<PAGE>
ANNUAL REPORT
.Pacific Corinthian Variable Separate Account of
Pacific Corinthian Life Insurance Company
[LOGO of PACIFIC CORINTHIAN VARIABLE ANNUITY]
<PAGE>
Dear Pacific Corinthian Variable Annuity Contract Owner:
We are pleased to share with you the Annual Report for the Pacific
Corinthian Variable Separate Account ("Separate Account") of Pacific Corinthian
Life Insurance Company ("Pacific Corinthian") for the year ended December 31,
1996 together with the 1996 Annual Report for the Pacific Select Fund.
The Separate Account supports the Pacific Corinthian Variable Annuity
Contract from the Pacific Corinthian. As a reminder, the assets of the Separate
Account are held for the exclusive benefit of Contract Owners who have an
interest in the Variable Accounts and are not subject to other liabilities of
Pacific Corinthian. Pacific Select Fund is the underlying investment vehicle for
the Separate Account. Pacific Mutual serves as Investment Advisor to the Pacific
Select Fund.
The total returns for 1996 for each Variable Account and the relevant
indices are as follows:
Total Return(1)
01/01/96
12/31/96
--------
Variable Account I (Money Market) ............... 3.81%
Variable Account II (Equity) .................... 26.50%
Variable Account III (Bond and Income) .......... (1.99)%
Variable Account IV (Government Securities) ..... 1.71%
Variable Account VII (Equity Income) ............ 18.00%
Variable Account IX (Multi-Strategy) ............ 11.21%
Variable Account X (Managed Bond) ............... 3.00%
Variable Account XI (High Yield Bond) ........... 9.97%
Variable Account XII (Equity Index) ............. 20.89%
Variable Account XIII (International) ........... 20.41%
Variable Account XIV (Growth LT) ................ 16.45%
Index* (Variable Account)
-----------------------
Lehman Brothers Government Bond Index ........... 2.77%
(Government Securities)
Lehman Brothers Government Corporate Bond Index . 2.91%
(High Yield Bond, Managed Bond and Multi-Strategy)
Lehman Brothers Aggregate Index ................. 3.61%
(Multi-Strategy)
Morgan Stanley Capital International Europe
Australia and Far East Index .................... 6.04%
(International)
Lehman Brothers Government Corporate LT Index ... 0.13%
(Bond and Income)
Standard & Poor's 500 Index ..................... 22.96%
(Equity, Equity Income, Equity Index,
Growth LT, and Multi-Strategy)
If you have any questions about your Contract, your Financial Consultant
will be pleased to help you, or call us at Pacific Corinthian at 800-735-5535.
Sincerely,
Yves F. Pinkowitz
President, Pacific Corinthian Life Insurance
Company
- -----------------
*All indices are unmanaged. Sources for indices: AIM(TM) Asset Investment
Management software, Micropal, Inc., Portland, Oregon.
(1) The total returns include deductions for expenses incurred by the
Separate Account. The total returns do not include the $30 Contract
Maintenance Charge or any applicable surrender charges and are based on
the 1996 performance of the Pacific Select Fund.
B-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Pacific Corinthian Life Insurance Company
We have audited the accompanying statement of assets and liabilities of the
Pacific Corinthian Variable Separate Account (comprised of Variable Accounts I,
II, III, IV, VII, IX, X, XI, XII, XIII, and XIV) as of December 31, 1996 and the
related statement of operations for the year then ended and the statement of
changes in net assets for each of the two years in the period then ended. 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 Corinthian Variable Separate Account as of
December 31, 1996 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 14, 1997
B-2
<PAGE>
PACIFIC CORINTHIAN VARIABLE SEPARATE ACCOUNT
STATEMENT OF ASSETS & LIABILITIES
DECEMBER 31, 1996
(In Thousands)
<TABLE>
<CAPTION>
Variable Variable Variable Variable Variable
Account I Account II Account III Account IV Account VII
--------- ---------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C>
ASSETS
Investments in Pacific Select Fund:
Money Market (600 shares; cost $6,015)........... $ 6,024
Equity (4,399 shares; cost $59,161).............. $ 92,662
Bond and Income (2,723 shares; cost $31,822)..... $ 32,816
Government Securities (135 shares; cost $1,377).. $ 1,401
Equity Income (1,025 shares; cost $14,379)....... $ 20,967
Multi-Strategy (1,228 shares; cost $14,652)......
Managed Bond (4 shares; cost $46)................
High Yield Bond (9 shares; cost $81).............
