<PAGE>
SEMI-ANNUAL REPORT
. PACIFIC SELECT SEPARATE ACCOUNT OF
PACIFIC MUTUAL LIFE INSURANCE COMPANY
PACIFIC SELECT
<PAGE>
PACIFIC SELECT SEPERATE ACCOUNT
STATEMENT ASSETS AND LIABILITIES
JUNE 30, 1997 (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
High Govern-
Money Yield Managed ment Aggressive
Market Bond Bond Securities Growth Equity
Variable Variable Variable Variable Variable Variable
Account Account Account Account Account Account
---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Investments:
Money Market Portfolio (21 shares; cost $214) ............. $214
High Yield Bond Portfolio (589 shares; cost $5,435) ....... $5,865
Managed Bond Portfolio (54 shares; cost $570) ............. $578
Government Securities Portfolio (30 shares; cost $325) .... $314
Growth Portfolio (284 shares; cost $4,578) ................ $6,323
Aggressive Equity Portfolio (1 shares; cost $13) .......... $13
Growth LT Portfolio (76 shares; cost $1,007) ..............
Equity Income Portfolio (141 shares; cost $2,198) .........
Multi-Strategy Portfolio (67 shares; cost $822) ...........
Equity Index Portfolio (126 shares; cost $2,342) ..........
International Portfolio (260 shares; cost $3,435) .........
Emerging Markets Portfolio (8 shares; cost $86) ...........
--------------------------------------------------------------------
Total Assets ............................................... 214 5,865 578 314 6,323 13
--------------------------------------------------------------------
LIABILITIES
Payables:
Mortality and expense risk fee ............................ 13 1 1 13
--------------------------------------------------------------------
Total Liabilites .......................................... 13 1 1 13
--------------------------------------------------------------------
NET ASSETS ................................................. 214 5,852 577 313 6,310 13
--------------------------------------------------------------------
<CAPTION>
Growth Equity Multi- Equity Inter- Emerging
LT Income Strategy Index national Markets
Variable Variable Variable Variable Variable Variable
Account Account Account Account Account Account
----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Investments:
Money Market Portfolio (21 shares; cost $214) .............
High Yield Bond Portfolio (589 shares; cost $5,435) .......
Managed Bond Portfolio (54 shares; cost $570) .............
Government Securities Portfolio (30 shares; cost $325) ....
Growth Portfolio (284 shares; cost $4,578) ................
Aggressive Equity Portfolio (1 shares; cost $13) ..........
Growth LT Portfolio (76 shares; cost $1,007) .............. $1,250
Equity Income Portfolio (141 shares; cost $2,198) ......... $3,149
Multi-Strategy Portfolio (67 shares; cost $822) ........... $1,013
Equity Index Portfolio (126 shares; cost $2,342) .......... $2,968
International Portfolio (260 shares; cost $3,435) ......... $4,455
Emerging Markets Portfolio (8 shares; cost $86) ........... $90
--------------------------------------------------------------------
Total Assets ............................................... 1,250 3,149 1,013 2,968 4,455 90
--------------------------------------------------------------------
LIABILITIES
Payables:
Mortality and expense risk fee ............................ 3 7 2 6 10
--------------------------------------------------------------------
Total Liabilites .......................................... 3 7 2 6 10
--------------------------------------------------------------------
NET ASSETS ................................................. $1,247 $3,142 $1,011 $2,962 $4,445 $90
--------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements
B-1
<PAGE>
PACIFIC SELECT SEPERATE ACCOUNT
STATEMENT OF OPERATIONS
FOR THE PERIOD ENDED JUNE 30, 1997 (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
High Govern-
Money Yield Managed ment Aggressive
Market Bond Bond Securities Growth Equity
Variable Variable Variable Variable Variable Variable
Account Account Account Account Account Account (1)
-----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends .............................................. $5 $269 $17 $8 $636
EXPENSES
Mortality and expense risk fee ......................... 1 20 2 1 20
-----------------------------------------------------------------------
Net Investment Income ................................... 4 249 15 7 616
-----------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS
Net realized gain (loss) from security transactions .... 5 (1) 37
Net unrealized appreciation (depreciation)
on investments ........................................ 4 (3) 297
-----------------------------------------------------------------------
Net Realized And Unrealized Gain
(Loss) On Investments .................................. 9 (3) (1) 334
-----------------------------------------------------------------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS .............................. $4 $258 $12 $6 $950 $0
-----------------------------------------------------------------------
<CAPTION>
Growth Equity Multi- Equity Inter- Emerging
LT Income Strategy Index national Markets
Variable Variable Variable Variable Variable Variable
Account Account Account Account Account Account (1)
-----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends .............................................. $63 $190 $68 $122 $94
EXPENSES
Mortality and expense risk fee ......................... 4 10 3 9 15
-----------------------------------------------------------------------
Net Investment Income ................................... 59 180 65 113 79
-----------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS
Net realized gain (loss) from security transactions .... 17 49 12 15 20
Net unrealized appreciation (depreciation)
on investments ........................................ (17) 236 15 363 441 $5
-----------------------------------------------------------------------
Net Realized And Unrealized Gain
(Loss) On Investments .................................. 0 285 27 378 461 5
-----------------------------------------------------------------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS .............................. $59 $465 $92 $491 $540 $5
-----------------------------------------------------------------------
</TABLE>
(1) Operations commenced January 15, 1997.
