<PAGE>
ANNUAL REPORT
. SEPARATE ACCOUNT A OF PACIFIC LIFE INSURANCE COMPANY
[LOGO OF SEPARATE ACCOUNT A]
<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 Life's Separate Account A (comprised of the Money Market, High Yield
Bond, Managed Bond, Government Securities, 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 Life's Separate Account A 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
C-1
<PAGE>
SEPARATE ACCOUNT A
STATEMENT OF ASSETS AND LIABILITIES
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>
ASSETS
Investments In Pacific Select Fund:
Money Market Portfolio (3,252 shares; cost $32,703) ................ $32,704
High Yield Bond Portfolio (3,205 shares; cost $31,924) ............. $31,969
Managed Bond Portfolio (4,434 shares; cost $48,271) ................ $49,387
Government Securities Portfolio (1,531 shares; cost $16,085) ....... $16,504
Aggressive Equity Portfolio (1,671 shares; cost $17,989) ...........
Growth LT Portfolio (2,810 shares; cost $46,787) ...................
Equity Income Portfolio (2,531 shares; cost $57,738) ...............
Receivables:
Due from Pacific Life Insurance Company ............................ 116 428 218
Fund shares redeemed ............................................... 540
--------------------------------------------------------
Total Assets ........................................................ 33,244 32,085 49,815 16,722
--------------------------------------------------------
LIABILITIES
Payables:
Due to Pacific Life Insurance Company .............................. 540
Fund shares purchased .............................................. 116 428 218
Other Liabilities .................................................. 3 2 3 1
--------------------------------------------------------
Total Liabilities ................................................... 543 118 431 219
--------------------------------------------------------
NET ASSETS .......................................................... $32,701 $31,967 $49,384 $16,503
--------------------------------------------------------
<CAPTION>
Aggressive Growth Equity
Equity LT Income
Variable Variable Variable
Account Account Account
<S> ----------------------------------------
ASSETS <C> <C> <C>
Investments In Pacific Select Fund:
Money Market Portfolio (3,252 shares; cost $32,703) ................
High Yield Bond Portfolio (3,205 shares; cost $31,924) .............
Managed Bond Portfolio (4,434 shares; cost $48,271) ................
Government Securities Portfolio (1,531 shares; cost $16,085) .......
Aggressive Equity Portfolio (1,671 shares; cost $17,989) ........... $18,692
Growth LT Portfolio (2,810 shares; cost $46,787) ................... $48,626
Equity Income Portfolio (2,531 shares; cost $57,738) ............... $61,934
Receivables:
Due from Pacific Life Insurance Company ............................ 172 203 373
Fund shares redeemed ...............................................
---------------------------------------------
Total Assets ........................................................ 18,864 48,829 62,307
---------------------------------------------
LIABILITIES
Payables:
Due to Pacific Life Insurance Company ..............................
