<PAGE>
Annual Report
. Pacific Corinthian Variable Separate Account of Pacific Life Insurance
Company
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PACIFIC SELECT FUND
<S> <C>
Chairman's Letter.................................................. A-1
Performance Discussion............................................. A-2
Independent Auditors' Report....................................... B-1
Financial Statements:
Statements of Assets and Liabilities............................. B-2
Statements of Operations......................................... B-4
Statements of Changes in Net Assets.............................. B-6
Financial Highlights............................................... B-10
Schedules of Investments and Notes................................. B-13
Notes to Financial Statements...................................... B-58
<CAPTION>
PACIFIC CORINTHIAN VARIABLE SEPARATE ACCOUNT
<S> <C>
Independent Auditors' Report....................................... C-1
Financial Statements:
Statement of Assets and Liabilities.............................. C-2
Statement of Operations.......................................... C-3
Statement of Changes in Net Assets............................... C-4
Notes to Financial Statements...................................... C-6
</TABLE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Pacific Life Insurance Company
We have audited the accompanying statement of assets and liabilities of
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, 1998 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 Pacific Corinthian Variable Separate Account as of December 31,
1998 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 5, 1999
C-1
<PAGE>
PACIFIC CORINTHIAN VARIABLE SEPARATE ACCOUNT
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
(In thousands)
<TABLE>
<CAPTION>
Variable Variable Variable Variable Variable Variable Variable Variable Variable Variable Variable
Account Account Account Account Account Account Account Account Account Account Account
I II III IV VII IX X XI XII XIII XIV
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Investments in Pacific Select
Fund:
Money Market Portfolio (418
shares; cost $4,203)........... $4,208
Equity Portfolio (2,005 shares;
cost $27,003).................. $58,697
Bond and Income Portfolio
(1,231 shares; cost $14,348)... $16,372
Government Securities
Portfolio (112 shares; cost
$1,144)........................ $1,229
Equity Income Portfolio (544
shares; cost $7,671)........... $14,640
Multi-Strategy Portfolio (512
shares; cost $6,105)........... $8,868
Managed Bond Portfolio (25
shares; cost $283)............. $289
High Yield Bond Portfolio (34
shares; cost $330)............. $319
Equity Index Portfolio (90
shares; cost $2,319)........... $2,908
International Portfolio (46
shares; cost $660)............. $727
Growth LT Portfolio (130
shares; cost $2,197)........... $3,417
Receivables:
Fund shares redeemed........... 4 54 13 1 31 6 233 1 1
--------------------------------------------------------------------------------------------------
Total Assets.................... 4,212 58,751 16,385 1,230 14,671 8,874 289 319 3,141 728 3,418
--------------------------------------------------------------------------------------------------
LIABILITIES
Payables:
Due to Pacific Life Insurance
Company........................ 4 54 13 1 31 6 233 1 1
Other liabilities.............. 10 495 73 3 179 17 1 8 2 12
--------------------------------------------------------------------------------------------------
Total Liabilities............... 14 549 86 4 210 23 1 241 3 13
--------------------------------------------------------------------------------------------------
NET ASSETS...................... $4,198 $58,202 $16,299 $1,226 $14,461 $8,851 $289 $318 $2,900 $725 $3,405
--------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements
C-2
<PAGE>
PACIFIC CORINTHIAN VARIABLE SEPARATE ACCOUNT
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
(In thousands)
<TABLE>
<CAPTION>
Variable Variable Variable Variable Variable Variable Variable Variable Variable Variable Variable
Account Account Account Account Account Account Account Account Account Account Account
I II III IV VII IX X XI XII XIII XIV
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends..................... $192 $3,864 $1,078 $88 $1,838 $1,084 $17 $30 $54 $66 $104
--------------------------------------------------------------------------------------------------
Total Investment Income........ 192 3,864 1,078 88 1,838 1,084 17 30 54 66 104
--------------------------------------------------------------------------------------------------
EXPENSES
Mortality and expense risk
fees.......................... 44 709 213 15 173 125 3 4 31 10 29
Other operating expenses...... 1 8 2 2 1
--------------------------------------------------------------------------------------------------
Total Expenses................. 45 717 215 15 175 126 3 4 31 10 29
--------------------------------------------------------------------------------------------------
Net Investment Income.......... 147 3,147 863 73 1,663 958 14 26 23 56 75
--------------------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) from
security transactions......... 5 12,281 788 2 1,387 1,316 1 (16) 98 (12) 14
Net unrealized appreciation
(depreciation) on investments. (5) 451 (331) 22 (17) (635) 4 (15) 457 (19) 1,025
--------------------------------------------------------------------------------------------------
Net Realized and Unrealized
Gain (Loss) on Investments..... 0 12,732 457 24 1,370 681 5 (31) 555 (31) 1,039
--------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM
OPERATIONS..................... $147 $15,879 $1,320 $97 $3,033 $1,639 $19 $(5) $578 $25 $1,114
--------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements
C-3
<PAGE>
PACIFIC CORINTHIAN VARIABLE SEPARATE ACCOUNT
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1998
(In thousands)
