<PAGE>
ANNUAL REPORT
. PACIFIC SELECT VARIABLE ANNUITY SEPARATE ACCOUNT OF
PACIFIC MUTUAL LIFE INSURANCE COMPANY
[LOGO OF PACIFIC SELECT VARIABLE ANNUITY APPEARS HERE]
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Pacific Mutual Life Insurance Company
We have audited the accompanying statements of assets and liabilities of the
Pacific Select Variable Annuity Separate Account (comprised of the Money Market,
Managed Bond, Government Securities, High Yield Bond, Growth, Equity Income,
Multi-Strategy, International, Equity Index, Growth LT, Equity, and Bond and
Income Variable Accounts) as of December 31, 1995 and the related statements of
operations for the year then ended and statements of changes in net assets for
each of the two years ended December 31, 1995 and 1994. These financial
statements are the responsibility of the Separate Account's management. Our
responsibility is to express an opinion on these 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 financial statements referred to above present fairly, in
all material respects, the financial position of each of the respective Variable
Accounts constituting the Pacific Select Variable Annuity Separate Account at
December 31, 1995 and the results of their operations for the year then ended
and the changes in their net assets for each of the two years then ended, in
conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Costa Mesa, California
February 16, 1996
B-1
<PAGE>
PACIFIC SELECT VARIABLE ANNUITY SEPARATE ACCOUNT
STATEMENTS OF ASSETS & LIABILITIES
DECEMBER 31 1995
(In thousands)
<TABLE>
<CAPTION>
High
Money Managed Government Yield Equity
Market Bond Securities Bond Growth Income
Variable Variable Variable Variable Variable Variable
Account Account Account Account Account Account
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Investments in Pacific Select Fund:
Money Market Portfolio (6,229 shares; cost $62,510)........... $ 62,375
Managed Bond Portfolio (5,966 shares; cost $63,939)........... $ 66,211
Government Securities Portfolio (4,549 shares; cost $47,409).. $ 49,321
High Yield Bond Portfolio (6,729 shares; cost $63,907)........ $ 65,851
Growth Portfolio (1,539 shares; cost $25,479)................. $ 28,574
Equity Income Portfolio (7,162 shares; cost $116,389)......... $ 130,395
Multi-Strategy Portfolio (3,875 shares; cost $49,299).........
International Portfolio (9,217 shares, cost $116,439).........
Equity Index Portfolio (4,183 shares; cost $65,584)...........
Growth LT Portfolio (10,074 shares; cost $134,923)............
Equity Portfolio (1,661 shares; cost $28,054).................
Bond and Income Portfolio (1,410 shares; cost $17,139)........
Receivables:
Due from Pacific Mutual Life Insurance Company................ 932 35 215 121 3 491
--------- --------- --------- --------- --------- ---------
TOTAL ASSETS.................................................... 63,307 66,246 49,536 65,972 28,577 130,886
--------- --------- --------- --------- --------- ---------
LIABILITIES
Payables:
Fund shares purchased......................................... 932 35 215 121 3 491
--------- --------- --------- --------- --------- ---------
TOTAL LIABILITIES............................................... 932 35 215 121 3 491
--------- --------- --------- --------- --------- ---------
NET ASSETS...................................................... $ 62,375 $ 66,211 $ 49,321 $ 65,851 $ 28,574 $ 130,395
========= ========= ========= ========= ========= =========
<CAPTION>
Multi- Inter- Equity Growth Bond &
Strategy national Index LT Equity Income
Variable Variable Variable Variable Variable Variable
Account Account Account Account Account Account
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Investments in Pacific Select Fund:
Money Market Portfolio (6,229 shares; cost $62,510)...........
Managed Bond Portfolio (5,966 shares; cost $63,939)...........
Government Securities Portfolio (4,549 shares; cost $47,409)..
High Yield Bond Portfolio (6,729 shares; cost $63,907).......
