<PAGE>   1
================================================================================

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934

    FOR THE FISCAL YEAR ENDED: JANUARY 30, 2000

                                       OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934

    FOR THE TRANSITION PERIOD FROM                     TO
                                   -------------------     --------------------

                         COMMISSION FILE NUMBER 0-21296


                       PACIFIC SUNWEAR OF CALIFORNIA, INC.
--------------------------------------------------------------------------------
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)


          CALIFORNIA                                             95-3759463
-------------------------------                              ------------------
(State or other jurisdiction of                               (i.r.s. employer
 incorporation or organization)                              identification no.)


5200 E. LA PALMA AVENUE, ANAHEIM, CALIFORNIA                       92807
--------------------------------------------                  -----------------
  (Address of principal executive offices)                       (Zip code)


       REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (714) 693-8066

        SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE

           SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:

                          COMMON STOCK, $.01 PAR VALUE
--------------------------------------------------------------------------------
                                (TITLE OF CLASS)

         Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X  No
                                             ---   ---

         Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K [X].

         The aggregate market value of Common Stock held by non-affiliates of
the registrant on March 22, 2000 was approximately $989 million. All outstanding
shares of voting stock, except for shares held by executive officers and members
of the Board of Directors and their affiliates, are deemed to be held by
non-affiliates.

         On March 22, 2000 the registrant had 31,530,431 shares of Common Stock
outstanding.

                       DOCUMENTS INCORPORATED BY REFERENCE

         Part III incorporates information by reference from the definitive
Proxy Statement for the 2000 Annual Meeting of Shareholders, to be filed with
the Commission no later than 120 days after the end of the registrant's fiscal
year covered by this Form 10-K.

================================================================================

<PAGE>   2

                                     PART I

ITEM 1. BUSINESS

        Pacific Sunwear of California, Inc. and its wholly-owned subsidiaries
(the "Company" or "the Registrant") is a leading specialty retailer of everyday
casual apparel, accessaries and footwear designed to meet the needs of active
teens and young adults. The Company operates three nationwide, primarily
mall-based, chains of retail stores under the names "Pacific Sunwear" (as well
as "PacSun"), "Pacific Sunwear (PacSun) Outlet," and "d.e.m.o." PacSun and
PacSun Outlet stores specialize in board-sport inspired casual apparel, footwear
and related accessories catering to teenagers and young adults. d.e.m.o.
specializes in hip-hop music inspired casual apparel and related accessories
catering to teenagers and young adults. In addition, the Company operates a web
site through a wholly-owned subsidiary which sells merchandise online, provides
content and community for its target customers and provides information about
the Company.

        As of the year ended January 30, 2000 ("fiscal 1999"), the Company
operated 384 PacSun stores, 26 PacSun Outlet stores and 40 d.e.m.o. stores for a
total of 450 stores in 47 states. As of the date of this filing, the Company
operated 406 PacSun stores, 30 PacSun Outlet stores and 43 d.e.m.o. stores for a
total of 479 stores in 47 states.

        The Company, a California corporation, was incorporated in August 1982.

STORE FORMATS

        Pacific Sunwear ("PacSun") stores - The Company's original and primary
store format offers a selection of board-sport inspired casual apparel, footwear
and related accessories in order to satisfy the casual wardrobe needs of its
customers. Within each merchandise classification, PacSun stores offer a broad
selection, with the goal of being viewed by its customers as the dominant
retailer in its niche.

        Until 1995 PacSun stores averaged approximately 2,000 square feet.
Beginning in late 1995, the Company has increased its average new store size to
between approximately 3,000 and 4,000 square feet. In addition, each year since
the year ended February 2, 1997 ("fiscal 1996"), the Company has also enlarged
the size of certain existing smaller PacSun stores through expansion or
relocation. The Company expanded or relocated 15 PacSun stores in each of fiscal
1999, the year ended January 31, 1999 ("fiscal 1998") and the year ended
February 1, 1998 ("fiscal 1997"). At the end of fiscal 1999, the Company
operated 276 PacSun stores in its larger format and 108 in its smaller format
for a total of 384 stores.

        Pacific Sunwear ("PacSun") Outlet - These stores average approximately
4,000 square feet and are located in value-oriented outlet malls, both open-air
and enclosed. This format carries a selection similar to the PacSun mall stores,
with an emphasis on value pricing. The merchandise offerings at PacSun Outlets
consist primarily of off-price brand merchandise, private brand merchandise and
a smaller selection of full-priced branded merchandise. At the end of fiscal
1999, the Company operated 26 PacSun Outlet stores.

        d.e.m.o. - d.e.m.o. stores average approximately 2,000 square feet and
offer a broad assortment of hip-hop music inspired casual apparel and related
accessories. There is no merchandise overlap with PacSun or PacSun Outlet
stores. At the end of fiscal 1999, the Company operated 40 d.e.m.o. stores.

STRATEGY

        The Company's goal is to be the dominant nationwide specialty retailer
of everyday casual apparel, footwear and accessories catering primarily to the
teen market through multiple retail formats and channels. The Company's target
customers are young men and women between the ages of 12 and 24. The Company
believes its customers want to stay abreast of fashion trends and continually
seek newness in their everyday wear. The Company endeavors to satisfy such
demands by offering a complete wardrobe selection representing fashion trends
considered timely by the Company's target customers. The principal aspects of
the Company's strategy are as follows:

        Offer Popular Name Brands Supplemented by Private Brands. In each of its
store formats, the Company offers a carefully edited selection of popular name
brands supplemented by private brands, with the goal of being seen by its
teenage and young adult customers as the source for wardrobe choices appropriate
to their lifestyle. The Company believes that its merchandising strategy
differentiates its stores from its competitors offering 100% private labels or
100% name brands or seeking to serve a wider customer base and age range. See
"--Merchandising."


                                       2

<PAGE>   3

        Promote the PacSun and d.e.m.o. Brand Images. The Company promotes the
PacSun and d.e.m.o. brands through national print advertising in major magazines
that target teens and young adults. The Company has also sponsored lifestyle
events consistent with the PacSun brand image, including the 1999 Vans Warped
Tour and the 2000 Winter X Games. In addition, beginning in "fiscal 2000" (the
year ending February 4, 2001) the Company initiated its first ever PacSun
television advertising campaign in conjunction with its sponsorship of the 2000
Winter X Games.

        Actively Manage Merchandise Trends. The Company does not attempt to
dictate fashion, but instead devotes considerable effort to identifying emerging
fashion trends and brand names. By using focus groups, listening to its
customers and store employees, monitoring sell-through trends, testing small
quantities of new merchandise in a limited number of stores, and maintaining
domestic and international sourcing relationships, the Company enhances its
ability to identify and respond to emerging fashion trends and brand names as
well as develop new private brand styles in order to maximize existing fashion
trends. The Company believes its proactive strategy helps minimize fashion risk
and the potential need for significant markdowns, while permitting a rapid
response to changing fashions and the timely roll out of new merchandise.

        Maintain Strong Vendor Relationships. The Company views its vendor
relationships as important to its success, and promotes frequent personal
interaction with its vendors. The Company believes many of its vendors view
PacSun stores, PacSun Outlets and d.e.m.o. stores as important distribution
channels, in many cases as one of their largest customers, which enhance their
own brand image in the eyes of the customer.

        Provide Attentive Customer Service. The Company is committed to offering
courteous, professional and nonintrusive customer service. The Company strives
to give its customers the same level of respect that is generally given to adult
customers at other retail stores, and to provide friendly and informed customer
service for parents. Responding to the expressed preferences of its customers,
the Company trains its employees to greet each customer, to give prompt and
courteous assistance when asked, and to thank customers after purchases are
made, but to refrain from giving extensive unsolicited advice to its shoppers.
PacSun and PacSun Outlet stores display large assortments of name brands and
private brands, merchandised by category. d.e.m.o. merchandise is displayed by
brand together with by vendor logo signage. Additionally, the stores provide a
friendly and social atmosphere for teens with appropriate background music,
while also providing a comfortable environment for parents and other adults. The
Company believes the combination of its attentive customer service and its
unique store environments is integral to its success.

        Store Growth Strategy. The Company intends to continue its store growth
through the opening of new stores under its three formats. During fiscal 2000,
the Company plans to open approximately 125 new stores of which 65 will be
PacSun stores, 20 will be PacSun Outlet stores and 40 will be d.e.m.o. stores.
The Company also plans to expand or relocate approximately 35 existing smaller
PacSun stores during fiscal 2000. See "--Expansion."

        Internet Strategy. The Company began selling merchandise over the
internet in June 1999 at www.pacsun.com. The website offers a selection of the
same merchandise carried in the PacSun stores. In addition, the website offers
free e-mail, contests and lifestyle articles in a section named "Pipeline." The
Company maintains a database of e-mail names which it uses for marketing
purposes. The Company also advertises its website as a shopping destination on
major internet portals such as Yahoo and America Online, as well as markets its
website in its PacSun stores using in-store signage, merchandise bags and
receipts.

MERCHANDISING

   Merchandise

        PacSun, PacSun Outlet and d.e.m.o. stores offer a broad selection of
casual apparel and related accessories for young men and young women ("juniors")
with the goal of being viewed by its customers as the dominant retailer in its
niche.


                                       3

<PAGE>   4

        The following table sets forth the Company's merchandise assortment as a
percentage of net sales for the periods shown:


                                        FISCAL YEAR ENDED
                                       --------------------
                                       JAN. 30,    JAN. 31,
                                         2000        1999
                                       --------    --------

           Young mens apparel             54%        58%

           Juniors apparel                25         22

           Accessories                    13         12

           Footwear                        8          8
                                         ---        ---
           Total                         100%       100%
                                         ===        ===

        The Company offers many name brands best known by its target customers.
PacSun offers a wide selection of well-known board-sport inspired name brands
such as Quiksilver and Billabong. d.e.m.o. offers well-known name brands sought
by its target customers, such as ECKO and Phat Farm. In addition the Company
continuously adds and supports new, up and coming name brands in both PacSun and
d.e.m.o. No vendor accounted for more than 6% of net sales during fiscal 1999.

        The Company supplements its name brand offerings with private brands.
The Company believes that offering high-quality private brands contributes to
its status as a key fashion resource for the casual lifestyle and differentiates
the Company from its competitors. In addition, the private brands provide the
Company an opportunity to broaden its customer base by providing merchandise of
comparable quality to brand name merchandise at lower prices, to capitalize on
emerging fashion trends when branded merchandise is not available in sufficient
quantities, and to exercise a greater degree of control over the flow of its
merchandise. The Company's private brand merchandise is designed and sourced
internally by a product development group in collaboration with the Company's
buying staff. The product development staff also oversees the manufacture and
delivery of the private brand merchandise, with manufacturing done on a contract
basis domestically, in Asia and in Mexico. Private brand merchandise sales
accounted for 36% of the Company's net sales in each of fiscal 1999 and fiscal
1998.

   Vendor and Contract Manufacturer Relationships

        The Company views its vendor relationships as important to its success
and promotes frequent personal interaction with its vendors. The Company
believes many of its vendors view PacSun stores, PacSun Outlets and d.e.m.o.
stores as important distribution channels, in many cases as one of their largest
customers, which enhance their own brand image in the eyes of the customer. The
Company's vendor base currently includes more than 200 vendors. The Company
maintains strong and interactive relationships with its vendors, many of whose
philosophies of controlled distribution and merchandise development are
consistent with the Company's strategy. The Company generally purchases
merchandise from vendors who prefer distributing through specialty retailers,
small boutiques and, in some cases, better department stores, rather than
distributing their merchandise through mass market channels.

        To encourage the design and development of new merchandise, the Company
frequently shares ideas regarding fashion trends and merchandise sell-through
information with its vendors. The Company also suggests merchandise design and
fabrication with certain vendors. The Company encourages the development of new
vendor relationships by attending trade shows and through its weekly "Open-house
Wednesday" program, during which new vendors are encouraged to make
presentations of their merchandise to the Company's buying and product
development staffs. A number of the Company's key vendors have been introduced
to the Company through this program.

        The Company has cultivated its private brand sources with a view towards
high-quality merchandise, production reliability and consistency of fit. The
Company sources its private brand merchandise both domestically and
internationally in order to benefit from the lower costs associated with foreign
manufacturing and the shorter lead times associated with domestic manufacturing.

        The Company's business is dependant upon its ability to offer current
season, brand name apparel at competitive prices and in adequate quantities.
Some of the Company's vendors have limited resources, production capacities and
operating histories and some have intentionally limited the distribution of
their merchandise. The inability or unwillingness


                                       4

<PAGE>   5

on the part of key vendors to expand their operations to keep pace with the
anticipated growth of PacSun stores, PacSun Outlets and d.e.m.o. stores, or the
loss of one or more key vendors or private brand sources for any reason, could
have a material adverse effect on the Company's business.

   Purchasing, Allocation and Distribution

        The Company's merchandising department oversees the purchasing and
allocation of the Company's merchandise. The Company's buyers are responsible
for reviewing branded merchandise lines from new and existing vendors, selecting
branded and private label merchandise styles in quantities, colors and sizes to
meet inventory levels established by management and identifying emerging fashion
trends. The Company's planning and allocation department is responsible for
management of inventory levels by store and by class, allocation of merchandise
to stores and inventory replenishment based upon information generated by the
Company's merchandise management information systems. These systems provide the
planning department with current inventory levels at each store and for the
Company as a whole, as well as current selling history within each store by
merchandise classification and by style. See "--Information Systems."

        The Company's corporate offices and distribution center are located in
Anaheim, California. The Company believes its distribution center is capable of
servicing at least 700 stores. All merchandise is delivered by its vendors to
the main facility, where it is inspected, received into the Company's computer
system, allocated to stores, ticketed when necessary, and boxed for distribution
to the Company's stores. Each store is typically shipped merchandise three to
five times a week, providing it with a steady flow of new merchandise. The
Company uses a national and a regional small package carrier to ship merchandise
to its stores and occasionally uses air freight during peak selling periods.



