<PAGE>
PFL
VARIABLE
ANNUITY
FUND
II
[ART APPEARS HERE]
--------------------------------------------------------------------------------
LETTER TO
CONTRACT OWNERS
AND
SEMI-ANNUAL REPORT
FOR THE SIX MONTHS ENDED
JUNE 30, 1995
--------------------------------------------------------------------------------
<PAGE>
[ART WORK APPEARS HERE]
LETTER TO CONTRACT OWNERS
To Our Contract Owners:
The report of the PFL Variable Annuity for the six months ended June 30, 1994 is
enclosed for your review.
If you have any questions concerning your contract, please call the Annuity
Service Center at 800-634-4672 or write to the following address:
PFL Life Insurance Company
Variable Annuity Dept.
4333 Edgewood Road Northeast
Cedar Rapids, Iowa 52499
We welcome your inquiries into other tax-deferred products offered by PFL Life.
It is a privilege to serve you and help you prepare for your retirement. Please
let us know if we can be of further assistance to you.
Sincerely,
/s/ William L. Busler
William L. Busler
President
PFL LIFE INSURANCE COMPANY
<PAGE>
PFL VARIABLE ANNUITY FUND II
BALANCE SHEET
JUNE 30, 1995 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investment in Lexington Growth
& Income Fund, Inc., at
current market value
(Note 2).................... $ 426,044
==========
LIABILITIES
Accrued mortality and
expense risk charges
(Note 5)................... $ 312
Contract terminations
payable.................... (63)
----------
249
CONTRACT OWNERS'
EQUITY
Deferred annuity contracts
terminable by owners
(Note 3)................... 425,795
----------
$ 426,044
==========
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE>
PFL VARIABLE ANNUITY FUND II
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
<S> <C>
NET INVESTMENT LOSS
Income:
Dividends................................... $ 1,531
Expenses:
Mortality
and expense risk
charges (Note 5)............................ (1,842)
---------
Net investment
loss...................................... (311)
---------
NET REALIZED AND UNREALIZED
CAPITAL GAIN FROM INVESTMENTS
Net realized
capital loss:
Proceeds from sales........................ 21,405
Cost of investments
sold..................................... 26,656
---------
Net realized
capital loss.......................... (5,251)
---------
Unrealized appreciation
of investments:
Beginning of
year...................................... (46,692)
End of period.............................. (4,510)
---------
Net change in
unrealized
appreciation of investments................ 42,182
---------
Net realized and
unrealized capital
gain from
investments................................ 36,931
---------
INCREASE FROM OPERATIONS........................ $ 36,620
=========
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE>
PFL VARIABLE ANNUITY FUND II
STATEMENTS OF CHANGES IN CONTRACT OWNERS' EQUITY
SIX MONTHS ENDED JUNE 30, 1995 AND
YEAR ENDED DECEMBER 31, 1994 (UNAUDITED)
<TABLE>
<CAPTION>
1995 1994
------------------------
<S> <C> <C>
OPERATIONS
Net investment
income (loss)................ $ (311) 768
Net realized and
unrealized capital
gain (loss) from
investments.................. 36,931 (17,076)
------------------------
Increase (decrease)
from operations.......... 36,620 (16,308)
------------------------
CONTRACT
TRANSACTIONS
Decrease from
contract terminations,
surrenders and other
deductions.................. (13,199) (28,480)
------------------------
Net increase (decrease)
in contract
owners' equity.............. 23,421 (44,788)
CONTRACT OWNERS'
EQUITY
Beginning of year.............. 402,374 447,162
------------------------
End of period.................. $ 425,795 402,374
========================
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE>
PFL VARIABLE ANNUITY FUND II
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION - PFL Variable Annuity Fund II ("Fund II") is a segregated
investment account of PFL Life Insurance Company ("PFL Life"), an indirect,
wholly owned subsidiary of AEGON USA, Inc. ("AUSA"), a holding company. AUSA
is an indirect, wholly owned subsidiary of AEGON N.V., a holding company
organized under the laws of The Netherlands. Fund II is registered with the
Securities and Exchange Commission as a Unit Investment Trust pursuant to
provisions of the Investment Company Act of 1940.
INVESTMENT - Fund II is invested solely in shares of Lexington Growth &
Income Fund, Inc., (the "mutual fund"), an open-end diversified management
investment company registered under the Investment Company Act of 1940.
Investments are stated at the closing net asset value per share on June 30,
1995.
Unrealized gains or losses from investment in the mutual fund are credited or
charged to contract owners' equity.
Realized capital gains or losses from sale of shares in the mutual fund are
determined on the first-in, first-out basis.
DIVIDEND INCOME - Dividends received from the mutual fund investment are
reinvested to purchase additional mutual fund shares.
2. INVESTMENT
A summary of the mutual fund investment at June 30, 1994 follows:
<TABLE>
<CAPTION>
NUMBER NET ASSET
OF SHARES VALUE MARKET
HELD PER SHARE VALUE COST
--------------------------------------------------------------------------------
<S> <C> <C> <C>
27,153.836 $15.69 $426,044 $430,553
================================================================================
</TABLE>
<PAGE>
PFL VARIABLE ANNUITY FUND II
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. CONTRACT OWNERS' EQUITY
A summary at June 30 of deferred annuity contracts terminable by owners
follows:
<TABLE>
<CAPTION>
JUNE 30, 1995 Dec. 31, 1994
-------------------------------
<S> <C> <C>
Accumulation units
owned by individuals 50,875.763 52,535.264
Unit value............. $ 8.369309 7.659117
-------------------------------
Deferred annuity
contracts terminable
by owners........... $ 425,795 402,374
===============================
</TABLE>
4. TAXES
Operations of Fund II form a part of PFL Life, which is taxed as a life
insurance company under Subchapter L of the Internal Revenue Code of 1986, as
amended (the "Code"). The operations of Fund II are accounted for separately
from other operations of PFL Life for purposes of federal income taxation.
Fund II is not separately taxable as a regulated investment company under
Subchapter M of the Code and is not otherwise taxable as an entity separate
from PFL Life. Under existing federal income tax laws, the income of Fund II,
to the extent applied to increase reserves under the variable annuity
contracts, is not taxable to PFL Life.
5. INSURANCE RISK CHARGES
PFL Life deducts a daily charge equal to an annual rate of 0.9% of the value
of the contract owner's individual account as a charge for mortality and
expense risk assumed by PFL Life.
6. NET ASSETS
At June 30, 1995 contract owners' equity was comprised of:
<TABLE>
<S> <C>
Cost of mutual fund
shares to investors,
cash and dividend
reinvestments.................................$ 430,553
Adjustment for depreciation
to market value............................... (4,509)
Expense deductions payable
from the total cost
to investors.................................. (249)
-------
Total Contract Owners' Equity...................$ 425,795
=======
</TABLE>
<PAGE>
[LOGO OF PFL LIFE INSURANCE COMPANY APPEARS HERE]
PFL LIFE
INSURANCE COMPANY
4333 Edgewood Road Northeast
Cedar Rapids, Iowa 52499
4524 895
INV006