Growth Portfolio (1,539 shares; cost $25,479).................
Equity Income Portfolio (7,162 shares; cost $116,389).........
Multi-Strategy Portfolio (3,875 shares; cost $49,299)......... $ 55,029
International Portfolio (9,217 shares, cost $116,439)......... $ 119,245
Equity Index Portfolio (4,183 shares; cost $65,584)........... $ 72,991
Growth LT Portfolio (10,074 shares; cost $134,923)............ $ 142,226
Equity Portfolio (1,661 shares; cost $28,054)................. $ 29,099
Bond and Income Portfolio (1,410 shares; cost $17,139)........ $ 18,346
Receivables:
Due from Pacific Mutual Life Insurance Company................ 159 367 204 667 316 71
--------- --------- --------- --------- --------- ---------
TOTAL ASSETS.................................................... 55,188 119,612 73,195 142,893 29,415 18,417
--------- --------- --------- --------- --------- ---------
LIABILITIES
Payables:
Fund shares purchased......................................... 159 367 204 667 316 71
--------- --------- --------- --------- --------- ---------
TOTAL LIABILITIES............................................... 159 367 204 667 316 71
--------- --------- --------- --------- --------- ---------
NET ASSETS...................................................... $ 55,029 $ 119,245 $ 72,991 $ 142,226 $ 29,099 $ 18,346
========= ========= ========= ========= ========= =========
</TABLE>
See Notes to Financial Statements.
B-2
<PAGE>
PACIFIC SELECT VARIABLE ANNUITY SEPARATE ACCOUNT
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31 1995
(In thousands)
<TABLE>
<CAPTION>
High
Money Managed Government Yield Equity
Market Bond Securities Bond Growth Income
Variable Variable Variable Variable Variable Variable
Account Account Account Account Account Account
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends.................................................. $ 3,199 $ 2,742 $ 1,647 $ 3,271 $ 242 $ 1,155
EXPENSES
Mortality and expense risk fee............................. 701 543 350 470 340 858
--------- --------- --------- --------- --------- ---------
NET INVESTMENT INCOME (LOSS)................................. 2,498 2,199 1,297 2,801 (98) 297
--------- --------- --------- --------- --------- ---------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Net realized gain (loss) from security transactions........ (140) (95) (222) 487 (1,783) 27
Net unrealized appreciation (depreciation) on investments.. (10) 4,750 3,263 2,449 7,708 16,440
--------- --------- --------- --------- --------- ---------
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS...................................... (150) 4,655 3,041 2,936 5,925 16,467
--------- --------- --------- --------- --------- ---------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS.................................. $ 2,348 $ 6,854 $ 4,338 $ 5,737 $ 5,827 $ 16,764
========= ========= ========= ========= ========= =========
<CAPTION>
Multi- Inter- Equity Growth Bond &
Strategy national Index LT Equity Income
Variable Variable Variable Variable Variable Variable
Account Account Account Account Account Account
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends.................................................. $ 1,324 $ 2,225 $ 765 $ 9,470 $ 14 $ 451
EXPENSES
Mortality and expense risk fee............................. 469 916 397 976 114 74
--------- --------- --------- --------- --------- ---------
NET INVESTMENT INCOME (LOSS)................................. 855 1,309 368 8,494 (100) 377
--------- --------- --------- --------- --------- ---------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Net realized gain (loss) from security transactions........ (23) 309 1,229 6,574 1 (6)
Net unrealized appreciation (depreciation) on investments.. 6,951 4,662 7,194 6,191 1,045 1,206
--------- --------- --------- --------- --------- ---------
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS...................................... 6,928 4,971 8,423 12,765 1,046 1,200
--------- --------- --------- --------- --------- ---------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS.................................. $ 7,783 $ 6,280 $ 8,791 $ 21,259 $ 946 $ 1,577
========= ========= ========= ========= ========= =========
</TABLE>
See Notes to Financial Statements.