Equity Index (20 shares; cost $342)..............
International (44 shares; cost $585).............
Growth LT (87 shares; cost $1,229)...............
Receivables:
Fund shares redeemed............................. 26 60 26 1 13
--------- ---------- ----------- ---------- -----------
TOTAL ASSETS......................................... 6,050 92,722 32,842 1,402 20,980
--------- ---------- ----------- ---------- -----------
LIABILITIES
Payables:
Due to Pacific Corinthian Life Insurance Co...... 26 60 26 1 13
Other Liabilities................................ 22 531 165 13 231
--------- ---------- ----------- ---------- -----------
TOTAL LIABILITIES.................................... 48 591 191 14 244
--------- ---------- ----------- ---------- -----------
NET ASSETS........................................... $ 6,002 $ 92,131 $ 32,651 $ 1,388 $ 20,736
========= ========== =========== ========== ===========
</TABLE>
<TABLE>
<CAPTION>
Variable Variable Variable Variable Variable Variable
Account IX Account X Account XI Account XII Account XIII Account XIV
---------- --------- ---------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Investments in Pacific Select Fund:
Money Market (600 shares; cost $6,015)...........
Equity (4,399 shares; cost $59,161)..............
Bond and Income (2,723 shares; cost $31,822).....
Government Securities (135 shares; cost $1,377)..
Equity Income (1,025 shares; cost $14,379).......
Multi-Strategy (1,228 shares; cost $14,652)...... $ 18,107
Managed Bond (4 shares; cost $46)................ $ 47
High Yield Bond (9 shares; cost $81)............. $ 85
Equity Index (20 shares; cost $342).............. $ 414
International (44 shares; cost $585)............. $ 678
Growth LT (87 shares; cost $1,229)............... $ 1,430
Receivables:
Fund shares redeemed............................. 14 1
---------- --------- ---------- ----------- ------------ -----------
TOTAL ASSETS......................................... 18,121 47 85 414 678 1,431
---------- --------- ---------- ----------- ------------ -----------
LIABILITIES
Payables:
Due to Pacific Corinthian Life Insurance Co...... 14 1
Other Liabilities................................ 50 1 2 6
---------- --------- ---------- ----------- ------------ -----------
TOTAL LIABILITIES.................................... 64 1 2 7
---------- --------- ---------- ----------- ------------ -----------
NET ASSETS........................................... $ 18,057 $ 47 $ 85 $ 413 $ 676 $ 1,424
========== ========= ========== =========== ============ ===========
</TABLE>
See Notes to Financial Statements.
B-3
<PAGE>
PACIFIC CORINTHIAN VARIABLE SEPARATE ACCOUNT
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(In thousands)
<TABLE>
<CAPTION>
Variable Variable Variable Variable Variable Variable
Account I Account II Account III Account IV Account VII Account IX
--------- ---------- ----------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends................................. $ 280 $ 5,150 $ 2,331 $ 127 $ 1,206 $ 1,417
------- ------- ------- ------- ------- -------
Total Investment Income................ 280 5,150 2,331 127 1,206 1,417
------- ------- ------- ------- ------- -------
EXPENSES:
Mortality and Expense Risk Fees........... 72 1,043 406 21 234 213
Other Operating Expenses.................. 1 8 3 2 2
------- ------- ------- ------- ------- -------
Total Expenses........................ 73 1,051 409 21 236 215
------- ------- ------- ------- ------- -------
NET INVESTMENT INCOME (LOSS)................... 207 4,099 1,922 106 970 1,202
------- ------- ------- ------- ------- -------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net Realized Gain......................... 3 2,716 112 16 1,023 496
Net Unrealized Appreciation
(Depreciation).......................... 16 13,454 (2,995) (99) 1,347 194
------- ------- ------- ------- ------- -------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS...................... 19 16,170 (2,883) (83) 2,370 690
------- ------- ------- ------- ------- -------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS.................. $ 226 $20,269 $ (961) $ 23 $ 3,340 $ 1,892
======= ======= ======= ======= ======= =======
<CAPTION>
Variable Variable Variable Variable Variable
Account X Account XI Account XII Account XIII Account XIV
--------- ---------- ----------- ------------ -----------
<S>............................................ <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends................................. $ 6 $ 8 $ 15 $ 13 $ 10
------- ------- ------- ------- -------
Total Investment Income................ 6 8 15 13 10
------- ------- ------- ------- -------
EXPENSES:
Mortality and Expense Risk Fees........... 1 1 4 5 13
Other Operating Expenses
------- ------- ------- ------- -------
Total Expenses........................ 1 1 4 5 13
------- ------- ------- ------- -------
NET INVESTMENT INCOME (LOSS)................... 5 7 11 8 (3)
------- ------- ------- ------- -------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net Realized Gain......................... 1 12 6 50
Net Unrealized Appreciation
(Depreciation).......................... (7) 1 49 74 109
------- ------- ------- ------- -------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS...................... (6) 1 61 80 159
------- ------- ------- ------- -------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS.................. $ (1) $ 8 $ 72 $ 88 $ 156
======= ======= ======= ======= =======
</TABLE>
See notes to financial statements.
