (19,284)
---------- ---------- ----------
Total benefits and expenses 1,391,583 1,404,111 1,344,153
---------- ---------- ----------
Income from operations before taxes 241,582 266,676 199,295
Federal income tax expense (benefit):
Current 93,584 84,612 68,033
Deferred (15,351) (7,832) 744
---------- ---------- ----------
Total federal income tax expense 78,233 76,780 68,777
---------- ---------- ----------
Net income $ 163,349 $ 189,896 $ 130,518
========== ========== ==========
Other comprehensive income, after tax:
Foreign currency translation adjust-
ments $ (947) $ 947 $ --
Unrealized gains (losses) on securities 47,889 47,414 (44,940)
---------- ---------- ----------
Other comprehensive income, net of tax 46,942 48,361 (44,940)
---------- ---------- ----------
Comprehensive income $ 210,291 $ 238,257 $ 85,578
========== ========== ==========
</TABLE>

See accompanying notes to consolidated financial statements.

68
<PAGE>

Minnesota Life Insurance Company and Subsidiaries
Consolidated Statements of Changes in Stockholder's Equity

Years ended December 31, 1998, 1997, and 1996

<TABLE>
<CAPTION>
1998 1997 1996
---------- ---------- ----------
(In thousands)
<S> <C> <C> <C>
Common stock:
Issued during the year $ 5,000 $ -- $ --
---------- ---------- ----------
Total common stock $ 5,000 $ -- $ --
========== ========== ==========
Retained earnings:
Beginning balance $1,380,012 $1,190,116 $1,059,598
Net income 163,349 189,896 130,518
Retained earnings transfer for common
stock issued (5,000) -- --
Dividends to stockholder (24,700) -- --
---------- ---------- ----------
Total retained earnings $1,513,661 $1,380,012 $1,190,116
========== ========== ==========
Accumulated other comprehensive income:
Beginning balance $ 156,673 $ 108,312 $ 153,252
Change in unrealized appreciation (de-
preciation) of investments 47,889 47,414 (44,940)
Change in unrealized gain on foreign
currency translation (947) 947 --
---------- ---------- ----------
Total accumulated other comprehensive
income $ 203,615 $ 156,673 $ 108,312
========== ========== ==========
Total stockholder's equity $1,722,276 $1,536,685 $1,298,428
========== ========== ==========
</TABLE>

See accompanying notes to consolidated financial statements.

69
<PAGE>

Minnesota Life Insurance Company and Subsidiaries
Consolidated Statements of Cash Flows

Years ended December 31, 1998, 1997, and 1996

<TABLE>
<CAPTION>
1998 1997 1996
----------- ----------- -----------
(In thousands)
<S> <C> <C> <C>
Cash Flows from Operating Activities
Net income $ 163,349 $ 189,896 $ 130,518
Adjustments to reconcile net income to
net cash provided by operating activi-
ties:
Interest credited to annuity and in-
surance contracts 265,841 276,719 275,968
Fees deducted from policy and con-
tract balances (212,901) (214,803) (206,780)
Change in future policy benefits 56,716 76,358 84,389
Change in other policyholders' lia-
bilities (20,802) 7,597 16,099
Change in deferred policy acquisition
costs (18,042) (26,878) (19,284)
Change in premiums due and other re-
ceivables 5,421 (9,280) (26,142)
Change in federal income tax liabili-
ties 15,589 36,049 (38,113)
Net realized investment gains (114,652) (114,367) (55,574)
Other, net 32,380 (23,213) 56,045
----------- ----------- -----------
Net cash provided by operating ac-
tivities 172,899 198,078 217,126
----------- ----------- -----------
Cash Flows from Investing Activities
Proceeds from sales of:
Fixed maturity securities, available-
for-sale 1,835,726 1,099,114 877,682
Equity securities 523,617 601,936 352,901
Mortgage loans -- -- 15,567
Real estate 7,800 9,279 11,678
Other invested assets 21,682 26,877 12,280
Proceeds from maturities and repayments
of:
Fixed maturity securities, available-
for-sale 414,726 403,829 329,550
Fixed maturity securities, held-to-
maturity 148,848 139,394 114,222
Mortgage loans 126,066 109,246 94,703
Purchases of:
Fixed maturity securities, available-
for-sale (2,384,720) (1,498,048) (1,228,048)
Fixed maturity securities, held-to-
maturity (99,530) (82,835) (60,612)
Equity securities (516,907) (585,349) (446,599)
Mortgage loans (141,008) (157,247) (108,691)
Real estate (5,612) (3,908) (3,786)
Other invested assets (75,682) (55,988) (29,271)
Finance receivable originations or pur-
chases (77,141) (115,248) (175,876)
Finance receivable principal payments 109,277 133,762 142,723
Other, net 141,768 (88,626) (40,062)
----------- ----------- -----------
Net cash provided by (used for) in-
vesting activities 28,910 (63,812) (141,639)
----------- ----------- -----------
Cash Flows from Financing Activities
Deposits credited to annuity and insur-
ance contracts 952,622 928,696 657,405
Withdrawals from annuity and insurance
contracts (1,053,844) (1,013,588) (702,681)
Proceeds from issuance of debt 40,000 -- 60,000
Payments on debt (31,000) (21,000) (21,000)
Other, net (6,023) (3,355) (6,898)
----------- ----------- -----------
Net cash used for financing activi-
ties (98,245) (109,247) (13,174)
----------- ----------- -----------
Net increase in cash and short-term in-
vestments 103,564 25,019 62,313
Cash and short-term investments, begin-
ning of year 208,531 183,512 121,199
----------- ----------- -----------
Cash and short-term investments, end of
year $ 312,095 $ 208,531 $ 183,512
=========== =========== ===========
</TABLE>

See accompanying notes to consolidated financial statements.

70
<PAGE>

Minnesota Life Insurance Company and Subsidiaries

Notes to Consolidated Financial Statements
(1) Nature of Operations

Conversion to a Mutual Holding Company Structure
Consent was given from the Minnesota Department of Commerce (Department of
Commerce) allowing The Minnesota Mutual Life Insurance Company to implement a
conversion to a mutual holding company. The Minnesota Mutual Life Insurance
Company enacted this privilege effective October 1, 1998. The conversion
created Minnesota Mutual Companies, Inc., a mutual holding company, Securian
Holding Company and Securian Financial Group, Inc., which are intermediate
stock holding companies. The Minnesota Mutual Life Insurance Company was
converted into a stock life insurance company and renamed Minnesota Life
Insurance Company. Minnesota Mutual Companies, Inc. will at all times, in
accordance with the conversion plan and as required by the Mutual Insurance
Holding Company Act, directly or indirectly control Minnesota Life Insurance
Company through the ownership of at least a majority of the voting power of the
voting shares of the capital stock of Minnesota Life Insurance Company. Annuity
contract and life insurance policyholders of Minnesota Life Insurance Company
have certain membership interests consisting primarily of the right to vote on
certain matters involving Minnesota Mutual Companies, Inc. and the right to
receive distributions of surplus in the event of demutualization, dissolution
or liquidation of Minnesota Mutual Companies, Inc.

Description of Business
Minnesota Life Insurance Company, both directly and through its subsidiaries
(collectively, the Company), 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 five strategic business
units which focus on various markets: Individual Insurance, Financial Services,
Group Insurance, Pension and Asset Management. Revenues in 1998 for these
business units were $862,240,000, $273,511,000, $258,928,000, $102,061,000 and
$20,723,000, respectively. Additional revenues of $115,702,000 were reported by
the Company's subsidiaries.
The Company serves over six million people through more than 4,000 associates
located at its St. Paul, Minnesota headquarters and in 75 general agencies and
45 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 Life Insurance Company and its subsidiaries. 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.

