<PAGE>
Mentor VIP High Income Portfolio
PORTFOLIO SELECT VARIABLE ANNUITY/SM/
Issued by
PFL LIFE INSURANCE COMPANY
Supplement Dated July 30, 1999
To The
Prospectus Dated May 1, 1999
The Mentor VIP High Income Portfolio has been added as an additional investment
option under the Portfolio Select Variable Annuity. This prospectus supplement
provides very limited information about this new investment option. The May 3,
1999 Mentor Variable Investment Portfolios prospectus that is currently included
with the May 1, 1999 Portfolio Select Variable Annuity prospectus provides more
complete information about the Mentor VIP High Income Portfolio. The
information in this supplement is qualified in its entirety by the additional
information in those prospectuses. You should read the prospectuses carefully
before you invest.
Depending upon the investment performance of the Mentor VIP High Income
Portfolio, you can make or lose money allocated to the Mentor VIP High Income
Subaccount. The general public may not invest in the Mentor VIP High Income
Portfolio. It is only available through insurance companies or certain
qualified plans. The investment objectives and policies may be similar to other
portfolios and mutual funds managed by the same investment adviser or manager
that are sold directly to the public. You should not expect that the investment
results of the other portfolios and mutual funds will be comparable to those of
the Mentor VIP High Income Portfolio. More detailed information, including an
explanation of the Mentor VIP High Income Portfolio's investment objectives, may
be found in its current prospectus.
The table on the following page summarizes the charges and deductions that may
be applicable to an investment in the Mentor VIP High Income Portfolio through
the Portfolio Select Variable Annuity. These charges and deductions are
explained in the prospectus for the Portfolio Select Variable Annuity, and the
prospectus for the Mentor VIP High Income Portfolio. This table does not
include any premium taxes that may be applicable.
All italicized terms used, which are not defined in this supplement, shall have
the same meanings as the same terms used in the accompanying prospectus.
This Prospectus Supplement must be accompanied
by the
Prospectus for the Portfolio Select Variable Annuity/SM/ dated May 1, 1999
and by the
Prospectus for the Mentor VIP High Income Portfolio dated May 3, 1999
<PAGE>
<TABLE>
<CAPTION>
ANNUITY POLICY FEE TABLE
Separate Account Annual Expenses
Policy Owner Transaction Expenses (as a percentage of account value)
<S> <C> <C> <C>
Sales Load On Purchase Payments ... 0 Mortality and Expense Risk 1.25%
Fee(4)..........
Maximum Surrender Charge Administrative 0.15%
(as a % of Premium Payments Charge..................... ----
Surrendered)(1)(2) .................... 6%
Surrender Fees ........................... 0 TOTAL SEPARATE ACCOUNT
Annual Service Charge(2) ................. $30 Per Policy ANNUAL EXPENSES ........... 1.40%
Transfer Fee(2) .......................... Currently No Fee
Family Income Protector (optional)(3)
Rider Fee.............................. 0.30%
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Mentor VIP High Income Portfolio Annual Expenses(5)
(as a percentage of average net assets and after expense reimbursements)
- ------------------------------------------------------------------------------------------------------------------------------------
Management Other Rule 12b-1 Total Portfolio
Fees Expenses Fees Annual Expenses
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Mentor VIP High Income Portfolio(8)(13)... 0.48% 0.52% 0.25% 1.00%
====================================================================================================================================
</TABLE>
/(1)/ The surrender charge is decreased based on the number of years since the
premium payment was made, from 6% in the year in which the premium payment
was made to 0% in the sixth year after the premium payment was made.
However, after the tenth policy year, no surrender charges apply,
regardless of when you made your last premium payment. If applicable, a
surrender charge will only be applied to withdrawals that exceed the
amount available under certain listed exceptions.
/(2)/ The surrender charge and transfer fee, if any is imposed, apply to each
policy, regardless of how policy value is allocated among the separate
account and the fixed account. The service charge is the lesser of $30 or
2% of the policy value. It applies to both the fixed account and the
separate account, and is assessed on a pro rata basis relative to each
account's policy value as a percentage of the policy's total policy value.
There is no fee for the first 12 transfers per year. For additional
transfers, PFL may charge a fee of $10 per transfer, but currently PFL
does not charge for any transfers. Separate account and annual expenses do
not apply to the fixed account.