See Notes to Financial Statements
B-2
<PAGE>
PACIFIC SELECT SEPERATE ACCOUNT
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED JUNE 30, 1997 (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
High Govern-
Money Yield Managed ment Aggressive
Market Bond Bond Securities Growth Equity
Variable Variable Variable Variable Variable Variable
Account Account Account Account Account Account (1)
-----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income .................................... $ 4 $ 249 $ 15 $ 7 $ 616
Net realized gain (loss) from security transactions ...... 5 (1) 37
Net unrealized appreciation (depreciation)
on investments ......................................... 4 (3) 297
-----------------------------------------------------------------------
Net Increase In Net Assets
Resulting From Operations ................................ 4 258 12 6 950
-----------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
FROM POLICY TRANSACTIONS
Transfers--policy charges and deductions ................. (1) (19) (3) (2) (35)
Transfers in (from other variable accounts) .............. 7 41 62 1 152 $13
Transfers out (to other variable accounts) ............... (7) (10) (17) (15) (140)
Transfers--other ......................................... 2 (1) (1) (2) (28)
-----------------------------------------------------------------------
Net Increase (Decrease) In Net Assets Derived
From Policy Transactions ................................. 1 11 41 (18) (51) 13
-----------------------------------------------------------------------
NET INCREASE (DRECREASE) IN NET ASSETS .................... 5 269 53 (12) 899 13
-----------------------------------------------------------------------
NET ASSETS
Beginning of Period ...................................... 209 5,583 524 325 5,411
-----------------------------------------------------------------------
End of Period ............................................ $214 $5,852 $577 $313 $6,310 $13
-----------------------------------------------------------------------
<CAPTION>
Growth Equity Multi- Equity Inter- Emerging
LT Income Strategy Index national Markets
Variable Variable Variable Variable Variable Variable
Account Account Account Account Account Account (1)
-----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income .................................... $ 59 $ 180 $ 65 $ 113 $ 79
Net realized gain (loss) from security transactions ...... 17 49 12 15 20
Net unrealized appreciation (depreciation)
on investments ......................................... (17) 236 15 363 441 $ 5
-----------------------------------------------------------------------
Net Increase In Net Assets
Resulting From Operations ................................ 59 465 92 491 540 5
-----------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
FROM POLICY TRANSACTIONS
Transfers--policy charges and deductions ................. (5) (29) (8) (16) (26)
Transfers in (from other variable accounts) .............. 48 28 4 154 48 85
Transfers out (to other variable accounts) ............... (73) (122) (4) (47)
Transfers--other ......................................... (15) (45) (25) (8) (17)
-----------------------------------------------------------------------
Net Increase (Decrease) In Net Assets Derived
From Policy Transactions ................................. (45) (168) (33) 130 (42) 85
-----------------------------------------------------------------------
NET INCREASE (DRECREASE) IN NET ASSETS .................... 14 297 59 621 498 90
-----------------------------------------------------------------------
NET ASSETS
Beginning of Period ...................................... 1,233 2,845 952 2,341 3,947
-----------------------------------------------------------------------
End of Period ............................................ $1,247 $3,142 $1,011 $2,962 $4,445 $90
-----------------------------------------------------------------------
</TABLE>
(1) Operations commenced January 15, 1997.