                                       5

<PAGE>   6

STORES

   Locations

        The Company has expanded from 11 stores in California at the end of
fiscal 1986 to 450 stores in 47 states at the end of fiscal 1999. The table
below sets forth the number of stores located in each state as of the end of
fiscal 1999:

<TABLE>
<CAPTION>

                               PACSUN                                                         PACSUN
STATE               PACSUN     OUTLETS   D.E.M.O.    TOTAL       STATE             PACSUN     OUTLETS   D.E.M.O.    TOTAL
-----               -------    -------   --------    -----       -----             -------    -------   --------    -----
<S>                 <C>        <C>       <C>         <C>         <C>               <C>        <C>       <C>         <C>
Alabama                  5         1                    6        Montana               2                              2

Alaska                   1                              1        Nebraska              2                              2

Arizona                  8         1          1        10        Nevada                3         1                    4

California              50         4          7        61        New Hampshire         3                              3

Colorado                 6                    1         7        New Jersey           16         1          7        24

Connecticut              8                              8        New Mexico            2                              2

Delaware                 2         1                    3        New York             19         2          3        24

Florida                 37         3          8        48        North Carolina        9         1                   10

Georgia                 10         1                   11        Ohio                 20                             20

Hawaii                   2                    2         4        Oklahoma              3                              3

Idaho                    1                              1        Oregon                4         1                    5

Illinois                14         1          3        18        Pennsylvania         21         1          2        24

Indiana                  8                              8        Rhode Island          1                              1

Iowa                     4                              4        South Carolina        2         1                    3

Kansas                   3                              3        South Dakota          1                              1

Kentucky                 2                              2        Tennessee             6                              6

Louisiana                5                    1         6        Texas                21         2                   23

Maine                    2                              2        Utah                  2                              2

Maryland                11                    1        12        Vermont               1                              1

Massachusetts           14         1          1        16        Virginia             10         2                   12

Michigan                16         1          2        19        Washington            6                              6

Minnesota                7                    1         8        West Virginia         1                              1

Mississippi              1                              1        Wisconsin             5                              5
                                                                                     ---       ---        ---       ---
Missouri                 7                              7        Total               384        26         40       450
                                                                                     ===       ===        ===       ===
</TABLE>

   Store Expansion

        During fiscal 1999, the Company opened 73 PacSun stores, 17 PacSun
Outlet stores and 25 d.e.m.o. stores. In addition, the Company expanded or
relocated 15 PacSun stores during fiscal 1999. During fiscal 2000, the Company
plans to open approximately 125 new stores of which 65 will be PacSun stores, 20
will be PacSun Outlet stores and 40 will be d.e.m.o. stores. The Company also
plans to expand or relocate approximately 35 existing smaller PacSun stores
during fiscal 2000. The Company has identified regional malls in major
metropolitan areas nationwide and in Puerto Rico for potential new stores
subject to financial return and site selection criteria. As of the date of this
filing, substantially all of the leases for the approximately 125 stores the
Company expects to open in fiscal 2000 have been executed.

        The Company's site selection strategy is to locate its stores primarily
in regional malls serving markets which meet its demographic criteria, including
average household income and population density. The Company also considers mall
sales per square foot, the performance of other retail tenants serving teens and
young adult customers, anchor tenants and occupancy costs. The Company currently
seeks PacSun store locations of approximately 3,500-4,000 square feet and
d.e.m.o. store locations of approximately 2,000 square feet primarily in
high-traffic locations within regional malls. The Company currently seeks PacSun
Outlet store locations of approximately 4,000 square feet primarily in
high-traffic value-oriented outlet malls, both open-air and enclosed.


                                       6

<PAGE>   7

        The Company's average cost to build a new store, across all formats,
including leasehold improvements, furniture and fixtures and landlord
allowances, was approximately $236,000 and $222,000 in fiscal 1999 and fiscal
1998, respectively. The average cost of expanding or relocating a store was
approximately $309,000 in each of fiscal 1999 and fiscal 1998. The average total
cost to build new stores and relocate or expand stores will vary in the future,
depending on various factors, including square footage, changes in store design,
local construction costs and landlord allowances. The Company's average initial
inventory for new stores opened in fiscal 1999 was as follows: approximately
$124,000 for Pacific Sunwear stores, approximately $177,000 for Pacific Sunwear
Outlet stores and approximately $94,000 for d.e.m.o. stores. The Company's
initial inventory for new stores will vary in the future depending on various
factors, including store concept and square footage.

        The Company's continued growth depends on its ability to open and
operate stores on a profitable basis. The Company's ability to expand
successfully will be dependent upon a number of factors, including sufficient
demand for the Company's merchandise in its existing and new markets, customer
acceptance of its new store formats, and the ability of the Company to locate
and obtain favorable store sites, negotiate acceptable lease terms, obtain
adequate merchandise supply and hire and train qualified management-level and
other employees.

   Store Operations

        Each store has a manager, one or more co-managers and approximately four
to 10 part-time sales associates. Approximately seven to twelve stores are
managed by a district manager and approximately six to nine district managers
report to a regional manager. These managers and individual store managers
participate in a bonus program based on achieving predetermined levels of sales
and inventory shrinkage. Company stores are open during mall shopping hours. The
Company has well-established store operating policies and procedures and an
extensive four week in-store training program for new store managers and
co-managers. The Company places great emphasis on its loss prevention program in
order to control inventory shrinkage. This program includes the installation of
electronic article surveillance systems in all stores, education of store
personnel on loss prevention, and monitoring of returns, voids and employee
sales. Since fiscal 1991, the Company has achieved an inventory shrinkage rate
of 1.1% or less of net sales in each fiscal year, which the Company believes is
among the lowest shrinkage rates among national specialty apparel retailers.

INFORMATION SYSTEMS

        The Company's merchandise, financial and store computer systems are
fully integrated and operate using IBM equipment. The software, which is
primarily provided by one of the largest vendors to the retail trade, is
regularly upgraded or modified as needs arise or change. See-- "Management's
Discussion and Analysis of Financial Condition and Results of Operations - Year
2000 Date Changeover." The Company's information systems provide management,
buyers and planners comprehensive data which helps them identify emerging trends
and manage inventories. The systems include purchase order management, open
order reporting, open-to-buy, receiving, distribution, merchandise allocation,
basic stock replenishment, inter-store transfers, inventory and price
management. Weekly best/worst item sales reports are used by management to
enhance the timeliness and effectiveness of purchasing and markdown decisions.
Merchandise purchases are based on planned sales and inventories and are
frequently revised to reflect changes in demand for a particular item or
classification.

        All of the Company's stores have a point-of-sale system operating on IBM
in-store computer hardware. The system features bar-coded ticket scanning,
automatic price look-up, dial-out check and credit authorization and automatic
nightly transmittal of data between the store and the Company's corporate
offices. Each of the regional and district managers use a laptop computer and
can instantly access Company-wide information, including actual and budgeted
sales by store, district and region, transaction information, and payroll data.
The Company believes its management information systems are adequate to support
its planned expansion at least through fiscal 2001.

COMPETITION

        The retail apparel, footwear and accessory business is highly
competitive. PacSun stores, PacSun Outlets and d.e.m.o. stores compete on a
national level with certain leading department stores and national chains that
offer the same or similar brands and styles of merchandise. The Company's stores
also compete with a wide variety of regional and local specialty stores, such as
Abercrombie and Fitch, American Eagle Outfitters, The Buckle, Gadzooks, The Gap,
Mr. Rags and Wet Seal. Many of the Company's competitors are larger and have
significantly greater resources than the Company. The Company believes the
principal competitive factors in its industry are fashion, merchandise
assortment, quality, price, store location, environment and customer service.


                                       7

<PAGE>   8

TRADEMARKS AND SERVICE MARKS

        The Company is the owner in the United States of the marks "Pacific
Sunwear of California," "PacSun," "Pacific Sunwear," "d.e.m.o." and "Betty's
Space." The Company also uses and has registered, or has a pending registration
on a number of marks, including "Bullhead," "Breakdown," "Trans 9," "Good
Vibes," "Venus Girl Trap," "Tilt," "Hoax," "Factor," "Proto 23," "Reverb" and
"Pure Diva." The Company has also registered many of its marks outside of the
United States. The Company believes its rights in its marks are important to its
business and the Company intends to maintain its marks and the related
registrations.

EMPLOYEES

        At January 30, 2000, the Company had approximately 5,600 employees of
whom approximately 3,800 were part-time. Of the total employees, approximately
240 were employed at the Company's corporate headquarters and distribution
center. A significant number of seasonal employees are hired during peak selling
periods. None of the Company's employees is represented by a labor union, and
the Company believes that its relationships with its employees are good.


                                       8

<PAGE>   9

                      EXECUTIVE OFFICERS OF THE REGISTRANT

        Set forth below are the names, ages, titles, present and past positions
of persons serving as executive officers or key employees of the Company as of
March 21, 2000.

<TABLE>
<CAPTION>

EXECUTIVE OFFICERS:            AGE            POSITION
-------------------            ---            --------
<S>                            <C>            <C>
Greg H. Weaver                  46            Chairman of the Board and Chief Executive Officer
Timothy M. Harmon               48            President and Chief Merchandising Officer
Mark A. Hoffman                 51            Chief Operating Officer
Michael J. Scandiffio           50            Executive Vice President of Merchandising
Carl W. Womack                  48            Senior Vice President, Chief Financial Officer
                                                and Secretary
KEY EMPLOYEES:
--------------
Gary C.W. Hunt                  49            Vice President of Product Development
Robert G. Entersz               54            Vice President of Merchandising, Footwear,
                                                Accessories and Internet Sales
Debra Shinn                     43            Vice President of Merchandising, Juniors
Larry J. Fesler                 49            Vice President of Stores
Shelley Smith                   41            Vice President of Real Estate
Ronald L. Ehlers                48            Vice President of Information Systems
Frank J. Schools                42            Vice President of Finance
Mark A. Kibler                  41            Vice President of Distribution
</TABLE>

        Greg H. Weaver has served as Chairman of the Board and Chief Executive
Officer since November 1997. He served as President and Chief Executive Officer
from October 1996 to November 1997 and as a director since February 1996. Mr.
Weaver served as President and Chief Operating Officer from February 1996 to
October 1996 and as Chief Operating Officer and Executive Vice President from
October 1994 to February 1996. He served as Executive Vice President of Store
Operations and Real Estate from September 1993 to October 1994. Mr. Weaver
served as Senior Vice President of Store Operations and Real Estate from
November 1990 to September 1993 and as Vice President of Stores from July 1987
to October 1990. Prior to joining the Company, he was employed for 13 years by
Jaeger Sportswear Ltd. in both operational and merchandising capacities for the
U.S. and Canadian stores.

        Timothy M. Harmon, who joined the Company in September 1991, has served
as President and Chief Merchandising Officer from November 1997. He served as
Executive Vice President of Merchandising from December 1996 to November 1997
and as Senior Vice President of Merchandising from October 1994 to November
1996. He served as Vice President of Merchandising from September 1991 to
September 1994. Prior to joining the Company, he served as Vice President and
General Manager of Wideworld/MTV Sportswear, a domestic apparel manufacturer,
from May 1990 until May 1991. From March 1986 until March 1990, Mr. Harmon
served as Vice President and General Manager, Women's Division, of Chauvin
International, an apparel manufacturer. Prior to that, he served as Divisional
Merchandise Manager for Millers Outpost, a young men's apparel retailer, where
he was employed for six years.

        Mark A. Hoffman joined the Company in June 1999 as the Company's Chief
Operating Officer. Prior to joining the Company, Mr. Hoffman was the President
and Chief Operating Officer of Claire's Stores, Inc., a 2000-store retail chain
with U.S. and international operations, where he was employed from 1994 to 1999.
Prior to that he served as President and CEO of Accessory Place from 1991 to
1994, and Executive Vice President and Managing Director of Country Road
Australia-US from 1988 to 1990.

        Michael J. Scandiffio, joined the Company in August 1999 as Executive
Vice President of Merchandising. Previously, Mr. Scandiffio was President of
Brooks Brothers Retail, from January 1997 to July 1999. Prior positions also
include Executive Vice President of Merchandising at American Eagle Outfitters
from 1994 to 1997 as well as senior executive positions at Limited Inc and
Espirit de Corp.


                                       9

<PAGE>   10

        Carl W. Womack, who joined the Company in May 1986, has served as Senior
Vice President and Chief Financial Officer since October 1994. He served as Vice
President of Finance and Chief Financial Officer from May 1986 to September
1994. He has served as Secretary of the Company since November 1992. Prior to
joining the Company, Mr. Womack served in several positions in public and
private accounting. Mr. Womack is a certified public accountant.

        Gary C.W. Hunt joined the Company as Vice President of Product
Development in October 1993. Prior to joining the Company, he served as Vice
President of Merchandising with Pepe Clothing (USA), a jeanswear collection
company, from November 1990 to September 1993 and as Vice President of
Merchandising with Filippo Enterprises, Inc., a national jeanswear manufacturer,
from September 1988 to August 1990. Previously, he served as Vice President of
Merchandising for Jordache and for Zena Enterprises, Inc., each of which is a
jeanswear manufacturer.

        Robert G. Entersz joined the Company in November 1995 as Vice President
of Merchandising and currently oversees Footwear, Accessories and Internet
Sales. Prior to joining the Company, he was President of Journey's, a specialty
shoe retailer, from May 1993 to February 1995. Previously he was Executive Vice
President at Broadway Southwest, a department store, from January 1991 to April
1993. Prior to that, he was Senior Vice President and General Merchandise
Manager at Rich's, a division of Federated Department Stores.

        Debra Shinn, who joined the Company in May 1998 has served as Vice
President of Merchandising, Juniors, since December 1999. She served as
Divisional Merchandise Manager for Juniors from May 1998 to December 1999.
Previously, Ms. Shinn served as divisional merchandise manager of Juniors and
Young Men's and Boys apparel at Hecht's, a division of May Department Stores,
from August 1990 to April 1998. She began her retail career at Hecht's in June
1979 as an executive trainee.

        Larry J. Fesler has served as Vice President of Stores since joining the
Company in August 1993. Previously, he served for 11 years as Regional Sales
Manager with The Limited for its southwest store operations, where he was
employed for 15 years.

        Shelley Smith joined the Company in October 1994 as Vice President of
Real Estate. Previously, she was Director of Real Estate for Gymboree
Corporation, a children's apparel retailer, from October 1993 to September 1994.
From March 1989 to September 1993, she served as Director of Real Estate for
Natural Wonders, Inc., a nature and science gift retailer. Prior to that, she
was a Real Estate Representative for WNS, Inc., a specialty retailer with
several chains, where she was employed from August 1985 to February 1989.

        Ronald L. Ehlers joined the Company in June 1994 as Vice President of
Information Systems. Previously, he was Director of Management Information
Systems for Woman's World Shops, Inc., a women's specialty apparel retailer,
where he was employed for 16 years.

        Frank J. Schools, who joined the Company in July 1994, has served as
Vice President of Finance since November 1997. He served as the Company's
Controller from July 1994 to October 1997. Previously he was Assistant
Controller at Mac Frugal's Bargains. Close-outs, Inc., a general merchandise
close-out retailer, from October 1991 to July 1994. Prior to that, he served in
various accounting management positions at HomeClub, a warehouse home
improvement chain, from July 1986 to October 1991.