B-4
<PAGE>
PACIFIC CORINTHIAN VARIABLE SEPARATE ACCOUNT
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1996
(In thousands)
<TABLE>
<CAPTION>
Variable Variable Variable Variable Variable Variable Variable
Account I Account II Account III Account IV Account VII Account IX Account X
--------- ---------- ----------- ---------- ----------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
FROM OPERATIONS:
Net Investment Income (Loss) ......... $ 207 $ 4,099 $ 1,922 $ 106 $ 970 $ 1,202 $ 5
Net Realized Gain on Investments ..... 3 2,716 112 16 1,023 496 1
Net Unrealized Appreciation
(Depreciation)
on Investments ..................... 16 13,454 (2,995) (99) 1,347 194 (7)
--------- ---------- ----------- ---------- ----------- ---------- ---------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS .............. 226 20,269 (961) 23 3,340 1,892 (1)
--------- ---------- ----------- ---------- ----------- ---------- ---------
FROM ACCOUNT TRANSACTIONS:
Transfers in ......................... 1,293 649 94 40 87 63 8
Transfers out ........................ (1,426) (7,026) (4,553) (662) (3,114) (2,388) (84)
--------- ---------- ----------- ---------- ----------- ---------- ---------
NET INCREASE (DECREASE) IN NET ASSETS
FROM ACCOUNT TRANSACTIONS .............. (133) (6,377) (4,459) (622) (3,027) (2,325) (76)
--------- ---------- ----------- ---------- ----------- ---------- ---------
NET INCREASE (DECREASE) IN NET ASSETS ..... 93 13,892 (5,420) (599) 313 (433) (77)
NET ASSETS
Beginning of year .................... 5,909 78,239 38,071 1,987 20,423 18,490 124
--------- ---------- ----------- ---------- ----------- ---------- ---------
End of year .......................... $ 6,002 $ 92,131 $ 32,651 $ 1,388 $ 20,736 $ 18,057 $ 47
========= ========== =========== ========== =========== ========== =========
<CAPTION>
Variable Variable Variable Variable
Account XI Account XII Account XIII Account XIV
---------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
FROM OPERATIONS:
Net Investment Income (Loss) ......... $ 7 $ 11 $ 8 $ (3)
Net Realized Gain on Investments ..... 12 6 50
Net Unrealized Appreciation
(Depreciation)
on Investments ..................... 1 49 74 109
---------- ----------- ------------ -----------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS .............. 8 72 88 156
---------- ----------- ------------ -----------
FROM ACCOUNT TRANSACTIONS:
Transfers in ......................... 9 117 308 646
Transfers out ........................ (10) (75) (70) (186)
---------- ----------- ------------ -----------
NET INCREASE (DECREASE) IN NET ASSETS
FROM ACCOUNT TRANSACTIONS .............. (1) 42 238 460
---------- ----------- ------------ -----------
NET INCREASE (DECREASE) IN NET ASSETS ..... 7 114 326 616
NET ASSETS
Beginning of year .................... 78 299 350 808
---------- ----------- ------------ -----------
End of year .......................... $ 85 $ 413 $ 676 $ 1,424
========== =========== ============ ===========
</TABLE>
See Notes to Financial Statements.
