<PAGE>
ANNUAL REPORT
. Pacific Corinthian Variable Separate Account of
Pacific Life Insurance Company
[LOGO OF PACIFIC CORINTHIAN]
<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 Corinthian Variable Separate Account (comprised of Variable Accounts I,
II, III, IV, VII, IX, X, XI, XII, XIII, and XIV) as of December 31, 1997 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 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, such financial statements 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,
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, in conformity with
generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Costa Mesa, California
February 6, 1998
B-1
<PAGE>
PACIFIC CORINTHIAN VARIABLE SEPARATE ACCOUNT
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1997
(In thousands)
<TABLE>
<CAPTION>
Variable Variable Variable Variable Variable Variable
Account Account Account Account Account Account
I II III IV VII IX
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Investments in Pacific Select Fund:
Money Market Portfolio (408 shares; cost $4,096) ........... $4,106
Equity Portfolio (2,993 shares; cost $40,267) .............. $71,510
Bond and Income Portfolio (1,790 shares; cost $20,864) ..... $23,217
Government Securities Portfolio (113 shares; cost $1,160) .. $1,222
Equity Income Portfolio (672 shares; cost $9,467) .......... $16,453
Multi-Strategy Portfolio (796 shares; cost $9,483) ......... $12,880
Managed Bond Portfolio (17 shares; cost $191) ..............
High Yield Bond Portfolio (30 shares; cost $296) ...........
Equity Index Portfolio (60 shares; cost $1,417) ............
International Portfolio (54 shares; cost $792) .............
Growth LT Portfolio (96 shares; cost $1,458) ...............
Receivables:
Due from Pacific Life Insurance Company ....................
Fund shares redeemed ....................................... 36 560 344 9 91 143
--------------------------------------------------------------------
Total Assets................................................. 4,142 72,070 23,561 1,231 16,544 13,023
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LIABILITIES
Payables:
Due to Pacific Life Insurance Company ...................... 36 1,125 428 9 139 174
Fund shares purchased ......................................
Other liabilities .......................................... 19 438 128 5 126 44
--------------------------------------------------------------------
Total Liabilities ........................................... 55 1,563 556 14 265 218
--------------------------------------------------------------------
NET ASSETS .................................................. $4,087 $70,507 $23,005 $1,217 $16,279 $12,805
--------------------------------------------------------------------
<CAPTION>
Variable Variable Variable Variable Variable
Account Account Account Account Account
X XI XII XIII XIV
--------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ASSETS
Investments in Pacific Select Fund:
Money Market Portfolio (408 shares; cost $4,096) ...........
Equity Portfolio (2,993 shares; cost $40,267) ..............
Bond and Income Portfolio (1,790 shares; cost $20,864) .....
Government Securities Portfolio (113 shares; cost $1,160) ..
Equity Income Portfolio (672 shares; cost $9,467) ..........
Multi-Strategy Portfolio (796 shares; cost $9,483) .........
Managed Bond Portfolio (17 shares; cost $191) .............. $194
High Yield Bond Portfolio (30 shares; cost $296) ........... $301
Equity Index Portfolio (60 shares; cost $1,417) ............ $1,549
International Portfolio (54 shares; cost $792) ............. $878
Growth LT Portfolio (96 shares; cost $1,458) ............... $1,653
Receivables:
Due from Pacific Life Insurance Company .................... 41
Fund shares redeemed ....................................... 1
--------------------------------------------------------
Total Assets................................................. 194 301 1,590 878 1,654
--------------------------------------------------------
LIABILITIES
Payables:
Due to Pacific Life Insurance Company ...................... 1
Fund shares purchased ...................................... 41
Other liabilities .......................................... 1 1 4 4 7
--------------------------------------------------------
Total Liabilities ........................................... 1 1 45 4 8
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NET ASSETS .................................................. $193 $300 $1,545 $874 $1,646
--------------------------------------------------------
</TABLE>
See Notes to Financial Statements
B-2
<PAGE>
PACIFIC CORINTHIAN VARIABLE SEPARATE ACCOUNT
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(In thousands)
<TABLE>
<CAPTION>
Variable Variable Variable Variable Variable Variable
Account Account Account Account Account Account
I II III IV VII IX
---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends ...................................... $287 $ 3,818 $2,366 $ 71 $1,487 $1,491
---------------------------------------------------------------------------
Total Investment Income ......................... 287 3,818 2,366 71 1,487 1,491
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EXPENSES
Mortality and expense risk fees ................ 68 1,143 363 16 258 207
Other operating expenses ....................... 1 10 3 2 2
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Total Expenses .................................. 69 1,153 366 16 260 209
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Net Investment Income ........................... 218 2,665 2,000 55 1,227 1,282
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REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS
Net realized gain from security transactions ... 9 15,642 825 9 3,789 1,803
Net unrealized appreciation (depreciation)
on investments ............................... 2 (2,259) 1,360 38 398 (58)
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Net Realized And Unrealized Gain
On Investments ................................ 11 13,383 2,185 47 4,187 1,745
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NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS ...................... $229 $16,048 $4,185 $102 $5,414 $3,027
---------------------------------------------------------------------------
<CAPTION>
Variable Variable Variable Variable Variable
Account Account Account Account Account
X XI XII XIII XIV
---------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends ...................................... $ 5 $ 16 $ 30 $ 31 $ 79
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Total Investment Income ......................... 5 16 30 31 79
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EXPENSES
Mortality and expense risk fees ................ 1 2 8 10 18
Other operating expenses .......................