        Mark A. Kibler joined the Company in August 1998 as Vice President of
Distribution. Previously, he was Vice President of Distribution for L.A. Gear
Inc., a footwear and apparel wholesaler, from March 1988 to July 1998. Prior to
that, he served as Division Distribution Manager for Mervyns, a department
store, from February 1980 to March 1988.


                                       10

<PAGE>   11

ITEM 2. PROPERTIES

        The Company's corporate offices and distribution center are located in
Anaheim, California. The Company's corporate offices and distribution facility
occupy an aggregate of approximately 197,000 square feet of a larger building,
under a lease expiring in February 2008. In addition, the Company has leased the
remaining portion of the same building (approximately 70,000 square feet) under
a lease expiring in February 2008. The Company has subleased this portion of the
building with an option to terminate the sublease at the Company's discretion
after five years.

        The majority of the Company's stores are leased with initial lease terms
ranging from approximately eight to ten years. Substantially all leases for the
Company's stores provide for percentage rent, in excess of specified minimums,
based upon net sales.

ITEM 3. LEGAL PROCEEDINGS

        The Company is involved from time to time in litigation incidental to
its business. Management believes that the outcome of current litigation will
not have a material adverse effect upon the results of operations or financial
condition of the Company.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

        No matters were submitted to a vote of the Company's shareholders during
the fourth quarter of the fiscal year covered by this report.



                                       11

<PAGE>   12

                                     PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

        The common stock trades on the Nasdaq National Market under the symbol
"PSUN". The following table sets forth for the quarterly periods indicated the
high and low bid prices per share of the common stock, adjusted to give
retroactive effect to the three-for-two stock splits effected in June 1999 and
June 1998, as reported by Nasdaq:

<TABLE>
<CAPTION>
        FISCAL 1999         HIGH         LOW             FISCAL 1998        HIGH         LOW
        -----------        ------      ------            -----------       ------       ------
<S>                        <C>         <C>               <C>               <C>          <C>
        1st Quarter        $26.00      $15.88            1st Quarter       $20.45       $12.11
        2nd Quarter         26.42       19.08            2nd Quarter        26.25        18.67
        3rd Quarter         33.13       18.69            3rd Quarter        23.04        11.67
        4th Quarter         36.75       23.88            4th Quarter        17.37         8.00
</TABLE>

        As of March 22, 2000, the number of holders of record of common stock of
the Company was approximately 270 and the number of beneficial holders of the
common stock is in excess of 5,000.

        The Company has never declared or paid any dividends on its common stock
and does not intend to pay any dividends on its common stock in the foreseeable
future. In addition, the Company's current line of credit arrangements prohibit
the payment of cash dividends on its capital stock.

ITEM 6. SELECTED FINANCIAL DATA

        The balance sheet and income statement data as of January 30, 2000 and
January 31, 1999 and for each of the three fiscal years in the period ended
January 30, 2000 are derived from audited consolidated financial statements of
the Company included herein and should be read in conjunction with such
financial statements. Such data and the selected operating data below also
should be read in conjunction with the "Management's Discussion and Analysis of
Financial Condition and Results of Operations" included in this report. The
balance sheet and income statement data as of February 1, 1998, February 2, 1997
and February 4, 1996 and for each of the two fiscal years in the period ended
February 4, 1996 are derived from audited consolidated financial statements of
the Company, which are not included herein.


                                       12

<PAGE>   13

<TABLE>
<CAPTION>
                                                                       FISCAL YEAR ENDED (1)
                                           -------------------------------------------------------------------------
                                            JAN. 30,          JAN. 31,        FEB. 1,        FEB. 2,         FEB. 4,
                                              2000             1999            1998           1997            1996
                                           ----------       ----------       --------       --------       ---------
                                                  (IN THOUSANDS, EXCEPT PER SHARE AND SELECTED OPERATING DATA)
<S>                                        <C>              <C>              <C>            <C>            <C>
CONSOLIDATED INCOME STATEMENT DATA:

Net sales                                  $  436,808       $  321,125       $227,130       $155,261       $ 112,921

Cost of goods sold (including buying,
  distribution and occupancy costs)           284,187          212,859        150,219        106,126          80,788
                                           ----------       ----------       --------       --------       ---------
Gross margin                                  152,621          108,266         76,911         49,135          32,133

Selling, general and administrative
  expenses                                     96,117           70,369         51,093         37,126          27,996
                                           ----------       ----------       --------       --------       ---------
Operating income                               56,504           37,897         25,818         12,009           4,137

Net interest income                               916              977          1,248            237              63
                                           ----------       ----------       --------       --------       ---------
Income before income tax expense               57,420           38,874         27,066         12,246           4,200

Income tax expense                             22,119           15,369         10,707          4,834           1,576
                                           ----------       ----------       --------       --------       ---------
Net income                                 $   35,301       $   23,505       $ 16,359       $  7,412       $   2,624
                                           ==========       ==========       ========       ========       =========
Net income per share, diluted(2)           $     1.10       $     0.73       $   0.53       $   0.26       $    0.10
                                           ==========       ==========       ========       ========       =========
Weighted average shares outstanding,
  diluted(2)                                   32,190           32,233         30,644         28,023          27,079
                                           ==========       ==========       ========       ========       =========

SELECTED CONSOLIDATED OPERATING DATA:

Stores open at end of period                      450              342            272            209             182

Stores opened during period                       111               74             52             30              55

Stores acquired during period                      --               --             15             --              --

Stores closed during period                         3                4              4              3               1

Capital expenditures (000's)               $   40,219       $   31,603       $ 21,020       $  8,126       $   9,761

Average net sales per gross square
  foot(3)(4)                               $      398       $      403       $    408       $    377       $     340

Average net sales per store(3)(4)          $1,084,000       $1,034,000       $959,000       $792,000       $ 684,000

Square footage of gross store space
  at end of period                          1,254,373          888,507        679,357        455,607         364,069

Comparable store net sales increase
  (decrease)(4)(5)                                7.8%             8.6%          15.1%          15.7%           (2.2)%

CONSOLIDATED BALANCE SHEET DATA:

Working capital                            $   67,351       $   47,545       $ 48,119       $ 21,690       $  14,800

Total assets                                  209,342          147,775        121,666         65,705          51,471

Long-term debt                                     --               --             --             --             406

Shareholders' equity                       $  161,826       $  116,697       $ 96,563       $ 47,546       $  38,309
</TABLE>

----------------
(1)   Except for the fiscal year ended February 4, 1996, which included 53
      weeks, all fiscal years presented included 52 weeks.

(2)   Adjusted to give effect to the three-for-two stock splits effected as of
      June 8, 1999, June 8, 1998, October 9, 1997 and October 9, 1996.

(3)   For purposes of calculating these amounts, the number of stores and the
      amount of square footage reflect the number of months during the period
      that new stores and closed stores were open.

(4)   These amounts have been adjusted to exclude the fifty-third week in the
      fiscal year ended February 4, 1996.

(5)   Stores are deemed comparable stores on the first day of the first month
      following the one year anniversary of their opening. Commencing in fiscal
      1996, in conjunction with the expansion or relocation of certain stores to
      the larger format, the Company excluded each such store's net sales
      results from the first day of the month of its expansion or relocation.
      Each of these stores is deemed a comparable store on the first day of the
      first month following the one-year anniversary of its expansion or
      relocation. Commencing in fiscal 1998, in conjunction with the conversion
      of certain stores to the d.e.m.o. format, the Company excluded each such
      store's net sales results from the first day of the month of its
      conversion. Each of these stores is deemed a comparable store on the first
      day of the first month following the one-year anniversary of its
      conversion to the d.e.m.o. format.


                                       13

<PAGE>   14

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
        RESULTS OF OPERATIONS

        The following discussion should be read in conjunction with the
Financial Statements and Notes thereto of the Company included elsewhere in this
Form 10-K. Commencing in fiscal 1996, in conjunction with the expansion or
relocation of certain stores to a larger format, the Company excluded each such
store's net sales results from the first day of the month of its expansion or
relocation. Each of these stores is deemed a comparable store on the first day
of the first month following the one-year anniversary of its expansion or
relocation. Commencing in fiscal 1998, in conjunction with the conversion of
certain stores to the d.e.m.o. format, the Company excluded each such store's
net sales results from the first day of the month of its conversion. Each of
these stores is deemed a comparable store on the first day of the first month
following the one-year anniversary of its conversion to the d.e.m.o. format. The
following Management's Discussion and Analysis of Financial Condition and
Results of Operations contains forward-looking statements which involve risks
and uncertainties. The Company's actual results could differ materially from
those anticipated in these forward-looking statements as a result of certain
factors, including those set forth under "Cautionary Note Regarding
Forward-Looking Statements and Risk Factors" in this section.

RESULTS OF OPERATIONS

        The following table sets forth selected income statement data of the
Company expressed as a percentage of net sales for the fiscal years indicated:

<TABLE>
<CAPTION>
                                                      AS A PERCENTAGE OF NET SALES,
                                                            FISCAL YEAR ENDED
                                                    --------------------------------
                                                    JAN. 30,    JAN. 31,     FEB. 1,
                                                      2000        1999        1998
                                                    --------    --------     -------
<S>                                                 <C>         <C>          <C>
Net sales                                            100.0%      100.0%       100.0%
Cost of goods sold (including buying,
  distribution and occupancy costs)                   65.1         66.3        66.1
                                                     -----        -----       -----
Gross margin                                          34.9         33.7        33.9
Selling, general and administrative expenses          22.0         21.9        22.5
                                                     -----        -----       -----
Operating income                                      12.9         11.8        11.4
Interest income, net                                   0.2          0.3         0.5
                                                     -----        -----       -----
Income before income tax expense                      13.1         12.1        11.9
Income tax expense                                     5.0          4.8         4.7
                                                     -----        -----       -----
Net income                                             8.1%         7.3%        7.2%
                                                     =====        =====       =====

Number of stores open at end of period                 450          342         272
</TABLE>


                                       14

<PAGE>   15

FISCAL 1999 COMPARED TO FISCAL 1998

Net Sales

        Net sales increased to $436.8 million in fiscal 1999 from $321.1 million
in fiscal 1998, an increase of $115.7 million, or 36.0%. Of this $115.7 million
increase, $56.2 million was attributable to net sales generated by 111 new
stores opened in fiscal 1999 not yet included in the comparable store base,
$33.5 million was attributable to net sales generated by new stores opened in
fiscal 1998 not yet included in the comparable store base, $23.1 million was
attributable to a 7.8% increase in comparable store net sales in fiscal 1999 and
$6.7 million was attributable to other non-comparable store sales. Offsetting
these increases was a $3.8 million decrease in net sales attributable to the
closing of four stores during fiscal 1998 and three stores during fiscal 1999.
Other non-comparable sales consist of: sales from Pacific Sunwear stores that
have been expanded or relocated and not yet included in the comparable store
base, Pacific Sunwear stores converted to "d.e.m.o." stores and not yet included
in the comparable store base, as well as merchandise sold over the internet.
Stores are deemed comparable stores on the first day of the first month
following the one year anniversary of their opening or expansion/relocation or
conversion from Pacific Sunwear to the d.e.m.o. format. The increase in
comparable store net sales was primarily attributable to increases in comparable
store net sales of juniors, shoes, accessory merchandise and, to a lesser
extent, increases in comparable store net sales of young men's merchandise.
Retail prices of the Company's merchandise remained relatively unchanged in
fiscal 1999 compared to fiscal 1998 and had no significant impact on the net
sales increase for fiscal 1999.

Gross Margin

        Gross margin, after buying, distribution and occupancy costs, increased
to $152.6 million in fiscal 1999 from $108.3 million in fiscal 1998, an increase
of $44.3 million, or 40.9%. As a percentage of net sales, gross margin was 34.9%
for fiscal 1999 compared to 33.7% for fiscal 1998. Of this 1.2% increase, net
merchandise margins increased .8% as a percentage of net sales for fiscal 1999
compared to fiscal 1998 and occupancy costs for fiscal 1999 decreased .2% as a
percentage of net sales compared to fiscal 1998, which was related to higher
comparable store net sales and higher total net sales. The increase in net
merchandise margins were primarily related to an increase in initial markup. In
addition, distribution costs decreased .2% as a percentage of net sales compared
to fiscal 1998 as a result of leveraging these expenses over higher total net
sales.

Selling, General and Administrative Expenses

        Selling, general and administrative expenses increased to $96.1 million
in fiscal 1999 from $70.4 million in fiscal 1998, an increase of $25.7 million,
or 36.5%. As a percentage of net sales, these expenses increased to 22.0% from
21.9%. Of this .1% net increase as a percentage of net sales, .3% was due to an
increase in advertising as a percentage of net sales, which was related to the
Company's first ever national print advertising campaign which commenced in
February 1999, and .2% was due to an increase in store payroll as a percentage
of total net sales. These increases were offset by a decrease of .3% in store
expansion/relocation and closing expenses as a percentage of net sales and a
decrease of .1% in general and administrative expenses as a percentage of net
sales. These decreases as a percentage of net sales were primarily a result of
leveraging these expenses over higher total net sales.

Net Interest Income

        Net interest income was $.9 million in fiscal 1999 compared to $1.0
million in fiscal 1998, a decrease of $.1 million. This decrease was a result of
lower average cash balances during fiscal 1999 as compared to fiscal 1998.

Income Tax Expense

        Income tax expense was $22.1 million in fiscal 1999 compared to $15.4
million in fiscal 1998. The effective income tax rate in fiscal 1999 was 38.5%
compared to 39.5% in fiscal 1998. The lower effective income tax rate for fiscal
1999 was primarily attributable to a lower weighted effective state income tax
rate for the Company. The weighted effective state income tax rate of the
Company will vary depending on a number of factors, such as differing income tax
rates by state and changes in the weighting formulas primarily caused by the
Company's growth by state.


                                       15

<PAGE>   16

FISCAL 1998 COMPARED TO FISCAL 1997

Net Sales

        Net sales increased to $321.1 million in fiscal 1998 from $227.1 million
in fiscal 1997, an increase of $94.0 million, or 41.4%. Of this $94.0 million
increase, $36.8 million was attributable to net sales generated by 74 new stores
opened in fiscal 1998 and not yet included in the comparable store base, $33.3
million was attributable to net sales generated by new stores opened or acquired
in fiscal 1997, as well as Pacific Sunwear stores converted to the d.e.m.o.
format, and not yet included in the comparable store base, $17.0 million was
attributable to an 8.6% increase in comparable store net sales in fiscal 1998
compared to fiscal 1997 and $7.9 million was attributable to 30 stores that were
expanded or relocated to the larger format and not yet included in the
comparable store base. Partially offsetting this increase was a $1.0 million
decrease in net sales attributable to the closing of eight stores, four of which
were closed during fiscal 1997 and four of which were closed during fiscal 1998.
The increase in comparable store net sales was primarily attributable to
increases in comparable store net sales of juniors, shoes, accessory merchandise
and, to a lesser extent, increases in comparable store net sales of young men's
merchandise. Net sales of junior female apparel represented approximately 22% of
total net sales in fiscal 1998 compared to 16% of net sales in fiscal 1997.
Retail prices of the Company's merchandise remained relatively unchanged in
fiscal 1998 compared to fiscal 1997 and had no significant impact on the net
sales increase for fiscal 1998.

