<PAGE>
ANNUAL REPORT
. PACIFIC SELECT VARIABLE ANNUITY SEPARATE ACCOUNT OF PACIFIC LIFE INSURANCE
COMPANY
[LOGO OF PACIFIC SELECT VARIABLE ANNUITY]
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Pacific Life Insurance Company
We have audited the accompanying statement of assets and liabilities of the
Pacific Select Variable Annuity Separate Account (comprised of the Money Market,
High Yield Bond, Managed Bond, Government Securities, Growth, Aggressive Equity,
Growth LT, Equity Income, Multi-Strategy, Equity, Bond and Income, Equity Index,
International and Emerging Markets Variable Accounts) as of December 31, 1997
and the related statement of operations for the year then ended and statement of
changes in net assets for each of the two years then ended (as to the Aggressive
Equity Variable Account and the Emerging Markets Variable Account, for the year
ended December 31, 1997 and for the period from commencement of operations
through December 31, 1996). 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, such financial statements present fairly, in all material
respects, the financial position of each of the respective Variable Accounts
constituting the Pacific Select Variable Annuity Separate Account as of December
31, 1997 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 (as to the
Aggressive Equity Variable Account and the Emerging Markets Variable Account,
for the year ended December 31, 1997 and for the period from commencement of
operations through December 31, 1996), in conformity with generally accepted
accounting principles.
DELOITTE & TOUCHE LLP
Costa Mesa, California
February 6, 1998
B-1
<PAGE>
PACIFIC SELECT VARIABLE ANNUITY SEPARATE ACCOUNT
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1997
(In thousands)
<TABLE>
<CAPTION>
High Govern-
Money Yield Managed ment
Market Bond Bond Securities Growth
Variable Variable Variable Variable Variable
Account Account Account Account Account
-------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ASSETS
Investments In Pacific Select Fund:
Money Market Portfolio (17,877 shares; cost $179,669) .......... $179,759
High Yield Bond Portfolio (23,859 shares; cost $234,646) ....... $237,997
Managed Bond Portfolio (27,708 shares; cost $297,618) .......... $308,589
Government Securities Portfolio (9,206 shares; cost $95,760) ... $99,233
Growth Portfolio (1,366 shares; cost $23,974) .................. $33,608
Aggressive Equity Portfolio (8,426 shares; cost $89,087) .......
Growth LT Portfolio (28,145 shares; cost $433,720) .............
Receivables:
Due from Pacific Life Insurance Company ........................ 1,200 110 5
Fund shares redeemed ........................................... 239 23
-------------------------------------------------------------
Total Assets .................................................... 180,959 238,236 308,699 99,256 33,613
-------------------------------------------------------------
LIABILITIES
Payables:
Due to Pacific Life Insurance Company .......................... 239 23
Fund shares purchased .......................................... 1,200 110 5
-------------------------------------------------------------
Total Liabilities ............................................... 1,200 239 110 23 5
-------------------------------------------------------------
NET ASSETS ...................................................... $179,759 $237,997 $308,589 $99,233 $33,608
-------------------------------------------------------------
<CAPTION>
Aggressive Growth
Equity LT
Variable Variable
Account Account
------------------------
<S> <C> <C>
ASSETS
Investments In Pacific Select Fund:
Money Market Portfolio (17,877 shares; cost $179,669) ..........
High Yield Bond Portfolio (23,859 shares; cost $234,646) .......
Managed Bond Portfolio (27,708 shares; cost $297,618) ..........
Government Securities Portfolio (9,206 shares; cost $95,760) ...
Growth Portfolio (1,366 shares; cost $23,974) ..................
Aggressive Equity Portfolio (8,426 shares; cost $89,087) ....... $94,232
Growth LT Portfolio (28,145 shares; cost $433,720) ............. $487,062
Receivables:
Due from Pacific Life Insurance Company ........................ 160 478
Fund shares redeemed ...........................................
------------------------
Total Assets .................................................... 94,392 487,540
------------------------
LIABILITIES
Payables:
Due to Pacific Life Insurance Company ..........................