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Total Expenses .................................. 1 2 8 10 18
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Net Investment Income ........................... 4 14 22 21 61
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REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS
Net realized gain from security transactions ... 1 1 73 54 102
Net unrealized appreciation (depreciation)
on investments ............................... 1 0 59 (8) (5)
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Net Realized And Unrealized Gain
On Investments ................................ 2 1 132 46 97
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NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS ...................... $ 6 $ 15 $ 154 $ 67 $ 158
---------------------------------------------------------------
</TABLE>
See Notes to Financial Statements
B-3
<PAGE>
PACIFIC CORINTHIAN VARIABLE SEPARATE ACCOUNT
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1997
(In thousands)
<TABLE>
<CAPTION>
Variable Variable Variable Variable Variable Variable
Account Account Account Account Account Account
I II III IV VII IX
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net investment income .......................... $ 218 $ 2,665 $ 2,000 $ 55 $ 1,227 $ 1,282
Net realized gain from security transactions ... 9 15,642 825 9 3,789 1,803
Net unrealized appreciation (depreciation)
on investments ............................... 2 (2,259) 1,360 38 398 (58)
-------------------------------------------------------------------------------
Net Increase In Net Assets
Resulting From Operations ...................... 229 16,048 4,185 102 5,414 3,027
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INCREASE (DECREASE) IN NET ASSETS
FROM ACCOUNT TRANSACTIONS
Transfers in ................................... 609 1,275 468 72 591 341
Transfers out .................................. (2,753) (38,947) (14,299) (345) (10,462) (8,620)
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Net Increase (Decrease) In Net Assets Derived
From Account Transactions ...................... (2,144) (37,672) (13,831) (273) (9,871) (8,279)
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NET INCREASE (DECREASE) IN NET ASSETS ........... (1,915) (21,624) (9,646) (171) (4,457) (5,252)
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NET ASSETS
Beginning of Year .............................. 6,002 92,131 32,651 1,388 20,736 18,057
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End of Year .................................... $ 4,087 $ 70,507 $ 23,005 $1,217 $ 16,279 $12,805
-------------------------------------------------------------------------------
<CAPTION>
Variable Variable Variable Variable Variable
Account Account Account Account Account
X XI XII XIII XIV
-------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net investment income .......................... $ 4 $ 14 $ 22 $ 21 $ 61
Net realized gain from security transactions ... 1 1 73 54 102
Net unrealized appreciation (depreciation)
on investments ............................... 1 0 59 (8) (5)
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Net Increase In Net Assets
Resulting From Operations ...................... 6 15 154 67 158
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INCREASE (DECREASE) IN NET ASSETS
FROM ACCOUNT TRANSACTIONS
Transfers in .................................. 167 227 1,203 400 624
Transfers out ................................. (27) (27) (225) (269) (560)
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Net Increase (Decrease) In Net Assets Derived
From Account Transactions ...................... 140 200 978 131 64
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NET INCREASE (DECREASE) IN NET ASSETS ........... 146 215 1,132 198 222
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NET ASSETS
Beginning of Year .............................. 47 85 413 676 1,424
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End of Year ................................... $193 $300 $1,545 $ 874 $1,646
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</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
Account Account Account Account Account Account
I II III IV VII IX
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net investment income (loss) ................... $ 207 $ 4,099 $ 1,922 $ 106 $ 970 $ 1,202
Net realized gain from security transactions ... 3 2,716 112 16 1,023 496
Net unrealized appreciation (depreciation)
on investments ............................... 16 13,454 (2,995) (99) 1,347 194
----------------------------------------------------------------------------
Net Increase (Decrease) In Net Assets
Resulting From Operations ...................... 226 20,269 (961) 23 3,340 1,892
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INCREASE (DECREASE) IN NET ASSETS
FROM ACCOUNT TRANSACTIONS
Transfers in ................................... 1,293 649 94 40 87 63
Transfers out .................................. (1,426) (7,026) (4,553) (662) (3,114) (2,388)
----------------------------------------------------------------------------
Net Increase (Decrease) In Net Assets Derived
From Account Transactions ...................... (133) (6,377) (4,459) (622) (3,027) (2,325)
----------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS ........... 93 13,892 (5,420) (599) 313 (433)
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NET ASSETS
Beginning of Year .............................. 5,909 78,239 38,071 1,987 20,423 18,490
