N-30D/A 1 dn30da.htm PACIFIC SELECT SEPARATE ACCOUNT Prepared by R.R. Donnelley Financial -- Pacific Select Separate Account
December 31, 2001
  
Ÿ
  
Pacific Select
Separate Account of
Pacific Life Insurance Company
Annual
    Report
PACIFIC SELECT

 
TABLE OF CONTENTS
 
PACIFIC SELECT SEPARATE ACCOUNT
 
Financial Statements:
     
Statement of Assets and Liabilities
   
1
Statement of Operations
   
3
Statement of Changes in Net Assets
   
5
Notes to Financial Statements
   
9
Independent Auditors’ Report
   
12

PACIFIC SELECT SEPARATE ACCOUNT
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 2001
(In thousands)
 
    
Emerging
Markets
Variable
Account
     
Small-Cap
Equity
Variable
Account
     
Multi-
Strategy
Variable
Account
     
Equity
Income
Variable
Account
     
Growth
LT
Variable
Account
     
International
Value
Variable
Account
     
Equity
Index
Variable
Account
                                
                                
                                
    
ASSETS
                                               
Investments:
                                               
Emerging Markets Portfolio
   
$124
                                          
Small-Cap Equity Portfolio
          
$6,629
                                   
Multi-Strategy Portfolio
                 
$1,140
                            
Equity Income Portfolio
                        
$2,598
                     
Growth LT Portfolio
                               
$1,782
              
International Value Portfolio
                                      
$3,226
       
Equity Index Portfolio
                                             
$4,224
    
Total Assets
   
124
     
6,629
     
1,140
     
2,598
     
1,782
     
3,226
     
4,224
    
LIABILITIES
                                               
Payables:
                                               
Mortality and expense risk fees
          
4
     
1
     
2
     
1
     
2
     
3
    
Total Liabilities
          
4
     
1
     
2
     
1
     
2
     
3
    
NET ASSETS
   
$124
     
$6,625
     
$1,139
     
$2,596
     
$1,781
     
$3,224
     
$4,221
    
Shares Owned in each Portfolio
   
20
     
381
     
77
     
124
     
96
     
267
     
143
    
Cost of Investments
   
$163
     
$7,229
     
$1,060
     
$2,521
     
$3,035
     
$3,767
     
$3,515
    
 
See Notes to Financial Statements

1

 
PACIFIC SELECT SEPARATE ACCOUNT
STATEMENT OF ASSETS AND LIABILITIES (Continued)
DECEMBER 31, 2001
(In thousands)
 
    
Inflation Managed Variable Account (1)
     
Managed Bond Variable Account
     
Money Market Variable Account
     
High Yield Bond
Variable Account
     
Equity Variable Account
     
Aggressive Equity Variable Account
    
ASSETS
                                        
Investments:
                                        
Inflation Managed Portfolio (1)
   
$294
                                   
Managed Bond Portfolio
          
$802
                            
Money Market Portfolio
                 
$641
                     
High Yield Bond Portfolio
                        
$5,934
              
Equity Portfolio
                               
$121
       
Aggressive Equity Portfolio
                                      
$96
    
Total Assets
   
294
     
802
     
641
     
5,934
     
121
     
96
    
LIABILITIES
                                        
Payables:
                                        
Mortality and expense risk fees
                        
4
              
    
Total Liabilities
                        
4
              
    
NET ASSETS
   
$294
     
$802
     
$641
     
$5,930
     
$121
     
$96
    
Shares Owned in each Portfolio
   
27
     
73
     
64
     
840
     
6
     
10
    
Cost of Investments
   
$293
     
$783
     
$642
     
$7,570
     
$184
     
$115
    
 
(1) Formerly named Government Securities Variable Account and Government Securities Portfolio.
 