Fund shares purchased .......................................... 160 478
------------------------
Total Liabilities ............................................... 160 478
------------------------
NET ASSETS ...................................................... $94,232 $487,062
------------------------
</TABLE>
See Notes to Financial Statements
B-2
<PAGE>
PACIFIC SELECT VARIABLE ANNUITY SEPARATE ACCOUNT
STATEMENT OF ASSETS AND LIABILITIES (Continued)
DECEMBER 31, 1997
(In thousands)
<TABLE>
<CAPTION>
Equity Multi- Bond and Equity
Income Strategy Equity Income Index
Variable Variable Variable Variable Variable
Account Account Account Account Account
--------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ASSETS
Investments In Pacific Select Fund:
Equity Income Portfolio (23,583 shares; cost $464,329) ....... $577,149
Multi-Strategy Portfolio (12,087 shares; cost $171,588) ...... $195,598
Equity Portfolio (8,927 shares; cost $187,010) ............... $213,297
Bond and Income Portfolio (5,986 shares; cost $72,137) ....... $77,640
Equity Index Portfolio (21,886 shares; cost $453,261) ........ $562,772
International Portfolio (33,277 shares; cost $490,322) .......
Emerging Markets Portfolio (7,961 shares; cost $79,664) ......
Receivables:
Due from Pacific Life Insurance Company ...................... 585 174 633 28 758
Fund shares redeemed .........................................
--------------------------------------------------------------
Total Assets .................................................. 577,734 195,772 213,930 77,668 563,530
--------------------------------------------------------------
LIABILITIES
Payables:
Due to Pacific Life Insurance Company ........................
Fund shares purchased ........................................ 585 174 633 28 758
--------------------------------------------------------------
Total Liabilities ............................................. 585 174 633 28 758
--------------------------------------------------------------
NET ASSETS .................................................... $577,149 $195,598 $213,297 $77,640 $562,772
--------------------------------------------------------------
<CAPTION>
Inter- Emerging
national Markets
Variable Variable
Account Account
--------------------
<S> <C> <C>
ASSETS
Investments In Pacific Select Fund:
Equity Income Portfolio (23,583 shares; cost $464,329) .......
Multi-Strategy Portfolio (12,087 shares; cost $171,588) ......
Equity Portfolio (8,927 shares; cost $187,010) ...............
Bond and Income Portfolio (5,986 shares; cost $72,137) .......
Equity Index Portfolio (21,886 shares; cost $453,261) ........
International Portfolio (33,277 shares; cost $490,322) ....... $539,317
Emerging Markets Portfolio (7,961 shares; cost $79,664) ...... $ 75,369
Receivables:
Due from Pacific Life Insurance Company ...................... 76
Fund shares redeemed ......................................... 3,134
--------------------
Total Assets .................................................. 542,451 75,445
--------------------
LIABILITIES
Payables:
Due to Pacific Life Insurance Company ........................ 3,134
Fund shares purchased ........................................ 76
--------------------
Total Liabilities ............................................. 3,134 76
--------------------
NET ASSETS .................................................... $539,317 $ 75,369
--------------------
</TABLE>
See Notes to Financial Statements
B-3
<PAGE>
PACIFIC SELECT VARIABLE ANNUITY SEPARATE ACCOUNT
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(In thousands)
<TABLE>
<CAPTION>
High Govern-
Money Yield Managed ment
Market Bond Bond Securities Growth
Variable Variable Variable Variable Variable
Account Account Account Account Account
---------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends ................................................. $ 8,836 $16,670 $13,753 $4,577 $3,226
EXPENSES
Mortality and expense risk fee ............................ 2,127 2,404 2,858 1,065 409
-------------------------------------------------------------
Net Investment Income (Loss) ................................ 6,709 14,266 10,895 3,512 2,817
-------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Net realized gain (loss) from security transactions ....... (14) 387 (268) (168) 1,567
Net unrealized appreciation (depreciation) on investments.. (3) (124) 9,969 3,517 3,843
-------------------------------------------------------------
Net Realized And Unrealized Gain (Loss) On Investments ...... (17) 263 9,701 3,349 5,410
-------------------------------------------------------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS ................................. $ 6,692 $14,529 $20,596 $6,861 $8,227
-------------------------------------------------------------
<CAPTION>
Aggressive Growth
Equity LT
Variable Variable
Account Account
---------------------
<S> <C> <C>
INVESTMENT INCOME
Dividends ................................................. $19,092
EXPENSES
Mortality and expense risk fee ............................ $ 850 5,138
--------------------
Net Investment Income (Loss) ................................ (850) 13,954
--------------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Net realized gain (loss) from security transactions ....... (585) 716
Net unrealized appreciation (depreciation) on investments.. 3,975 22,018