B-5
<PAGE>
PACIFIC CORINTHIAN VARIABLE SEPARATE ACCOUNT
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1995
(In thousands)
<TABLE>
<CAPTION>
Variable Variable Variable Variable Variable Variable
Account I Account II Account III Account IV Account VII Account IX
--------- ---------- ----------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
FROM OPERATIONS:
Net Investment Income (Loss)................. $ 276 $ (649) $ 2,063 $ 87 $ 87 $ 410
Net Realized Gain on Investments............. 20 2,053 95 10 1,312 491
Net Unrealized Appreciation (Depreciation)
on Investments............................ (8) 14,129 7,961 245 4,148 3,117
--------- ---------- ----------- ---------- ----------- ----------
NET INCREASE IN ASSETS
RESULTING FROM OPERATIONS..................... 288 15,533 10,119 342 5,547 4,018
--------- ---------- ----------- ---------- ----------- ----------
FROM ACCOUNT TRANSACTIONS:
Transfers in................................. 1,391 797 244 146 288 161
Transfers out................................ (3,927) (10,979) (6,230) (756) (6,835) (5,356)
--------- ---------- ----------- ---------- ----------- ----------
NET INCREASE (DECREASE) IN THE ASSETS
FROM ACCOUNT TRANSACTIONS..................... (2,536) (10,182) (5,986) (610) (6,547) (5,195)
--------- ---------- ----------- ---------- ----------- ----------
NET INCREASE (DECREASE) IN NET ASSETS............ (2,248) 5,351 4,133 (268) (1,000) (1,177)
NET ASSETS
Beginning of year........................... 8,157 72,888 33,938 2,255 21,423 19,667
--------- ---------- ----------- ---------- ----------- ----------
End of year................................. $ 5,909 $ 78,239 $ 38,071 $ 1,987 $ 20,423 $ 18,490
========= ========== =========== ========== =========== ==========
</TABLE>
<TABLE>
<CAPTION>
Variable Variable Variable Variable Variable
Account X Account XI Account XII Account XIII Account XIV
--------- ---------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C>
FROM OPERATIONS:
Net Investment Income (Loss)................ $ 5 $ 4 $ 1 $ 4 $ 48
Net Realized Gain on Investments............ 3
Net Unrealized Appreciation (Depreciation)
on Investments............................ 9 4 24 19 92
------- ------- ------- ------- --------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS..................... 14 8 25 23 143
------- ------- ------- ------- --------
FROM ACCOUNT TRANSACTIONS:
Transfers in................................ 110 70 283 390 686
Transfers out............................... (9) (63) (21)
------- ------- ------- ------- --------
NET INCREASE (DECREASE) IN NET ASSETS
FROM ACCOUNT TRANSACTIONS..................... 110 70 274 327 665
------- ------- ------- ------- --------
NET INCREASE (DECREASE) IN NET ASSETS............ 124 78 299 350 808
NET ASSETS
Beginning of year...........................
------- ------- ------- ------- -------
End of year................................. $ 124 $ 78 $ 299 $ 350 $ 808
======= ======= ======= ======= =======
</TABLE>
See notes to financial statements.
B-6
<PAGE>
PACIFIC CORINTHIAN VARIABLE SEPARATE ACCOUNT
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION
Pacific Corinthian Variable Separate Account of Pacific Corinthian Life
Insurance Company (the "Separate Account"), is a separate investment account
established by a resolution of the Board of Directors of Pacific Corinthian Life
Insurance Company (the "Company").
The Separate Account held by the Company represents funds from individual
flexible premium deferred annuity and variable accumulation contracts.
The Separate Account which operates as a Unit Investment Trust under the
Investment Company Act of 1940, as amended, is divided into subaccounts
("Variable Accounts"). Each Variable Account invests in shares of a designated
Portfolio of Pacific Select Fund as follows:
Variable Accounts Portfolios
------------------ ----------
Variable Account I Money Market Portfolio
Variable Account II Equity Portfolio
Variable Account III Bond and Income Portfolio
Variable Account IV Government Securities Portfolio
Variable Account VII Equity Income Portfolio
Variable Account IX Multi-Strategy Portfolio
Variable Account X Managed Bond Portfolio
Variable Account XI High Yield Bond Portfolio
Variable Account XII Equity Index Portfolio
Variable Account XIII International Portfolio
Variable Account XIV Growth LT Portfolio
The Company, a subsidiary of Pacific Mutual Life Insurance Company, is a
stock life insurance company organized under the laws of the State of
California.
The Company was formed to rehabilitate the business of First Capital Life
Insurance Company under a five year rehabilitation plan ("the Plan"). The Plan
required all Contract Owners to make an election to either surrender their
Contract or continue as Contract Owners and consent to the assumption and
reinsurance by the Company.
The Plan does not allow the Company to accept new premiums nor does it
allow Contract Owners to transfer from any of the Variable Accounts to the Fixed
Account, or from the Fixed Account to any of the Variable Accounts. Transfers
continue to be permitted among the Variable Accounts. The Plan had no impact
upon the operations or unit values of the Separate Account.