See Notes to Financial Statements

2

 
PACIFIC SELECT SEPARATE ACCOUNT
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2001
(In thousands)
 
    
Emerging Markets Variable Account
       
Small-Cap Equity Variable Account
       
Multi- Strategy Variable Account
       
Equity Income Variable Account
     
Growth LT Variable Account
       
International Value Variable Account
       
Equity Index Variable Account
  
    
INVESTMENT INCOME
                                                           
Dividends (1)
            
$1,074
 
     
$31
 
     
$51
 
   
$409
 
     
$96
 
     
$64
 
EXPENSES
                                                           
Mortality and expense risk fees
   
$1
 
     
45
 
     
8
 
     
19
 
   
16
 
     
25
 
     
31
 
    
Net Investment Income (Loss)
   
(1
)
     
1,029
 
     
23
 
     
32
 
   
393
 
     
71
 
     
33
 
    
NET REALIZED AND UNREALIZED
    GAIN (LOSS) ON INVESTMENTS
                                                           
Net realized gain (loss) from security transactions
   
(4
)
     
19
 
     
15
 
     
61
 
   
113
 
     
(2
)
     
63
 
Net unrealized depreciation on investments
   
(3
)
     
(1,277
)
     
(60
)
     
(384
)
   
(1,445
)
     
(1,006
)
     
(731
)
    
Net Realized and Unrealized Loss on Investments
   
(7
)
     
(1,258
)
     
(45
)
     
(323
)
   
(1,332
)
     
(1,008
)
     
(668
)
    
NET DECREASE IN NET ASSETS
    RESULTING FROM OPERATIONS
   
($8
)
     
($229
)
     
($22
)
     
($291
)
   
($939
)
     
($937
)
     
($635
)
    
 
(1)
 
Pacific Select Fund declared dividends on the Emerging Markets Portfolio during 2001. The amounts received by the Emerging Markets Variable Account were less than $500 for the year.
 
See Notes to Financial Statements
 

3

PACIFIC SELECT SEPARATE ACCOUNT
STATEMENT OF OPERATIONS (Continued)
FOR THE YEAR ENDED DECEMBER 31, 2001
(In thousands)
 
    
Inflation Managed Variable Account (1)
     
Managed
Bond
Variable
Account
     
Money
Market
Variable
Account
     
High Yield
Bond
Variable
Account
     
Equity
Variable
Account
     
Aggressive Equity Variable Account
    
INVESTMENT INCOME
                                        
Dividends
   
$11
     
$42
     
$24
     
$596
     
$8
       
EXPENSES
                                        
Mortality and expense risk fees
   
2
     
6
     
4
     
42
     
1
     
$1
    
Net Investment Income (Loss)
   
9
     
36
     
20
     
554
     
7
     
(1)
    
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS
                                        
Net realized gain (loss)
from security transactions
   
1
     
4
            
(25)
     
(4)
     
(7)
Net unrealized appreciation
(depreciation) on investments
          
12
            
(490)
     
(37)
     
(14)
    
Net Realized and Unrealized Gain (Loss)
on Investments
   
1
     
16
            
(515)
     
(41)
     
(21)
    
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS
   
$10
     
$52
     
$20
     
$39
     
($34)
     
($22)
    
 
(1)
 
Formerly named Government Securities Variable Account.
 
See Notes to Financial Statements
 

4

PACIFIC SELECT SEPARATE ACCOUNT
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 2001
(In thousands)
 
    
Emerging Markets Variable Account
       
Small-Cap Equity     Variable     Account
     
Multi- Strategy Variable Account
     
Equity Income Variable Account
     
Growth
LT Variable Account
       
International Value Variable Account
       
Equity Index Variable Account
  
    
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
                                                       
Net investment income (loss)
   
($1
)
     
$1,029
 
   
$23
 
   
$32
 
   
$393
 
     
$71
 
     
$33
 
Net realized gain (loss)
from security transactions
   
(4
)
     
19
 
   
15
 
   
61
 
   
113
 
     
(2
)
     
63
 
Net unrealized depreciation
on investments
   
(3
)
     
(1,277
)
   
(60
)
   
(384
)
   
(1,445
)
     
(1,006
)
     
(731
)
    
Net Decrease in Net Assets
Resulting from Operations
   
(8
)
     
(229
)
   
(22
)
   
(291
)
   
(939
)
     
(937
)
     
(635
)
    
INCREASE (DECREASE) IN NET ASSETS
FROM POLICY TRANSACTIONS
                                                       
Transfer of net premiums
            
2
 
          
2
 
                     
1
 
Transfers between variable accounts, net
   
27
 
     
(11
)
   
(2
)
   
(41
)
   
(306
)
     
13
 
     
(27
)
Transfers—policy charges and deductions
   
(1
)
     
(55
)
   
(10
)
   
(46
)
   
(15
)
     
(29
)
     