Gross Margin

        Gross margin, after buying, distribution and occupancy costs, increased
to $108.3 million in fiscal 1998 from $76.9 million in fiscal 1997, an increase
of $31.4 million, or 40.8%. As a percentage of net sales, gross margin decreased
to 33.7% from 33.9%. Of this .2% decrease, .4% was due to higher distribution
costs as a percentage of net sales for fiscal 1998 compared to fiscal 1997,
which was related to startup costs and higher occupancy costs of the Company's
new distribution center facility and .1% was due to an increase in occupancy
costs as a percentage of net sales. The increase in occupancy costs was
primarily due to opening 74 new stores with lower sales volumes than mature
stores and therefore higher occupancy costs as a percentage of net sales. The
increase in net merchandise margins was primarily related to an increase in
initial markup. These increases were offset by an increase in net merchandise
margins of .3% as a percentage of net sales for fiscal 1998 compared to fiscal
1997 due to an increase in initial markup.

Selling, General and Administrative Expenses

        Selling, general and administrative expenses increased to $70.4 million
in fiscal 1998 from $51.1 million in fiscal 1997, an increase of $19.3 million,
or 37.8%. As a percentage of net sales, these expenses decreased to 21.9% from
22.5%. Of this .6% decrease as a percentage of net sales, .5% was due to a
decrease in store expansion/relocation and closing expenses as a percentage of
net sales and .3% was due to a decrease in general and administrative expenses
as a percentage of net sales. These decreases as a percentage of net sales were
primarily a result of leveraging these expenses over higher total net sales.
Offsetting these decreases was an increase in store selling expenses as a
percentage of net sales of .2% due to higher store selling expenses as a
percentage of net sales associated with 74 new stores. Sales volumes in new
stores generally increase during the first four years of operation, while store
selling expenses are generally fixed.

Net Interest Income

        Net interest income was $1.0 million in fiscal 1998 compared to $1.2
million in fiscal 1997, a decrease of $.2 million. This decrease was a result of
lower average cash balances during fiscal 1998 as compared to fiscal 1997.

Income Tax Expense

        Income tax expense was $15.4 million in fiscal 1998 compared to $10.7
million in fiscal 1997. The effective income tax rate in fiscal 1998 was 39.5%
compared to 39.6% in fiscal 1997.


                                       16

<PAGE>   17

LIQUIDITY AND CAPITAL RESOURCES

        The Company has financed its operations from internally generated cash
flow, short-term borrowings and equity financing. The Company's primary capital
requirements have been for the construction of new stores, remodeling,
expansion, or relocation of selected stores and financing of inventories. In
fiscal 1998, the Company used funds for the relocation of and capital
improvements to its new corporate offices and distribution facility.

        Net cash provided by operating activities for fiscal 1999, fiscal 1998
and fiscal 1997 was $49.6 million, $30.3 million and $18.2 million,
respectively. Working capital at the end of fiscal 1999, fiscal 1998 and fiscal
1997 was $67.4 million, $47.5 million and $48.1 million, respectively.
Inventories at January 30, 2000 were $60.0 million compared to $42.5 million at
January 31, 1999, an increase of $17.5 million or 41.2%. The Company's average
store inventories vary throughout the year and increase in advance of the peak
selling periods of spring break, back-to-school and Christmas. The increase in
inventories at January 30, 2000 was primarily related to opening 111 new stores
and expanding/relocating 15 stores which have in excess of 50% larger average
square footage than their previous locations. The increase in accounts payable
of $6.2 million at January 30, 2000 compared to January 31, 1999 was primarily
attributable to the increase in inventories at January 30, 2000.

        Net cash used in investing activities in fiscal 1999, fiscal 1998 and
fiscal 1997 was $40.2 million, $27.7 million and $44.2 million, respectively.
Net cash used for investment in property and equipment in fiscal 1999, fiscal
1998 and fiscal 1997 was $40.2 million, $31.6 million and $21.0 million,
respectively. Of the $40.2 million of net cash used for investment in property
and equipment in fiscal 1999, $24.8 million was used for 111 new stores opened
in fiscal 1999, $1.2 million was used for leasehold improvements and furniture
and fixtures for the Company's corporate offices and distribution center, $1.0
million was used to purchase computer hardware and software, $1.3 million was
used for the relocation and expansion of 15 existing stores and $6.3 million was
used for the initial construction costs of 82 of the 125 stores to be opened in
fiscal 2000. In addition, $4.2 million was used for capital expenditures on
existing stores in fiscal 1999 and $1.4 million was used for store
expansions/relocations planned for fiscal 2000. In fiscal 1999 there were no
short-term investment maturities compared to $12.7 million of net cash provided
by short-term investment maturities in fiscal 1998. In a series of open market
transactions during the fourth quarter of fiscal 1998, the Company purchased and
retired 1,001,250 (as adjusted for the stock split which occurred in June 1999)
shares of its common stock at an average cost of $8.87 per share for a total
cost of $8.9 million. These purchases were made pursuant to a resolution adopted
by the Board of Directors in December 1998 which authorized the Company to
purchase up to 1.5 million shares of its common stock, as adjusted for the stock
split which occurred in June 1999.

        Net cash provided by financing activities in fiscal 1999, fiscal 1998
and fiscal 1997 was $4.0 million, $1.7 million and $30.8 million, respectively.
In fiscal 1999, fiscal 1998 and fiscal 1997, the Company received proceeds of
$4.0 million, $1.7 million and $.7 million, respectively, from the exercise of
stock options. In fiscal 1997, the Company received net proceeds of $30.1
million from the issuance of common stock.

        The Company has a credit facility with a bank, which expires in August
2001. The credit facility provides for a $35.0 million line of credit, which can
be used for cash advances, commercial letters of credit and shipside bonds.
Interest on cash advances under the line of credit facility is payable monthly
at the bank's prime rate (8.50 % at January 30, 2000). At January 30, 2000, the
Company had $6.2 million in letters of credit outstanding and no cash advances
outstanding. The loan agreement subjects the Company to various restrictive
covenants, including maintenance of certain financial ratios and prohibits
payment of cash dividends on common stock. At January 30, 2000, the Company was
in compliance with all of its covenants.

        The Company has minimum annual rental commitments under existing store
leases and the lease for its corporate offices and distribution center of
approximately $39.8 million in fiscal 2000 and similar amounts thereafter.

        The Company's average cost to build a new store, across all formats,
including leasehold improvements, furniture and fixtures and landlord
allowances, was approximately $236,000 and $222,000 in fiscal 1999 and fiscal
1998, respectively. The average cost of expanding or relocating a store was
approximately $309,000 in each of fiscal 1999 and fiscal 1998. The average total
cost to build new stores and relocate or expand stores will vary in the future,
depending on various factors, including square footage, changes in store design,
local construction costs and landlord allowances. The Company's average initial
inventory for new stores opened in fiscal 1999 was as follows: approximately
$124,000 for Pacific Sunwear stores, approximately $177,000 for Pacific Sunwear
Outlet stores and approximately $94,000 for d.e.m.o. stores. The Company's
initial inventory for new stores will vary in the future depending on various
factors, including store concept and square footage.

        During fiscal 2000, the Company plans to open approximately 125 new
stores, of which 64 will be PacSun stores, 21 will be PacSun Outlet stores and
40 will be d.e.m.o. stores. The Company also plans to expand or relocate 31
existing smaller PacSun stores. The Company estimates that capital expenditures
in fiscal 2000 will total approximately $46 million.


                                       17


<PAGE>   18

        The Company reviews the operating performance of its stores on an
ongoing basis to determine which stores, if any, to expand, relocate or close.
The Company closed three stores in fiscal 1999 and anticipates closing three to
five stores in fiscal 2000.

        Management believes that the Company's working capital, bank loan
agreement and cash flow from operating activities will be sufficient to meet the
Company's operating and capital expenditure requirements through the end of
fiscal 2000.

NEW ACCOUNTING PRONOUNCEMENTS

        Accounting for Derivatives and Hedging Activities -- In June 1998, the
Financial Accounting Standards Board issued SFAS No. 133, "Accounting for
Derivatives and Hedging Activities". SFAS No. 133 must be implemented by the
Company for the years ending February 4, 2001. SFAS No. 133 is not expected to
have a significant impact on the Company's consolidated financial statements.

INFLATION

        The Company does not believe that inflation has had a material effect on
the results of operations in the recent past. There can be no assurance that the
Company's business will not be affected by inflation in the future.

SEASONALITY AND QUARTERLY RESULTS

        The Company's business is seasonal by nature, with the Christmas and
back-to-school periods historically accounting for the largest percentage of
annual net sales. The Company's first quarter historically accounts for the
smallest percentage of annual net sales. In fiscal 1999 and fiscal 1998,
excluding sales generated by new and relocated/expanded stores, the Christmas
and back-to-school periods together accounted for approximately 33% and 34%,
respectively, of the Company's annual net sales and a higher percentage of the
Company's operating income. In fiscal 1999, excluding net sales generated by new
and relocated/expanded stores, approximately 45% of the Company's annual net
sales occurred in the first half of the fiscal year and 55% in the second half.
The Company's quarterly results of operations may also fluctuate significantly
as a result of a variety of factors, including the timing of store openings; the
amount of revenue contributed by new stores; the timing and level of markdowns;
the timing of store closings, expansions and relocations; competitive factors;
and general economic conditions.

YEAR 2000 DATE CHANGEOVER

        As of the date of this filing, the Company has not incurred any
significant business disruptions attributable to the date changeover on January
1, 2000 or to the leap year on February 29, 2000. However, unforeseen year 2000
readiness problems could still arise, and these problems could have an adverse
impact on the Company.

        The Company incurred internal staff costs as well as certain outside
consulting and other expenditures related to its year 2000 readiness efforts and
during the year ended January 30, 2000 incurred less than $300,000 in expenses
relating to its year 2000 readiness efforts.

        The Company's material merchandise, financial and store computer
software systems are provided by third-party vendors and are used with minor
modifications by the Company. The software vendors have provided updated
software versions as part of the normal periodic software upgrade process that
address the year 2000 issue. This upgrade process was been substantially
completed as of the end of fiscal 1998 and did not cost the Company additional
amounts beyond normal recurring annual software maintenance fees paid by the
Company.

        The Company's most significant software system includes purchase order
management, open order reporting, open-to-buy, receiving, distribution, basic
stock replenishment, inter-store transfers, inventory and price management,
general ledger and accounts payable functions. This system was upgraded in
fiscal 1999 and has been certified by the software vendor as year 2000
compliant. In addition, the Company successfully completed a fully-integrated
year 2000 readiness test of this system at an off-site recovery computer center
in August of fiscal 1999. At its new distribution center, the Company uses a
recently installed materials handling system and the vendor of this system has
advised the Company that the system is year 2000 compliant.


                                       18

<PAGE>   19

        With regard to the Company's vendors, as of the date of this filing, the
Company has not been notified of any system failures attributable to the date
changeover on January 1, 2000 or any failures attributable to the leap year on
February 29, 2000. As of the date of this filing, the Company has not incurred
any significant business disruptions as a result of any systems failure of its
vendors attributable to the year 2000. The Company will continue to monitor
deliveries of its merchandise, goods and services from its vendors and will use
alternate vendors should any year 2000 problems arise. There is no assurance
that the systems of the vendors from whom the Company receives merchandise,
goods and services will not be impacted by the year 2000 or that any failure on
their part to be year 2000 ready would not have an adverse impact on the Company
if a number of such vendors have failures which can be attributed to the year
2000.

        While the Company continues to believe the year 2000 issues described
above will not materially affect its financial position or results of
operations, it remains uncertain as to what extent, if any, the Company may be
impacted.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS AND RISK FACTORS

        This report on Form 10-K contains "forward-looking statements" within
the meaning of Sections 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934, and the Company intends that such
forward-looking statements be subject to the safe harbors created thereby. The
Company is hereby providing cautionary statements identifying important factors
that could cause the Company's actual results to differ materially from those
projected in forward-looking statements of the Company herein. Any statements
that express, or involve discussions as to, expectations, beliefs, plans,
objectives, assumptions, future events or performance (often, but not always
through the use of words or phrases such as "will result" "expects to" "will
continue" "anticipates" "plans" "intends" "estimated" "projects" and "outlook")
are not historical facts and may be forward-looking and, accordingly, such
statements involve estimates, assumptions and uncertainties which could cause
actual results to differ materially from those expressed in the forward-looking
statements. Such uncertainties include, among others, the following factors:

        FLUCTUATIONS IN COMPARABLE STORE NET SALES RESULTS. The Company's
comparable store net sales results have fluctuated significantly in the past, on
a monthly, quarterly and annual basis, and are expected to continue to fluctuate
in the future. A variety of factors affect the Company's comparable store net
sales results, including changes in fashion trends, changes in the Company's
merchandise mix, calendar shifts of holiday periods, actions by competitors,
weather conditions and general economic conditions. The Company's comparable
store net sales results for any particular fiscal month, fiscal quarter or
fiscal year in the future may decrease. As a result of these or other factors
the Company's future comparable store net sales results are likely to have a
significant effect on the market price of the Company's common stock.

        RISKS OF NEW SPECIALTY STORE CONCEPT NAMED "D.E.M.O.". The Company's
ability to expand into new concepts has not been fully tested. The Company
opened the first d.e.m.o. store in April of fiscal 1998, and at the end of
fiscal 1999 operated 40 d.e.m.o. stores. Accordingly, the operation of its
d.e.m.o. stores is subject to numerous risks, including unanticipated operating
problems, lack of experience, lack of customer acceptance, new vendor
relationships and competition from existing and new retailers. There can be no
assurance that the Company's d.e.m.o. stores will achieve sales and
profitability levels that justify the Company's investment in this new retail
format. Expansion of the d.e.m.o. format also involves other risks that could
have a material adverse effect on the Company, including (i) the diversion of
management's attention from the Company's core business, (ii) difficulties with
the hiring, retention and training of key personnel for the d.e.m.o. stores,
(iii) risks associated with new vendors and (iv) difficulties with locating and
obtaining favorable store sites and negotiating acceptable lease terms.