See Notes to Financial Statements
B-3
<PAGE>
PACIFIC SELECT SEPERATE ACCOUNT
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
High Govern-
Money Yield Managed ment Growth
Market Bond Bond Securities Growth LT
Variable Variable Variable Variable Variable Variable
Account Account Account Account Account Account
---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net investment income .................................... $23 $396 $33 $22 $502 2
Net realized gain (loss) from security transactions ...... (1) 5 3 (3) 860 32
Net unrealized appreciation (depreciation)
on investments ......................................... 7 103 (18) (13) 231 145
---------------------------------------------------------------------
Net Income In Net Assets
Resulting From Operations ............................... 29 504 18 6 1,593 179
---------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
FROM POLICY TRANSACTIONS
Transfer of net premiums ................................ 2
Transfers--policy charges and deductions ................ (8) (39) (5) (5) (108) (12)
Transfers in (from other variable accounts) ............. 11,217 5,077 79 12 4,076 496
Transfers out (to other variable accounts) .............. (12,403) (3,676) (42) (20) (7,965) (332)
Transfers--other ........................................ (13) (3) (29) (141) (16)
---------------------------------------------------------------------
Net Increase In Net Assets Derived
From Policy Transactions ................................ (1,207) 1,359 32 (42) (4,136) 136
---------------------------------------------------------------------
NET INCREASE (DECREASE)
IN NET ASSETS ........................................... (1,178) 1,863 50 (36) (2,543) 315
---------------------------------------------------------------------
NET ASSETS
Beginning of Year ....................................... 1,387 3,720 474 361 7,954 918
---------------------------------------------------------------------
End of Year ............................................. $209 $5,583 $524 $325 $5,411 $1,233
---------------------------------------------------------------------
<CAPTION>
Equity Multi- Equity Inter-
Income Strategy Index national
Variable Variable Variable Variable
Account Account Account Account
-------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net investment income .................................... $141 $64 $29 $51
Net realized gain (loss) from security transactions ...... 49 6 24 31
Net unrealized appreciation (depreciation)
on investments ......................................... 267 31 188 465
-------------------------------------------------------------
Net Income In Net Assets
Resulting From Operations ............................... 457 101 241 547
-------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
FROM POLICY TRANSACTIONS
Transfer of net premiums ................................ 2
Transfers--policy charges and deductions ................ (80) (16) (26) (52)
Transfers in (from other variable accounts) ............. 413 9 1,899 2,052
Transfers out (to other variable accounts) .............. (241) (2) (17) (90)
Transfers--other ........................................ (67) 2 (20) (81)
------------------------------------------------------------
Net Increase In Net Assets Derived
From Policy Transactions ................................ 27 (7) 1,836 1,829
------------------------------------------------------------
NET INCREASE (DECREASE)
IN NET ASSETS ........................................... 484 94 2,077 2,376
------------------------------------------------------------
NET ASSETS
Beginning of Year ....................................... 2,361 858 264 1,571
------------------------------------------------------------
End of Year ............................................. $2,845 $952 $2,341 $3,947
------------------------------------------------------------
</TABLE>
See Notes to Financial Statements
B-4
<PAGE>
PACIFIC SELECT SEPARATE ACCOUNT
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES
The Pacific Select Separate Account (the "Separate Account") is registered as
a unit investment trust under the Investment Company Act of 1940, as amended,
and is currently comprised of fourteen subaccounts called Variable Accounts: the
Money Market Variable Account, the High Yield Bond Variable Account, the Managed
Bond Variable Account, the Government Securities Variable Account, the Growth
Variable Account, the Aggressive Equity Variable Account, the Growth LT
Variable Account, the Equity Income Variable Account, the Multi-Strategy
Variable Account, the Equity Variable Account, the Bond and Income Variable
Account, the Equity Index Variable Account, the International Variable Account,
and the Emerging Markets Variable Account. The assets in each Variable Account
are invested in shares of the corresponding portfolios of Pacific Select Fund
(the "Fund"), each of which pursues different investment objectives and
policies. The financial statements of the Fund, including the portfolios of
investments, are included elsewhere in this report and should be read in
conjunction with the Separate Account's financial statements.
The Separate Account has organized and registered with the Securities and
Exchange Commission two other Variable Accounts, the Equity Variable Account and
the Bond and Income Variable Account, under the Investment Company Act of 1940.
There was no operational activity through June 30, 1997 in both Variable
Accounts.
The Separate Account was established by Pacific Mutual Life Insurance Company
("Pacific Mutual") on November 20, 1986 and commenced operations on January 7,
1988. Under applicable insurance law, the assets and liabilities of the Separate
Account are clearly identified and distinguished from the other assets and
liabilities of Pacific Mutual. The assets of the Separate Account will not be
charged with any liabilities arising out of any other business conducted by
Pacific Mutual, but the obligations of the Separate Account, including benefits
related to variable life insurance, are obligations of Pacific Mutual.