--------------------
Net Realized And Unrealized Gain (Loss) On Investments ...... 3,390 22,734
--------------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS ................................. $2,540 $36,688
--------------------
</TABLE>
See Notes to Financial Statements
B-4
<PAGE>
PACIFIC SELECT VARIABLE ANNUITY SEPARATE ACCOUNT
STATEMENT OF OPERATIONS (Continued)
FOR THE YEAR ENDED DECEMBER 31, 1997
(In thousands)
<TABLE>
<CAPTION>
Equity Multi- Bond and Equity Inter- Emerging
Income Strategy Equity Income Index national Markets
Variable Variable Variable Variable Variable Variable Variable
Account Account Account Account Account Account Account
---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends ............................................ $27,086 $11,841 $ 5,930 $4,535 $ 18,844 $17,134 $ 368
EXPENSES
Mortality and expense risk fee ....................... 5,592 1,892 2,084 745 5,024 5,782 735
---------------------------------------------------------------------------
Net Investment Income (Loss) .......................... 21,494 9,949 3,846 3,790 13,820 11,352 (367)
---------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Net realized gain (loss) from security transactions .. 3,481 705 1,815 (84) 6,185 4,148 (385)
Net unrealized appreciation (depreciation)
on investments....................................... 72,238 13,607 15,977 5,524 80,096 9,909 (3,911)
---------------------------------------------------------------------------
Net Realized And Unrealized Gain (Loss)
On Investments....................................... 75,719 14,312 17,792 5,440 86,281 14,057 (4,296)
---------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS ............................ $97,213 $24,261 $21,638 $9,230 $100,101 $25,409 $(4,663)
---------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements
B-5
<PAGE>
PACIFIC SELECT VARIABLE ANNUITY SEPARATE ACCOUNT
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1997
(In thousands)
<TABLE>
<CAPTION>
High Govern-
Money Yield Managed ment
Market Bond Bond Securities
Variable Variable Variable Variable
Account Account Account Account
--------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net investment income (loss) ................................ $ 6,709 $ 14,266 $ 10,895 $ 3,512
Net realized gain (loss) from security transactions ......... (14) 387 (268) (168)
Net unrealized appreciation (depreciation) on investments ... (3) (124) 9,969 3,517
--------------------------------------------------------
Net Increase In Net Assets Resulting
From Operations ............................................. 6,692 14,529 20,596 6,861
--------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS FROM
POLICY TRANSACTIONS
Transfer of net premiums .................................... 407,184 65,608 90,345 18,702
Transfers--policy charges and deductions .................... (2,713) (2,620) (2,668) (1,716)
Transfers in (from other variable accounts) ................. 493,873 119,494 82,960 32,708
Transfers out (to other variable accounts) .................. (844,241) (96,259) (37,009) (31,414)
Transfers--other ............................................ (14,044) (8,185) (7,976) (5,468)
--------------------------------------------------------
Net Increase (Decrease) In Net Assets Derived
From Policy Transactions .................................... 40,059 78,038 125,652 12,812
--------------------------------------------------------
NET INCREASE IN NET ASSETS ................................... 46,751 92,567 146,248 19,673
--------------------------------------------------------
NET ASSETS
Beginning of Year ........................................... 133,008 145,430 162,341 79,560
--------------------------------------------------------
End of Year ................................................. $ 179,759 $237,997 $308,589 $ 99,233
--------------------------------------------------------
<CAPTION>
Aggressive Growth
Growth Equity LT
Variable Variable Variable
Account Account Account
-----------------------------------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net investment income (loss) ................................ $ 2,817 $ (850) $ 13,954
Net realized gain (loss) from security transactions ......... 1,567 (585) 716
Net unrealized appreciation (depreciation) on investments ... 3,843 3,975 22,018
-----------------------------------------
Net Increase In Net Assets Resulting
From Operations ............................................. 8,227 2,540 36,688
-----------------------------------------
INCREASE (DECREASE) IN NET ASSETS FROM
POLICY TRANSACTIONS
Transfer of net premiums .................................... 466 32,980 111,853
Transfers--policy charges and deductions .................... (654) (714) (3,895)
Transfers in (from other variable accounts) ................. 7,804 71,444 138,546
Transfers out (to other variable accounts) .................. (7,720) (47,132) (105,269)
Transfers--other ............................................ (4,161) (1,840) (13,875)
-----------------------------------------
Net Increase (Decrease) In Net Assets Derived
From Policy Transactions .................................... (4,265) 54,738 127,360
-----------------------------------------
NET INCREASE IN NET ASSETS ................................... 3,962 57,278 164,048
-----------------------------------------