71
<PAGE>

Minnesota Life Insurance Company and Subsidiaries

Notes to Consolidated Financial Statements (continued)

(2) Summary of Significant Accounting Policies (continued)

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
policy acquisition costs are amortized over the premium paying period in
proportion to the ratio of annual premium revenues to ultimate anticipated
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 policy
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 policy acquisition costs amortized were $148,098,000, $128,176,000
and $125,978,000 for the years ended December 31, 1998, 1997 and 1996,
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

72
<PAGE>

Minnesota Life Insurance Company and Subsidiaries

Notes to Consolidated Financial Statements (continued)

(2) Summary of Significant Accounting Policies (continued)

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.
Venture capital limited partnerships are carried at cost, net of write-downs
for other than temporary declines in value and allowances for temporary
declines in value. Cash distributions are recorded as a return of capital
and/or income as appropriate. In-kind distributions are recorded as a return of
capital for the cost basis of the stock received.
Real estate is carried at cost less accumulated depreciation and an allowance
for estimated losses. Accumulated depreciation on real estate at December 31,
1998 and 1997, was $6,713,000 and $6,269,000, respectively.
Policy loans are carried at the unpaid principal balance.

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 1997. The swaps were carried at fair value, which were
based upon dealer quotes. Changes in fair value were recorded directly in
stockholder's equity. Upon settlement of the swaps, gains or losses were
recognized in income, and the Company realized a loss of approximately
$31,000,000 in 1997, upon settlement of these equity swaps.
The Company began investing in international bonds denominated in foreign
currencies in 1997. Unrealized gains or losses are recorded on foreign
denominated securities due to the fluctuation in foreign currency exchange
rates and/or related payables and receivables and interest on foreign
securities. 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.
Realized and unrealized gains and losses on these forward foreign exchange
contracts are recorded in income as incurred. In addition, these contracts are
generally short-term in nature and there is no material exposure to the Company
at December 31, 1998. Notional amounts for the years ended December 31, 1998
and 1997, were $115,194,000 and $80,997,000, respectively.

73
<PAGE>

Minnesota Life Insurance Company and Subsidiaries

Notes to Consolidated Financial Statements (continued)

(2) Summary of Significant Accounting Policies (continued)

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 stockholder's equity,
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
$101,692,000 and $90,926,000 at December 31, 1998 and 1997, 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,
1998, 1997 and 1996, were $10,765,000, $8,965,000 and $6,454,000, 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 policyholders 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, included with separate account assets, amounted to
$46,945,000 and $46,293,000 at December 31, 1998 and 1997, respectively.

Policyholders' 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 policyholders' funds are comprised of dividend accumulations, premium
deposit funds and supplementary contracts without life contingencies.

Participating Business
Dividends on participating policies and other discretionary payments are
declared by the Board of Directors 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.

74
<PAGE>

Minnesota Life Insurance Company and Subsidiaries

Notes to Consolidated Financial Statements (continued)

(2) Summary of Significant Account Policies (continued)

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 1997 and 1996 consolidated financial statement balances have been
reclassified to conform to the 1998 presentation.

(3) Investments

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

<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
(In thousands)
<S> <C> <C> <C>
Fixed maturity securities $445,220 $457,391 $433,985
Equity securities 12,183 16,182 14,275
Mortgage loans 54,785 55,929 63,865
Real estate (236) (407) (475)
Policy loans 15,502 15,231 13,828
Short-term investments 6,147 6,995 6,535
Other invested assets 3,826 3,871 4,901
-------- -------- --------
Gross investment income 537,427 555,192 536,914
Investment expenses (6,346) (1,419) (5,927)
-------- -------- --------
Total $531,081 $553,773 $530,987
======== ======== ========

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

<CAPTION>
1998 1997 1996
-------- -------- --------
(In thousands)
<S> <C> <C> <C>
Fixed maturity securities $ 43,244 $ 3,711 $ (6,536)
Equity securities 47,526 92,765 57,770
Mortgage loans 3,399 2,011 (721)
Real estate 7,809 1,598 7,088
Other invested assets 12,674 14,282 (2,027)
-------- -------- --------
Total $114,652 $114,367 $ 55,574
======== ======== ========

Gross realized gains (losses) on the sales of fixed maturity securities and
equity securities for the years ended December 31 were as follows:

<CAPTION>
1998 1997 1996
-------- -------- --------
(In thousands)
<S> <C> <C> <C>
Fixed maturity securities, available-for-sale:
Gross realized gains $ 56,428 $ 18,804 $ 19,750
Gross realized losses (13,184) (15,093) (26,286)
Equity securities:
Gross realized gains 107,342 120,437 79,982
Gross realized losses (59,816) (27,672) (22,212)
</TABLE>

75
<PAGE>

Minnesota Life Insurance Company and Subsidiaries

Notes to Consolidated Financial Statements (continued)

(3)Investments (continued)

Net unrealized gains (losses) included in stockholder's equity at December 31
were as follows:

<TABLE>
<CAPTION>
1998 1997
--------- ---------
(In thousands)
<S> <C> <C>
Gross unrealized gains $ 487,479 $ 472,671
Gross unrealized losses (73,440) (118,863)
Adjustment to deferred acquisition costs (119,542) (100,299)
Adjustment to unearned policy and contract fees 15,912 (13,087)
Deferred federal income taxes (106,794) (83,749)
--------- ---------
Net unrealized gains $ 203,615 $ 156,673
========= =========
</TABLE>

76
<PAGE>

Minnesota 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, 1998
Available-for-sale:
United States government and
government agencies and
authorities $ 195,650 $ 17,389 $ 201 $ 212,838
Foreign governments 784 -- 311 473
Corporate securities 2,357,861 204,277 30,648 2,531,490
International bond securities 188,448 22,636 1,298 209,786
Mortgage-backed securities 1,924,945 52,580 18,100 1,959,425
---------- -------- -------- ----------
Total fixed maturities 4,667,688 296,882 50,558 4,914,012
Equity securities-unaffiliated 463,777 157,585 15,057 606,305
Equity securities-affiliated
mutual funds 115,769 27,726 -- 143,495
---------- -------- -------- ----------
Total equity securities 579,546 185,311 15,057 749,800
---------- -------- -------- ----------
Total available-for-sale 5,247,234 482,193 65,615 5,663,812
Held-to maturity:
Corporate securities 894,064 67,496 235 961,325
Mortgage-backed securities 192,484 9,030 1,055 200,459
---------- -------- -------- ----------
Total held-to-maturity 1,086,548 76,526 1,290 1,161,784
---------- -------- -------- ----------
Total $6,333,782 $558,719 $ 66,905 $6,825,596
========== ======== ======== ==========
<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
government agencies and authori-
ties $ 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 mu-
tual funds 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
========== ======== ======== ==========
</TABLE>

77
<PAGE>

Minnesota 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, 1998, 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 $ 38,375 $ 35,299 $ 11,109 $ 11,346
Due after one year through five
years 529,019 616,064 128,658 133,657
Due after five years through ten
years 1,251,763 1,316,512 373,294 403,159
Due after ten years 923,586 986,712 381,003 413,163
---------- ---------- ---------- ----------
2,742,743 2,954,587 894,064 961,325
Mortgage-backed securities 1,924,945 1,959,425 192,484 200,459
---------- ---------- ---------- ----------
Total $4,667,688 $4,914,012 $1,086,548 $1,161,784
========== ========== ========== ==========
</TABLE>

At December 31, 1998 and 1997, fixed maturity securities and short-term
investments with a carrying value of $6,361,000 and $8,000,000, respectively,
were on deposit with various regulatory authorities as required by law.
Allowances for credit losses on investments are reflected on the consolidated
balance sheets as a reduction of the related assets and were as follows:

<TABLE>
<CAPTION>
1998 1997
------- -------
(In thousands)
<S> <C> <C>
Mortgage loans $ 1,500 $ 1,500
Investment real estate 841 2,248
------- -------
Total $ 2,341 $ 3,748
======= =======
</TABLE>

At December 31, 1998, the recorded investment in mortgage loans that were
considered to be impaired was $8,798 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, 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.
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, 1998 and 1997.