The Separate Account held by Pacific Mutual represents funds from individual
flexible premium variable life policies. The assets of the Separate Account are
carried at market value.
The preparation of the accompanying financial statements requires management
to make estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts of
income and expenses during the reporting period. Actual results could differ
from those estimates
A. Valuation of Investments
Investments in shares of the Fund are valued at the reported net asset values
of the respective portfolios. Valuation of securities held by the Fund is
discussed in the notes to their financial statements.
B. Security Transactions
Transactions are recorded on the trade date. Realized gains and losses on
sales of investments are determined on the basis of identified cost.
C. Federal Income Taxes
The operations of the Separate Account will be reported on the Federal income
tax return of Pacific Mutual, which is taxed as a life insurance company under
the provisions of the Tax Reform Act of 1986. Under current tax law, no Federal
income taxes are expected to be paid by Pacific Mutual with respect to the
operations of the Separate Account.
2. DIVIDENDS
During 1997, the Fund has declared dividends for each portfolio except for
the Aggressive Equity Portfolio and the Emerging Markets Portfolio. The amounts
accrued by the Separate Account for its share of the dividends were reinvested
in additional full and fractional shares of the related portfolio.
3. CHARGES AND EXPENSES
Pacific Mutual charges the Separate Account daily for mortality and expense
risks assumed with respect to variable life insurance policies funded by the
Separate Account at an annual rate of 0.70% of the average daily net assets of
each Variable Account. Under the policies, Pacific Mutual makes certain
deductions from the net assets of each Variable Account for sales load,
administrative expenses, state premium taxes, cost of insurance and charges for
optional benefits. The operating expenses of the Separate Account are paid by
Pacific Mutual.
4. RELATED PARTY AGREEMENT
Pacific Mutual Distributors, Inc., a wholly-owned subsidiary of Pacific
Mutual, is the principal underwriter of variable life insurance policies funded
by interests in the Separate Account, and is compensated by Pacific Mutual.
B-5
<PAGE>
PACIFIC SELECT SEPARATE ACCOUNT
NOTES TO FINANCIAL STATEMENTS (Continued)
(Unaudited)
5. POLICY OWNERS' COST OF INVESTMENTS IN THE FUND SHARES
The investment in the Fund shares are carried at identified cost, which
represents the amount available for investment (including reinvested
distributions of net investment income and realized gains) in such shares after
deduction of mortality and expense risk (M&E) charges. The cost and market value
of total Policy Owners' investments in the Fund as of June 30, 1997 were as
follows (amounts in thousands):
<TABLE>
<CAPTION>
VARIABLE ACCOUNTS
-----------------------------------------------------------
MONEY HIGH YIELD MANAGED GOVERNMENT
MARKET BOND BOND SECURITIES
-----------------------------------------------------------
<S> <C> <C> <C> <C>
Total cost of investments at beginning of period $209 $5,166 $514 $336
Add: Total proceeds from sales of units net of M&E charges 5 30 50
Reinvested distributions from the Fund:
(a) Net investment income 5 219 15 8
(b) Net realized gain 50 2
-----------------------------------------------------------
Sub-Total 219 5,465 581 344
Less: Cost of investments disposed during the period 5 30 11 19
-----------------------------------------------------------
Total cost of investments at end of period 214 5,435 570 325
Add: Unrealized appreciation (depreciation) 430 8 (11)
-----------------------------------------------------------
Total market value of investments at end of period $214 $5,865 $578 $314
-----------------------------------------------------------
<CAPTION>
AGGRESSIVE GROWTH EQUITY
GROWTH EQUITY (1) LT INCOME
-----------------------------------------------------------
<S> <C> <C> <C> <C>
Total cost of investments at beginning of period $3,972 $975 $2,135
Add: Total proceeds from sales of units net of M&E charges 119 $13 15
Reinvested distributions from the Fund:
(a) Net investment income 7 6 13
(b) Net realized gain 629 57 176
-----------------------------------------------------------
Sub-Total 4,727 13 1,053 2,324
Less: Cost of investments disposed during the period 149 46 126
-----------------------------------------------------------
Total cost of investments at end of period 4,578 13 1,007 2,198
Add: Unrealized appreciation 1,745 243 951
-----------------------------------------------------------
Total market value of investments at end of period $6,323 $13 $1,250 $3,149
-----------------------------------------------------------
<CAPTION>
MULTI- EQUITY INTER- EMERGING
STRATEGY INDEX NATIONAL MARKETS (1)
-----------------------------------------------------------
<S> <C> <C> <C> <C>
Total cost of investments at beginning of period $777 $2,083 $3,374
Add: Total proceeds from sales of units net of M&E charges 4 152 17 $87
Reinvested distributions from the Fund:
(a) Net investment income 16 22 15
(b) Net realized gain 52 100 79
-----------------------------------------------------------
Sub-Total 849 2,357 3,485 87
Less: Cost of investments disposed during the period 27 15 50 1
-----------------------------------------------------------
Total cost of investments at end of period 822 2,342 3,435 86
Add: Unrealized appreciation 191 626 1,020 4
-----------------------------------------------------------
Total market value of investments at end of period $1,013 $2,968 $4,455 $90
-----------------------------------------------------------
</TABLE>
____________________________________________________
(1) Operations commenced on January 15, 1997.