NET ASSETS
Beginning of Year ........................................... 29,646 36,954 323,014
-----------------------------------------
End of Year ................................................. $33,608 $ 94,232 $ 487,062
-----------------------------------------
</TABLE>
See Notes to Financial Statements
B-6
<PAGE>
PACIFIC SELECT VARIABLE ANNUITY SEPARATE ACCOUNT
STATEMENT OF CHANGES IN NET ASSETS (Continued)
FOR THE YEAR ENDED DECEMBER 31, 1997
(In thousands)
<TABLE>
<CAPTION>
Equity Multi- Bond and
Income Strategy Equity Income
Variable Variable Variable Variable
Account Account Account Account
------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net investment income (loss) ................................ $ 21,494 $ 9,949 $ 3,846 $ 3,790
Net realized gain (loss) from security transactions ......... 3,481 705 1,815 (84)
Net unrealized appreciation (depreciation) on investments ... 72,238 13,607 15,977 5,524
-----------------------------------------------------
Net Increase (Decrease) In Net Assets Resulting
From Operations ............................................. 97,213 24,261 21,638 9,230
-----------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS FROM
POLICY TRANSACTIONS
Transfer of net premiums .................................... 139,421 44,848 61,684 18,421
Transfers--policy charges and deductions .................... (4,837) (2,182) (1,073) (1,051)
Transfers in (from other variable accounts) ................. 140,187 43,643 69,763 19,615
Transfers out (to other variable accounts) .................. (82,182) (21,717) (43,588) (13,877)
Transfers--other ............................................ (14,665) (5,989) (4,653) (2,179)
-----------------------------------------------------
Net Increase In Net Assets Derived
From Policy Transactions .................................... 177,924 58,603 82,133 20,929
-----------------------------------------------------
NET INCREASE IN NET ASSETS ................................... 275,137 82,864 103,771 30,159
-----------------------------------------------------
NET ASSETS
Beginning of Year ........................................... 302,012 112,734 109,526 47,481
-----------------------------------------------------
End of Year ................................................. $577,149 $195,598 $213,297 $ 77,640
-----------------------------------------------------
<CAPTION>
Equity Inter- Emerging
Index national Markets
Variable Variable Variable
Account Account Account
----------------------------------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net investment income (loss) ................................ $ 13,820 $ 11,352 $ (367)
Net realized gain (loss) from security transactions ......... 6,185 4,148 (385)
Net unrealized appreciation (depreciation) on investments ... 80,096 9,909 (3,911)
----------------------------------------
Net Increase (Decrease) In Net Assets Resulting
From Operations ............................................. 100,101 25,409 (4,663)
----------------------------------------
INCREASE (DECREASE) IN NET ASSETS FROM
POLICY TRANSACTIONS
Transfer of net premiums .................................... 151,785 143,884 27,528
Transfers--policy charges and deductions .................... (3,528) (3,992) (378)
Transfers in (from other variable accounts) ................. 220,944 250,890 87,097
Transfers out (to other variable accounts) .................. (140,715) (188,605) (61,671)
Transfers--other ............................................ (12,182) (14,402) (1,349)
----------------------------------------
Net Increase In Net Assets Derived
From Policy Transactions .................................... 216,304 187,775 51,227
----------------------------------------
NET INCREASE IN NET ASSETS ................................... 316,405 213,184 46,564
----------------------------------------
NET ASSETS
Beginning of Year ........................................... 246,367 326,133 28,805
----------------------------------------
End of Year ................................................. $ 562,772 $ 539,317 $ 75,369
----------------------------------------
</TABLE>
See Notes to Financial Statements
B-7
<PAGE>
PACIFIC SELECT VARIABLE ANNUITY SEPARATE ACCOUNT
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1996
(In thousands)
<TABLE>
<CAPTION>
High Govern-
Money Yield Managed ment
Market Bond Bond Securities 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 (loss) ................................ $ 3,743 $ 8,131 $ 6,385 $ 4,059 $ 1,549
Net realized gain (loss) from security transactions ......... 22 1,367 (24) (350) 1,671
Net unrealized appreciation (depreciation) on investments ... 228 1,531 (1,269) (1,956) 2,697
------------------------------------------------------------------
Net Increase In Net Assets Resulting
From Operations ............................................. 3,993 11,029 5,092 1,753 5,917
------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS FROM
POLICY TRANSACTIONS
Transfer of net premiums .................................... 321,230 58,033 64,456 31,163 595
Transfers--policy charges and deductions .................... (3,380) (1,106) (1,207) (1,052) (149)
Transfers in (from other variable accounts) ................. 225,700 73,979 49,626 23,966 8,511
Transfers out (to other variable accounts) .................. (468,490) (59,025) (19,319) (23,202) (12,342)