/(3)/ The annual rider fee is currently equal to 0.30% of the minimum
annuitization value on the previous policy anniversary; PFL may at its
discretion change the rate in the future, but the rate will never be
greater than 0.50% per year. The stabilized payment fee is only charged if
you annuitize under the family income protector rider, and then only after
annuitization. This fee is reflected in the amount of the variable
payments. The stabilized payment fee is currently equal to an effective
annual rate of 1.25% of the daily net asset value in the variable
investment options; PFL may at its discretion change the rate in the
future, but the rate will never be greater than 2.25% per year. Once the
family income protector rider is added to your policy, neither the rider
fee nor the stabilized payment fee that is in effect at that time will
change during the life of that family income protector rider. These fees
could change if you elect to upgrade.
/(4)/ Mortality and expense risk fees shown (1.25%) are for the "5% Annually
Compounding Death Benefit" and the "Annual Step Up Death Benefit." The
corresponding fees for the "Return of Premium Death Benefit" are 1.10% for
each subaccount.
/(5)/ The fee table information relating to the underlying funds is for 1998 and
was provided to PFL by the underlying funds, and PFL has not independently
verified such information.
<PAGE>
/(8)/ The portfolios have adopted a Distribution Plan (the Plan) pursuant to
Rule 12b-1 under the Investment Company Act of 1940. Under a Distribution
Agreement between the portfolios and Mentor Distributors, LLC ("Mentor
Distributors") a wholly-owned subsidiary of BISYS Fund Services, Inc.,
Mentor Distributors was appointed distributor of the portfolios. To
compensate Mentor Distributors for the services it provides and for the
expenses in incurs under the Distribution Agreement, the portfolios pay a
distribution fee, which is accrued daily and paid monthly at the annual
rate of 0.25% of the portfolios' average daily net assets. For the period
ended December 31, 1998, Mentor Distributors waived such fees in the
amount of $9,226 and $17,544 for the Growth Portfolio and Capital Growth
Portfolio, respectively.
/(13)/ With respect to the Mentor VIP High Income Fund, Mentor Investment
Advisors intends to voluntarily waive 0.22% of its advisory fee in order
to maintain a total expense ratio of 1.00%. If the underlying fund had
borne all expenses that were assumed or waived by the investment advisor,
the ratios for Management Fee and Total Portfolio Operating Expenses
would have been 0.70% and 1.22%, respectively.
FEE TABLE EXAMPLES
You would pay the following expenses on a $1,000 investment, assuming a
hypothetical 5% annual return on assets, assuming the entire policy value is in
the Mentor VIP High Income Subaccount, and assuming the family income protector
rider has been selected.
The expenses reflect different mortality and expense risk fees depending on
which death benefit you select:
A = Return of Premium Death Benefit (1.10% charge)
B = 5% Annually Compounding Death Benefit or the Annual Step-Up Death Benefit
(1.25% charge)
<TABLE>
<CAPTION>
If the Policy is annuitized at
If the Policy is surrendered the end of the applicable time
at the end of the applicable period or if the Policy is not
time period. surrendered or annuitized.
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Subaccount 1 3 5 10 1 3 5 10
Year Years Years Years Year Years Years Years
- ----------------------------------------------------------------------------------------------------------------------------
Mentor VIP High Income A $81 $123 $149 $297 $27 $82 $140 $297
----------------------------------------------------------------------------------------------
B $82 $127 $156 $312 $28 $86 $147 $312
============================================================================================================================
</TABLE>
The above table will assist you in understanding the costs and expenses of the
policy and the Mentor VIP High Income Portfolio that you will bear, directly or
indirectly. These include the 1998 expenses of the Mentor VIP High Income
Portfolio. In addition to the expenses listed above, premium taxes, currently
ranging from 0% to 3.50% of premium payments may be applicable.
The examples should not be considered a representation of past or future
expenses, and actual expenses may be greater or less than those shown. The
assumed 5% annual return is hypothetical and should not be considered a
representation of past or future annual returns, which may be greater or less
than the assumed rate.
In these examples, the $30 service charge is reflected as a charge of 0.086%
based on an estimated average policy value of $35,000.