Fund shares purchased .............................................. 172 203 373
Other Liabilities .................................................. 1 3 3
---------------------------------------------
Total Liabilities ................................................... 173 206 376
---------------------------------------------
NET ASSETS .......................................................... $18,691 $48,623 $61,931
---------------------------------------------
</TABLE>
See Notes to Financial Statements
C-2
<PAGE>
SEPARATE ACCOUNT A
STATEMENT OF ASSETS AND LIABILITIES (Continued)
DECEMBER 31, 1997
(In thousands)
<TABLE>
<CAPTION>
Multi- Bond and Equity Inter- Emerging
Strategy Equity Income Index national Markets
Variable Variable Variable Variable Variable Variable
Account Account Account Account Account Account
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Investments In Pacific Select Fund:
Multi-Strategy Portfolio (1,472 shares; cost $22,835) .. $23,824
Equity Portfolio (1,219 shares; cost $27,926) .......... $29,115
Bond and Income Portfolio (845 shares; cost $10,371) ... $10,959
Equity Index Portfolio (2,722 shares; cost $63,305) .... $70,000
International Portfolio (4,168 shares; cost $67,008) ... $67,548
Emerging Markets Portfolio (1,316 shares; cost $13,176). $12,458
Receivables:
Due from Pacific Life Insurance Company ................ 223 277 217 422 47
Fund shares purchased .................................. 40
-----------------------------------------------------------------------
Total Assets ............................................ 24,047 29,392 11,176 70,422 67,588 12,505
-----------------------------------------------------------------------
LIABILITIES
Payables:
Due to Pacific Life Insurance Company .................. 40
Fund shares purchased .................................. 223 277 217 422 47
Other Liabilities ...................................... 1 1 4 3 1
-----------------------------------------------------------------------
Total Liabilities ....................................... 224 278 217 426 43 48
-----------------------------------------------------------------------
NET ASSETS .............................................. $23,823 $29,114 $10,959 $69,996 $67,545 $12,457
-----------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements
C-3
<PAGE>
SEPARATE ACCOUNT A
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(In thousands)
<TABLE>
<CAPTION>
High Govern-
Money Yield Managed ment Aggressive
Market Bond Bond Securities Equity
Variable Variable Variable Variable Variable
Account Account Account Account Account
----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends ................................................... $1,155 $1,376 $1,348 $538
EXPENSES
Mortality and expense risk fee and adminitrative fee ........ 297 216 296 135 145
----------------------------------------------------------
Net Investment Income (Loss) ................................. 858 1,160 1,052 403 (145)
----------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Net realized loss from security transactions ................ (42) (11) (8) (26) (91)
Net unrealized appreciation (depreciation) on investments ... (4) (100) 1,048 431 593
----------------------------------------------------------
Net Realized And Unrealized Gain (Loss) On Investments ....... (46) (111) 1,040 405 502
----------------------------------------------------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS ................................... $ 812 $1,049 $2,092 $808 $357
----------------------------------------------------------
<CAPTION>
Growth Equity
LT Income
Variable Variable
Account Account
--------------------
<S> <C> <C>
INVESTMENT INCOME
Dividends ................................................... $1,002 $1,262
EXPENSES
Mortality and expense risk fee and adminitrative fee ........ 374 384
--------------------
Net Investment Income (Loss) ................................. 628 878
--------------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Net realized loss from security transactions ................ (70) (21)
Net unrealized appreciation (depreciation) on investments ... 1,446 3,631
--------------------
Net Realized And Unrealized Gain (Loss) On Investments ....... 1,376 3,610
--------------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS ................................... $2,004 $4,488
--------------------
</TABLE>
See Notes to Financial Statements
C-4
<PAGE>
SEPARATE ACCOUNT A
STATEMENT OF OPERATIONS (Continued)
FOR THE YEAR ENDED DECEMBER 31, 1997
(In thousands)
<TABLE>
<CAPTION>
Multi- Bond and Equity Inter- Emerging
Strategy Equity Income Index national Markets
Variable Variable Variable Variable Variable Variable
Account Account Account Account Account Account
----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends ................................................. $ 612 $ 433 $315 $1,237 $1,651 $ 61
EXPENSES
Mortality and expense risk fee and adminitrative fee ...... 134 199 58 441 547 96
--------------------------------------------------------------------
Net Investment Income (Loss) ............................... 478 234 257 796 1,104 (35)
--------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Net realized gain (loss) from security transactions ....... (6) (80) (20) (66) 46 (124)