Transfers--other ............................................ (8,420) (3,331) (2,518) (2,389) (1,460)
------------------------------------------------------------------
Net Increase (Decrease) In Net Assets Derived
From Policy Transactions .................................... 66,640 68,550 91,038 28,486 (4,845)
------------------------------------------------------------------
NET INCREASE IN NET ASSETS ................................... 70,633 79,579 96,130 30,239 1,072
------------------------------------------------------------------
NET ASSETS
Beginning of Year ........................................... 62,375 65,851 66,211 49,321 28,574
------------------------------------------------------------------
End of Year ................................................. $ 133,008 $145,430 $162,341 $ 79,560 $ 29,646
------------------------------------------------------------------
<CAPTION>
Aggressive Growth
Equity LT
Variable Variable
Account (1) Account
----------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net investment income (loss) ................................ $ (146) $ (943)
Net realized gain (loss) from security transactions ......... (75) 9,057
Net unrealized appreciation (depreciation) on investments ... 1,169 24,020
----------------------------
Net Increase In Net Assets Resulting
From Operations ............................................. 948 32,134
----------------------------
INCREASE (DECREASE) IN NET ASSETS FROM
POLICY TRANSACTIONS
Transfer of net premiums .................................... 19,431 115,655
Transfers--policy charges and deductions .................... (48) (2,621)
Transfers in (from other variable accounts) ................. 21,702 151,434
Transfers out (to other variable accounts) .................. (4,811) (108,767)
Transfers--other ............................................ (268) (7,047)
----------------------------
Net Increase (Decrease) In Net Assets Derived
From Policy Transactions .................................... 36,006 148,654
----------------------------
NET INCREASE IN NET ASSETS ................................... 36,954 180,788
----------------------------
NET ASSETS
Beginning of Year ........................................... 142,226
----------------------------
End of Year ................................................. $36,954 $ 323,014
----------------------------
</TABLE>
(1) For the period from April 1, 1996 (commencement of operations) to December
31, 1996.
See Notes to Financial Statements
B-8
<PAGE>
PACIFIC SELECT VARIABLE ANNUITY SEPARATE ACCOUNT
STATEMENT OF CHANGES IN NET ASSETS (Continued)
FOR THE YEAR ENDED DECEMBER 31, 1996
(In thousands)
<TABLE>
<CAPTION>
Equity Multi- Bond and
Income Strategy Equity Income
Variable Variable Variable Variable
Account Account Account Account
-----------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net investment income (loss) ................................ $ 8,169 $ 4,799 $ 2,354 $ 1,967
Net realized gain (loss) from security transactions ......... 2,288 40 1,580 (139)
Net unrealized appreciation (depreciation) on investments ... 26,576 4,673 9,264 (1,227)
-------------------------------------------------------
Net Increase (Decrease) In Net Assets Resulting
From Operations ............................................. 37,033 9,512 13,198 601
-------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS FROM
POLICY TRANSACTIONS
Transfer of net premiums .................................... 108,809 38,378 48,041 20,471
Transfers--policy charges and deductions .................... (1,752) (1,122) (747) (320)
Transfers in (from other variable accounts) ................. 86,018 25,490 55,281 20,444
Transfers out (to other variable accounts) .................. (52,423) (12,149) (33,491) (11,225)
Transfers--other ............................................ (6,068) (2,404) (1,855) (836)
-------------------------------------------------------
Net Increase In Net Assets Derived
From Policy Transactions .................................... 134,584 48,193 67,229 28,534
-------------------------------------------------------
NET INCREASE IN NET ASSETS ................................... 171,617 57,705 80,427 29,135
-------------------------------------------------------
NET ASSETS
Beginning of Year ........................................... 130,395 55,029 29,099 18,346
-------------------------------------------------------
End of Year ................................................. $302,012 $112,734 $109,526 $ 47,481
-------------------------------------------------------
<CAPTION>
Equity Inter- Emerging
Index national Markets
Variable Variable Variable
Account Account Account (1)
---------------------------------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net investment income (loss) ................................ $ 3,597 $ 3,323 $ (120)
Net realized gain (loss) from security transactions ......... 3,059 1,215 (9)
Net unrealized appreciation (depreciation) on investments ... 22,009 36,279 (383)
------------------------------------------
Net Increase (Decrease) In Net Assets Resulting
From Operations ............................................. 28,665 40,817 (512)
------------------------------------------
INCREASE (DECREASE) IN NET ASSETS FROM
POLICY TRANSACTIONS
Transfer of net premiums .................................... 102,522 113,891 14,273