        INTERNET SALES. The Company began selling merchandise over the internet
in June 1999. The internet operations involve, among other things, internet web
site design activities, investment in new systems, distribution center
enhancements, training of personnel and hiring of additional personnel to handle
new functions. The Company's internet operations are subject to numerous risks,
including unanticipated operating problems, reliance on third party computer
hardware and software providers, system failures and the need to invest in
additional computer systems, lack of experience in managing the new internet
business, lack of customer acceptance and lack of experience in the fulfillment
and shipping of individual orders to customers. There can be no assurance that
the internet operations will achieve sales and profitability levels that justify
the Company's investment therein. The internet operations also involve other
risks that could have a material adverse effect on the Company, including (i)
the diversion of management's attention from the Company's core business, (ii)
the failure to reach profitability within the foreseeable future, (iii)
difficulties with hiring, retention and training of key personnel to conduct the
Company's internet operations, (iv) diversion of sales from PacSun stores, (v)
rapid technological change, (vi) liability for online content and (vii) risks
related to the failure of the computer systems that operate the web site and its
related support systems, including computer viruses, telecommunication failures
and electronic break-ins and similar disruptions. In addition, the internet
operations involve risks which are beyond the Company's control that could have
a material adverse effect on the Company, including (i) price competition
involving the items the Company intends to sell, (ii) the entry of the Company's
vendors into the internet business, in


                                       19


<PAGE>   20

direct competition with the Company, (iii) the level of merchandise returns
experienced by the Company, (iv) governmental regulation, (v) online security
breaches, (vi) credit card fraud, (vii) general economic conditions and economic
conditions specific to the internet, online commerce and the apparel industry
and (viii) competition from other internet web sites that may have significantly
more capital resources and experience in internet sales than the Company.

        EXPANSION AND MANAGEMENT OF GROWTH. PacSun's continued growth depends to
a significant degree on its ability to open and operate stores on a profitable
basis and on management's ability to manage the Company's planned expansion.
During fiscal 2000, the Company plans to open approximately 125 new stores, of
which 64 will be PacSun stores, 21 will be PacSun Outlet stores and 40 will be
d.e.m.o. stores. The Company's planned expansion is dependant upon a number of
factors, including the ability of the Company to locate and obtain favorable
store sites, negotiate acceptable lease terms, obtain adequate merchandise
supply and hire and train qualified management level and other employees.
Factors beyond the Company's control may also affect the Company's ability to
expand, including general economic and business conditions affecting consumer
spending. There can be no assurance that the Company will achieve its planned
expansion or that such expansion will be profitable. As the Company's operations
grow, there could be increasing strain on the Company's resources, and the
Company could experience difficulties relating to a variety of operational
matters, including hiring, training and managing an increasing number of
employees, having sufficient working capital, bank line of credit and cash flow
from operating activities for the Company's future operating and capital
requirements, obtaining sufficient quantities of merchandise from its preferred
vendors, obtaining sufficient materials and contract manufacturers to produce
its private brand products and enhancing its distribution, financial and
operating systems. There can be no assurance that the Company will be able to
manage its growth effectively. Any failure to manage growth could have a
material adverse effect on the Company's business, financial condition and
results of operations.

        MERCHANDISING/FASHION SENSITIVITY. The Company's success is largely
dependent upon its ability to gauge the fashion tastes of its customers and to
provide merchandise that satisfies customer demand in a timely manner. The
Company's failure to anticipate, identify or react appropriately in a timely
manner to changes in fashion trends could have a material adverse effect on the
Company's business, financial condition and results of operations. Misjudgements
or unanticipated fashion misjudgements could have a material adverse effect on
the Company's image with its customers. See Item 1. "Business - Merchandising."

        PRIVATE LABEL MERCHANDISE. Sales from private label merchandise
accounted for approximately 36% of net sales in fiscal 1999 and fiscal 1998. The
Company may increase the percentage of net sales in private label merchandise in
the future, although there can be no assurance that the Company will be able to
achieve increases in private label merchandise sales as a percentage of net
sales. Because the Company's private label merchandise generally carries higher
merchandise margins than its other merchandise, the Company's failure to
anticipate, identify and react in a timely manner to fashion trends with its
private label merchandise, particularly if the percentage of net sales derived
from private label merchandise increases, may have a material adverse affect on
the Company's business, financial condition and results of operations. See Item
1. "Business - Merchandising."

        RELIANCE ON KEY PERSONNEL. The continued success of the Company is
dependant to a significant degree upon the services of its key personnel,
particularly its executive officers. The loss of the services of any member of
senior management could have a material adverse effect on the Company's
business, financial condition and results of operations. The Company's success
in the future will also be dependent upon the Company's ability to attract and
retain qualified personnel. The Company's inability to attract and retain
qualified personnel in the future could have a material adverse effect on the
Company's business, financial condition and results of operations. See
"Executive Officers of the Registrant."

        DEPENDANCE ON SINGLE DISTRIBUTION FACILITY. The Company's distribution
functions for all of its stores are handled from a single facility in Anaheim,
California. In addition, the Company processes shipments related to sales of
merchandise over the internet from the same facility. Any significant
interruption in the operation of the distribution facility due to natural
disasters, accidents or system failures, would have a material adverse effect on
the Company's business, financial condition and results of operations.

        VOLATILITY OF STOCK PRICE. The market price of the Company's common
stock has fluctuated substantially in the past and there can be no assurance
that the market price of the common stock will not continue to fluctuate
significantly. Future announcements or management discussions concerning the
Company or its competitors, internet sales results, d.e.m.o. sales and
profitability results, quarterly variations in operating results or comparable
store net sales, changes in earnings estimates by analysts or changes in
accounting policies, among other factors, could cause the market price of the
common stock to fluctuate substantially. For example, in December 1998 the
Company's stock price decreased dramatically after a decrease in the Company's
comparable store net sales for the month of November 1998 was reported. In
addition, stock markets have


                                       20


<PAGE>   21

experienced extreme price and volume volatility in recent years. This volatility
has had a substantial effect on the market prices of securities of many small
public companies for reason frequently unrelated to the operating performance of
the specific companies. See Item 5. "Market for Registrant's Common Equity and
Related Stockholder Matters."

                                  *************

        The Company cautions that the risk factors described above could cause
actual results or outcomes to differ materially from those expressed in any
forward-looking statements of the Company made by or on behalf of the Company.
Further, management cannot assess the impact of each such factor on the
Company's business or the extent to which any factor, or combination of factors,
may cause actual results to differ materially from those contained in any
forward-looking statements.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

        The Company is exposed to market risk related to changes in interest
rates. A discussion of the Company's accounting policies for financial
instruments and further disclosures relating to financial instruments is
included in the Summary of Significant Accounting Policies and Nature of
Business in the Notes to Consolidated Financial Statements. The Company monitors
the risks associated with interest rates and financial instrument positions.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

        Information with respect to this item is set forth in "Index to
Financial Statements."

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE.

        None.


                                       21

<PAGE>   22

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

        Information with respect to this item is incorporated by reference from
the Registrant's definitive Proxy Statement to be filed with the Commission not
later than 120 days after the end of the registrant's fiscal year.

ITEM 11. EXECUTIVE COMPENSATION.

        Information with respect to this item is incorporated by reference from
the Registrant's definitive Proxy Statement to be filed with the Commission not
later than 120 days after the end of the registrant's fiscal year.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

        Information with respect to this item is incorporated by reference from
the Registrant's definitive Proxy Statement to be filed with the Commission not
later than 120 days after the end of the Registrant's fiscal year.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

        Information with respect to this item is incorporated by reference from
the Registrant's definitive Proxy Statement to be filed with the Commission not
later than 120 days after the end of the Registrant's fiscal year.

                                     PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.

         (a) 1. The financial statements listed in the "Index to Financial
                Statements" at page F-1 are filed as a part of this report.

             2. Financial statement schedules are omitted because they are not
                applicable or the required information is shown in the financial
                statements or notes thereto.

             3. Exhibits included or incorporated herein:

                See Index to Exhibits.

         (b)    Reports on Form 8-K.

             1. None


                                       22

<PAGE>   23

                                   SIGNATURES

        Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
April 5, 2000 on its behalf by the undersigned, thereunto duly authorized.

                                             PACIFIC SUNWEAR OF CALIFORNIA, INC.


                                             By: /s/ GREG H. WEAVER
                                                 -------------------------------
                                                     Greg H. Weaver
                                                     Chairman of the Board and
                                                     Chief Executive Officer

        Each person whose signature appears below hereby authorizes Greg H.
Weaver and Carl W. Womack or either of them, as attorneys-in-fact to sign on his
behalf, individually, and in each capacity stated below and to file all
amendments and/or supplements to the Annual Report on Form 10-K.

        Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.

<TABLE>
<CAPTION>
          SIGNATURE                        TITLE                        DATE
          ---------                        -----                        ----
<S>                            <C>                                  <C>
     /s/ GREG H. WEAVER        Chairman of the Board                April 5, 2000
-----------------------------  and Chief Executive Officer
         Greg H. Weaver        (Principal Executive Officer)


     /s/ CARL W. WOMACK        Sr. Vice President and Chief          April 5, 2000
-----------------------------  Financial Officer (Principal
         Carl W. Womack        Financial and Accounting Officer)


    /s/ JULIUS JENSEN III      Director                              April 5, 2000
-----------------------------
        Julius Jensen III


  /s/ PEARSON C. CUMMIN III    Director                              April 5, 2000
-----------------------------
      Pearson C. Cummin III


    /s/ PETER L. HARRIS        Director                              April 5, 2000
-----------------------------
        Peter L. Harris


  /s/ SALLY FRAME KASAKS       Director                              April 5, 2000
-----------------------------
      Sally Frame Kasaks
</TABLE>

                                       23

<PAGE>   24
                       PACIFIC SUNWEAR OF CALIFORNIA, INC.

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS



YEARS ENDED JANUARY 30, 2000, JANUARY 31, 1999 AND FEBRUARY 1, 1998:

CONSOLIDATED FINANCIAL STATEMENTS:


<TABLE>
<S>                                                                                                         <C>
  Independent auditors' report                                                                              F-2

  Consolidated Balance Sheets as of January 30, 2000 and January 31, 1999                                   F-3

  Consolidated Statements of Income and Comprehensive Income for each of the three fiscal years
     in the period ended January 30, 2000                                                                   F-4

  Consolidated Statements of Shareholders' Equity for each of three fiscal years
     in the period ended January 30, 2000                                                                   F-5

  Consolidated Statements of Cash flows for each of the three fiscal years
     in the period ended January 30, 2000                                                                   F-6

  Notes to Consolidated Financial Statements                                                                F-7
</TABLE>


                                       F-1


<PAGE>   25

                          INDEPENDENT AUDITORS' REPORT




The Board of Directors and Shareholders
Pacific Sunwear of California, Inc.
Anaheim, California

We have audited the accompanying consolidated balance sheets of Pacific Sunwear
of California, Inc. and its wholly owned subsidiaries as of January 30, 2000 and
January 31, 1999 and the related statements of income and comprehensive income,
shareholders' equity, and cash flows for each of the three fiscal years in the
period ended January 30, 2000. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements 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 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 Pacific Sunwear of California, Inc. as of
January 30, 2000 and January 31, 1999, and the results of its operations and its
cash flows for each of the three fiscal years in the period ended January 30,
2000, in conformity with accounting principles generally accepted in the United
States of America.

DELOITTE & TOUCHE LLP
Costa Mesa, California
March 7, 2000



                                       F-2

<PAGE>   26

                       PACIFIC SUNWEAR OF CALIFORNIA, INC.

                           CONSOLIDATED BALANCE SHEETS
                                     ASSETS

<TABLE>
<CAPTION>
                                                                                          JANUARY 30,          JANUARY 31,
CURRENT ASSETS:                                                                              2000                 1999
                                                                                         -------------        -------------
<S>                                                                                      <C>                  <C>
  Cash and cash equivalents (Note 1)                                                     $  32,416,794        $  19,031,738
  Accounts receivable                                                                        2,178,105              899,179
  Merchandise inventories                                                                   60,002,230           42,469,829
  Prepaid expenses, includes $4,874,867 and $3,620,435 of prepaid rent, respectively         7,043,428            5,044,941
  Prepaid income tax (Note 4)                                                                       --              713,402
  Deferred taxes (Note 4)                                                                    2,541,765            1,944,275
                                                                                         -------------        -------------
      Total current assets                                                                 104,182,322           70,103,364
PROPERTY AND EQUIPMENT (Note 1):
  Leasehold improvements                                                                    66,998,372           47,877,157
  Furniture, fixtures and equipment                                                         63,992,331           45,819,759
                                                                                         -------------        -------------
                                                                                           130,990,703           93,696,916
  Less accumulated depreciation and amortization                                           (37,777,329)         (26,773,496)
                                                                                         -------------        -------------
      Net property and equipment                                                            93,213,374           66,923,420
OTHER ASSETS:
  Goodwill, net of accumulated amortization of $984,960 and $758,180,
     respectively (Note 1)                                                                   7,114,805            7,605,563
  Deferred compensation and other assets (Notes 6 and 8)                                     4,831,038            3,142,504
                                                                                         -------------        -------------
      Total other assets                                                                    11,945,843           10,748,067
                                                                                         -------------        -------------
               Total assets                                                              $ 209,341,539        $ 147,774,851
                                                                                         =============        =============

                      LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
  Accounts payable                                                                       $  20,113,199        $  13,867,906
  Accrued liabilities (Note 7)                                                              13,874,533            8,690,783
  Income taxes payable (Note 4)                                                              2,844,051                   --
                                                                                         -------------        -------------
      Total current liabilities                                                             36,831,783           22,558,689
DEFERRED COMPENSATION (Note 6)                                                               4,436,776            2,826,531
OTHER LONG-TERM LIABILITIES                                                                     28,316               28,316
DEFERRED RENT                                                                                5,831,988            4,689,772
DEFERRED TAXES (Note 4)                                                                        387,012              974,522
COMMITMENTS AND CONTINGENCIES (Note 5)


SHAREHOLDERS' EQUITY (Notes 3 and 6):
 Preferred stock, par value $.01; authorized, 5,000,000; none issued and
   outstanding
 Common stock, par value $.01; authorized 75,937,500 shares; issued and
   outstanding, 31,462,751 and 30,650,778 shares, respectively (Note 1)                        314,628              306,508
 Additional paid-in capital                                                                 69,619,372           59,800,206
 Retained earnings                                                                          91,891,664           56,590,307
                                                                                         -------------        -------------
      Total shareholders' equity                                                           161,825,664          116,697,021
                                                                                         -------------        -------------
               Total liabilities and shareholders' equity                                $ 209,341,539        $ 147,774,851
                                                                                         =============        =============
</TABLE>



                 See notes to consolidated financial statements

                                       F-3



<PAGE>   27

                       PACIFIC SUNWEAR OF CALIFORNIA, INC.

           CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME


<TABLE>
<CAPTION>
                                                                                            FISCAL YEAR ENDED
                                                                          --------------------------------------------------------
                                                                          JANUARY 30,           JANUARY 31,           FEBRUARY 1,
                                                                              2000                  1999                  1998
                                                                          ------------          ------------          ------------
<S>                                                                       <C>                   <C>                   <C>
Net sales                                                                 $436,807,841          $321,125,009          $227,129,848
Cost of goods sold, including buying, distribution and occupancy costs     284,186,631           212,859,474           150,219,301

                                                                          ------------          ------------          ------------
Gross margin                                                               152,621,210           108,265,535            76,910,547
Selling, general and administrative expenses                                96,116,747            70,369,424            51,093,091
                                                                          ------------          ------------          ------------
Operating income                                                            56,504,463            37,896,111            25,817,456
                                                                                                                      ============
Interest income                                                                915,894               977,398             1,248,003
                                                                          ------------          ------------          ------------
Income before income tax expense                                            57,420,357            38,873,509            27,065,459
Income tax expense (Note 4)                                                 22,119,000            15,369,000            10,707,000
                                                                          ------------          ------------          ------------
Net income                                                                $ 35,301,357          $ 23,504,509          $ 16,358,459
                                                                          ============          ============          ============
Comprehensive income (Note 1)                                             $ 35,301,357          $ 23,504,509          $ 16,358,459
                                                                          ============          ============          ============
Net income per share, basic (Note 1)                                      $       1.14          $       0.75          $       0.55
                                                                          ============          ============          ============
Net income per share, diluted (Note 1)                                    $       1.10          $       0.73          $       0.53
                                                                          ============          ============          ============
Weighted average shares outstanding, basic (Note 1)                         31,052,399            31,163,415            29,549,403
                                                                          ============          ============          ============
Weighted average shares outstanding, diluted (Note 1)                       32,189,616            32,232,989            30,644,384
                                                                          ============          ============          ============
</TABLE>



                 See notes to consolidated financial statements

                                       F-4

<PAGE>   28

                       PACIFIC SUNWEAR OF CALIFORNIA, INC.

                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY


<TABLE>
<CAPTION>
                                                      COMMON        COMMON         ADDITIONAL
                                                      STOCK          STOCK          PAID-IN         RETAINED
                                                      SHARES        AMOUNT          CAPITAL          EARNINGS           TOTAL
                                                    ----------   ----------     -------------     -------------    -------------
<S>                                                 <C>          <C>            <C>               <C>              <C>
BALANCE, FEBRUARY 2, 1997                           27,310,863     $273,109     $  30,545,594     $  16,727,339    $  47,546,042
  Net proceeds from issuance of common
    stock                                            2,941,313       29,413        30,055,660                --       30,085,073
  Exercise of stock options and restricted stock
    grant (Note 6)                                     673,950        6,739           681,743                --          688,482
  Cancellation of fractional shares due to
    3-for-2 stock split (Note 1)                          (120)          (1)           (2,186)               --           (2,187)
  Tax benefits related to exercise of stock
    options (Note 6)                                        --           --         1,887,188                --        1,887,188
  Net income                                                --           --                --        16,358,459       16,358,459
                                                    ----------   ----------     -------------     -------------    -------------
BALANCE, FEBRUARY 1, 1998                           30,926,006      309,260        63,167,999        33,085,798       96,563,057
  Exercise of stock options and shares sold
    under employee stock purchase plan
    (Note 6)                                           727,452        7,275         1,726,929                --        1,734,204
  Cancellation of fractional shares due to
    3-for-2 stock split (Note 1)                        (1,430)         (14)          (28,914)               --          (28,928)
  Repurchase and retirement of common stock
    (Note 3)                                        (1,001,250)     (10,013)       (8,874,405)               --       (8,884,418)
  Tax benefits related to exercise of stock
    options (Note 6)                                        --           --         3,808,597                --        3,808,597
  Net income                                                --           --                --        23,504,509       23,504,509
                                                    ----------   ----------     -------------     -------------    -------------
BALANCE, JANUARY 31, 1999                           30,650,778      306,508        59,800,206        56,590,307      116,697,021
  Exercise of stock options and shares sold
    under employee stock purchase plan and
    restricted stock grant (Note 6)                    812,467        8,125         3,969,466                --        3,977,591
  Cancellation of fractional shares due to
    3-for-2 stock split (Note 1)                          (494)          (5)          (10,673)               --          (10,678)
 Restricted stock award, vesting of shares
   (Note 6)                                                 --           --           290,355                --          290,355
  Tax benefits related to exercise of stock
    options (Note 6)                                        --           --         5,570,018                --        5,570,018
  Net income                                                --           --                --        35,301,357       35,301,357
                                                    ----------   ----------     -------------     -------------    -------------
BALANCE, JANUARY 30, 2000                           31,462,751     $314,628     $  69,619,372     $  91,891,664    $ 161,825,664
                                                    ==========   ==========     =============     =============    =============
</TABLE>



                 See notes to consolidated financial statements

                                       F-5

<PAGE>   29

                       PACIFIC SUNWEAR OF CALIFORNIA, INC.

                      CONSOLIDATED STATEMENTS OF CASH FLOWS


<TABLE>
<CAPTION>
                                                                                               FISCAL YEAR ENDED
                                                                                --------------------------------------------------
                                                                                 JANUARY 30,       JANUARY 31,         FEBRUARY 1,
                                                                                    2000              1999                1998
                                                                                ------------      ------------        ------------
<S>                                                                             <C>               <C>                 <C>
CASH FLOWS FROM OPERATING ACTIVITIES:

  Net income                                                                    $ 35,301,357      $ 23,504,509        $ 16,358,459
  Adjustments to reconcile net income to net cash provided by
    operating activities:
    Depreciation and amortization                                                 14,293,950        10,448,317           6,891,981
    Change in operating assets and liabilities, net of effect of acquisition:
     Accounts receivable                                                          (1,278,926)          110,660            (426,028)
     Merchandise inventories                                                     (17,532,401)      (10,347,488)        (11,087,295)
     Prepaid expenses                                                             (1,998,487)         (680,404)         (1,133,377)
     Deferred compensation and other assets                                         (128,291)          (76,116)             91,267
     Accounts payable                                                              6,245,293         4,950,991           2,230,354
     Accrued liabilities                                                           5,650,090          (143,378)          2,798,472
     Income taxes and deferred taxes                                               7,942,471         1,551,072           1,894,569
     Other liabilities                                                                    --            28,316                  --
     Deferred rent                                                                 1,142,216           943,526             606,759
                                                                                ------------      ------------        ------------
       Net cash provided by operating activities                                  49,637,272        30,290,005          18,225,161
CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchases of short-term investments                                                     --                --         (27,590,049)
  Short-term investment maturities                                                        --        12,742,666          14,847,383
  Acquisition, net of cash acquired                                                       --                --         (10,414,634)
  Repurchase and retirement of common stock                                               --        (8,884,418)                 --
  Investment in property and equipment                                           (40,219,129)      (31,603,357)        (21,020,289)
                                                                                ------------      ------------        ------------
       Net cash used in investing activities                                     (40,219,129)      (27,745,109)        (44,177,589)
CASH FLOWS FROM FINANCING ACTIVITIES:
  Cash paid in lieu of fractional shares due to 3-for-2 stock split                  (10,678)          (28,928)             (2,187)
  Proceeds from exercise of stock options                                          3,977,591         1,734,204             688,482
  Net proceeds from issuance of common stock                                              --                --          30,085,073
                                                                                ------------      ------------        ------------
        Net cash provided by financing activities                                  3,966,913         1,705,276          30,771,368
                                                                                ------------      ------------        ------------
NET INCREASE IN CASH AND CASH EQUIVALENTS:                                        13,385,056         4,250,172           4,818,940
CASH AND CASH EQUIVALENTS, BEGINNING OF FISCAL YEAR                               19,031,738        14,781,566           9,962,626
                                                                                ------------      ------------        ------------
CASH AND CASH EQUIVALENTS, END OF FISCAL YEAR                                   $ 32,416,794      $ 19,031,738        $ 14,781,566
                                                                                ============      ============        ============


SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
  Cash paid during the period for:
   Interest                                                                     $         --      $         --        $      2,381
   Income taxes                                                                 $ 14,176,529      $ 13,817,928        $  8,812,430
----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

Supplemental disclosures of noncash transactions: During the fiscal years ended
January 30, 2000, January 31, 1999 and February 1, 1998, the Company recorded an
increase to additional paid-in capital of $5,570,018, $3,808,597 and $1,887,188,
respectively, related to tax benefits associated with the exercise of
nonqualified stock options. In addition, during the fiscal year ended January
30, 2000 the Company recorded an increase to additional paid-in capital of
$290,355 related to the issuance of stock to satisfy certain deferred
compensation liabilities.



                 See notes to consolidated financial statements

                                       F-6

<PAGE>   30


                       PACIFIC SUNWEAR OF CALIFORNIA, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                  FOR THE FISCAL YEARS ENDED JANUARY 30, 2000,
                     JANUARY 31, 1999, AND FEBRUARY 1, 1998

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND NATURE OF BUSINESS

      Nature of Business -- Pacific Sunwear of California, Inc. and its
wholly-owned subsidiaries (the "Company") is a leading specialty retailer of
everyday casual apparel, accessories and footwear designed to meet the needs of
active teens and young adults. The Company operates three nationwide, primarily
mall-based chains of retail stores, under the names "Pacific Sunwear" (as well
as "PacSun"), "Pacific Sunwear Outlet", and "d.e.m.o." Pacific Sunwear and
Pacific Sunwear Outlet stores specialize in board-sport inspired casual apparel,
footwear and related accessories catering to teenagers and young adults.
d.e.m.o. specializes in hip-hop music inspired casual apparel and related
accessories catering to teenagers and young adults. In addition, the Company
operates a web site through a wholly-owned subsidiary which sells merchandise
online, provides content and community for its target customers and provides
information about the Company.

      The Company's fiscal year is a 52- or 53-week period ending near January
31. Fiscal 1999 was a 52-week period ended January 30, 2000. Fiscal 1998 was a
52-week period ended January 31, 1999. Fiscal 1997 was a 52-week period ended
February 1, 1998.

      Principles of Consolidation -- The consolidated financial statements
include the accounts of Pacific Sunwear of California, Inc., Pacific Sunwear
Stores Corp. and ShopPacSun.com Corp., its wholly-owned subsidiaries. All
significant intercompany transactions have been eliminated in consolidation.

      Use of Estimates -- The preparation of financial statements in conformity
with generally accepted accounting principles necessarily requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and reported expenses during the reported period.
Actual results could differ from these estimates.

      Fair Value of Financial Instruments -- Statement of Financial Accounting
Standards ("SFAS") No. 107, "Disclosures about Fair Value of Financial
Instruments," requires management to disclose the estimated fair value of
certain assets and liabilities defined by SFAS No. 107 as financial instruments.
Financial instruments are generally defined by SFAS No. 107 as cash, evidence of
ownership interest in an entity, or a contractual obligation that both conveys
to one entity a right to receive cash or other financial instruments from
another entity and imposes on the other entity the obligation to deliver cash or
other financial instruments to the first entity. At January 30, 2000, management
believes that the carrying amounts of cash, receivables and payables approximate
fair value because of the short maturity of these financial instruments.

      Merchandise Inventories -- Merchandise inventories are stated at the lower
of cost (first-in, first-out method) or market.

      Property and Equipment -- Leasehold improvements and furniture, fixtures
and equipment are stated at cost. Amortization of leasehold improvements is
computed on the straight-line method over the lesser of their estimated useful
lives or the life of the lease (generally 10 years). Depreciation on furniture,
fixtures and equipment is computed on the straight-line method over five years.

      Intangible Assets -- The intangible assets consist of the excess of cost
over net assets acquired (goodwill), of $.8 million, which arose from the
acquisition of four stores in 1986 and is being amortized on a straight-line
method over 40 years. In addition, in fiscal 1997 the Company acquired 15 retail
stores which resulted in the recording of $7.3 million of goodwill and $.3
million for non-competition agreements, which are being amortized over 25 years
and 5 years, respectively.

      The Company evaluates the recoverability of its goodwill at each balance
sheet date. The recoverability of goodwill is determined by comparing the
carrying value of the goodwill to the estimated operating income of the related
entity on an undiscounted cash flow basis. Any impairment is recorded at the
date of determination. During fiscal 1999, the Company closed one of the four
stores acquired in 1986 and net goodwill was reduced by $175,985.

      Income Taxes -- The Company accounts for income taxes under the provisions
of SFAS No. 109, "Accounting for Income Taxes." Deferred taxes on income result
from temporary differences between the reporting of income for financial
statements and tax reporting purposes.



                 See notes to consolidated financial statements

                                       F-7

<PAGE>   31

      Deferred Rent -- The Company's policy is to average any defined rental
escalations over the term of the related lease in order to provide level
recognition of rent expense.

      Statements of Cash Flows -- For purposes of the statements of cash flows,
the Company considers all highly-liquid debt instruments, if any, purchased with
an original maturity of three months or less to be cash equivalents.

      Stock Split -- On June 8, 1999, the Company effected a three-for-two stock
split. Shareholders' equity has been restated to give retroactive recognition to
the stock split in prior periods by reclassifying the par value ($102,169) of
the additional shares arising from the split from additional paid-in capital to
common stock.

      Revenue Recognition -- Sales are recognized upon purchase by customers.

      Advertising Costs -- Costs associated with the production of advertising,
such as photography, design, creative talent, editing and other costs, are
expensed the first time the advertising takes place. Costs associated with
communicating advertising that has been produced, such as television and
magazine advertising, are expensed when the advertising takes place. Advertising
costs were $4,901,099, $2,568,537 and $1,888,990 in fiscal 1999, fiscal 1998 and
fiscal 1997, respectively.