Net unrealized appreciation (depreciation) on investments.. 847 1,030 557 6,164 (505) (711)
--------------------------------------------------------------------
Net Realized And Unrealized Gain (Loss) On Investments ..... 841 950 537 6,098 (459) (835)
--------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS ................................. $1,319 $1,184 $794 $6,894 $ 645 $(870)
--------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements
C-5
<PAGE>
SEPARATE ACCOUNT A
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) ............................... $ 858 $ 1,160 $ 1,052 $ 403
Net realized loss from security transactions ............... (42) (11) (8) (26)
Net unrealized appreciation (depreciation) on investments .. (4) (100) 1,048 431
-------------------------------------------------------
Net Increase In Net Assets Resulting
From Operations ............................................ 812 1,049 2,092 808
-------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS FROM
POLICY TRANSACTIONS
Transfer of net premiums ................................... 115,302 18,682 26,477 7,751
Transfers--policy charges and deductions ................... (22) (547) (78) (202)
Transfers in (from other variable accounts) ................ 23,430 12,337 16,805 6,324
Transfers out (to other variable accounts) ................. (117,217) (5,630) (2,569) (2,996)
Transfers--other ........................................... (4,919) (837) (968) (2,016)
-------------------------------------------------------
Net Increase In Net Assets Derived
From Policy Transactions ................................... 16,574 24,005 39,667 8,861
-------------------------------------------------------
NET INCREASE IN NET ASSETS .................................. 17,386 25,054 41,759 9,669
-------------------------------------------------------
NET ASSETS
Beginning of Year .......................................... 15,315 6,913 7,625 6,834
-------------------------------------------------------
End of Year ................................................ $ 32,701 $31,967 $49,384 $16,503
-------------------------------------------------------
<CAPTION>
Agressive Growth Equity
Equity LT Income
Variable Variable Variable
Account Account Account
----------------------------------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net investment income (loss)................................ $ (145) $ 628 $ 878
Net realized loss from security transactions................ (91) (70) (21)
Net unrealized appreciation (depreciation) on investments... 593 1,446 3,631
----------------------------------------
Net Increase In Net Assets Resulting
From Operations............................................. 357 2,004 4,488
----------------------------------------
INCREASE (DECREASE) IN NET ASSETS FROM
POLICY TRANSACTIONS
Transfer of net premiums ................................... 10,620 24,708 34,531
Transfers--policy charges and deductions ................... (16) (123) (86)
Transfers in (from other variable accounts) ................ 7,486 19,932 20,296
Transfers out (to other variable accounts) ................. (3,496) (7,775) (4,907)
Transfers--other ........................................... (401) (1,160) (1,054)
----------------------------------------
Net Increase In Net Assets Derived
From Policy Transactions ................................... 14,193 35,582 48,780
----------------------------------------
NET INCREASE IN NET ASSETS .................................. 14,550 37,586 53,268
----------------------------------------
NET ASSETS
Beginning of Year .......................................... 4,141 11,037 8,663
----------------------------------------
End of Year ................................................ $18,691 $48,623 $61,931
----------------------------------------
</TABLE>
See Notes to Financial Statements
C-6
<PAGE>
SEPARATE ACCOUNT A
STATEMENT OF CHANGES IN NET ASSETS (Continued)
FOR THE YEAR ENDED DECEMBER 31, 1997
(In thousands)
<TABLE>
<CAPTION>
Multi- Bond and Equity
Strategy Equity Income Index
Variable Variable Variable Variable
Account Account Account Account
-------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net investment income (loss) ..................................... $ 478 $ 234 $ 257 $ 796
Net realized gain (loss) from security transactions .............. (6) (80) (20) (66)
Net unrealized appreciation (depreciation) on investments ........ 847 1,030 557 6,164
-------------------------------------------------
Net Increase (Decrease) In Net Assets Resulting
From Operations .................................................. 1,319 1,184 794 6,894
-------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS FROM
POLICY TRANSACTIONS
Transfer of net premiums ......................................... 12,888 17,040 7,314 40,392
Transfers--policy charges and deductions ......................... (58) (48) (11) (165)
Transfers in (from other variable accounts) ...................... 7,912 10,022 2,387 23,572
Transfers out (to other variable accounts) ....................... (825) (4,147) (891) (8,496)
Transfers--other ................................................. (667) (645) (148) (1,264)
-------------------------------------------------
Net Increase In Net Assets Derived