(29
)
Transfers—surrenders
            
(28
)
          
(30
)
            
(16
)
     
(11
)
Transfers—other
            
14
 
   
(1
)
   
(12
)
   
(31
)
     
4
 
     
(16
)
    
Net Increase (Decrease) in Net Assets
Derived from Policy Transactions
   
26
 
     
(78
)
   
(13
)
   
(127
)
   
(352
)
     
(28
)
     
(82
)
    
NET INCREASE (DECREASE) IN NET ASSETS
   
18
 
     
(307
)
   
(35
)
   
(418
)
   
(1,291
)
     
(965
)
     
(717
)
    
NET ASSETS
                                                       
Beginning of Year
   
106
 
     
6,932
 
   
1,174
 
   
3,014
 
   
3,072
 
     
4,189
 
     
4,938
 
    
End of Year
   
$124
 
     
$6,625
 
   
$1,139
 
   
$2,596
 
   
$1,781
 
     
$3,224
 
     
$4,221
 
    
 
See Notes to Financial Statements
 

5

 
PACIFIC SELECT SEPARATE ACCOUNT
 
STATEMENT OF CHANGES IN NET ASSETS (Continued)
 
FOR THE YEAR ENDED DECEMBER 31, 2001
 
(In thousands)
 
      
Inflation Managed Variable Account (1)
     
Managed Bond Variable Account
     
Money Market Variable Account
     
High Yield Bond Variable Account
     
Equity Variable Account
       
Aggressive Equity Variable Account
  
      
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
                                              
Net investment income (loss)
     
$9
 
   
$36
 
   
$20
 
   
$554
 
   
$7
 
     
($1
)
Net realized gain (loss) from security transactions
     
1
 
   
4
 
          
(25
)
   
(4
)
     
(7
)
Net unrealized appreciation (depreciation) on investments
            
12
 
          
(490
)
   
(37
)
     
(14
)
      
Net Increase (Decrease) in Net Assets
Resulting from Operations
     
10
 
   
52
 
   
20
 
   
39
 
   
(34
)
     
(22
)
      
INCREASE (DECREASE) IN NET ASSETS
FROM CAPITAL UNIT TRANSACTIONS
                                              
Transfers between variable accounts, net
     
15
 
   
(55
)
   
422
 
   
(29
)
   
(4
)
     
(2
)
Transfers—policy charges and deductions
     
(3
)
   
(5
)
   
(8
)
   
(24
)
   
(1
)
     
(1
)
Transfers—surrenders
                   
(408
)
                       
Transfers—other
     
(1
)
   
2
 
   
(3
)
   
(2
)
   
(12
)
         
      
Net Increase (Decrease) in Net Assets
                                              
Derived from Policy Transactions
     
11
 
   
(58
)
   
3
 
   
(55
)
   
(17
)
     
(3
)
      
NET INCREASE (DECREASE) IN NET ASSETS
     
21
 
   
(6
)
   
23
 
   
(16
)
   
(51
)
     
(25
)
      
NET ASSETS
                                              
Beginning of Year
     
273
 
   
808
 
   
618
 
   
5,946
 
   
172
 
     
121
 
      
End of Year
     
$294
 
   
$802
 
   
$641
 
   
$5,930
 
   
$121
 
     
$96
 
      
 
(1) Formerly named Government Securities Variable Account.
 
See Notes to Financial Statements
 

6

 
PACIFIC SELECT SEPARATE ACCOUNT
 
STATEMENT OF CHANGES IN NET ASSETS
 
FOR THE YEAR ENDED DECEMBER 31, 2000
 
(In thousands)
 
    
Emerging Markets Variable Account
     
Small-Cap     Equity     Variable Account
     
Multi- Strategy Variable Account
     
Equity Income Variable Account
     
Growth
LT Variable Account
       
International Value Variable Account
     
Equity Index Variable Account
  
    
INCREASE (DECREASE) IN NET ASSETS
    FROM OPERATIONS
                                                   
Net investment income (Loss)
   
($1
)
   
$630
 
   
$112
 
   
$266
 
   
$618
 
     
$110
 
   
$76
 
Net realized gain from security transactions
   
9
 
   
284
 
   
22
 
   
131
 
   
483
 
     
29
 
   
212
 
Net unrealized depreciation on investments
   
(56
)
   