B-6
<PAGE>
PACIFIC SELECT SEPARATE ACCOUNT
NOTES TO FINANCIAL STATEMENTS (Continued)
(Unaudited)
6. TRANSACTIONS IN SEPARATE ACCOUNT UNITS AND SELECTED ACCUMULATION UNIT **
INFORMATION
Transactions in Separate Account units for the period ended June 30, 1997 and
the selected accumulation unit information as of June 30, 1997 and December 31,
1996 were as follows:
<TABLE>
<CAPTION>
Variable Accounts
------------------------------------------------------------------------
Money High Yield Managed Government
Market Bond Bond Securities
------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Total units outstanding at beginning of period 13,843 238,658 25,744 16,830
Increase (decrease) in units resulting from
Policy transactions:
(a) Transfers--policy charges and deductions (99) (801) (128) (98)
(b) Transfers in (from other variable accounts) 186 1,404 2,009 777
(c) Transfers out (to other variable accounts) (4,687) (106) (8,730) (1,102)
(d) Transfers--other 4,627 (47) 8,831 (474)
------------------------------------------------------------------------
Sub-Total 27 450 1,982 (897)
------------------------------------------------------------------------
Total units outstanding at end of period 13,870 239,108 27,726 15,933
------------------------------------------------------------------------
------------------------------------------------------------------------
Accumulation Unit Value: At beginning of period $15.08 $23.39 $20.34 $19.31
At end of period $15.40 $24.47 $20.81 $19.67
------------------------------------------------------------------------
<CAPTION>
Aggressive Growth Equity
Growth Equity (1) LT Income
------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Total units outstanding at beginning of period 159,620 68,915 103,533
Increase (decrease) in units resulting from
Policy transactions:
(a) Transfers--policy charges and deductions (976) (12) (289) (964)
(b) Transfers in (from other variable accounts) 9,071 1,358 2,061 8,775
(c) Transfers out (to other variable accounts) (14,403) (417) (4,040) (13,976)
(d) Transfers--other 5,031 413 (222) 501
------------------------------------------------------------------------
Sub-Total (1,277) 1,342 (2,490) (5,664)
------------------------------------------------------------------------
Total units outstanding at end of period 158,343 1,342 66,425 97,869
------------------------------------------------------------------------
------------------------------------------------------------------------
Accumulation Unit Value: At beginning of period $33.90 $10.00 $17.89 $27.47
At end of period $39.85 $9.64 $18.78 $32.10
------------------------------------------------------------------------
<CAPTION>
Multi- Equity Inter- Emerging
Strategy Index national Markets (1
------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Total units outstanding at beginning of period 40,429 105,503 193,550
Increase (decrease) in units resulting from
Policy transactions:
(a) Transfers--policy charges and deductions (306) (656) (1,207) (37)
(b) Transfers in (from other variable accounts) 7,872 3,827 7,403
(c) Transfers out (to other variable accounts) (400) (11,969)
(d) Transfers--other (591) (1,607) 7,483 969
------------------------------------------------------------------------
Sub-Total (1,297) 5,609 (1,866) 8,335
------------------------------------------------------------------------
Total units outstanding at end of period 39,132 111,112 191,684 8,335
------------------------------------------------------------------------
------------------------------------------------------------------------
Accumulation Unit Value: At beginning of period $23.54 $22.19 $20.39 $10.00
At end of period $25.83 $26.65 $23.19 $10.81
------------------------------------------------------------------------
</TABLE>
_________________________________________________
(1) Operations commenced on January 15, 1997.
** Accumulation Unit: unit of measure used to calculate the value of a Policy
Owner's interest in a Variable Account during the accumulation period.
B-7