      Net Income per Share -- The Company adopted SFAS No. 128, "Earnings Per
Share," beginning with the Company's fourth quarter of fiscal 1997. Basic
earnings per common share is computed using the weighted average number of
shares outstanding. Diluted earnings per common share is computed using the
weighted average number of shares outstanding adjusted for the incremental
shares attributed to outstanding options to purchase common stock. Incremental
shares of 1,137,217, 1,069,574 and 1,094,981 in fiscal 1999, fiscal 1998 and
fiscal 1997, respectively, were used in the calculation of diluted earnings per
common share. Options to purchase 34,714, 130,569 and 202,086 shares of common
stock in fiscal 1999, fiscal 1998 and fiscal 1997, respectively, were not
included in the computation of diluted earnings per common share because the
option exercise price was greater than the average market price of the common
stock.

      Stock-Based Compensation -- The Company accounts for stock-based
compensation in accordance with Accounting Principles Board ("APB") Opinion No.
25. See Note 6 for the pro-forma disclosure requirements of SFAS No.123,
"Accounting for Stock Based Compensation."

      Comprehensive Income -- The Company adopted SFAS No. 130, "Reporting
Comprehensive Income" in the first quarter of 1998. SFAS No. 130 establishes
standards for the reporting and display of comprehensive income. Components of
comprehensive income include net earnings (loss), foreign currency translation
adjustments and gains/losses associated with investments available for sale. The
adoption of SFAS No. 130 required no additional disclosure for the Company and
did not have any effect on the Company's financial position or results of
operations.

      Accounting for Derivatives and Hedging Activities -- In June 1998, the
Financial Accounting Standards Board issued SFAS No. 133, "Accounting for
Derivatives and Hedging Activities". SFAS No. 133 must be implemented by the
Company for the year ending February 4, 2001. SFAS No. 133 is not expected to
have a significant impact on the Company's consolidated financial statements.

      Segment Information -- The Company operates in one principal business
segment domestically.

      Merchandise Risk -- The Company's success is largely dependent upon its
ability to gauge the fashion tastes of its customers and provide merchandise
that satisfies customer demand. Any inability to provide appropriate merchandise
in sufficient quantities in a timely manner could have a material adverse effect
on the Company's business, operating results and financial condition.

2. CREDIT FACILITY

      The Company has a credit facility with a bank, which expires in August
2001. The credit facility provides for a $35.0 million line of credit, which can
be used for cash advances, commercial letters of credit and shipside bonds.
Interest on cash advances under the line of credit facility is payable monthly
at the bank's prime rate (8.50 % at January 30, 2000). At January 30, 2000, the
Company had $6.2 million in letters of credit outstanding and no cash advances
outstanding. The loan agreement subjects the Company to various restrictive
covenants, including maintenance of certain financial ratios and prohibits
payment of cash dividends on common stock. At January 30, 2000, the Company was
in compliance with all of its covenants.


                 See notes to consolidated financial statements

                                       F-8

<PAGE>   32

                       PACIFIC SUNWEAR OF CALIFORNIA, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                  FOR THE FISCAL YEARS ENDED JANUARY 30, 2000,
                     JANUARY 31, 1999 AND FEBRUARY 1, 1998

3. COMMON STOCK

      Common Stock Purchase and Retirement -- In a series of open market
transactions during the fourth quarter of fiscal 1998, the Company repurchased
1,001,250 shares of its common stock at an average cost of $8.87 per share.
These purchases, aggregating $8,884,418, were made pursuant to a resolution
adopted by the Board of Directors in December 1998 which authorized the Company
to purchase up to 1.5 million shares of common stock.

      Stock Splits -- During each of the fiscal years ended January 30, 2000,
January 31, 1999 and February 1, 1998 the Company effected a three-for-two stock
split. Shareholders' equity has been restated to give retroactive recognition to
the stock splits in prior periods by reclassifying the par value of the
additional shares arising from the split from additional paid-in capital to
common stock. Additionally, all share and per share amounts have been restated
to give effect to the stock splits.

      Sale of Common Stock -- During fiscal 1997, the Company issued an
aggregate of 2,941,313 shares of its common stock in a follow-on stock offering.
The sale of shares yielded net proceeds to the Company, after deducting expenses
associated with the offering, of $30.1 million.

      Shareholder Rights Plan -- In December 1998, the Board of Directors
approved the adoption of a Shareholder Rights Plan ("the Rights Plan.") The
Rights Plan provides for the distribution to the Company's shareholders of one
preferred stock purchase "Right" for each outstanding share of the Company's
common stock. The Rights have an exercise price of $75 per Right, subject to
subsequent adjustment. Initially, the Rights will trade with the Company's
common stock, and will not be exercisable until the occurrence of certain
takeover-related events, as defined. The Rights Plan provides that if a person
or group acquires more than 15% of the Company's stock without prior approval of
the Board of Directors, holders of the Rights will be entitled to purchase the
Company's stock at half of market value. The Rights Plan also provides that if
the Company is acquired in a merger or other business combination after a person
or group acquires more than 15% of the Company's stock without prior approval of
the Board of Directors, holders of the Rights will be entitled to purchase the
acquirer's stock at half of market value. The Rights were distributed to holders
of the Company's common stock of record on December 29, 1998, as a dividend, and
will expire, unless earlier redeemed, on December 29, 2008.

4. INCOME TAXES

      The components of the income tax expense are as follows:


<TABLE>
<CAPTION>
                                              FISCAL YEAR ENDED
                             ----------------------------------------------------
                              JANUARY 30,         JANUARY 31,         FEBRUARY 1,
                                 2000                1999                1998
                             ------------        ------------        ------------
<S>                          <C>                 <C>                 <C>
Current income taxes:
Federal                      $ 20,095,967        $ 13,485,816        $  9,082,864
State                           3,208,033           2,359,031           2,215,772
                             ------------        ------------        ------------
                               23,304,000          15,844,847          11,298,636
Deferred income taxes:
Federal                        (1,019,690)           (453,831)           (586,544)
State                            (165,310)            (22,016)             (5,092)
                             ------------        ------------        ------------
                               (1,185,000)           (475,847)           (591,636)
                             ------------        ------------        ------------
                             $ 22,119,000        $ 15,369,000        $ 10,707,000
                             ============        ============        ============
</TABLE>



                                       F-9

<PAGE>   33

      A reconciliation of the income tax expense to the amount of income tax
      expense that would result from applying the federal statutory rate to
      income before income taxes is as follows:

<TABLE>
<CAPTION>
                                                                           FISCAL YEAR ENDED
                                                            --------------------------------------------------
                                                             JANUARY 30,       JANUARY 31,         FEBRUARY 1,
                                                                2000               1999               1998
                                                            ------------       ------------       ------------
<S>                                                         <C>                <C>                <C>
Provision for income taxes at statutory rate                $ 20,097,000       $ 13,606,000       $  9,473,000
State income taxes, net of federal income tax benefit          1,983,000          1,519,000          1,437,000
Other                                                             39,000            244,000           (203,000)
                                                            ------------       ------------       ------------
                                                            $ 22,119,000       $ 15,369,000       $ 10,707,000
                                                            ============       ============       ============
</TABLE>

      At January 30, 2000 and January 31, 1999, the Company's current net
deferred tax asset was $2,541,765 and $1,944,275, respectively, and long-term
net deferred tax liability was $387,012 and $974,522, respectively. The major
components of the Company's net deferred tax asset of $2,154,753 and $969,753 at
January 30, 2000 and January 31, 1999, respectively, are as follows:


<TABLE>
<CAPTION>
                                                               JANUARY 30,        JANUARY 31,
                                                                  2000               1999
                                                               -----------        -----------
<S>                                                            <C>                <C>
Depreciation                                                   $(4,589,867)       $(4,015,178)
Deferred rent                                                    2,349,574          1,922,807
Reserve for store expansion/relocation and closing costs           350,121            556,757
State income taxes                                                 252,966            115,541
Inventory cost capitalization                                    1,489,051          1,024,097
Deferred compensation                                            1,787,475          1,158,878
Other                                                              515,433            206,851
                                                               -----------        -----------
                                                               $ 2,154,753        $   969,753
                                                               ===========        ===========
</TABLE>

5. COMMITMENTS AND CONTINGENCIES

      Operating Leases -- The Company leases its retail stores, corporate
offices and distribution facilities and certain equipment under operating lease
agreements expiring at various dates through 2014. Substantially all of the
leases require the Company to pay maintenance, insurance, property taxes and
percentage rent ranging from 5% to 7% based on sales volumes over certain
minimum sales levels.

   Minimum future annual rental commitments under noncancellable leases are as
follows:

Fiscal year ending:
<TABLE>
<S>                                          <C>
February 4, 2001                             $ 39,774,381
February 3, 2002                               39,749,993
February 2, 2003                               39,548,051
February 1, 2004                               39,357,316
January 30, 2005                               38,165,558
Thereafter                                    147,680,960
                                             ------------
                                             $344,276,259
                                             ============
</TABLE>

      Rental expense, including common area maintenance, was $51,698,739,
$39,094,115 and $27,533,077, of which $1,111,595, $759,224 and $377,895 was paid
as percentage rent based on sales volume for the fiscal years ended January 30,
2000, January 31, 1998 and February 1, 1998, respectively.



                                      F-10

<PAGE>   34

                       PACIFIC SUNWEAR OF CALIFORNIA, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                  FOR THE FISCAL YEARS ENDED JANUARY 30, 2000,
                     JANUARY 31, 1999 AND FEBRUARY 1, 1998

      Letters of Credit - The Company was contingently liable for $6.2 million
in open letters of credit with foreign suppliers at January 30, 2000.

      Litigation - The Company is involved from time to time in litigation
incidental to its business. Management believes that the outcome of current
litigation will not have a material adverse effect upon the results of
operations or financial condition of the Company.

6. STOCK OPTION AND RETIREMENT PLANS

      Under the Company's stock option plans, incentive and nonqualified options
have been granted to employees, directors and consultants to purchase common
stock at prices equal to the fair value of the Company's shares at the grant
dates.

      At January 30, 2000, outstanding incentive and nonqualified options had
exercise prices ranging from $.11 to $35.63 per share, with an average exercise
price of $13.57, and generally begin vesting one year after the grant date. On
the initial vesting date, 25% of the options vest and, thereafter, options
generally continue to vest at 2.08% each calendar month. The options generally
expire ten years from the date of grant or 90 days after employment or services
are terminated.

      At January 30, 2000, incentive and nonqualified options to purchase
3,194,799 shares were outstanding. At January 30, 2000, 923,339 shares were
available for future grant under the Company's stock option plans. During the
years ended January 30, 2000 and January 31, 1999 the Company recognized tax
benefits of $5,570,018 and $3,808,597, respectively, resulting from the exercise
of certain nonqualified stock options. Stock option (incentive and nonqualified)
activity for the three years ended January 30, 2000 was as follows:


<TABLE>
<CAPTION>
                                                                   STOCK OPTIONS
                                                     ---------------------------------------------
                                                     NUMBER OF SHARES        PRICE RANGE PER SHARE
                                                     ----------------        ---------------------
<S>                                                  <C>                     <C>
Balance at February 2, 1997                             2,743,499                $0.11 to $6.93
  Options granted (weighted average fair
       value of $6.43)                                  1,076,621                 7.78 to 14.47
  Options canceled                                       (147,969)                1.29 to 13.52
  Options exercised                                      (484,124)                  .11 to 6.19
                                                        ---------
Balance at February 1, 1998                             3,188,027                  .11 to 14.47
  Options granted (weighted average fair
       value of $11.74)                                   815,639                 9.13 to 25.25
  Options canceled                                       (109,330)                1.49 to 21.42
  Options exercised                                      (701,063)                 .11 to 12.47
                                                        ---------
Balance at January 31, 1999                             3,193,273                  .11 to 25.25
  Options granted (weighted average fair
       value of $23.43)                                   858,500                16.67 to 35.63
  Options canceled                                       (127,684)                 .11 to 25.25
  Options exercised                                      (729,290)                1.98 to 24.25
                                                        ---------
Balance at January 30, 2000                             3,194,799                  .11 to 35.63
                                                        =========
</TABLE>


      The following is a summary of the weighted average exercise prices for
activity during the year ended January 30, 2000:


                                      F-11

<PAGE>   35

<TABLE>
<CAPTION>
                                                                          WEIGHTED
                                                                          AVERAGE
                                                   SHARES              EXERCISE PRICE
                                                  ---------            --------------
<S>                                               <C>                  <C>
Beginning Outstanding                             3,193,273                $ 8.95
  Options granted                                   858,500                 23.43
  Options exercised                                (729,290)                 4.81
  Options canceled                                 (127,684)                14.40
                                                  ---------
Ending outstanding                                3,194,799                $13.57
                                                  =========
Exercisable as of January 30, 2000                1,385,697                $ 8.22
</TABLE>

      Additional information regarding options outstanding as of January 30,
2000 is as follows:


<TABLE>
<CAPTION>
                                                OPTIONS OUTSTANDING                                   OPTIONS EXERCISABLE
                              -------------------------------------------------------          -----------------------------------
                                 NUMBER              WEIGHTED                                    NUMBER
  RANGE OF                     OUTSTANDING            AVERAGE            WEIGHTED              EXERCISABLE            WEIGHTED
  EXERCISE                       AS OF               REMAINING            AVERAGE                 AS OF                AVERAGE
   PRICES                     JAN 30, 2000        CONTRACTUAL LIFE     EXERCISE PRICE          JAN 30, 2000         EXERCISE PRICE
---------------               ------------        ----------------     --------------          ------------         --------------
<S>                           <C>                 <C>                  <C>                     <C>                  <C>
$ 0.11 - $ 6.12                 609,342                 5.84               $ 3.41                 545,580               $ 3.28
  6.19 -  10.52                 453,911                 7.10                 7.65                 303,638                 7.46
 11.26 -  11.72                 576,169                 7.74                11.72                 300,786                11.72
 12.17 -  15.04                 551,136                 8.60                14.69                 167,583                14.68
 15.44 -  23.50                 376,460                 8.85                20.36                  66,828                19.83
 23.81 -  23.81                 465,000                 9.63                23.81                      --                   --
$23.88 - $35.63                 162,781                 9.45                25.85                   1,282                24.01
                                                                                                ---------               ------
                              3,194,799                 7.93               $13.57               1,385,697               $ 8.22
</TABLE>

      During the year ended February 1, 1998, the Company granted a restricted
stock award of 189,841 shares with a purchase price of $.01 per share to its
Chief Executive Officer. The 189,841 share award began vesting on March 31,
1999, with 25% of the shares vested at such time, and thereafter will vest at
25% on each of March 31, 2000, 2001 and 2002, if, in each instance, at the time
of the vesting date, certain cumulative earnings per share growth targets have
been satisfied. During the year ended January 30, 2000, the Company recorded
$240,440 of deferred compensation expense associated with this award.