(3,023
)
   
(135
)
   
(638
)
   
(2,022
)
     
(713
)
   
(853
)
    
Net Decrease in Net Assets
    Resulting from Operations
   
(48
)
   
(2,109
)
   
(1
)
   
(241
)
   
(921
)
     
(574
)
   
(565
)
    
INCREASE (DECREASE) IN NET ASSETS
    FROM POLICY TRANSACTIONS
                                                   
Transfers between variable accounts, net
   
80
 
   
(235
)
   
(67
)
   
11
 
   
809
 
     
45
 
   
249
 
Transfers—policy charges and deductions
   
(1
)
   
(62
)
   
(8
)
   
(40
)
   
(22
)
     
(30
)
   
(34
)
Transfers—surrenders
   
(1
)
   
(118
)
          
(4
)
   
(255
)
     
(3
)
   
(242
)
Transfers—other
   
(2
)
   
13
 
   
(1
)
          
(128
)
     
(13
)
   
(21
)
    
Net Increase (Decrease) in Net Assets
                                                   
    Derived from Policy Transactions
   
76
 
   
(402
)
   
(76
)
   
(33
)
   
404
 
     
(1
)
   
(48
)
    
NET INCREASE (DECREASE) IN NET ASSETS
   
28
 
   
(2,511
)
   
(77
)
   
(274
)
   
(517
)
     
(575
)
   
(613
)
    
NET ASSETS
                                                   
Beginning of Year
   
78
 
   
9,443
 
   
1,251
 
   
3,288
 
   
3,589
 
     
4,764
 
   
5,551
 
    
End of Year
   
$106
 
   
$6,932
 
   
$1,174
 
   
$3,014
 
   
$3,072
 
     
$4,189
 
   
$4,938
 
    
 
See Notes to Financial Statements
 

7

PACIFIC SELECT SEPARATE ACCOUNT
STATEMENT OF CHANGES IN NET ASSETS (Continued)
FOR THE YEAR ENDED DECEMBER 31, 2000
(In thousands)
 
      
Inflation Managed Variable Account (1)
       
Managed Bond Variable Account
       
Money Market Variable Account
       
High Yield Bond Variable Account
       
Equity Variable Account
       
Aggressive Equity Variable Account
  
      
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
                                                      
Net investment income
     
$13
 
     
$44
 
     
$51
 
     
$551
 
     
$14
 
     
$4
 
Net realized gain (loss)
from security transactions
                       
1
 
     
(15
)
                  
Net unrealized appreciation
(depreciation) on investments
     
15
 
     
38
 
     
3
 
     
(811
)
     
(73
)
     
(37
)
      
Net Increase (Decrease) in Net Assets
Resulting from Operations
     
28
 
     
82
 
     
55
 
     
(275
)
     
(59
)
     
(33
)
      
INCREASE (DECREASE) IN NET ASSETS
FROM CAPITAL UNIT TRANSACTIONS
                                                      
Transfers between variable accounts, net
              
(27
)
     
(325
)
     
(31
)
     
22
 
     
11
 
Transfers—policy charges and deductions
     
(2
)
     
(5
)
     
(11
)
     
(23
)
     
(1
)
     
(1
)
Transfers—surrenders
              
(3
)
     
(409
)
     
(10
)
                  
Transfers—other
                       
(5
)
     
1
 
                  
      
Net Increase (Decrease) in Net Assets
                                                      
Derived from Policy Transactions
     
(2
)
     
(35
)
     
(750
)
     
(63
)
     
21
 
     
10
 
      
NET INCREASE (DECREASE) IN NET ASSETS
     
26
 
     
47
 
     
(695
)
     
(338
)
     
(38
)
     
(23
)
      
NET ASSETS
                                                      
Beginning of Year
     
247
 
     
761
 
     
1,313
 
     
6,284
 
     
210
 
     
144
 
      
End of Year
     
$273
 
     
$808
 
     
$618
 
     
$5,946
 
     
$172
 
     
$121
 
      
 
(1)
 
Formerly named Government Securities Variable Account.
 