Changes in the allowance for credit losses on mortgage loans were as follows:

<TABLE>
<CAPTION>
1998 1997 1996
------ ------ ------
(In thousands)
<S> <C> <C> <C>
Balance at beginning of year $1,500 $1,895 $1,711
Provision for credit losses -- -- 381
Charge-offs -- (395) (197)
------ ------ ------
Balance at end of year $1,500 $1,500 $1,895
====== ====== ======
</TABLE>

78
<PAGE>

Minnesota 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>
1998 1997 1996
---- ------ ------
(In thousands)
<S> <C> <C> <C>
Average impaired mortgage loans $14 $3,268 $9,375
Interest income on impaired mortgage loans--contractual 18 556 1,796
Interest income on impaired mortgage loans--collected 17 554 1,742
</TABLE>

(4) Notes Receivable

In connection with the Company's planned construction of an additional home
office facility in St. Paul, Minnesota, the Company entered into a loan
contingency agreement with the Housing and Redevelopment Authority of the City
of St. 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, 1998, HRA has
drawn $9,669,128 on this loan contingency agreement and accrued interest of
$673,435.

(5) Net Finance Receivables

Finance receivables as of December 31 were as follows:

<TABLE>
<CAPTION>
1998 1997
-------- --------
(In thousands)
<S> <C> <C>
Direct installment loans $147,425 $183,424
Retail installment notes 12,209 20,373
Retail revolving credit 17,170 25,426
Accrued interest 2,683 3,116
-------- --------
Gross receivables 179,487 232,339
Allowance for uncollectible amounts (16,076) (20,545)
-------- --------
Finance receivables, net $163,411 $211,794
======== ========
</TABLE>

Direct installment loans at December 31, 1998, consisted of $81,066,000 of
discount basis loans (net of unearned finance charges) and $66,359,000 of
interest-bearing loans. Direct installment loans at December 31, 1997,
consisted of $83,836,000 of discount basis loans (net of unearned finance
charges) and $99,588,000 of interest-bearing loans. 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 $44,000,000 and $65,000,000 of
real estate secured loans at December 31, 1998 and 1997, respectively.
Revolving credit loans included approximately $16,000,000 and $24,000,000 of
real estate secured loans at December 31, 1998 and 1997, 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
$75,011,000, $90,940,000 and $92,438,000 and the percentage of these cash
collections to the average net balances were 47%, 47% and 48% for the years
ended December 31, 1998, 1997 and 1996, respectively.

79
<PAGE>

Minnesota 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>
1998 1997 1996
------- ------- -------
(In thousands)
<S> <C> <C> <C>
Balance at beginning of year $20,545 $ 7,497 $ 6,377
Provision for credit losses 10,712 28,206 10,086
Charge-offs (18,440) (17,869) (11,036)
Recoveries 3,259 2,711 2,070
------- ------- -------
Balance at end of year $16,076 $20,545 $ 7,497
======= ======= =======
</TABLE>

At December 31, 1998, 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, 1998 and the related allowance for
credit losses were as follows:

<TABLE>
<CAPTION>
Installment Revolving
Loans Credit Total
----------- --------- -------
(In thousands)
<S> <C> <C> <C>
Balances at December 31, 1998 $7,546 11,190 $18,736
Related allowance for credit losses $3,033 5,486 $ 8,519
</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 1998. The
average quarterly balances of impaired loans during the year ended December 31,
1998 and 1997, was $6,354,000 and $7,397,000, respectively, for installment
basis loans and $12,471,000 and $12,793,000, respectively for 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, 1998.

(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>
1998 1997 1996
------- ------- -------
(In thousands)
<S> <C> <C> <C>
Computed tax expense $84,553 $93,337 $69,753
Difference between computed and actual tax ex-
pense:
Dividends received deduction (1,730) (5,573) (2,534)
Special tax on mutual life insurance companies (3,455) 3,341 2,760
Sale of subsidiary -- (4,408) --
Foundation gain -- (4,042) (1,260)
Tax credits (4,416) (3,600) (3,475)
Expense adjustments and other 3,281 (2,275) 3,533
------- ------- -------
Total tax expense $78,233 $76,780 $68,777
======= ======= =======
</TABLE>

80
<PAGE>

Minnesota 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>
1998 1997
-------- --------
(In thousands)
<S> <C> <C>
Deferred tax assets:
Policyholders' liabilities $ 16,999 $ 14,374
Pension and post retirement benefits 27,003 23,434
Tax deferred policy acquisition costs 82,940 73,134
Net realized capital losses 8,221 9,609
Other 18,487 20,524
-------- --------
Gross deferred tax assets 153,650 141,075
-------- --------
Deferred tax liabilities:
Deferred policy acquisition costs 155,655 152,337
Real estate and property and equipment depreciation 10,275 11,165
Basis difference on investments 10,798 11,061
Net unrealized capital gains 143,354 122,876
Other 7,475 9,693
-------- --------
Gross deferred tax liabilities 327,557 307,132
-------- --------
Net deferred tax liability $173,907 $166,057
======== ========
</TABLE>

A valuation allowance for deferred tax assets was not considered necessary as
of December 31, 1998 and 1997, 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, 1998, 1997 and 1996, were
$91,259,000, $71,108,000 and $79,026,000, respectively.
The Company's tax returns for 1997, 1996 and 1995 are under examination by
the Internal Revenue Service. The Company believes additional taxes, if any,
assessed as a result of these examinations, will not have a material effect on
its financial position.

81
<PAGE>

Minnesota Life Insurance Company and Subsidiaries

Notes to Consolidated Financial Statements (continued)

(7) Liability for Unpaid Accident and Health Claims, Reserve for Losses, and
Claim and Loss Adjustment Expenses

Activity in the liability for unpaid accident and health claims, reserve for
losses and claim and loss adjustment expenses is summarized as follows:

<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
(In thousands)
<S> <C> <C> <C>
Balance at January 1 $409,249 $416,910 $377,302
Less: reinsurance recoverable 104,741 102,161 80,333
-------- -------- --------
Net balance at January 1 304,508 314,749 296,969
-------- -------- --------
Incurred related to:
Current year 92,793 121,153 134,727
Prior years 14,644 7,809 4,821
-------- -------- --------
Total incurred 107,437 128,962 139,548
-------- -------- --------
Paid related to:
Current year 27,660 51,275 51,695
Prior years 58,124 57,475 70,073
-------- -------- --------
Total paid 85,784 108,750 121,768
-------- -------- --------
Decrease in liabilities due to sale of subsidiary -- 30,453 --
-------- -------- --------
Net balance at December 31 326,161 304,508 314,749
Plus: reinsurance recoverable 108,918 104,741 102,161
-------- -------- --------
Balance at December 31 $435,079 $409,249 $416,910
======== ======== ========
</TABLE>

The liability for unpaid accident and health claims, reserve for losses and
claim and loss 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, reserve for losses and claim and loss adjustment
expenses incurred increased by $14,644,000, $7,809,000 and $4,821,000 in 1998,
1997 and 1996, respectively. These amounts are the result of normal reserve
development inherent in the uncertainty of establishing the liability for
unpaid accident and health claims, reserve for losses and claim and loss
adjustment expenses.

(8) Employee Benefit Plans

Pension Plans and Post Retirement Plans Other than Pensions
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.
The Company also has unfunded post retirement 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.