Transfers--policy charges and deductions .................... (1,086) (1,735) (85)
Transfers in (from other variable accounts) ................. 92,870 109,050 17,112
Transfers out (to other variable accounts) .................. (45,695) (49,335) (1,836)
Transfers--other ............................................ (3,900) (5,800) (147)
------------------------------------------
Net Increase In Net Assets Derived
From Policy Transactions .................................... 144,711 166,071 29,317
------------------------------------------
NET INCREASE IN NET ASSETS ................................... 173,376 206,888 28,805
------------------------------------------
NET ASSETS
Beginning of Year ........................................... 72,991 119,245
------------------------------------------
End of Year ................................................. $246,367 $326,133 $28,805
------------------------------------------
</TABLE>
(1) For the period from April 1, 1996 (commencement of operations) to December
31, 1996.
See Notes to Financial Statements
B-9
<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 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 (not offered to new Contract
Owners beginning January 1, 1994), 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 schedules of
investments, are included elsewhere in this report and should be read in
conjunction with the Separate Account's financial statements.
The Separate Account was established by Pacific Life Insurance Company
(formerly named Pacific Mutual Life Insurance Company - see Note 1 to Financial
Statements of the Fund on A-66) 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 Life. The assets of the Separate Account will not be
charged with any liabilities arising out of any other business conducted by
Pacific Life, but the obligations of the Separate Account, including benefits
related to variable annuities, are obligations of Pacific Life.
The Separate Account held by Pacific Life represents funds from individual
flexible premium variable accumulation deferred annuity contracts (the
"Contracts"). 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 its 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 Life, 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 Life 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. 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 Life charges the Separate Account daily for mortality and expense
risks assumed with respect to the 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 Life makes certain deductions from the net assets
of each Variable Account for administrative expenses, contract maintenance, any
state premium taxes, and any surrender charges. The operating expenses of the
Separate Account are paid by Pacific Life.
4. RELATED PARTY AGREEMENT
Pacific Mutual Distributors, Inc., a wholly-owned subsidiary of Pacific Life,
is the principal underwriter of variable life insurance policies funded by
interests in the Separate Account, and is compensated by Pacific Life.
B-10
<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, 1997
were as follows:
<TABLE>
<CAPTION>
Accumulation
Unit Value
- ------------------------------------------------------------------------------------
At
Commence- Begin- Number of Units
Variable ment of ning of At Outstanding
Accounts Operations Year End of Year At End of Year
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Money Market 7/24/90 $12.29 $12.77 14,071,168
- ------------------------------------------------------------------------------------
High Yield
Bond 8/16/90 $20.68 $22.35 10,646,620
- ------------------------------------------------------------------------------------
Managed Bond 9/05/90 $16.58 $18.00 17,140,870
- ------------------------------------------------------------------------------------
Government
Securities 8/22/90 $15.94 $17.24 5,756,107
- ------------------------------------------------------------------------------------
Growth 8/16/90 $24.36 $31.34 1,072,376
- ------------------------------------------------------------------------------------
Aggressive
Equity 4/01/96 $10.69 $10.95 8,602,223
- ------------------------------------------------------------------------------------
Growth LT 1/04/94 $17.59 $19.27 25,269,203
- ------------------------------------------------------------------------------------
Equity Income 8/16/90 $21.61 $27.45 21,028,366
- ------------------------------------------------------------------------------------
Multi-Strategy 9/25/90 $19.65 $23.22 8,424,713
- ------------------------------------------------------------------------------------
Equity 1/04/95 $15.47 $18.06 11,810,163
- ------------------------------------------------------------------------------------
Bond and
Income 1/04/95 $12.94 $14.86 5,223,465
- ------------------------------------------------------------------------------------
Equity Index 2/11/91 $21.29 $27.96 20,127,373
- ------------------------------------------------------------------------------------
International 8/16/90 $15.07 $16.27 33,155,306
- ------------------------------------------------------------------------------------
Emerging
Markets 4/01/96 $ 9.59 $ 9.31 8,096,690
- ------------------------------------------------------------------------------------
</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.