 
See
 
Notes to Financial Statements
 

8

PACIFIC SELECT SEPARATE ACCOUNT
NOTES TO FINANCIAL STATEMENTS
 
1. SIGNIFICANT ACCOUNTING POLICIES
 
The Pacific Select Separate Account (the “Separate Account”) is registered as a unit investment trust under the Investment Company Act of 1940, as amended, and as of December 31, 2001 is comprised of thirteen subaccounts called Variable Accounts: Emerging Markets, Small-Cap Equity, Multi-Strategy, Equity Income, Growth LT, International Value, Equity Index, Inflation Managed (formerly Government Securities), Managed Bond, Money Market, High Yield Bond, Equity, and Aggressive Equity Variable Accounts. 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 provided separately and should be read in conjunction with the Separate Account’s financial statements.
 
On September 22, 2000, the net assets of the Fund’s Bond and Income Portfolio, the underlying portfolio for the Bond and Income Variable Account, were transferred to the Fund’s Managed Bond Portfolio in exchange for shares of the Managed Bond Portfolio (the “reorganization”). In connection with the reorganization, a total of 1,272 outstanding accumulation units (valued at $13,604) of the Bond and Income Variable Account were exchanged for 546 accumulation units with equal value of the Managed Bond Variable Account.
 
The Separate Account was established by Pacific Life Insurance Company (“Pacific Life”) on November 20, 1986 and commenced operations on January 7, 1988. 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 life insurance, are obligations of Pacific Life.
 
The Separate Account held by Pacific Life represents funds from individual flexible premium variable life insurance policies. The assets of the Separate Account are carried at market value.
 
The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America for investment companies which require management to make certain estimates and assumptions at the date of the financial statements. 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 and Investment Income
 
Transactions are recorded on the trade date. Realized gains and losses on sales of investments are determined on the basis of identified cost. Dividend income is recorded on the ex-dividend date.
 
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 2001, the Fund declared dividends for each of the portfolios invested in by the Separate Account except the Aggressive Equity Portfolio. The amounts accrued by the Separate Account for its share of the dividends were reinvested in additional full and fractional shares of the related portfolio.
 
3. CHARGES AND EXPENSES
 
Pacific Life charges the Separate Account daily for mortality and expense risks assumed with respect to variable life insurance policies funded by the Separate Account at an annual rate of 0.70% of the average daily net assets of each Variable Account. Under the policies, Pacific Life makes certain deductions from the net assets of each Variable Account for sales load, administrative expenses, state premium taxes, cost of insurance and charges for optional benefits. The operating expenses of the Separate Account are paid by Pacific Life.
 
4. RELATED PARTY AGREEMENT
 
Pacific Select Distributors, Inc., a wholly-owned subsidiary of Pacific Life, serves as principal underwriter of variable life insurance policies funded by interests in the Separate Account, without remuneration from the Separate Account.

9

PACIFIC SELECT SEPARATE ACCOUNT
NOTES TO FINANCIAL STATEMENTS (Continued)
 
5.   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). A reconciliation of total cost and market value of the Separate Account’s investments in the Fund as of December 31, 2001 were as follows (amounts in thousands):
      
Variable Accounts
                  
      
 
      
Emerging
Markets
         
Small-Cap
    Equity    
          
Multi-
Strategy
        
Equity
Income
      
Growth
LT
  
      
 
Total cost of investments at beginning of year
     
$ 142
 
       
$6,259
 
        
$1,036
 
      
$2,556
      
$2,882
 
Add:    Total net proceeds from policy and M&E transactions
     
35
 
       
69
 
        
74
 
      
88
      
55
 
Reinvested distributions from the Fund:
                                                  
(a) Net investment income
                
40
 
        
29
 
      
19
      
26
 
(b) Net realized gain
                
1,034
 
        
2
 
      
32
      
383
 
      
Sub Total
     
177
 
       
7,402
 
        
1,141
 
      
2,695
      
3,346
 
Less:    Cost of investments disposed during the year
     
14
 
       
173
 
        
81
 
      
174
      
311
 
      
Total cost of investments at end of year
     
163
 
       
7,229
 
        
1,060
 
      
2,521
      
3,035
 
Add:    Unrealized appreciation (depreciation)
     
(39
)
       
(600
)
        
80
 
      
77
      
(1,253
)
      
Total market value of investments at end of year
     
$124
 
       
$6,629
 
        
$1,140
 
      
$2,598
      
$1,782
 
      
 
      
International Value
         
Equity Index
          
Inflation Managed (1)
        
Managed
Bond
      
Money Market
  
      
 