82
<PAGE>

Minnesota Life Insurance Company and Subsidiaries

Notes to Consolidated Financial Statements (continued)

(8) Employee Benefit Plans (continued)

The change in the benefit obligation and plan assets for the Company's plans
as of December 31 was calculated as follows:

<TABLE>
<CAPTION>
Pension Benefits Other Benefits
------------------ ------------------
1998 1997 1998 1997
-------- -------- -------- --------
(In thousands)
<S> <C> <C> <C> <C>
Change in benefit obligation:
Benefit obligation at beginning of
year $151,509 $134,959 $ 24,467 $ 24,836
Service cost 8,402 6,847 1,375 1,047
Interest cost 10,436 9,956 1,713 1,872
Amendments 6 -- -- (99)
Actuarial gain 16,298 3,816 4,542 (1,930)
Benefits paid (5,212) (4,069) (861) (1,259)
-------- -------- -------- --------
Benefit obligation at end of year $181,439 $151,509 $ 31,236 $ 24,467
======== ======== ======== ========
Change in plan assets:
Fair value of plan assets at the
beginning of the year $133,505 $118,963 $ -- $ --
Actual return on plan assets 13,068 13,670 -- --
Employer contribution 5,349 4,940 861 1,259
Benefits paid (5,212) (4,069) (861) (1,259)
-------- -------- -------- --------
Fair value of plan assets at the
end of year $146,710 $133,504 $ -- $ --
======== ======== ======== ========
Funded status $(34,729) $(18,005) $(31,236) $(24,467)
Unrecognized net actuarial loss
(gain) 12,283 (1,735) (6,251) (11,353)
Unrecognized prior service cost
(benefit) 5,293 5,865 (2,986) (3,499)
-------- -------- -------- --------
Net amount recognized $(17,153) $(13,875) $(40,473) $(39,319)
======== ======== ======== ========
Amounts recognized in the balance
sheet statement consist of:
Accrued benefit cost $(23,242) $(18,059) $(40,473) $(39,319)
Intangible asset 6,089 4,184 -- --
-------- -------- -------- --------
Net amount recognized $(17,153) $(13,875) $(40,473) $(39,319)
======== ======== ======== ========
</TABLE>

<TABLE>
<CAPTION>
Pension Other
Benefits Benefits
----------- -----------
1998 1997 1998 1997
----- ----- ----- -----
<S> <C> <C> <C> <C>
Weighted average assumptions as of December 31
Discount rate 7.00% 7.48% 7.00% 7.50%
Expected return on plan assets 8.27% 8.32% -- --
Rate of compensation increase 5.32% 5.29% -- --
</TABLE>

83
<PAGE>

Minnesota Life Insurance Company and Subsidiaries

Notes to Consolidated Financial Statements (continued)

(8) Employee Benefit Plans (continued)

For measurement purposes, an 8 percent annual rate of increase in the per
capita cost of covered health care benefits was assumed for 1999. The rate was
assumed to decrease gradually to 5.5 percent for 2003 and remain at that level
thereafter.

<TABLE>
<CAPTION>
Pension Benefits Other Benefits
----------------------- ----------------------
1998 1997 1996 1998 1997 1996
------- ------ ------ ------ ------ ------
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
Components of net periodic
benefit cost
Service cost $ 8,402 $6,847 $6,315 $1,375 $1,047 $1,041
Interest cost 10,436 9,956 8,852 1,713 1,872 2,074
Expected return on plan as-
sets (10,978) (9,859) (8,751) -- -- --
Amortization of prior serv-
ice cost (benefits) 578 578 578 (513) (510) (501)
Recognized net actuarial
loss (gain) 190 77 10 (559) (480) (177)
------- ------ ------ ------ ------ ------
Net periodic benefit cost $ 8,628 $7,599 $7,004 $2,016 $1,929 $2,437
======= ====== ====== ====== ====== ======
</TABLE>

The projected benefit obligation, accumulated benefit obligation, and fair
vale of plan assets for the pension plan with accumulated benefit obligations
in excess of plan assets were $39,470,000, $31,546,000 and $17,334,000 as of
December 31, 1998, respectively, and $32,622,000, $24,894,000 and $16,703,000
respectively, as of December 31, 1997.
The assumptions presented herein are based on pertinent information available
to management as of December 31, 1998 and 1997. 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 post retirement benefit obligation as of December 31, 1998 by
$5,875,000 and the estimated eligibility cost and interest cost components of
net periodic benefit costs for 1998 by $788,000. Decreasing the assumed health
care cost trend rates by one percentage point in each year would decrease the
post retirement benefit obligation as of December 31, 1998 by $4,618,000 and
the estimated eligibility cost and interest cost components of net periodic
post retirement benefit costs for 1998 by $598,000.

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 directors 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
1998, 1997 and 1996 of $8,395,000, $7,173,000 and $6,092,000, respectively.
Participants may elect to receive a portion of their contributions in cash.

(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.

84
<PAGE>

Minnesota Life Insurance Company and Subsidiaries

Notes to Consolidated Financial Statements (continued)

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

<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
(In thousands)
<S> <C> <C> <C>
Direct premiums $553,408 $595,686 $615,098
Reinsurance assumed 91,548 78,097 64,489
Reinsurance ceded (67,263) (58,530) (67,228)
-------- -------- --------
Net premiums $577,693 $615,253 $612,359
======== ======== ========
</TABLE>

Reinsurance recoveries on ceded reinsurance contracts were $54,174,000,
$58,072,000 and $72,330,000 during 1998, 1997 and 1996, 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, 1998 and 1997.
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,
1998 and 1997, 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,
1998 and 1997, 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, 1998 and 1997
as those investment 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.

85
<PAGE>

Minnesota 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>
1998 1997
--------------------- ---------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
---------- ---------- ---------- ----------
(In thousands)
<S> <C> <C> <C> <C>
Fixed maturity securities:
Available-for-sale $4,914,012 $4,914,012 $4,719,801 $4,719,801
Held-to-maturity 1,086,548 1,161,784 1,088,312 1,158,227
Equity securities 749,800 749,800 686,638 686,638
Mortgage loans:
Commercial 579,890 603,173 506,860 527,994
Residential 101,329 104,315 154,477 158,334
Policy loans 226,409 226,409 213,488 213,488
Short-term investments 136,435 136,435 112,352 112,352
Cash 175,660 175,660 96,179 96,179
Finance receivables, net 163,411 163,411 211,794 211,794
Venture capital 160,958 164,332 115,856 122,742
Foreign currency exchange con-
tract 1,594 1,594 1,457 1,457
---------- ---------- ---------- ----------
Total financial assets $8,296,046 $8,400,925 $7,907,214 $8,009,006
========== ========== ========== ==========
</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>
1998 1997
--------------------- ---------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
---------- ---------- ---------- ----------
(In thousands)
<S> <C> <C> <C> <C>
Deferred annuities $2,085,408 $2,075,738 $2,131,806 $2,112,301
Annuity certain contracts 57,528 60,766 55,431 57,017
Other fund deposits 722,321 731,122 754,960 753,905
Guaranteed investment contracts 862 862 8,188 8,187
Supplementary contracts without
life contingencies 44,696 44,251 46,700 45,223
Notes payable 267,000 272,834 298,000 302,000
---------- ---------- ---------- ----------
Total financial liabilities $3,177,815 $3,185,573 $3,295,085 $3,278,633
========== ========== ========== ==========
</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 policyholders' 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. The approved accrued interest
was $3,008,000 as of December 31, 1998 and 1997. The issuance costs of
$1,421,000 are deferred and amortized over 30 years on straight-line basis.

86
<PAGE>

Minnesota 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>
1998 1997
-------- --------
(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 142,000 173,000
-------- --------
Total notes payable $267,000 $298,000
======== ========
</TABLE>

At December 31, 1998, the aggregate minimum annual notes payable maturities
for the next five years were as follows: 1999, $49,000,000; 2000, $33,000,000;
2001, $26,000,000; 2002, $22,000,000; 2003, $12,000,000; thereafter
$125,000,000.
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 $44,070,000. The consumer finance subsidiary was in compliance with all such
provisions at December 31, 1998.
Interest paid on debt for the years ended December 31, 1998, 1997 and 1996,
was $25,008,000, $18,197,000 and $21,849,000, respectively.