B-3
<PAGE>
PACIFIC SELECT VARIABLE ANNUITY SEPARATE ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31 1995
(In thousands)
<TABLE>
<CAPTION>
High
Money Managed Government Yield Equity
Market Bond Securities Bond Growth Income
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 (loss)............................... $ 2,498 $ 2,199 $ 1,297 $ 2,801 $ (98) $ 297
Net realized gain (loss) from security transactions........ (140) (95) (222) 487 (1,783) 27
Net unrealized appreciation (depreciation) on investments.. (10) 4,750 3,263 2,449 7,708 16,440
--------- --------- --------- --------- --------- ---------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS.................................. 2,348 6,854 4,338 5,737 5,827 16,764
--------- --------- --------- --------- --------- ---------
INCREASE (DECREASE) IN NET ASSETS FROM
POLICY TRANSACTIONS
Transfer of net premiums................................... 261,308 20,349 18,216 22,854 688 42,780
Transfers--policy charges and deductions................... (2,480) (1,677) (1,715) (1,647) (1,790) (2,704)
Transfers in (from other variable accounts)................ 95,496 21,953 20,465 53,916 12,132 53,482
Transfers out (to other variable accounts)................. (337,675) (8,318) (6,494) (29,696) (15,335) (10,459)
Transfers--other........................................... (42) 27 7 10 (19) 27
--------- --------- --------- --------- --------- ---------
NET INCREASE (DECREASE) IN NET ASSETS
DERIVED FROM POLICY TRANSACTIONS........................... 16,607 32,334 30,479 45,437 (4,324) 83,126
--------- --------- --------- --------- --------- ---------
NET INCREASE IN NET ASSETS................................... 18,955 39,188 34,817 51,174 1,503 99,890
NET ASSETS
Beginning of year.......................................... 43,420 27,023 14,504 14,677 27,071 30,505
--------- --------- --------- --------- --------- ---------
End of year................................................ $ 62,375 $ 66,211 $ 49,321 $ 65,851 $ 28,574 $ 130,395
========= ========= ========= ========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
Multi- Inter- Equity Growth Bond &
Strategy national Index LT Equity Income
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 (loss)............................... $ 855 $ 1,309 $ 368 $ 8,494 (100) $ 377
Net realized gain (loss) from security transactions........ (23) 309 1,229 6,574 1 (6)
Net unrealized appreciation (depreciation) on investments.. 6,951 4,662 7,194 6,191 $ 1,045 1,206
--------- --------- --------- --------- --------- ---------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS.................................. 7,783 6,280 8,791 21,259 946 1,577
--------- --------- --------- --------- --------- ---------
INCREASE (DECREASE) IN NET ASSETS FROM
POLICY TRANSACTIONS
Transfer of net premiums................................... 12,463 36,739 30,757 45,013 13,229 9,770
Transfers--policy charges and deductions................... (1,662) (2,891) (1,339) (3,392) (293) (130)
Transfers in (from other variable accounts)................ 15,539 64,987 37,983 102,932 17,251 8,647
Transfers out (to other variable accounts)................. (5,516) (28,833) (13,200) (59,032) (2,040) (1,524)
Transfers--other........................................... 6 17 29 (8) 6 6
--------- --------- --------- --------- --------- ---------
NET INCREASE (DECREASE) IN NET ASSETS
DERIVED FROM POLICY TRANSACTIONS........................... 20,830 70,019 54,230 85,513 28,153 16,769
--------- --------- --------- --------- --------- ---------
NET INCREASE IN NET ASSETS................................... 28,613 76,299 63,021 106,772 29,099 18,346
NET ASSETS
Beginning of year.......................................... 26,416 42,946 9,970 35,454
--------- --------- --------- --------- --------- ---------
End of year................................................ $ 55,029 $ 119,245 $ 72,991 $ 142,226 $ 29,099 $ 18,346
========= ========= ========= ========= ========= =========
</TABLE>
See Notes to Financial Statements.