Total cost of investments at beginning of year
     
$3,726
 
       
$3,502
 
        
$272
 
      
$801
      
$619
 
Add:    Total net proceeds from policy and M&E transaction
     
51
 
       
59
 
        
61
 
      
19
      
334
 
Reinvested distributions from the Fund:
                                                  
(a) Net investment income
     
36
 
       
47
 
        
11
 
      
42
      
24
 
(b) Net realized gain
     
60
 
       
17
 
                              
      
Sub-Total
     
3,873
 
       
3,625
 
        
344
 
      
862
      
977
 
Less:     Cost of investments disposed during the year
     
106
 
       
110
 
        
51
 
      
79
      
335
 
      
Total cost of investments at end of year
     
3,767
 
       
3,515
 
        
293
 
      
783
      
642
 
Add:    Unrealized appreciation (depreciation)
     
(541
)
       
709
 
        
1
 
      
19
      
(1
)
      
Total market value of investments at end of year
     
$3,226
 
       
$4,224
 
        
$294
 
      
$802
      
$641
 
      
 
      
High Yield Bond
         
Equity
          
Aggressive Equity
                    
      
Total cost of investments at beginning of year
     
$7,094
 
       
$199
 
        
$126
 
                  
Add:    Total net proceeds from policy and M&E transactions
     
23
 
       
6
 
        
18
 
                  
Reinvested distributions from the Fund:
                                                  
(a) Net investment income
     
596
 
                                         
(b) Net realized gain
                
8
 
                              
      
Sub-Total
     
7,713
 
       
213
 
        
144
 
                  
Less:    Cost of investments disposed during the year
     
143
 
       
29
 
        
29
 
                  
      
Total cost of investments at end of year
     
7,570
 
       
184
 
        
115
 
                  
Add:    Unrealized depreciation
     
(1,636
)
       
(63
)
        
(19
)
                  
      
Total market value of investments at end of year
     
$5,934
 
       
$121
 
        
$96
 
                  
      
 
(1) Inflation Managed Variable Account was formerly named Government Securities Variable Account.
 
 
 

10

 
PACIFIC SELECT SEPARATE ACCOUNT
NOTES TO FINANCIAL STATEMENTS (Continued)
 
6.  TRANSACTIONS IN SEPARATE ACCOUNT UNITS
 
Transactions in Separate Account units for the year ended December 31, 2001 were as follows (units in thousands):
      
Variable Accounts
  
      
      
Emerging Markets
     
Small-Cap
    Equity    
       
Multi-
Strategy
     
Equity Income
     
Growth LT
       
International Value
     
Equity Index
  
      
Total units outstanding at beginning of year
     
16
     
137
 
     
34
 
   
67
 
   
65
 
     
168
 
   
122
 
Increase (decrease) in units
resulting from policy transactions:
                                                       
(a) Transfers between variable accounts, net
     
5
                     
(1
)
   
(9
)
     
1
 
   
(1
)
(b) Transfers—policy charges and deductions
            
(1
)
     
(1
)
   
(1
)
   
(1
)
     
(1
)
   
(1
)
(c) Transfers—surrenders
                            
(1
)
            
(1
)
       
(d) Transfers—others
                                   
(1
)
                
      
Sub-Total
     
5
     
(1
)
     
(1
)
   
(3
)
   
(11
)
     
(1
)
   
(2
)
      
Total units outstanding at end of year
     
21
     
136
 
     
33
 
   
64
 
   
54
 
     
167
 
   
120
 
      
 
     
Inflation Managed (1)
     
Managed Bond
       
Money Market
       
High Yield Bond
     
Equity
       
Aggressive Equity
  
      
Total units outstanding at beginning of year
     
11
     
31
 
     
34
 
     
235
 
   
16
 
     
11
 
Increase (decrease) in units
resulting from policy transactions:
                                                  
(a) Transfers between variable accounts, net
     
1
     
(2
)
     
23
 
     
(1
)
   
(1
)
     
(1
)
(b) Transfers—policy charges and deductions
                              
(1
)
                
(c) Transfers—surrenders
                     
(23
)
                         
(d) Transfers—other
                                     
(1
)
         
      
Sub-Total
     
1
     
(2
)
     
0
 
     
(2
)
   
(2
)
     
(1
)
      