2. SIGNIFICANT ACCOUNTING POLICIES
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. Investment Valuation:
Investments in shares of the Fund are valued at the reported net asset
values of the respective portfolio.
B-7
<PAGE>
PACIFIC CORINTHIAN VARIABLE SEPARATE ACCOUNT
NOTES TO FINANCIAL STATEMENTS (Continued)
2. SIGNIFICANT ACCOUNTING POLICIES (Continued)
B. Reinvestment of Dividends:
Dividends received from net investment income and net realized capital
gains are reinvested in additional shares of the portfolio of the Fund
making the distribution or, at the election of the Separate Account, are
received in cash. Dividend income and capital gain distributions are
recorded as income on the ex-dividend date.
C. Federal Income Taxes:
Operations of the Separate Account form a part of the Company, which
is taxed as a "life insurance company" under the Internal Revenue Code
(the "Code"). Under current law, no Federal income taxes are payable with
respect to the Separate Account.
Under the principles set forth in Internal Revenue Service Revenue
Ruling 81-225 and section 817(h) of the Code and regulations thereunder,
the Company believes that it will be treated as the owner of the assets
invested in the Separate Account for Federal income tax purposes, with the
result that earnings and gains, if any, derived from those assets will not
be included in a Contract Owner's gross income until amounts are
withdrawn, or received pursuant to an Optional Payment Plan.
3. CONTRACT CHARGES:
A contingent deferred sales charge may be deducted upon partial or
complete withdrawal or upon annuitization of a contract.
An annual contract maintenance charge of $30 is imposed on all
contracts on December 31 of each year. The charge covers the cost of
contract administration for the following year and is apportioned equally
among the accounts to which the Contract Value is allocated.
Mortality and expense risks assumed by the Company are compensated by
a charge equivalent to an annual rate of 1.19% of the value of each
Variable Account's net assets of which approximately 1.00% is for assuming
mortality risks and 0.19% is for assuming expense risks.
In addition, the Separate Account bears certain of its operating
expenses, subject to the Company guarantee that such expenses will not
exceed 0.25% of any Variable Account's average daily net assets annually.
The Company further guarantees that the ordinary operating expenses of a
Variable Account together with the operating expenses incurred by its
underlying Fund Portfolio, exclusive of advisory and management fees,
interest, taxes, brokerage commissions, transaction costs or extraordinary
expenses, will not exceed 0.6% of average daily net assets annually after
consideration for any adjustment by the Fund's Investment Adviser for Fund
expenses in excess of state expense limitations, except that additional
custodial costs associated with holding foreign securities and foreign
taxes on dividends, interests and gains will also be excluded with respect
to the underlying International Portfolio of the Fund.
B-8
<PAGE>
PACIFIC CORINTHIAN VARIABLE SEPARATE ACCOUNT
NOTES TO FINANCIAL STATEMENTS (Continued)
4. SELECTED ACCUMULATION UNIT** INFORMATION
Selected accumulation unit information for the year ended December 31,
1996 were as follows:
<TABLE>
<CAPTION>
Variable Variable Variable Variable Variable Variable
Account I Account II Account III Account IV Account VII Account IX
--------- ---------- ----------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
ACCUMULATION UNIT
VALUE:
Beginning $ 1.753 $ 4.117 $ 3.958 $ 1.804 $ 1.740 $ 1.677
========= ========== =========== ========== =========== ==========
Ending $ 1.819 $ 5.208 $ 3.879 $ 1.835 $ 2.053 $ 1.865
========= ========== =========== ========== =========== ==========
Number of Units Outstanding at
End of Year 3,299,125 17,691,032 8,418,032 756,267 10,099,851 9,682,862
<CAPTION>
Variable Variable Variable Variable Variable
Account X Account XI Account XII Account XIII Account XIV
--------- ---------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C>
ACCUMULATION UNIT
VALUE:
Beginning $ 1.167 $ 1.151 $ 1.334 $ 1.103 $ 1.306
========= ========== =========== ========== ===========
Ending $ 1.202 $ 1.266 $ 1.612 $ 1.328 $ 1.520
========= ========== =========== ========== ===========
Number of Units Outstanding at
End of Year 39,109 67,250 255,873 509,025 936,498
</TABLE>
- ---------------
** Accumulation Unit: unit of measure used to calculate the value of a
Contract Owner's interest in a Variable Account during the Accumulated
Period.
B-9