<TABLE>
<CAPTION>
Variable Variable Variable Variable Variable Variable Variable Variable Variable Variable Variable
Account Account Account Account Account Account Account Account Account Account Account
I II III IV VII IX X XI XII XIII XIV
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS
Net investment income....... $147 $3,147 $863 $73 $1,663 $958 $14 $26 $23 $56 $75
Net realized gain (loss)
from security transactions.. 5 12,281 788 2 1,387 1,316 1 (16) 98 (12) 14
Net unrealized appreciation
(depreciation) on
investments................. (5) 451 (331) 22 (17) (635) 4 (15) 457 (19) 1,025
-----------------------------------------------------------------------------------------------------
Net Increase (Decrease) in
Net Assets Resulting from
Operations................... 147 15,879 1,320 97 3,033 1,639 19 (5) 578 25 1,114
-----------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET
ASSETS FROM ACCOUNT
TRANSACTIONS
Transfers in................ 3,034 240 674 139 958 457 189 215 1,955 230 1,273
Transfers out............... (3,070) (28,424) (8,700) (227) (5,809) (6,050) (112) (192) (1,178) (404) (628)
-----------------------------------------------------------------------------------------------------
Net Increase (Decrease) in
Net Assets Derived from
Account Transactions......... (36) (28,184) (8,026) (88) (4,851) (5,593) 77 23 777 (174) 645
-----------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN
NET ASSETS................... 111 (12,305) (6,706) 9 (1,818) (3,954) 96 18 1,355 (149) 1,759
-----------------------------------------------------------------------------------------------------
NET ASSETS
Beginning of Year............ 4,087 70,507 23,005 1,217 16,279 12,805 193 300 1,545 874 1,646
-----------------------------------------------------------------------------------------------------
End of Year.................. $4,198 $58,202 $16,299 $1,226 $14,461 $8,851 $289 $318 $2,900 $725 $3,405
-----------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements
C-4
<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 Variable Variable Variable Variable Variable
Account Account Account Account Account Account Account Account Account Account Account
I II III IV VII IX X XI XII XIII XIV
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <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 $4 $14 $22 $21 $61
Net realized gain from
security transactions...... 9 15,642 825 9 3,789 1,803 1 1 73 54 102
Net unrealized appreciation
(depreciation) on
investments................ 2 (2,259) 1,360 38 398 (58) 1 59 (8) (5)
------------------------------------------------------------------------------------------------------
Net Increase in Net Assets
Resulting from Operations... 229 16,048 4,185 102 5,414 3,027 6 15 154 67 158
------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET
ASSETS FROM ACCOUNT
TRANSACTIONS
Transfers in............... 609 1,275 468 72 591 341 167 227 1,203 400 624
Transfers out.............. (2,753) (38,947) (14,299) (345) (10,462) (8,620) (27) (27) (225) (269) (560)
------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in
Net Assets Derived from
Account Transactions........ (2,144) (37,672) (13,831) (273) (9,871) (8,279) 140 200 978 131 64
------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN
NET ASSETS.................. (1,915) (21,624) (9,646) (171) (4,457) (5,252) 146 215 1,132 198 222
------------------------------------------------------------------------------------------------------
NET ASSETS
Beginning of Year........... 6,002 92,131 32,651 1,388 20,736 18,057 47 85 413 676 1,424
------------------------------------------------------------------------------------------------------
End of Year................. $4,087 $70,507 $23,005 $1,217 $16,279 $12,805 $193 $300 $1,545 $874 $1,646
------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements
C-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 B-
58), 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
----------
<C> <S>
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 in Section B of 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.
C-6
<PAGE>
PACIFIC CORINTHIAN VARIABLE SEPARATE ACCOUNT
NOTES TO FINANCIAL STATEMENTS (Continued)
3. DIVIDENDS
During 1998, the Fund 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
stated 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. RELATED PARTY AGREEMENT
Pacific Mutual Distributors, Inc., a wholly-owned subsidiary of Pacific Life,
serves as principal underwriter of variable annuity contracts funded by
interests in the Separate Account, without remuneration from the Separate
Account.
6. SELECTED ACCUMULATION UNIT** INFORMATION
Selected accumulation unit information for the year ended December 31, 1998
were as follows:
<TABLE>
<CAPTION>
-----------------
Accumulation
Unit Value
- ------------------------------------------------
Number of
At Units
Begin- At Outstanding
Variable ning of End of At End of
Accounts Period Period Period
- ------------------------------------------------
<S> <C> <C> <C>
I $1.893 $1.969 2,132,107
- ------------------------------------------------
II 6.081 7.828 7,435,124
- ------------------------------------------------
III 4.458 4.800 3,395,678
- ------------------------------------------------
IV 1.985 2.142 572,117
- ------------------------------------------------
VII 2.609 3.201 4,517,515
- ------------------------------------------------
IX 2.204 2.574 3,439,368
- ------------------------------------------------
X 1.306 1.409 205,097
- ------------------------------------------------
XI 1.369 1.386 229,747
- ------------------------------------------------
XII 2.118 2.688 1,078,623
- ------------------------------------------------
XIII 1.434 1.496 484,374
- ------------------------------------------------
XIV 1.667 2.607 1,306,078
- ------------------------------------------------
</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.
C-7