(13) Other Comprehensive Income

Effective December 31, 1998, the Company adopted the provisions of SFAS No.
130, "Reporting Comprehensive Income." Comprehensive income is defined as any
change in stockholder's equity originating from non-owner transactions. The
Company had identified those changes as being comprised of net income,
unrealized appreciation (depreciation) on securities, and unrealized foreign
currency translation adjustments. The components of comprehensive income, other
than net income are illustrated below:

<TABLE>
<CAPTION>
1998 1997 1996
------- ------- --------
(In thousands)
<S> <C> <C> <C>
Other comprehensive income, before tax:
Foreign currency translation adjustment $ -- $ 1,457 $ --
Less: reclassification adjustment for gains in-
cluded in net income (1,457) -- --
------- ------- --------
(1,457) 1,457 --
Unrealized gains (loss) on securities 162,214 171,654 (18,746)
Less: reclassification adjustment for gains in-
cluded in net income (90,770) (96,476) (51,234)
------- ------- --------
71,444 75,178 (69,980)
Income tax expense related to items of other com-
prehensive income (23,045) (28,274) 25,040
------- ------- --------
Other comprehensive income, net of tax $46,942 $48,361 $(44,940)
======= ======= ========
</TABLE>

(14) Stock Dividends

On December 14, 1998, the Company declared and accrued a dividend to Securian
Financial Group, Inc. in the amount of $24,700,000 to be paid in 1999.
Dividend payments by Minnesota Life Insurance Company to its parent cannot
exceed the greater of 10% of statutory capital and surplus as of the preceding
year end or the statutory net gain from operations for the current calendar
year, without prior approval from the Department of Commerce. Based on this
limitation and 1997 statutory results, Minnesota Life Insurance Company could
have paid $87,069,000 in dividends in 1998 without prior approval.

87
<PAGE>

Minnesota Life Insurance Company and Subsidiaries

Notes to Consolidated Financial Statements (continued)

(15) Year 2000 (Unaudited)

The Company's business units utilize products and systems in the normal course
of business. Some of the Company's products and systems will have been replaced
or modified in order to process dates including the year 2000 and beyond.
The Company began preparing for the new millennium in the early 1980s by
designing systems with the year 2000 in mind. The Company began a comprehensive
Year 2000 project in 1995 to prepare all components of its business to function
properly before, during and after the year 2000.
The Company's goal is to have all computer systems and data prepared for the
year 2000. While the Company has taken extensive steps to renovate, upgrade and
replace applications, it is impossible to guarantee there will be no problems
associated with the year 2000 date change. The Company is currently developing
contingency and continuity plans to help minimize any impact of problems that
do arise.

(16) 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 $41,010,000 as of
December 31, 1998. 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 $165,191,000 as of December 31, 1998. The Company
estimates that $60,000,000 of these commitments will be invested in 1999, with
the remaining $105,191,000 invested over the next four years.
As of December 31, 1998, the Company had committed to purchase bonds and
mortgage loans totaling $198,907,000 but had not completed the purchase
transactions.
At December 31, 1998, the Company had guaranteed the payment of $75,100,000
in policyholders' dividends and discretionary amounts payable in 1999. The
Company has pledged bonds, valued at $76,596,000 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.

88
<PAGE>

Minnesota Life Insurance Company and Subsidiaries

Notes to Consolidated Financial Statements (continued)

(17) 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. The significant differences that exist between statutory and
GAAP accounting, and their effects are illustrated below:

<TABLE>
<CAPTION>
Year ended December
----------------------
1998 1997
---------- ----------
(In thousands)
<S> <C> <C>
Statutory capital and surplus $ 947,885 $ 870,688
Adjustments:
Deferred policy acquisition costs 564,382 576,030
Net unrealized investment gains 281,226 213,026
Statutory asset valuation reserve 239,455 242,100
Statutory interest maintenance reserve 49,915 24,169
Premiums and fees deferred or receivable (73,312) (74,025)
Change in reserve basis 117,806 101,415
Separate accounts (56,816) (51,172)
Unearned policy and contract fees (134,373) (126,477)
Surplus notes (125,000) (125,000)
Net deferred income taxes (173,907) (166,057)
Non-admitted assets 36,764 32,611
Policyholders' dividends 60,648 60,036
Other (12,397) (40,659)
---------- ----------
Stockholder's equity as reported in the accompanying
consolidated financial statements $1,722,276 $1,536,685
========== ==========
</TABLE>

<TABLE>
<CAPTION>
As of December 31
----------------------------
1998 1997 1996
-------- -------- --------
(In thousands)
<S> <C> <C> <C>
Statutory net income $104,609 $167,078 $115,797
Adjustments:
Deferred policy acquisition costs 18,042 26,878 19,284
Statutory interest maintenance reserve 25,746 (538) (8,192)
Premiums and fees deferred or receivable 708 2,175 1,587
Change in reserve basis 3,011 9,699 20,114
Separate accounts (5,644) (6,272) (6,304)
Unearned policy and contract fees (7,896) (12,825) (2,530)
Net deferred income taxes 15,351 7,832 (744)
Policyholders' dividends 1,194 2,708 502
Other 8,228 (6,839) (8,996)
-------- -------- --------
Net income as reported in the accompanying
consolidated financial statements $163,349 $189,896 $130,518
======== ======== ========
</TABLE>

89
<PAGE>

Minnesota Life Insurance Company and Subsidiaries

Schedule I

Summary of Investments--Other than Investments in Related Parties

December 31, 1998

<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 $ 195,650 $ 212,838 $ 212,838
Foreign governments 784 473 473
Public utilities 343,230 368,246 357,795
Mortgage-backed securities 2,117,429 2,159,884 2,151,909
All other corporate bonds 3,097,143 3,334,355 3,277,545
---------- ---------- ----------
Total bonds 5,754,236 6,075,796 6,000,560
---------- ---------- ----------
Equity securities:
Common stocks:
Public utilities 14,403 18,472 18,472
Banks, trusts and insurance companies 42,538 43,615 43,615
Industrial, miscellaneous and all
other 495,635 659,177 659,177
Nonredeemable preferred stocks 26,970 28,536 28,536
---------- ---------- ----------
Total equity securities 579,546 749,800 749,800
---------- ---------- ----------
Mortgage loans on real estate 681,219 XXXXXX 681,219
Real estate (2) 38,530 XXXXXX 38,530
Policy loans 226,409 XXXXXX 226,409
Other long-term investments 261,625 XXXXXX 261,625
Short-term investments 136,435 XXXXXX 136,435
---------- ---------- ----------
Total 1,344,218 -- 1,344,218
---------- ---------- ----------
Total investments $7,678,000 $6,825,596 $8,094,578
========== ========== ==========
</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

See independent auditors' report.

90
<PAGE>

Minnesota Life Insurance Company and Subsidiaries
Schedule III
Supplementary Insurance Information
(In thousands)