      During the year ended January 30, 2000, the Company granted a restricted
stock award of 50,000 shares with a purchase price of $.01 per share to its
Chief Executive Officer. The 50,000 share award begins vesting on September 17,
2001, with 25% of the shares vested at such time, and thereafter will vest at
25% on each of September 17, 2002, 2003 and 2004, if, in each instance, at the
time of the vesting date, certain cumulative earnings per share growth targets
have been satisfied. During the year ended January 30, 2000, the Company
recorded $88,817 of deferred compensation expense associated with this award.

      The Company accounts for its stock-based awards using the intrinsic value
method in accordance with APB Opinion No. 25, "Accounting for Stock Issued to
Employees," and its related interpretations. Accordingly, no compensation
expense has been recognized in the financial statements for employee stock
arrangements.

      SFAS No. 123, "Accounting for Stock-Based Compensation," requires the
disclosure of pro forma net income and earnings per share. Under SFAS No. 123,
the fair value of stock-based awards to employees is calculated through the use
of option- pricing models, even though such models were developed to estimate
the fair value of freely tradable, fully transferable options without vesting
restrictions, which significantly differ from the Company's stock option awards.
These models also require



                                      F-12

<PAGE>   36

                       PACIFIC SUNWEAR OF CALIFORNIA, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                  FOR THE FISCAL YEARS ENDED JANUARY 30, 2000,
                     JANUARY 31, 1999 AND FEBRUARY 1, 1998

subjective assumptions, including future stock price volatility and expected
time to exercise, which greatly affect the calculated values. The Company's
calculations were made using the Black-Scholes option-pricing model with the
following weighted average assumptions: expected life, 5 years following
vesting; stock volatility, 64.3% in fiscal 1999, 87.0% in fiscal 1998 and 60.6%
in fiscal 1997; risk-free interest rates, 6.6% in fiscal 1999, 4.7% in fiscal
1998 and 6.1% in fiscal 1997; and no dividends during the expected term. The
Company's calculations are based on a multiple-option valuation approach and
forfeitures are recognized as they occur. If the computed fair values of the
fiscal 1999, fiscal 1998 and fiscal 1997 awards had been amortized to expense
over the vesting period of the awards, pro forma net income and earnings per
share would have been reduced to the pro forma amounts indicated below:


<TABLE>
<CAPTION>
                                                                 FISCAL                  FISCAL                     FISCAL
                                                                  1999                    1998                       1997
      Net Income                                               -----------             -----------                -----------
<S>                                                            <C>                     <C>                        <C>
                                             As reported       $35,301,357             $23,504,509                $16,358,459
                                             Pro forma         $31,734,140             $21,289,248                $15,320,101
      Net Income Per Share, Basic
                                             As reported          $1.14                   $.75                       $0.55
                                             Pro forma            $1.02                   $.68                       $0.52
      Net Income Per Share, Diluted
                                             As reported          $1.10                   $.73                       $0.53
                                             Pro forma            $1.00                   $.67                       $0.51
</TABLE>

      The impact of outstanding nonvested stock options granted prior to fiscal
1995 has been excluded from the pro forma calculation; accordingly, the fiscal
1997, fiscal 1998 and fiscal 1999 pro forma adjustments are not indicative of
future period pro forma adjustments, when the calculation will apply to all
stock options granted after fiscal 1994.

      In fiscal 1997, the Company established the Pacific Sunwear of California,
Inc. Employee Stock Purchase Plan (the "ESPP"), which provides a method for
employees of the Company whereby they may voluntarily purchase common stock at a
10% discount from fair market value as of the beginning or the end of each
purchasing period of six months, whichever is lower. The ESPP covers
substantially all employees, except officers, who have three months of service
with the Company. The ESPP is intended to constitute an "employee stock purchase
plan" within the meaning of Section 423 of the Internal Revenue Code of 1986, as
amended, and therefore the Company does not recognize compensation expense
related to the ESPP. In fiscal 1999, 33,177 shares were issued at an average
price of $14.12 under the ESPP.

      In fiscal 1995, the Company established the Pacific Sunwear of California,
Inc. Executive Deferred Compensation Plan (the "Executive Plan"). The Executive
Plan covers officers of the Company, and is funded by participant contributions
and periodic discretionary contributions from the Company (Note 8). For each of
the three fiscal years in the period ended January 30, 2000, the Company made
contributions of $106,251, $82,236 and $58,854, respectively, to the Executive
Plan.

      In fiscal 1992, the Company established the Pacific Sunwear of California,
Inc. Employee Savings Plan ("the 401(k) Plan"). The 401(k) Plan is a defined
contribution plan (401(k)) covering substantially all employees who have reached
age 21 and have one year of service with the Company. The 401(k) Plan is funded
by employee contributions and periodic discretionary contributions from the
Company, which are subject to approval by the Company's Board of Directors. For
each of the three fiscal years in the period ended January 30, 2000, the Company
made contributions, net of forfeitures, of $213,227, $144,468 and $64,400
respectively, to the 401(k) Plan.


                                      F-13

<PAGE>   37

7. ACCRUED LIABILITIES

      Accrued liabilities consist of the following:

<TABLE>
<CAPTION>
                                                                       JANUARY 30,               JANUARY 31,
                                                                          2000                      1999
                                                                       -----------               -----------
<S>                                                                    <C>                       <C>
Accrued compensation and benefits                                      $ 7,368,490               $ 4,546,415
Gift certificates and store merchandise credits                          1,882,692                   969,378
Sales tax payable                                                        1,106,142                   738,910
Reserve for store expansion/relocation and closing costs                 1,045,797                 1,322,077
Accrued overage rent                                                       658,714                   375,071
Other                                                                    1,812,698                   738,932
                                                                       -----------               -----------
                                                                       $13,874,533               $ 8,690,783
                                                                       ===========               ===========
</TABLE>


8. DEFERRED COMPENSATION AND OTHER ASSETS

      Deferred compensation and other assets consist of the following:


<TABLE>
<CAPTION>
                                      JANUARY 30,              JANUARY 31,
                                         2000                     1999
                                      ----------               ----------
<S>                                   <C>                      <C>
Deferred compensation                 $4,505,058               $2,807,694
Covenant not-to-compete                  129,167                  179,167
Security deposits                        186,813                  155,643
Other                                     10,000                       --
                                      ----------               ----------
                                      $4,831,038               $3,142,504
                                      ==========               ==========
</TABLE>


                                      F-14

<PAGE>   38

                       PACIFIC SUNWEAR OF CALIFORNIA, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                  FOR THE FISCAL YEARS ENDED JANUARY 30, 2000,
                     JANUARY 31, 1999 AND FEBRUARY 1, 1998

9. QUARTERLY FINANCIAL DATA (UNAUDITED)

<TABLE>
<CAPTION>
                                                        FIRST                SECOND                THIRD                FOURTH
                                                       QUARTER               QUARTER              QUARTER               QUARTER
                                                    ------------          ------------          ------------          ------------
<S>                                                 <C>                   <C>                   <C>                   <C>
Fiscal year ended January 30, 2000:
Net sales                                           $ 81,443,000          $100,454,000          $124,044,000          $130,867,000
Gross margin                                          26,145,000            34,799,000            45,536,000            46,142,000
Operating income                                       6,464,000            11,748,000            19,662,000            18,631,000
Net income                                             4,043,000             7,300,000            12,265,000            11,694,000
                                                    ------------          ------------          ------------          ------------
Net income per share, basic                         $        .13          $        .24          $        .39          $        .37
Net income per share, diluted                       $        .13          $        .23          $        .38          $        .36
Weighted average shares outstanding, basic            30,732,074            30,926,234            31,181,415            31,369,880
  (Note 1)
Weighted average shares outstanding, diluted          31,858,811            32,048,185            32,303,781            32,565,484
  (Note 1)

Fiscal year ended January 31, 1999:
Net sales                                           $ 61,162,000          $ 73,203,000          $691,779,000          $ 94,981,000
Gross margin                                          19,607,000            24,576,000            32,636,000            31,447,000
Operating income                                       4,460,000             7,981,000            13,214,000            12,242,000
Net income                                             2,887,000             4,967,000             8,138,000             7,513,000
                                                    ------------          ------------          ------------          ------------
Net income per share, basic                         $        .09          $        .16          $        .26          $       0.24
Net income per share, diluted                       $        .09          $        .15          $        .25          $       0.24
Weighted average shares outstanding, basic            31,013,033            31,145,727            31,523,288            30,971,610
  (Note 1)
Weighted average shares outstanding, diluted          32,243,858            32,440,152            32,456,645            31,673,495
  (Note 1)
</TABLE>

Earnings per basic and diluted shares outstanding are computed independently for
each of the quarters presented and therefore may not sum to the totals for the
year.




                                      F-15

<PAGE>   39

                                INDEX TO EXHIBITS


<TABLE>
<CAPTION>
Exhibit Number               Description of Exhibit
--------------               -----------------------
<S>                 <C>
      (1)3.1        Third Amended and Restated Articles of Incorporation of the
                    Company

      (5)3.2        Certificate of Amendment of Third Amended and Restated
                    Articles of Incorporation of the Company

      (9)3.3        Certificate of Determination of Preferences of Series A
                    Junior Participating Preferred Stock of the Company

      (1)3.4        Second Amended and Restated Bylaws of the Company

     (10)3.5        Amendment, dated August 18, 1998, to the Second Amended and
                    Restated Bylaws of the Company

         3.6        Amendment, dated March 15, 2000, to the Second Amended and
                    Restated Bylaws of the Company as amended

      (1)4.1        Specimen stock certificate

     (1)10.1        Form of Indemnity Agreement between the Company and each of
                    its executive officers and directors

     (1)10.2        1986-87 Stock Option Plan dated as of December 11, 1986, as
                    amended (the "Option Plan")

     (1)10.3        Form of Incentive Stock Option under the Option Plan

     (1)10.4        Form of Nonstatutory Stock Option under the Option Plan

     (3)10.5        Second Amended and Restated 1992 Stock Award Plan dated June
                    8, 1994 (the "Award Plan")

     (2)10.6        Form of Nonqualified Stock Option Agreement under the Award
                    Plan

     (2)10.7        Form of Incentive Stock Option Agreement under the Award
                    Plan

     (2)10.8        Form of Restricted Stock Award Agreement under the Award
                    Plan

     (1)10.9        Registration Rights Agreement dated November 25, 1986, as
                    amended, by and among the Company and certain holders of the
                    Preferred Stock of the Company

    (11)10.11       Standard Industrial Lease - Net, dated September 30, 1997
                    between the Company and Bank of America National Trust and
                    Savings Association, as amended, and Standard Industrial
                    Lease - Net, dated January 12, 1998 between the Company and
                    The Realty Associates Fund IV, L.P., a Delaware limited
                    partnership, as amended for the Company's corporate
                    headquarters and distribution center located in Anaheim,
                    California

     (4)10.12       Pacific Sunwear of California, Inc. Executive Deferred
                    Compensation Plan and Trust Agreement

     (6)10.13       Pacific Sunwear of California, Inc. Employee Stock Purchase
                    Plan

     (7)10.14       Employment Agreement, dated November 3, 1997, by and between
                    Pacific Sunwear of California, Inc. and Greg H. Weaver

    (11)10.15       Severance Agreements, dated October 27, 1997 and November 6,
                    1996, by and between Pacific Sunwear of California, Inc. and
                    Timothy M. Harmon and Carl W. Womack, respectively

     (8)10.16       Asset Purchase Agreement dated August 4,1997 by and among
                    the Company, Good Vibrations Inc. and certain other parties

    (12)10.17       Rights Agreement, dated as of December 16, 1998, between the
                    Company and U.S. Stock Transfer Corporation

    (13)10.18       Amendment No.1 to Amended and Restated Employment Agreement,
                    dated as of January 31, 1999, between the
</TABLE>


                                      F-16

<PAGE>   40

<TABLE>
<S>                 <C>
                    Company and Greg H. Weaver

      (13)10.19     Standard Sublease - dated December 22, 1998 between the
                    Company and Bekins Moving and Storage Company, LLC

          10.20     Amendment No. 2 to Amended and Restated Employment Agreement,
                    dated as of January 18, 2000, between the Company and Greg
                    H. Weaver

          10.21     Severance Agreements, dated June 21, 1999 and August 2,
                    1999, by and between Pacific Sunwear of California, Inc. and
                    Mark A. Hoffman and Michael J. Scandiffio, respectively

          10.22     Restricted Stock Award Agreement dated September 17, 1999 by
                    and between the Company and Greg H. Weaver

      (14)10.23     1999 Stock Award Plan

          23.1      Consent of Deloitte & Touche LLP

          27        Financial Data Schedule
</TABLE>

----------------
(1)   Incorporated by reference from the Company's Form S-1 Registration
      Statement (No. 33-57860) as filed with the Securities and Exchange
      Commission on February 4, 1993.

(2)   Incorporated by reference from the Company's Annual Report on Form 10-K as
      filed with the Securities and Exchange Commission on April 8, 1994.

(3)   Incorporated by reference from the Company's Form S-8 Registration
      Statement as filed with the Securities and Exchange Commission on
      September 28, 1995.

(4)   Incorporated by reference from the Company's Annual Report on Form 10-K as
      filed with the Securities and Exchange Commission on March 17, 1995.

(5)   Incorporated by reference from the Company's Annual Report on Form 10-K as
      filed with the Securities and Exchange Commission on April 4, 1997.

(6)   Incorporated by reference from the Company's Registration Statement on
      Form S-8 as filed with the Securities and Exchange Commission on November
      20, 1997.

(7)   Incorporated by reference from the Company's Quarterly Report on Form 10-Q
      as filed with the Securities and Exchange Commission on December 16, 1997.

(8)   Incorporated by reference from the Company's Current Report on Form 8-K as
      filed with the Securities and Exchange Commission on September 16, 1997.

(9)   Incorporated by reference from the Company's Current Report on Form 8-K as
      filed with the Securities and Exchange Commission on December 24, 1998.

(10)  Incorporated by reference from the Company's Quarterly Report on Form 10-Q
      as filed with the Securities and Exchange Commission on December 9, 1998.

(11)  Incorporated by reference from the Company's Annual Report on Form 10-K as
      filed with the Securities and Exchange Commission on April 9, 1998.

(12)  Incorporated by reference from the Company's Form 8-A Registration
      Statement as filed with the Securities and Exchange Commission on December
      24, 1998.

(13)  Incorporated by reference from the Company's Annual Report on Form 10-K as
      filed with the Securities and Exchange Commission on April 8, 1999.

(14)  Incorporated by reference from the Company's Form S-8 Registration
      Statement as filed with the Securities and Exchange Commission on
      September 3, 1999.



                                      F-17