<PAGE>
PACIFIC SELECT VARIABLE ANNUITY SEPARATE ACCOUNT
NOTES TO FINANCIAL STATEMENTS (Continued)
6. SEPARATE ACCOUNT'S 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 charges (M&E). The cost and market value
of total Separate Account's investments in the Fund as of December 31, 1997 were
as follows (amounts in thousands):
<TABLE>
<CAPTION>
Variable Accounts
--------------------------------------------------------------------
Govern-
Money High Yield Managed ment
Market Bond Bond Securities Growth
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Total cost of investments at beginning of year $132,914 $141,955 $161,338 $ 79,604 $ 23,855
Add: Total net proceeds from policy and M&E transactions 426,928 124,151 127,331 29,321 8,011
Reinvested distributions from the Fund:
(a) Net investment income 8,836 15,156 13,111 4,577 68
(b) Net realized gain 1,514 642 3,158
--------------------------------------------------------------------
Sub-Total 568,678 282,776 302,422 113,502 35,092
Less: Cost of investments disposed during the year 389,009 48,130 4,804 17,742 11,118
--------------------------------------------------------------------
Total cost of investments at end of year 179,669 234,646 297,618 95,760 23,974
Add: Unrealized appreciation 90 3,351 10,971 3,473 9,634
--------------------------------------------------------------------
Total market value of investments at end of year $179,759 $237,997 $308,589 $ 99,233 $ 33,608
--------------------------------------------------------------------
<CAPTION>
Aggressive Growth Equity Multi-
Equity LT Income Strategy Equity
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Total cost of investments at beginning of year $ 35,784 $291,691 $261,430 $102,330 $ 99,216
Add: Total net proceeds from policy and M&E transactions 84,589 152,708 194,476 61,487 91,868
Reinvested distributions from the Fund:
(a) Net investment income 2,174 4,066 4,934 1,035
(b) Net realized gain 16,918 23,020 6,907 4,895
--------------------------------------------------------------------
Sub-Total 120,373 463,491 482,992 175,658 197,014
Less: Cost of investments disposed during the year 31,286 29,771 18,663 4,070 10,004
--------------------------------------------------------------------
Total cost of investments at end of year 89,087 433,720 464,329 171,588 187,010
Add: Unrealized appreciation 5,145 53,342 112,820 24,010 26,287
--------------------------------------------------------------------
Total market value of investments at end of year $ 94,232 $487,062 $577,149 $195,598 $213,297
--------------------------------------------------------------------
<CAPTION>
Bond and Equity Inter- Emerging
Income Index national Markets
-----------------------------------------------------
<S> <C> <C> <C> <C>
Total cost of investments at beginning of year $ 47,502 $216,952 $287,047 $ 29,189
Add: Total net proceeds from policy and M&E transactions 25,508 268,576 293,202 97,935
Reinvested distributions from the Fund:
(a) Net investment income 3,775 6,491 9,291 368
(b) Net realized gain 760 12,353 7,843
-----------------------------------------------------
Sub-Total 77,545 504,372 597,383 127,492
Less: Cost of investments disposed during the year 5,408 51,111 107,061 47,828
-----------------------------------------------------
Total cost of investments at end of year 72,137 453,261 490,322 79,664
Add: Unrealized appreciation (depreciation) 5,503 109,511 48,995 (4,295)
-----------------------------------------------------
Total market value of investments at end of year $ 77,640 $562,772 $539,317 $ 75,369
-----------------------------------------------------
</TABLE>
B-12