<TABLE>
<CAPTION>
As of December 31 For the years ended December 31
--------------------------------------------------- -----------------------------------------------------------
Future policy Amortization
Deferred benefits Other policy Benefits, of deferred
policy losses, claims claims and Net claims, losses policy Other
acquisition and settlement Unearned benefits Premium investment and settlement acquisition operating
Segment costs expenses(1) premiums(2) payable revenue(3) income expenses costs expenses
- ------- ----------- -------------- ----------- ------------ ---------- ---------- -------------- ------------ ---------
(In thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1998:
Life insurance $421,057 $2,303,580 $146,042 $51,798 $615,856 $246,303 $502,767 $114,589 $342,080
Accident and
health insurance 74,606 496,839 33,568 18,342 167,544 35,822 105,336 12,261 93,876
Annuity 68,719 3,186,148 25 424 93,992 247,970 225,004 21,248 136,527
Property and li-
ability insur-
ance -- 480 556 -- 662 986 2,848 -- 1,187
-------- ---------- -------- ------- -------- -------- -------- -------- --------
$564,382 $5,987,047 $180,191 $70,564 $878,054 $531,081 $835,955 $148,098 $573,670
======== ========== ======== ======= ======== ======== ======== ======== ========
1997:
Life insurance $434,012 $2,229,396 $166,704 $42,627 $576,468 $247,267 $476,747 $102,473 $345,938
Accident and
health insurance 70,593 466,109 34,250 17,153 205,869 40,343 87,424 9,451 101,960
Annuity 71,425 3,266,965 -- 4,576 64,637 261,768 242,738 16,252 129,263
Property and li-
ability insur-
ance -- 280 1,116 -- 40,316 4,395 33,773 -- 13,146
-------- ---------- -------- ------- -------- -------- -------- -------- --------
$576,030 $5,962,750 $202,070 $64,356 $887,290 $553,773 $840,682 $128,176 $590,307
======== ========== ======== ======= ======== ======== ======== ======== ========
1996:
Life insurance $456,461 $2,123,148 $149,152 $51,772 $568,874 $223,762 $478,228 $ 97,386 $290,525
Accident and
health insurance 62,407 437,118 33,770 18,774 160,097 34,202 96,743 14,017 87,222
Annuity 70,649 3,360,614 -- 31 79,245 267,473 243,387 14,575 111,366
Property and li-
ability insur-
ance -- 27,855 24,189 -- 50,109 5,550 36,933 -- 19,033
-------- ---------- -------- ------- -------- -------- -------- -------- --------
$589,517 $5,948,735 $207,111 $70,577 $858,325 $530,987 $855,291 $125,978 $508,146
======== ========== ======== ======= ======== ======== ======== ======== ========
<CAPTION>
Premiums
Segment written(4)
- ------- ----------
<S> <C>
1998:
Life insurance
Accident and
health insurance
Annuity
Property and li-
ability insur-
ance 103
----------
$ 103
==========
1997:
Life insurance
Accident and
health insurance
Annuity
Property and li-
ability insur-
ance 43,376
----------
$43,376
==========
1996:
Life insurance
Accident and
health insurance
Annuity
Property and li-
ability insur-
ance 50,515
----------
$50,515
==========
</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

See independent auditors' report.

91
<PAGE>

Minnesota Life Insurance Company and Subsidiaries
Schedule IV

Reinsurance

For the years ended December 31, 1998, 1997 and 1996

<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>
1998:
Life insurance in
force $158,229,143 $18,656,917 $28,559,482 $168,131,708 17.0%
============ =========== =========== ============
Premiums:
Life insurance $ 338,909 $ 30,532 $ 71,198 $ 379,575 18.8%
Accident and health
insurance 180,081 17,894 1,432 163,619 0.9%
Annuity 33,837 -- -- 33,837 --
Property and liabil-
ity insurance 581 18,837 18,918 662 2857.7%
------------ ----------- ----------- ------------
Total premiums $ 553,408 $ 67,263 $ 91,548 $ 577,693 15.8%
============ =========== =========== ============
1997:
Life insurance in
force $122,120,394 $14,813,351 $25,566,734 $132,873,777 19.2%
============ =========== =========== ============
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 liabil-
ity 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 liabil-
ity insurance 55,782 5,729 56 50,109 0.1%
------------ ----------- ----------- ------------
Total premiums $ 615,098 $ 67,228 $ 64,489 $ 612,359 10.5%
============ =========== =========== ============
</TABLE>

See independent auditors' report.

<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 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 value on the preceding monthly valuation date
($1.150000) to produce a ratio of 1.008696.

A-1
<PAGE>

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 of Minnesota Life Insurance Company
and Contract Owners of 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 Variable Fund D (the Account), formerly
Minnesota Mutual Variable Fund D, as of December 31, 1998 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, 1998 were verified by examination
of the underlying portfolios of Advantus 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 Variable Fund D at December 31, 1998 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 26, 1999

<PAGE>

VARIABLE FUND D
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
<TABLE>
<CAPTION>

SEGREGATED SUB-ACCOUNTS
--------------------------------------
MONEY
ASSETS GROWTH BOND MARKET
------ ------------ ------------ ------------
<S> <C> <C> <C>
Investments in shares of Advantus Series Fund, Inc.:
Growth Portfolio, 35,506,082 shares at net asset value of $2.74 per share
(cost $63,748,416). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 97,212,066 - -
Bond Portfolio, 313,546 shares at net asset value of $1.31 per share
(cost $405,836) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 410,056 -
Money Market Portfolio, 377,567 shares at net asset value of $1.00 per
share (cost $377,567) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - - 377,567
Asset Allocation Portfolio, 3,154,258 shares at net asset value of $2.28 per
share (cost $5,279,973) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - - -
Mortgage Securities Portfolio, 129,721 shares at net asset value of $1.22
per share (cost $153,771) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - - -
Index 500 Portfolio, 1,081,332 shares at net asset value of $3.91 per share
(cost $2,770,076) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - - -
Small Company Portfolio, 209,646 shares at net asset value of $1.68
per share (cost $328,919) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - - -
------------ ------------ ------------
97,212,066 410,056 377,567

Receivable from Advantus Series Fund, Inc. for investments sold . . . . . . . . . . . . . 135,124 9 8
Receivable from Minnesota Life for contract purchase payments . . . . . . . . . . . . . . 2,358 - 43
------------ ------------ ------------
Total assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97,349,548 410,065 377,618
------------ ------------ ------------

LIABILITIES

Payable to Advantus Series Fund, Inc. for investments purchased 2,358 - 43
Payable to Minnesota Life for contract terminations
and mortality and expense charges 135,124 9 8
------------ ------------ ------------
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137,482 9 51
------------ ------------ ------------
Net assets applicable to annuity contract owners. . . . . . . . . . . . . . . . $ 97,212,066 410,056 377,567
------------ ------------ ------------
------------ ------------ ------------

CONTRACT OWNERS' EQUITY

Contracts in accumulation period, accumulation units outstanding of 3,881,390
for Growth; 222,720 for Bond; 279,497 for Money Market; 2,377,329 for
Asset Allocation; 89,045 for Mortgage Securities; 949,618 for Index 500
and 177,501 for Small Company. . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 95,620,265 410,056 377,567
Contracts in annuity payment period (note 2). . . . . . . . . . . . . . . . . . . . . . . 1,591,801 - -
------------ ------------ ------------
Total contract owners' equity $ 97,212,066 410,056 377,567
------------ ------------ ------------
------------ ------------ ------------
NET ASSET VALUE PER ACCUMULATION UNIT . . . . . . . . . . . . . . . . . . . . . . . . . . $ 24.63 1.84 1.35
------------ ------------ ------------
------------ ------------ ------------

<CAPTION>
ASSET MORTGAGE INDEX SMALL
ASSETS ALLOCATION SECURITIES 500 COMPANY
------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Investments in shares of Advantus Series Fund, Inc.:
Growth Portfolio, 35,506,082 shares at net asset value of $2.74 per share
(cost $63,748,416) . . . . . . . . . . . . . . . . . . . . . . . . . . . . - - - -
Bond Portfolio, 313,546 shares at net asset value of $1.31 per share
(cost $405,836). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - - - -
Money Market Portfolio, 377,567 shares at net asset value of $1.00 per
share (cost $377,567). . . . . . . . . . . . . . . . . . . . . . . . . . . - - - -
Asset Allocation Portfolio, 3,154,258 shares at net asset value of $2.28 per
share (cost $5,279,973). . . . . . . . . . . . . . . . . . . . . . . . . . 7,188,101 - - -
Mortgage Securities Portfolio, 129,721 shares at net asset value of $1.22
per share (cost $153,771). . . . . . . . . . . . . . . . . . . . . . . . . - 157,962 - -
Index 500 Portfolio, 1,081,332 shares at net asset value of $3.91 per share
(cost $2,770,076). . . . . . . . . . . . . . . . . . . . . . . . . . . . . - - 4,227,927 -
Small Company Portfolio, 209,646 shares at net asset value of $1.68
per share (cost $328,919). . . . . . . . . . . . . . . . . . . . . . . . . - - - 351,218
------------ ------------ ------------ ------------
7,188,101 157,962 4,227,927 351,218