From Policy Transactions ......................................... 19,250 22,222 8,651 54,039
-------------------------------------------------
NET INCREASE IN NET ASSETS ........................................ 20,569 23,406 9,445 60,933
-------------------------------------------------
NET ASSETS
Beginning of Year ................................................ 3,254 5,708 1,514 9,063
-------------------------------------------------
End of Year ...................................................... $23,823 $29,114 $10,959 $69,996
-------------------------------------------------
<CAPTION>
Inter- Emerging
national Markets
Variable Variable
Account Account
---------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net investment income (loss) ..................................... $ 1,104 $ (35)
Net realized gain (loss) from security transactions .............. 46 (124)
Net unrealized appreciation (depreciation) on investments ........ (505) (711)
--------------------------
Net Increase (Decrease) In Net Assets Resulting
From Operations .................................................. 645 (870)
--------------------------
INCREASE (DECREASE) IN NET ASSETS FROM
POLICY TRANSACTIONS
Transfer of net premiums ......................................... 35,445 7,633
Transfers--policy charges and deductions ......................... (261) (22)
Transfers in (from other variable accounts) ...................... 28,054 5,556
Transfers out (to other variable accounts) ....................... (7,011) (1,911)
Transfers--other ................................................. (4,876) (233)
--------------------------
Net Increase In Net Assets Derived
From Policy Transactions ......................................... 51,351 11,023
--------------------------
NET INCREASE IN NET ASSETS ........................................ 51,996 10,153
--------------------------
NET ASSETS
Beginning of Year ................................................ 15,549 2,304
--------------------------
End of Year ...................................................... $67,545 $12,457
--------------------------
</TABLE>
See Notes to Financial Statements
C-7
<PAGE>
SEPARATE ACCOUNT A
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1996
(In thousands)
<TABLE>
<CAPTION>
High Govern-
Money Yield Managed ment Aggressive
Market Bond Bond Securities Equity
Variable Variable Variable Variable Variable
Account Account Account Account Account (1)
-------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net investment income (loss) ................................ $ 140 $ 175 $ 136 $ 104 $ (15)
Net realized loss from security transactions ................ (3) (4) (3) (10)
Net unrealized appreciation (depreciation) on investments ... 6 144 67 (11) 110
-------------------------------------------------------------------
Net Increase In Net Assets Resulting
From Operations ............................................. 143 319 199 90 85
-------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS FROM
POLICY TRANSACTIONS
Transfer of net premiums .................................... 31,584 3,894 5,689 2,781 3,207
Transfers in (from other variable accounts) ................. 5,153 4,364 2,063 4,221 1,056
Transfers out (to other variable accounts) .................. (21,498) (1,281) (289) (237) (197)
Transfers--other ............................................ (67) (383) (37) (21) (10)
-------------------------------------------------------------------
Net Increase In Net Assets Derived
From Policy Transactions .................................... 15,172 6,594 7,426 6,744 4,056
-------------------------------------------------------------------
NET INCREASE IN NET ASSETS ................................... 15,315 6,913 7,625 6,834 4,141
-------------------------------------------------------------------
NET ASSETS
Beginning of Year ...........................................
-------------------------------------------------------------------
End of Year ................................................. $ 15,315 $ 6,913 $7,625 $6,834 $4,141
-------------------------------------------------------------------
<CAPTION>
Growth Equity
LT Income
Variable Variable
Account Account
--------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net investment income (loss) ................................ $ (16) $ 3
Net realized loss from security transactions ................ (26) (19)
Net unrealized appreciation (depreciation) on investments ... 393 565
--------------------------
Net Increase In Net Assets Resulting
From Operations ............................................. 351 549
--------------------------
INCREASE (DECREASE) IN NET ASSETS FROM
POLICY TRANSACTIONS
Transfer of net premiums .................................... 8,126 6,487
Transfers in (from other variable accounts) ................. 4,788 2,498
Transfers out (to other variable accounts) .................. (2,176) (836)
Transfers--other ............................................ (52) (35)
--------------------------
Net Increase In Net Assets Derived
From Policy Transactions .................................... 10,686 8,114
--------------------------
NET INCREASE IN NET ASSETS ................................... 11,037 8,663
--------------------------
NET ASSETS
Beginning of Year ...........................................