Total units outstanding at end of year
     
12
     
29
 
     
34
 
     
233
 
   
14
 
     
10
 
      
 
7.  FINANCIAL HIGHLIGHTS
 
Selected accumulation unit value (AUV), total units outstanding, total net assets, ratios of investment income and expenses to average daily net assets and total returns for the year ended December 31, 2001 were as follows:
 
Variable Accounts
   
AUV
at
End
of Year
     
Number
of
Units
Outstanding
   
Total
Net
Assets
(in $000’s)
     
Ratios of
Investment
Income to
Average Net
Assets
   
Total
Returns (2)
Emerging Markets
   
$5.90
     
20,946
   
$124
     
0.17%
   
(9.98%)
Small-Cap Equity
   
48.85
     
135,608
   
6,625
     
16.48%
   
(2.46%)
Multi-Strategy
   
34.29
     
33,220
   
1,139
     
2.68%
   
(1.49%)
Equity Income
   
40.84
     
63,567
   
2,596
     
1.88%
   
(8.54%)
Growth LT
   
33.17
     
53,683
   
1,781
     
17.42%
   
(29.40%)
International Value
   
19.32
     
166,870
   
3,224
     
2.74%
   
(22.86%)
Equity Index
   
35.20
     
119,910
   
4,221
     
1.45%
   
(11.83%)
Inflation Managed (1)
   
25.51
     
11,520
   
294
     
3.67%
   
3.55%  
Managed Bond
   
27.69
     
28,951
   
802
     
5.13%
   
5.92%  
Money Market
   
18.68
     
34,294
   
641
     
3.78%
   
3.13%  
High Yield Bond
   
25.44
     
233,109
   
5,930
     
9.84%
   
0.46%  
Equity
   
8.60
     
14,046
   
121
     
6.02%
   
(21.45%)
Aggressive Equity
   
9.31
     
10,342
   
96
     
0.00%
   
(17.53%)
 
(1)
 
Inflation Managed Variable Account was formerly named Government Securities Variable Account.
(2)
 
Total returns reflect a deduction for mortality and expense risk charges assessed through the daily accumulation unit value calculation and these charges are assessed at an annual rate of 0.70% of the average daily net assets of each Variable Account as discussed in  Note 3. Total returns do not include deductions at the separate account or contract level for any cost of insurance charges, premium loads, administrative charges, maintenance fees, premium tax charges, surrender charges, or other charges that may be incurred under a contract, which, if incurred, would have resulted in lower returns.

11

 
INDEPENDENT AUDITORS’ REPORT
 
The Board of Directors
Pacific Life Insurance Company
 
We have audited the accompanying statement of assets and liabilities of Pacific Select Separate Account (the “Separate Account”) (comprised of the Emerging Markets, Small-Cap Equity, Multi-Strategy, Equity Income, Growth LT, International Value, Equity Index, Inflation Managed, Managed Bond, Money Market, High Yield Bond, Equity, and Aggressive Equity Variable Accounts) as of December 31, 2001 and the related statement of operations and financial highlights for the year then ended and statement of changes in net assets for each of the two years in the period then ended. These financial statements and financial highlights are the responsibility of the Separate Account’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
 
We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights. Our procedures included confirmation of securities owned as of December 31, 2001. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement and financial highlights presentation. We believe that our audits provide a reasonable basis for our opinion.
 
In our opinion, such financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of each of the respective Variable Accounts constituting Pacific Select Separate Account as of December 31, 2001 and the results of their operations and financial highlights for the year then ended and the changes in their net assets for each of the two years in the period then ended, in conformity with accounting principles generally accepted in the United States of America.
 
DELOITTE & TOUCHE LLP
 
Costa Mesa, California
February 8, 2002

12

Annual Report
as of December 31, 2001     
 
Ÿ  Pacific Select
    Separate Account of
    Pacific Life Insurance Company
 
Accountants
Deloitte & Touche LLP
695 Town Center Drive
Suite 1200
Costa Mesa, CA 92626
 
Counsel
Dechert
1775 Eye Street, N.W.
Washington, D.C. 20006-2401
 
 
Pacific Life Insurance Company
 
Life Insurance Operations Center
 
P.O. Box 7500
 
Newport Beach, California 92658-7500    
 
 
ADDRESS SERVICE REQUESTED
 
Form No. 15-21492-03