Receivable from Advantus Series Fund, Inc. for investments sold. . . . . . . . . 160 4 111 4
Receivable from Minnesota Life for contract purchase payments. . . . . . . . . . 1,331 - - -
------------ ------------ ------------ ------------
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,189,592 157,966 4,228,038 351,222
------------ ------------ ------------ ------------

LIABILITIES

Payable to Advantus Series Fund, Inc. for investments purchased. . . . . . . . . 1,331 - - -
Payable to Minnesota Life for contract terminations
and mortality and expense charges . . . . . . . . . . . . . . . . . . . . . . 160 4 111 4
------------ ------------ ------------ ------------
Total liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . 1,491 4 111 4
------------ ------------ ------------ ------------
Net assets applicable to annuity contract owners . . . . . . . . . . . 7,188,101 157,962 4,227,927 351,218
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------

CONTRACT OWNERS' EQUITY

Contracts in accumulation period, accumulation units outstanding of 3,881,390
for Growth; 222,720 for Bond; 279,497 for Money Market; 2,377,329 for
Asset Allocation; 89,045 for Mortgage Securities; 949,618 for Index 500
and 177,501 for Small . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,083,818 157,962 4,118,978 312,385
Contracts in annuity payment period (note 2) . . . . . . . . . . . . . . . . . . 104,283 - 108,949 38,833
------------ ------------ ------------ ------------
Total contract owners' equity. . . . . . . . . . . . . . . . . . . . . 7,188,101 157,962 4,227,927 351,218
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
NET ASSET VALUE PER ACCUMULATION UNIT. . . . . . . . . . . . . . . . . . . . . . 2.98 1.77 4.34 1.76
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>

See accompanying notes to financial statements.
<PAGE>

VARIABLE FUND D
STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998

<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) . . . . . . . . . $ 794,482 25,999 21,478
Reimbursement from Minnesota Mutual for excess expense charges (note 4). . . . . . . . 235,042 1,101 1,034
Mortality and expense charges (note 3) . . . . . . . . . . . . . . . . . . . . . . . . (683,906) (3,725) (2,916)
------------ ------------ ------------

Investment income (loss) - net. . . . . . . . . . . . . . . . . . . . . . . . . . . 345,618 23,375 19,596

Realized and unrealized gains on investments - net:
Realized gain distributions from underlying mutual fund (note 5) . . . . . . . . . . . 12,635,685 5,477 -
------------ ------------ ------------
Realized gains on sales of investments:
Proceeds from sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,087,211 841,674 687,476
Cost of investments sold. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (7,550,878) (830,555) (687,476)
------------ ------------ ------------
2,536,333 11,119 -
------------ ------------ ------------
Net realized gains (losses) on investments. . . . . . . . . . . . . . . . . . . . . 15,172,018 16,596 -
------------ ------------ ------------

Net change in unrealized appreciation or depreciation
of investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,064,337 (14,719) -
------------ ------------ ------------
Net gains (losses) on investments . . . . . . . . . . . . . . . . . . . . . . . . . 25,236,355 1,877 -
------------ ------------ ------------
Net increase in net assets resulting from operations. . . . . . . . . . . . . . . . . . . $ 25,581,973 25,252 19,596
------------ ------------ ------------
------------ ------------ ------------

<CAPTION>
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). . . . . 166,867 12,184 31,990 -
Reimbursement from Minnesota Mutual for excess expense charges (note 4) . . . 15,212 511 5,059 987
Mortality and expense charges (note 3). . . . . . . . . . . . . . . . . . . . (51,463) (1,729) (29,791) (1,619)

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

Investment income (loss) - net . . . . . . . . . . . . . . . . . . . . . . 130,616 10,966 7,258 (632)
------------ ------------ ------------ ------------

Realized and unrealized gains on investments - net:
Realized gain distributions from underlying mutual fund (note 5). . . . . . . 424,051 - 20,052 -
------------ ------------ ------------ ------------

Realized gains on sales of investments:
Proceeds from sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . 901,139 384,197 1,924,617 208,450
Cost of investments sold . . . . . . . . . . . . . . . . . . . . . . . . . (725,277) (384,016) (1,306,692) (218,523)
------------ ------------ ------------ ------------
175,862 181 617,925 (10,073)

Net realized gains (losses) on investments . . . . . . . . . . . . . . . . 599,913 181 637,977 (10,073)
------------ ------------ ------------ ------------

Net change in unrealized appreciation or depreciation
of investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 640,456 (242) 256,388 29,117
------------ ------------ ------------ ------------
Net gains (losses) on investments. . . . . . . . . . . . . . . . . . . . . 1,240,369 (61) 894,365 19,044
------------ ------------ ------------ ------------
Net increase in net assets resulting from operations . . . . . . . . . . . . . . 1,370,985 10,905 901,623 18,412
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>

See accompanying notes to financial statements.

<PAGE>

VARIABLE FUND D
STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED DECEMBER 31, 1998

<TABLE>
<CAPTION>
SEGREGATED SUB-ACCOUNTS
--------------------------------------
MONEY
GROWTH BOND MARKET
------------ ------------ ------------
<S> <C> <C> <C>
Operations:
Investment income (loss) - net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 345,618 23,375 19,596
Net realized gains (losses) on investments . . . . . . . . . . . . . . . . . . . . . . . 15,172,018 16,596 -
Net change in unrealized appreciation or depreciation of investments . . . . . . . . . . 10,064,337 (14,719) -
------------ ------------ ------------
Net increase in net assets resulting from operations. . . . . . . . . . . . . . . . . . . . 25,581,973 25,252 19,596
------------ ------------ ------------
Contract transactions (notes 2, 3, 5 and 6):
Contract purchase payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,304,654 776,403 643,001
Contract terminations and withdrawal payments. . . . . . . . . . . . . . . . . . . . . . (9,456,895) (839,050) (685,594)
Actuarial adjustments for mortality experience on annuities in payment period. . . . . . 7,871 - -
Annuity benefit payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (189,323) - -
------------ ------------ ------------
Increase (decrease) in net assets from contract transactions. . . . . . . . . . . . . . . . (7,333,693) (62,647) (42,593)
------------ ------------ ------------
Increase (decrease) in net assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,248,280 (37,395) (22,997)

Net assets at the beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78,963,786 447,451 400,564
------------ ------------ ------------
Net assets at the end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 97,212,066 410,056 377,567
------------ ------------ ------------
------------ ------------ ------------

<CAPTION>
ASSET MORTGAGE INDEX SMALL
ALLOCATION SECURITIES 500 COMPANY
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Operations:
Investment income (loss) - net. . . . . . . . . . . . . . . . . . . . . . . . 130,616 10,966 7,258 (632)
Net realized gains (losses) on investments. . . . . . . . . . . . . . . . . . 599,913 181 637,977 (10,073)
Net change in unrealized appreciation or depreciation of investments. . . . . 640,456 (242) 256,388 29,117
------------ ------------ ------------ ------------
Net increase in net assets resulting from operations . . . . . . . . . . . . . . 1,370,985 10,905 901,623 18,412
------------ ------------ ------------ ------------
Contract transactions (notes 2, 3, 5 and 6):
Contract purchase payments. . . . . . . . . . . . . . . . . . . . . . . . . . 466,292 311,440 1,765,982 348,911
Contract terminations and withdrawal payments . . . . . . . . . . . . . . . . (861,749) (382,978) (1,896,668) (206,762)
Actuarial adjustments for mortality experience on annuities in payment.period (1,265) - (1,283) (425)
Annuity benefit payments. . . . . . . . . . . . . . . . . . . . . . . . . . . (1,875) - (1,935) (632)
------------ ------------ ------------ ------------
Increase (decrease) in net assets from contract transactions . . . . . . . . . . (398,597) (71,538) (133,904) 141,092
------------ ------------ ------------ ------------
Increase (decrease) in net assets. . . . . . . . . . . . . . . . . . . . . . . . 972,388 (60,633) 767,719 159,504

Net assets at the beginning of year. . . . . . . . . . . . . . . . . . . . . . . 6,215,713 218,595 3,460,208 191,714
------------ ------------ ------------ ------------
Net assets at the end of year. . . . . . . . . . . . . . . . . . . . . . . . . . 7,188,101 157,962 4,227,927 351,218
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>

See accompanying notes to financial statements.