--------------------------
End of Year ................................................. $11,037 $8,663
--------------------------
</TABLE>
(1) For the period from April 17, 1996 (commencement of operations) to December
31, 1996.
See Notes to Financial Statements
C-8
<PAGE>
SEPARATE ACCOUNT A
STATEMENT OF CHANGES IN NET ASSETS (Continued)
FOR THE YEAR ENDED DECEMBER 31, 1996
(In thousands)
<TABLE>
<CAPTION>
Multi- Bond and Equity Inter-
Strategy Equity Income Index national
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) ...................................... $ 21 $ (23) $ 28 $ 22 $ 161
Net realized loss from security transactions ...................... (1) (23) (5) (5) (1)
Net unrealized appreciation (depreciation) on investments ......... 142 159 30 531 1,045
----------------------------------------------------------
Net Increase (Decrease) In Net Assets Resulting
From Operations ................................................... 162 113 53 548 1,205
----------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS FROM
POLICY TRANSACTIONS
Transfer of net premiums .......................................... 2,400 4,762 1,278 6,422 11,668
Transfers in (from other variable accounts) ....................... 824 1,399 408 2,551 3,445
Transfers out (to other variable accounts) ........................ (93) (533) (209) (403) (708)
Transfers--other .................................................. (39) (33) (16) (55) (61)
----------------------------------------------------------
Net Increase In Net Assets Derived
From Policy Transactions .......................................... 3,092 5,595 1,461 8,515 14,344
----------------------------------------------------------
NET INCREASE IN NET ASSETS ......................................... 3,254 5,708 1,514 9,063 15,549
----------------------------------------------------------
NET ASSETS
Beginning of Year .................................................
----------------------------------------------------------
End of Year ....................................................... $3,254 $5,708 $1,514 $9,063 $15,549
----------------------------------------------------------
<CAPTION>
Emerging
Markets
Variable
Account (1)
-----------
<S> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net investment income (loss) ...................................... $ (8)
Net realized loss from security transactions ...................... (2)
Net unrealized appreciation (depreciation) on investments ......... (7)
-----------
Net Increase (Decrease) In Net Assets Resulting
From Operations ................................................... (17)
-----------
INCREASE (DECREASE) IN NET ASSETS FROM
POLICY TRANSACTIONS
Transfer of net premiums .......................................... 1,846
Transfers in (from other variable accounts) ....................... 607
Transfers out (to other variable accounts) ........................ (117)
Transfers--other .................................................. (15)
-----------
Net Increase In Net Assets Derived
From Policy Transactions .......................................... 2,321
-----------
NET INCREASE IN NET ASSETS ......................................... 2,304
-----------
NET ASSETS
Beginning of Year .................................................
-----------
End of Year ....................................................... $2,304
-----------
</TABLE>
(1) For the period from April 17, 1996 (commencement of operations) to December
31, 1996.
See Notes to Financial Statements
C-9
<PAGE>
SEPARATE ACCOUNT A
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
The Separate Account A (the "Separate Account") is registered as a unit
investment trust under the Investment Company Act of 1940, as amended, and
during 1997 was comprised of thirteen 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
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 September 7, 1994 and commenced operations on
January 2, 1996. 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 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 and administrative costs incurred in operating the Separate
Account and issuing and administering the Contracts at an annual rate of 1.25%
and 0.15%, respectively, 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 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 annuity contracts funded by interests
in the Separate Account, and is compensated by Pacific Life.