B-4
<PAGE>
PACIFIC SELECT VARIABLE ANNUITY SEPARATE ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1994
(In thousands)
<TABLE>
<CAPTION>
High
Money Managed Government Yield
Market Bond Securities Bond Growth
Variable Variable Variable Variable Variable
Account Account Account Account Account
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net investment income...................................... $ 781 $ 988 $ 506 $ 799 $ 1,939
Net realized gain (loss) from security transactions........ 50 (642) (640) (577) (398)
Net unrealized appreciation (depreciation)
on investments............................................ (85) (1,841) (924) (251) (5,338)
--------- --------- --------- --------- ---------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS.................................. 746 (1,495) (1,058) (29) (3,797)
--------- --------- --------- --------- ---------
INCREASE (DECREASE) IN NET ASSETS FROM
POLICY TRANSACTIONS
Transfer of net premiums................................... 121,385 1,957 620 882 1,158
Transfers--policy charges and deductions................... (1,884) (1,117) (976) (367) (1,510)
Transfers in (from other variable accounts)................ 87,254 15,793 5,939 19,375 25,943
Transfers out (to other variable accounts)................. (178,819) (12,103) (6,689) (14,544) (30,173)
Transfers--other........................................... 4 (1) (2) 1 (32)
--------- --------- --------- --------- ---------
NET INCREASE (DECREASE) IN NET ASSETS
DERIVED FROM POLICY TRANSACTIONS........................... 27,940 4,529 (1,108) 5,347 (4,614)
--------- --------- --------- --------- ---------
NET INCREASE (DECREASE) IN NET ASSETS........................ 28,686 3,034 (2,166) 5,318 (8,411)
NET ASSETS
Beginning of year.......................................... 14,734 23,989 16,670 9,359 35,482
--------- --------- --------- --------- ---------
End of year................................................ $ 43,420 $ 27,023 $ 14,504 $ 14,677 $ 27,071
========= ========= ========= ========= =========
<CAPTION>
Equity Multi- Inter- Equity Growth
Income Strategy national Index LT
Variable Variable Variable Variable Variable
Account Account Account Account Account
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net investment income...................................... $ 2,467 $ 1,236 $ 1,397 $ 127 $ 371
Net realized gain (loss) from security transactions........ 55 (2) 1,741 24 (97)
Net unrealized appreciation (depreciation)
on investments............................................ (2,978) (1,876) (3,276) (161) 1,112
--------- --------- --------- --------- ---------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS.................................. (456) (642) (138) (10) 1,386
--------- --------- --------- --------- ---------
INCREASE (DECREASE) IN NET ASSETS FROM
POLICY TRANSACTIONS
Transfer of net premiums................................... 1,569 1,343 2,860 600 2,468
Transfers--policy charges and deductions................... (1,154) (778) (963) (366) (356)
Transfers in (from other variable accounts)................ 15,775 11,263 50,644 3,811 44,351
Transfers out (to other variable accounts)................. (4,366) (3,693) (25,259) (1,309) (12,397)
Transfers--other........................................... (4) (4) 46 2
--------- --------- --------- --------- ---------
NET INCREASE (DECREASE) IN NET ASSETS
DERIVED FROM POLICY TRANSACTIONS........................... 11,820 8,131 27,328 2,736 34,068
--------- --------- --------- --------- ---------
NET INCREASE (DECREASE) IN NET ASSETS........................ 11,364 7,489 27,190 2,726 35,454
NET ASSETS
Beginning of year.......................................... 19,141 18,927 15,756 7,244
--------- --------- --------- --------- ---------
End of year................................................ $ 30,505 $ 26,416 $ 42,946 $ 9,970 $ 35,454
========= ========= ========= ========= =========
</TABLE>
See Notes to Financial Statements.