<PAGE>

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

<CAPTION>
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>
VARIABLE FUND D

NOTES TO FINANCIAL STATEMENTS

(1) ORGANIZATION

Variable Fund D (the Account), formerly Minnesota Mutual Variable D Fund,
is organized as a segregated asset account of Minnesota Life Insurance
Company (Minnesota Life) 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 Life. 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., (the
Fund) organized by Minnesota Life 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. acts as the underwriter for the Account.
Advantus Capital Management, Inc., a wholly owned subsidiary of Minnesota
Life, acts as the investment adviser for the Fund. Ascend Financial
Services, Inc. is a wholly-owned subsidiary of Advantus Capital
Management, Inc.

(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 Life 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 Life if the reserves required are less than
originally estimated. If additional reserves are required, Minnesota Life
reimburses the Account.

<PAGE>

VARIABLE FUND D

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

The mortality and expense charge paid to Minnesota Life 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, 1998 and 1997 amounted to $2,249 and
$3,936, 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 Life 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 Life 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 Life 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 ten years Minnesota Life 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, 1998:

<TABLE>
<S> <C>
Growth Portfolio . . . . . . . . . . . . . . . . . . . . . . . $15,734,820
Bond Portfolio . . . . . . . . . . . . . . . . . . . . . . . . 807,879
Money Market Portfolio . . . . . . . . . . . . . . . . . . . . 664,478
Asset Allocation Portfolio . . . . . . . . . . . . . . . . . . 1,057,209
Mortgage Securities Portfolio. . . . . . . . . . . . . . . . . 323,625
Index 500 Portfolio. . . . . . . . . . . . . . . . . . . . . . 1,818,024
Small Company Portfolio. . . . . . . . . . . . . . . . . . . . 348,911
</TABLE>

<PAGE>

VARIABLE FUND D

(6) UNIT ACTIVITY FROM CONTRACT TRANSACTIONS

Transactions in units for each segregated sub-account for the years ended
December 31, 1998 and 1997 were as follows:

SEGREGATED SUB-ACCOUNTS
----------------------------------------
MONEY
GROWTH BOND MARKET
------------ ------------ ------------
<S> <C> <C> <C>
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
Contract purchase payments . . . . . . . . . . . . 102,498 432,492 489,578
Deductions for contract terminations and
withdrawal payments . . . . . . . . . . . . . . (450,347) (466,400) (519,627)
------------ ------------ ------------
Units outstanding at December 31, 1998. . . . . . . . . . 3,881,390 222,720 279,497
------------ ------------ ------------
------------ ------------ ------------
</TABLE>

<TABLE>
<CAPTION>
SEGREGATED SUB-ACCOUNTS
------------------------------------------------------
ASSET MORTGAGE INDEX SMALL
ALLOCATION SECURITIES 500 COMPANY
------------ ------------ ------------ ------------
<S> <C> <C> <C>
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
Contract purchase payments . . . . . . . . . . . . 179,041 183,321 442,749 199,852
Deductions for contract terminations and
withdrawal payments . . . . . . . . . . . . (366,535) (224,849) (505,539) (132,312)
------------ ------------ ------------ ------------
Units outstanding at December 31, 1998. . . . . . . . . 2,377,329 89,045 949,618 177,501
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>

<PAGE>

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

Income from investment operations:
Net investment income . . . . . . . . . . . . .08 .05 .05 .05 .05
Net gains or losses on securities
(both realized and unrealized). . . . . . 6.17 4.49 1.91 2.23 (.02)
-------- -------- -------- -------- --------

Total from investment operations. . . . . 6.25 4.54 1.96 2.28 0.03
-------- -------- -------- -------- --------

Unit value, end of year. . . . . . . . . . . . . $ 24.63 18.38 13.84 11.88 9.60
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
</TABLE>

<PAGE>

VARIABLE FUND D

(7) FINANCIAL HIGHLIGHTS - CONTINUED

BOND

Income (loss) from investment operations:
Net investment income . . . . . . . . . . . . .09 .09 .07 .04 .05
Net gains or losses on securities
(both realized and unrealized). . . . . . - .06 (.04) .21 (.12)
-------- -------- -------- -------- --------

Total from investment operations. . . . . .09 .15 .03 .25 (.07)
-------- -------- -------- -------- --------

Unit value, end of year. . . . . . . . . . . . . $ 1.84 1.75 1.60 1.57 1.32
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
</TABLE>

<PAGE>

VARIABLE FUND D

(7) FINANCIAL HIGHLIGHTS - CONTINUED

MONEY MARKET

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

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

Unit value, end of year. . . . . . . . . . . . . $ 1.35 1.29 1.24 1.19 1.13
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
</TABLE>

<PAGE>

VARIABLE FUND D

(7) FINANCIAL HIGHLIGHTS - CONTINUED

ASSET ALLOCATION

Net investment income . . . . . . . . . . . . .05 .04 .05 .04 .02
Net gains or losses on securities
(both realized and unrealized). . . . . . .51 .33 .17 .32 (.05)
-------- -------- -------- -------- --------

Total from investment operations. . . . . .56 .37 .22 .36 (.03)
-------- -------- -------- -------- --------

Unit value, end of year. . . . . . . . . . . . . $ 2.98 2.42 2.05 1.83 1.47
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
</TABLE>

<PAGE>

VARIABLE FUND D

(7) FINANCIAL HIGHLIGHTS - CONTINUED

MORTGAGE SECURITIES

Income (loss) from investment operations:
Net investment income . . . . . . . . . . . . .09 .12 .06 .10 .06
Net gains or losses on securities
(both realized and unrealized). . . . . . .01 .01 .01 .11 (.11)
-------- -------- -------- -------- --------

Total from investment operations. . . . . .10 .13 .07 .21 (.05)
-------- -------- -------- -------- --------

Unit value, end of year. . . . . . . . . . . . . $ 1.77 1.67 1.54 1.47 1.26
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
</TABLE>

<PAGE>

VARIABLE FUND D

(7) FINANCIAL HIGHLIGHTS - CONTINUED

INDEX 500

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------
1998 1997 1996 1995 1994
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Unit value, beginning of year. . . . . . . . . . $ 3.41 2.60 2.15 1.58 1.57
-------- -------- -------- -------- --------
Income from investment operations:
Net investment income . . . . . . . . . . . . .01 .01 .02 .02 .01
Net gains on securities
(both realized and unrealized). . . . . . .92 .80 .43 .55 -
-------- -------- -------- -------- --------

Total from investment operations. . . . . .93 .81 .45 .57 .01
-------- -------- -------- -------- --------

Unit value, end of year. . . . . . . . . . . . . $ 4.34 3.41 2.60 2.15 1.58
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
</TABLE>

<PAGE>

VARIABLE FUND D

(7) FINANCIAL HIGHLIGHTS - CONTINUED

SMALL COMPANY

Net investment loss . . . . . . . . . . . . . (.01) (.01) (.01) (.01) -
Net gains on securities (both
realized and unrealized). . . . . . . . . .03 .13 .09 .38 .06
-------- -------- -------- -------- --------

Total from investment operations. . . . . .02 .12 .08 .37 .06
-------- -------- -------- -------- --------

Unit value, end of period. . . . . . . . . . . . $ 1.76 1.74 1.62 1.54 1.17
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
</TABLE>