C-10
<PAGE>
Separate Account A
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 1/02/96 $10.36 $10.75 3,041,495
- ------------------------------------------------------------------------------------
High Yield
Bond 1/02/96 $10.96 $11.83 2,702,260
- ------------------------------------------------------------------------------------
Managed Bond 1/02/96 $10.27 $11.14 4,434,069
- ------------------------------------------------------------------------------------
Government
Securities 1/02/96 $10.14 $10.95 1,506,839
- ------------------------------------------------------------------------------------
Aggressive
Equity 4/17/96 $10.67 $10.92 1,711,363
- -------------------------------------------------------------------------------------
Growth LT 1/02/96 $11.61 $12.71 3,826,332
- ------------------------------------------------------------------------------------
Equity Income 1/02/96 $11.66 $14.78 4,189,318
- ------------------------------------------------------------------------------------
Multi-Strategy 1/02/96 $11.03 $13.01 1,830,504
- ------------------------------------------------------------------------------------
Equity 1/02/96 $12.59 $14.68 1,983,738
- ------------------------------------------------------------------------------------
Bond and
Income 1/02/96 $ 9.79 $11.23 975,740
- ------------------------------------------------------------------------------------
Equity Index 1/02/96 $11.97 $15.69 4,460,482
- ------------------------------------------------------------------------------------
International 1/02/96 $11.84 $12.76 5,292,436
- ------------------------------------------------------------------------------------
Emerging
Markets 4/17/96 $ 9.57 $ 9.28 1,342,086
- ------------------------------------------------------------------------------------
</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-11
<PAGE>
SEPARATE ACCOUNT A
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 Aggressive
Market Bond Bond Securities Equity
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<S> <C> <C> <C> <C> <C>
Total cost of investments at beginning of year $15,310 $ 6,769 $ 7,557 $ 6,845 $ 4,030
Add: Total net proceeds from policy and M&E transactions 62,294 26,361 39,703 11,567 15,151
Reinvested distributions from the Fund:
(a) Net investment income 1,155 1,283 1,303 538
(b) Net realized gain 93 45
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Sub-Total 78,759 34,506 48,608 18,950 19,181
Less: Cost of investments disposed during the year 46,056 2,582 337 2,865 1,192
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Total cost of investments at end of year 32,703 31,924 48,271 16,085 17,989
Add: Unrealized appreciation 1 45 1,116 419 703
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Total market value of investments at end of year $32,704 $31,969 $49,387 $16,504 $18,692
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<CAPTION>
Growth Equity Multi- Bond and
LT Income Strategy Equity Income
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<S> <C> <C> <C> <C> <C>
Total cost of investments at beginning of year $10,644 $ 8,098 $ 3,112 $ 5,549 $ 1,483
Add: Total net proceeds from policy and M&E transactions 37,243 48,874 19,448 23,319 9,132
Reinvested distributions from the Fund:
(a) Net investment income 118 269 333 107 279
(b) Net realized gain 884 993 279 326 36
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Sub-Total 48,889 58,234 23,172 29,301 10,930
Less: Cost of investments disposed during the year 2,102 496 337 1,375 559
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Total cost of investments at end of year 46,787 57,738 22,835 27,926 10,371
Add: Unrealized appreciation 1,839 4,196 989 1,189 588
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Total market value of investments at end of year $48,626 $61,934 $23,824 $29,115 $10,959
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<CAPTION>
Equity Inter- Emerging
Index national Markets
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<S> <C> <C> <C>
Total cost of investments at beginning of year $ 8,532 $14,505 $ 2,311
Add: Total net proceeds from policy and M&E transactions 55,488 55,044 11,744
Reinvested distributions from the Fund:
(a) Net investment income 530 1,080 61
(b) Net realized gain 707 571
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Sub-Total 65,257 71,200 14,116
Less: Cost of investments disposed during the year 1,952 4,192 940
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Total cost of investments at end of year 63,305 67,008 13,176
Add: Unrealized appreciation (depreciation) 6,695 540 (718)
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Total market value of investments at end of year $70,000 $67,548 $12,458
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</TABLE>
C-12