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End of Year .................................... $6,002 $92,131 $32,651 $1,388 $20,736 $18,057
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<CAPTION>
Variable Variable Variable Variable Variable
Account Account Account Account Account
X XI XII XIII XIV
---------------------------------------------------------------
<C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net investment income (loss) ................... $ 5 $ 7 $ 11 $ 8 $ (3)
Net realized gain from security transactions ... 1 12 6 50
Net unrealized appreciation (depreciation)
on investments ............................... (7) 1 49 74 109
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Net Increase (Decrease) In Net Assets
Resulting From Operations ...................... (1) 8 72 88 156
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INCREASE (DECREASE) IN NET ASSETS
FROM ACCOUNT TRANSACTIONS
Transfers in ................................... 8 9 117 308 646
Transfers out .................................. (84) (10) (75) (70) (186)
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Net Increase (Decrease) In Net Assets Derived
From Account Transactions ...................... (76) (1) 42 238 460
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NET INCREASE (DECREASE) IN NET ASSETS ........... (77) 7 114 326 616
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NET ASSETS
Beginning of Year .............................. 124 78 299 350 808
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End of Year .................................... $ 47 $ 85 $ 413 $ 676 $ 1,424
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</TABLE>
See Notes to Financial Statements
B-5
<PAGE>
PACIFIC CORINTHIAN VARIABLE SEPARATE ACCOUNT
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION
Pacific Corinthian Variable Separate Account (the "Separate Account") of
Pacific Life Insurance Company (formerly named Pacific Mutual Life Insurance
Company - see Note 1 to Financial statements of the Pacific Select Fund on A-
66), is a separate investment account originally established by a resolution of
the Board of Directors of Pacific Corinthian Life Insurance Company ("PCL").
PCL, formerly a wholly owned subsidiary of Pacific Life Insurance Company
("Pacific Life"), was a stock life insurance company organized under the laws of
the State of California.
PCL was formed to rehabilitate the business of First Capital Life Insurance
Company ("FCL") under a five year rehabilitation plan ("the Plan"). Under the
terms of the Plan, FCL's insurance policies in force, primarily individual
annuities and universal life insurance, were restructured and assumed by PCL on
December 31, 1992, pursuant to an assumption reinsurance agreement and asset
purchase agreement. On September 30, 1997, PCL completed the plan of FCL. On
October 30, 1997, PCL was merged into Pacific Life, with Pacific Life as the
surviving entity. The Separate Account remained intact and became a Separate
Account of Pacific Life.
During the rehabilitation period, the Plan did not allow PCL to accept new
premiums nor did it allow the 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 were permitted among the Variable Accounts. The
Plan had no impact upon the operations or unit values of the separate account.
The Separate Account held by Pacific Life represents funds from individual
flexible premium deferred annuity and variable accumulation contracts. The
assets of the Separate Account are carried at market value.
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"). The assets in each Variable Account are invested in
shares of the corresponding portfolios of Pacific Select Fund (the "Fund") as
follows:
<TABLE>
<CAPTION>
--------------------------------------------------------------
Portfolios
----------
<S> <C>
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
--------------------------------------------------------------
</TABLE>
Each Variable Account 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.
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. 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.
B-6
<PAGE>
PACIFIC CORINTHIAN VARIABLE SEPARATE ACCOUNT
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. DIVIDENDS
During 1997, the Fund has declared dividends for each portfolio invested by
the Separate Account. 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.
4. 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
and is apportioned equally among the Accounts to which the Contract Value is
allocated.
Mortality and expense risks assumed by Pacific Life are compensated for 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 Pacific Life's guarantee that such expenses will not exceed 0.25% of
each Variable Account's average daily net assets annually. Pacific Life 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.
5. SELECTED ACCUMULATION UNIT** INFORMATION
Selected accumulation unit information for the period ended December 31, 1997
were as follows:
<TABLE>
<CAPTION>
Accumulation
Unit Value
--------------------------------------------------
Number of
At At Units
Begin- End Outstanding
Variable ning of of At End of
Accounts Year Year Year
--------------------------------------------------
<S> <C> <C> <C>
I $1.819 $1.893 2,159,205
II 5.208 6.081 11,594,342
III 3.879 4.458 5,160,440
IV 1.835 1.985 613,263
VII 2.053 2.609 6,239,814
IX 1.865 2.204 5,809,371
X 1.202 1.306 147,954
XI 1.266 1.369 219,210
XII 1.612 2.118 729,232
XIII 1.328 1.434 609,459
XIV 1.520 1.667 987,435
--------------------------------------------------
</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