B-5
<PAGE>
PACIFIC SELECT VARIABLE ANNUITY SEPARATE ACCOUNT
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
The Pacific Select Variable Annuity 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 twelve subaccounts called
Variable Accounts: the Money Market Variable Account, the Managed Bond Variable
Account, the Government Securities Variable Account, the High Yield Bond
Variable Account, the Growth Variable Account (not offered to new
contractholders beginning January 1, 1994), the Equity Income Variable Account,
the Multi-Strategy Variable Account, the International Variable Account, the
Equity Index Variable Account, the Growth LT Variable Account, the Equity
Variable Account, and the Bond and Income 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 Separate Account was established by Pacific Mutual Life Insurance
Company ("Pacific Mutual") on November 30, 1989 and commenced operations on
July 24, 1990. 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 annuities, are obligations of Pacific Mutual.
The Separate Account held by Pacific Mutual represents funds from
individual flexible premium variable accumulation deferred annuity contracts.
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.
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 1995, the Fund has declared dividends for each 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 annuity contracts funded by the Separate
Account at an annual rate of 1.25% of the average daily net assets of each
Variable Account. Under the contracts, Pacific Mutual makes certain deductions
from the net assets of each Variable Account for administrative expenses,
contract maintenance, any state premium taxes, optional death benefits and any
sales surrender charges. The operating expenses of the Separate Account are paid
by Pacific Mutual.
4. RELATED PARTY AGREEMENT
Pacific Equities Network, a wholly-owned subsidiary of Pacific Mutual, is
the principal underwriter of variable annuity contracts funded by interests in
the Separate Account, and is compensated by Pacific Mutual.
B-6
<PAGE>
PACIFIC SELECT VARIABLE ANNUITY SEPARATE ACCOUNT
NOTES TO FINANCIAL STATEMENTS (Continued)
5. SELECTED ACCUMULATION UNIT** INFORMATION
Selected accumulation unit information for the year ended December 31, 1995
were as follows:
<TABLE>
<CAPTION>
High
Money Managed Government Yield Equity
Market Bond Securities Bond Growth Income
Variable Variable Variable Variable Variable Variable
Account Account Account Account Account Account
--------- --------- --------- --------- --------- ---------
Commencement of Operations 7/24/90 9/05/90 8/22/90 8/16/90 08/16/90 08/16/90
ACCUMULATION UNIT
VALUE:
<S> <C> <C> <C> <C> <C> <C>
Beginning $ 11.36 $ 13.70 $ 13.37 $ 16.03 $ 16.07 $ 14.09
======= ======= ======= ======= ======== ========
Ending $ 11.84 $ 16.11 $ 15.68 $ 18.82 $ 19.95 $ 18.32
======= ======= ======= ======= ======== ========
Number of Units Outstanding at
End of Period 5,268,194 4,110,672 3,144,652 3,499,795 1,431,985 7,116,753
<CAPTION>
Multi- Inter- Equity Growth Bond &
Strategy national Index LT Equity Income
Variable Variable Variable Variable Variable Variable
Account Account Account Account Account Account
--------- --------- --------- --------- --------- ---------
Commencement of Operations 9/25/90 8/16/90 2/11/91 1/04/94 1/04/95 1/04/95
ACCUMULATION UNIT
VALUE:
<S> <C> <C> <C> <C> <C> <C>
Beginning $ 14.29 $ 11.47 $ 13.03 $ 11.19 $ 10.00 $ 10.00
======== ======== ======== ======== ======== ========
Ending $ 17.68 $ 12.52 $ 17.62 $ 15.11 $ 12.24 $ 13.21
======== ======== ======== ======== ======== ========
Number of Units Outstanding at
End of Period 3,112,558 9,523,524 4,142,024 9,411,999 2,377,743 1,389,028
</TABLE>
- ---------
** Accumulation Unit: unit of measure used to calculate the value of a
Contract Owner's interest in a Variable Account during the Accumulation
Period.
B-7
